Income Tax Appellate Tribunal - Hyderabad
Tanneeru Madhava Rao, Khammam vs Ncome Tax Officer, Ward-1, Kothagudem on 27 July, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCHES "B" (SMC), HYDERABAD
BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER
I.T.A. No. 42/HYD/2018
Assessment Year: 2014-15
Sri Tanneeru Madhava Rao, The Income Tax Officer,
Enkoor (M), Vs Ward-1,
Kesupalli (V), Kothagudem
Khammam Dist.,
[PAN: AQKPT2965M]
(Appellant) (Respondent)
For Assessee : Shri K.C. Devdas, AR
For Revenue : Shri Nilanjan Dey, DR
Date of Hearing : 23-07-2018
Date of Pronouncement : 27-07-2018
ORDER
This is an appeal by assessee against the order of the Commissioner of Income Tax (Appeals)-7, Hyderabad, dated 20-10-2017, confirming the action of the Assessing Officer (AO) in rejecting the books of account and estimating the net profit at 5%.
2. Brief facts of the case are that, assessee is an individual, filed his return of income for the assessment year under consideration, admitting total income at Rs. 9,00,850/-. In the scrutiny assessment proceedings, after verification of various details, AO was of the opinion that the books of account :- 2 -:
I.T.A. No. 42/Hyd/2018 cannot be relied upon and resorted to estimation of net profit at 5% of the purchase or stock put to sale at Rs. 5,32,93,799/ which worked out to Rs. 26,64,690/-. Aggrieved, assessee preferred an appeal before the Ld.CIT(A), who after considering assessee's submissions and following various decisions of Co- ordinate Benches, confirmed the estimation at 5%. Further aggrieved, assessee is in appeal before us.
3. Even though assessee was challenging the rejection of books of account, Ld. Counsel restricted the arguments to the grounds raised at Nos. 3 & 4 i.e., estimation of income at 5% is on higher side and various Co-ordinate Benches have determined the profit at 3% of the stock put to sale. Ld. Counsel filed the decisions of Co-ordinate Bench in the following cases:
i. Secunderabad Wines Vs. ITO in ITA No. 181/Hyd/2016, dt. 20-07-2016;
ii. ITO Vs. M/s. Mallikharjuna Bar & Restaurant in ITA No. 186/Hyd/2012, dt. 28-06-2012;
iii. Shri G. Sudarshan Vs. ITO in ITA No. 126/Hyd/2012, dt. 04-05-2012;
iv. ITO Vs. M/s. Saptagiri Wines in ITA No. 03/Hyd/2012, dt. 04-05-2012;
v. ITO Vs. M/s. Sri Matha Wines (ITA No. 137/Hyd/2012) & ITO Vs. M/s. Sri Shiva Ganga Wines (ITA No. 138/Hyd/2012), dt. 04-05-2012;
:- 3 -:
I.T.A. No. 42/Hyd/2018
4. Ld.DR, however, submitted that Ld.CIT(A) has fairly considered as estimated by the AO and relied on various Co- ordinate Bench decisions as mentioned by CIT(A) in the impugned order.
5. I have considered the rival contentions and perused the orders placed on record. At the time of hearing, Ld. Counsel for assessee submitted that this issue is covered in favour of assessee by the decision of Co-ordinate Bench in the case of Secunderabad Wines Vs. ITO in ITA No. 181/Hyd/2016, dt. 20-07-2016, wherein that Bench has followed the decision of 'A' Bench of this Tribunal in the case of Sri Venkateswara Wines in ITA No. 1206/Hyd/2015, dt. 27-11-2015, wherein after taking into consideration similar circumstances, the Tribunal has upheld the estimation of income at 3% of the cost of the goods sold.
5.1. In the case of Suraj Harjani Vs. ITO in ITA No. 1745/Hyd/2017, dt. 11-04-2018, the Co-ordinate Bench has held as under:
"5. We have considered the rival contentions and perused the material on record. There is no dispute with reference to the fact that books of account are to be rejected and the income is to be estimated. AO estimated the income @ 5% relying on various Co-ordinate Bench decisions, which was confirmed by the CIT(A). However, perusing the various orders indicate that a uniform net profit cannot be adopted in each and every case of similar business. The estimation of net profit may be on the basis of the facts involved in each and every case. In all the orders relied upon before us, estimation of income is varying from 2.5% to 5%. The latest order by the SMC Bench in the group case of Badri Srinivas Vs. ITO (supra) is @ 3%. In the said case, the Bench has considered the issue as under:
:- 4 -:
I.T.A. No. 42/Hyd/2018 "11. I have carefully considered the rival submissions and perused the record. A.O. as well as Ld. CIT (A) have relied upon the decisions of the ITAT rendered in 2011 / 2012 whereas the Assessing Officer, under similar circumstances, made scrutiny assessments wherein the stringent change in policy as well as impact of the High Court directions were taken into consideration for the purpose of estimating the net income @ 3% and in fact in the later decisions of the Tribunal, the net income was estimated @ 3% of the cost of goods sold. Under these circumstances, consistent with the view taken by the Tribunal, cited (supra), I direct the A.O. to adopt 3% of the cost of the goods sold as the income of the assessees".
5.1. Keeping in view the latest order of the SMC Bench and the reasons given therein, we are of the opinion that estimation of income @ 3% would be reasonable on the facts of the case. However, AO is directed to keep in mind that the estimated income does not fall less than the profit declared by assessee, in which case the profit declared by assessee should be accepted. Subject to above direction, AO is directed to estimate the profit @ 3% of the cost of stock put to sale and re-determine the total income, accordingly".
5.2. In the other cases also relied upon by the Ld. Counsel, the Co-ordinate Benches have fixed the rate of net profit at 3%. Respectfully following the same, I direct the AO to adopt 3% of the cost of the goods sold as income of assessee, subject to not being less than the returned income. Since assessee did not press for the grounds about rejection of books of account, the grounds pertaining to that extent are rejected.
6. In the result, the appeal of assessee is partly allowed.
Order pronounced in the open court on 27th July, 2018 Sd/-
(B. RAMAKOTAIAH) ACCOUNTANT MEMBER Hyderabad, Dated 27th July, 2018 TNMM :- 5 -:
I.T.A. No. 42/Hyd/2018 Copy to :
1. Sri Tanneeru Madhava Rao, C/o. Sekhar & Co., 133/4, Rashtrapathi Road, Secunderabad.
2. The Income Tax Officer, Ward-1, Kothagudem.
3. CIT (Appeals)-7, Hyderabad.
4. Pr.CIT-7, Hyderabad.
5. D.R. ITAT, Hyderabad.
6. Guard File.