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2016 (7) TMI 379 - ITAT VISAKHAPATNAM

2016 (7) TMI 379 - ITAT VISAKHAPATNAM - TMI - Rejection of books of accounts - estimation of net profit of 20% on total stock put for sale - Held that:- We are of the view that the net profit estimated by the A.O. by relying upon the decision of Hon’ble A.P. High Court in the case of CIT Vs. R. Narayana Rao(2012 (6) TMI 402 - Andhra Pradesh High Court ), which was rendered under different facts is quite high. On the other hand, the assessee relied upon the decision of in the case of T. Appalaswa .....

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I.T.A.No.98/Vizag/2016, I.T.A.No.102/Vizag/2016, I.T.A.No.103/Vizag/2016, I.T.A.No.113/Vizag/2016 - Dated:- 2-6-2016 - SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER For The Appellant : Shri S.V. Satyanarayana,AR For The Respondent : Shri K. Ravi, DR ORDER PER G. MANJUNATHA, Accountant Member: These six appeals filed by the different assessees are directed against the separate, but identical orders of CIT(A), Visakhapatnam dated 21.12.2015 and it pertains to the ass .....

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return was processed u/s 143(1) of the Act. Subsequently, the case has been selected for scrutiny and accordingly, notice u/s 143(2) of the Act dated 28.8.2012 was issued. In response to notice, the authorized representative appeared from time to time and furnished books of accounts and other relevant information called for. During the course of assessment proceedings, the A.O. noticed that the net profit declared by the assessee is quite less when compared to the nature of business carried on .....

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sales bills do not contain quantitative and qualitative details, and hence, the net profit admitted could not be accepted. With these observations, issued a show cause notice and asked to explain why the books of accounts should not be rejected and profit shall not be estimated @ 20% of total purchases. 3. In response to the show cause notice, the assessee has filed written submission and contended that the net profit proposed by you is excessive when compared to the nature of business. The ass .....

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ucts and the business is controlled by the State Government through Andhra Pradesh State Beverages Corporation Ltd. and the prices of the products have been fixed by the State Government. The assessee being a licensee of the State Government cannot sell the products over and above the MRP. The State Government while fixing the MRP of the goods has allowed a gross margin of 20 to 25%. The assessee further submitted that it has reported a gross profit of more than 26%, which is in line with the ra .....

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of sales. In view of the unverifiable nature of books of accounts, the A.O. rejected the books of accounts u/s 145 of the Act and estimated the net profit of 20% on total stock put for sale. While doing so, the A.O. has relied upon the decision of Hon ble Andhra Pradesh High Court in the case of CIT Vs. R. Narayana Rao in ITA No.3/Vizag/2003 dated 21.6.2011, wherein the Hon ble A.P. High Court held that estimation of net profit at 16% on purchase price would be reasonable. 5. Aggrieved by the C .....

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which is in line with the gross profit margin allowed by the State Government and hence the net profit declared for the year should be accepted. The A.R. further submitted that while estimating the net profit of 20%, the A.O. relied upon the judgement of Hon ble A.P. High Court, which was rendered in the context of sale of arrack whereas it is into the business of dealing in IMFL where the margin of profit is quite less and also which was controlled by the State Government. Therefore, the case .....

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. The CIT(A) further observed that series of raids conducted on liquor traders by the Anti Corruption Bureau at various places in Andhra Pradesh reveals that the liquor traders have marked up price of the alcoholic beverages by as much as 30% to 40% higher than the maximum retail price fixed by the State Government. Therefore, considering the fact that the retail trader sell liquor at 30% to 40% higher than the MRP and also resorted to lose sale of liquor and other facts and circumstances of the .....

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ases net of all deductions. Therefore, requested to direct the A.O. to estimate the net profit of 5% on total purchases. On the other hand, the Ld. D.R. strongly supported the order of the CIT(A). 8. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. The A.O. estimated net profit of 20% on stock put for sale. The A.O. was of the opinion that the assessee has not maintained proper books of accounts and vouchers in suppor .....

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submitted that the case law relied upon by the assessee is not applicable to the facts of the present case. The case before the Hon ble A.P. High Court was that the assessee is into the business of trading in arrack, whereas it is in the business of dealing in IMFL. The assessee further contended that IMFL trade was controlled by the State Government through A.P. State Beverages Corporation Ltd. and the prices of the products are fixed by the State Government. The assessee being a license holde .....

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of the view that the A.O. was not justified in relying upon the judgement, which was rendered under different facts to estimate the net profit. On the other hand, the Ld. A.R. for the assessee, relied upon the decision of ITAT, Visakhapatnam bench in the case of T. Appalaswamy Vs. ACIT in ITA No.65 & 66/Vizag/2012. We have gone through the case laws relied upon by the assessee in the light of the facts of the present case and finds that the coordinate bench of this Tribunal, under similar ci .....

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