ITA No 177/Vizag/2016 Nagireddy Ganesh Visakhapatnam IN INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM SMC BENCH VISAKHAPATNAM BEFORE SHRI V DURGA RAO JUDICIAL MEMBER /I T No 177/Vizag/2016 ( / Assessment Year: 2011-12) Nagireddy Ganesh ITO Ward-1 Visakhapatnam Vs Anakapalli [PAN: AKTPN5474A] ( / Appellant) ( ! / Respondent) / Appellant by : Shri K S S Sarma AR / Respondent by : Shri T Satyanadham DR / Date of hearing : 03 10 2016 / Date of Pronouncement : 07 10 2016 / O R D E R PER V DURGA RAO Judicial Member: This appeal is filed by assessee against order of CIT(A)-2 Vijayawada dated 7 1 2016 for assessment year 2011-12 2 Facts are in brief that assessee is carrying business of IMFL and filed its return of income by declaring total income of ` 1 ITA No 177/Vizag/2016 Nagireddy Ganesh Visakhapatnam 3 73 740/- assessee s case was selected for scrutiny and assessment was completed by A O by determining total income of assessee at ` 35 78 286/- by estimating income at 20% of stock put to sale Assessee carried matter in appeal before CIT(A) Ld CIT(A) has scaled down same to 10% 3 assessee carried matter in appeal before Tribunal only ground raised by assessee is relating to estimation of profits At time of hearing Ld Counsel for assessee has submitted that in similar line of business coordinate bench of Visakhapatnam bench has passed order in case of Tangudu Jogisetty in ITA No 96/Vizag/2016 by order dated 2 6 2016 and estimated income of assessee at 5% of stock put to sale Assessee submitted that same may be followed 4 On other hand Ld D R has relied on orders of authorities below 5 We have heard both parties perused materials available on record and gone through orders of authorities below In this regard we find that as submitted by assessee very same issue of estimation of profit in trade of IMFL was considered by 2 ITA No 177/Vizag/2016 Nagireddy Ganesh Visakhapatnam coordinate bench of Tribunal in case of Tangudu Jogisetty (supra) and held that estimation of 5% net profit on purchase is reasonable and directed A O to estimate net profit of 5% on total purchases net of all deductions relevant portion of order is extracted as under: 8 We have heard both parties perused materials available on record and gone through orders of authorities below A O estimated net profit of 20% on stock put for sale A O was of opinion that assessee has not maintained proper books of accounts and vouchers in support of purchases and sales A O further observed that assessee has failed to maintain stock registers and books of accounts maintained by assessee are not susceptible for verification therefore rejected books of accounts and estimated net profit of 20% by relying upon decision of Hon ble P High Court It is contention of assessee that net profit estimated by A O is quite high when compared to nature of business carried on by assessee It is further submitted that case law relied upon by assessee is not applicable to facts of present case case before Hon ble P High Court was that assessee is into business of trading in arrack whereas it is in business of dealing in IMFL assessee further contended that IMFL trade was controlled by State Government through P State Beverages Corporation Ltd and prices of products are fixed by State Government assessee being license holder of State Government cannot sell products over and above MRP fixed by State Government We find force in arguments of assessee for reason that A O has estimated net profit by relying upon decision of P High Court in case of CIT Vs R Narayana Rao in ITA No 3 of 2003 which is rendered under different facts A P High Court has considered case of arrack dealer whereas assessee is into business of dealing in IMFL Therefore we are of view that A O was not justified in relying upon judgement which was rendered under different facts to estimate net profit On other hand Ld R for assessee relied upon decision of ITAT Visakhapatnam bench in case of T Appalaswamy Vs ACIT in ITA No 65 & 66/Vizag/2012 We have gone through case laws relied upon by assessee in light of facts of present case and finds that coordinate bench of this Tribunal under similar circumstances held that estimation of 3 ITA No 177/Vizag/2016 Nagireddy Ganesh Visakhapatnam 5% net profit on purchases is reasonable relevant portion of order is reproduced hereunder: 3 We have heard parties perused orders of revenue authorities as well as other materials on record It is contention of Ld R that estimation of profit at 16% is high and excessive considering normal rate of profit in this line of business Whereas Ld D R supported order of CIT(A) Having considered submissions of assessee we are of view that issue is no more res integra in view of series of decisions of ITAT Hyderabad bench in similar cases coordinate bench in case of ITA No 127/Hyd/12 and others dated 18 05 2012 as well as number of other cases have held that profit in case of business in Indian made foreign liquor has to be estimated at 5% of purchases made by assessee Therefore following decision of ITAT Hyderabad bench we set aside order of CIT(A) and direct assessing officer to estimate profit from wine business of assessee by applying rate of 5% of purchases made net of all other deductions assessing officer should also bear in mind that in no case income determined should be below income returned 9 Considering facts and circumstances of this case and also respectfully following ratios of coordinate bench we are of view that net profit estimated by A O by relying upon decision of Hon ble P High Court (supra) which was rendered under different facts is quite high On other hand assessee relied upon decision of coordinate bench and coordinate bench under similar circumstances estimated net profit of 5% on total purchases net of all deductions No contrary decision is placed on record by revenue to take any other view of matter than view so taken by coordinate bench Therefore we direct A O to estimate net profit of 5% on total purchases net of all deductions Ordered accordingly 6 Respectfully following above order of coordinate bench of Tribunal we set aside order passed by Ld CIT(A) and remit matter back to A O to estimate profit from business of assessee by applying rate of 5% of purchases made net of all 4 ITA No 177/Vizag/2016 Nagireddy Ganesh Visakhapatnam other deductions Thus this ground of appeal raised by assessee is allowed 7 In result appeal filed by assessee is partly allowed Order pronounced in open court on 7th Oct 16 Sd/- ( ) (V DURGA RAO) /JUDICIAL MEMBER ! /Visakhapatnam: % /Dated : 7 10 2016 VG/SPS ' ! ( ! /Copy of order forwarded to:- 1 / Appellant Nagireddy Ganesh C/o KSS Sarma 12-5-25A New Colony Anakapalli Visakhapatnam-531 001 2 / Respondent ITO Ward-1 Anakapalli 3 ) / CIT-2 Visakhapatnam 4 ) ( ) / CIT(A)-2 Visakhapatnam 5 ! ! / DR ITAT Visakhapatnam 6 / Guard file / BY ORDER // True Copy // / 0 (Sr Private Secretary) ! / ITAT VISAKHAPATNAM 5 Nagireddy Ganesh v. ITO, Ward-1, Anakapalli