2014 (4) TMI 1231 - AT - Income Tax

Rejection of books of accounts - estimation of profits - determination of profits in the business of wines - Held that - In similar matters, the Coordinate Benches of the Tribunal have been consistently directing adoption of rate of 5% of the purchase value or stock put to use whichever is more. As decided in ITO, Warangal vs. Shri P. Ramaiah and others 2013 (12) TMI 1001 - ITAT HYDERABAD income of the assessees in the line of liquor business has to be estimated at 5% cost of sales made by them - decided against revenue

Summary

Issues:
- Rejection of books of accounts
- Estimation of profits

Rejection of Books of Accounts:
The Revenue filed 12 appeals against the CIT(A) order for A.Y. 2008-2009 and 2009-10, raising grounds on rejection of books of accounts and estimation of profits. Despite notices sent to the assessees being returned un-served, the appeals were decided ex-parte. The A.O. had rejected the book results declared by the assessees, estimating the gross profit at 27% on the value of the stock put to sale. The Ld. CIT(A) confirmed the rejection of books by the A.O., leading to the Revenue filing appeals before the Tribunal.

Estimation of Profits:
On the issue of estimation of profits, the Ld. CIT(A) directed the A.O. to estimate the net profit at 5% on the purchases or stock put for sale during the year, based on the ITAT order in a similar case. The Revenue challenged this direction, arguing that the estimation should be at 27% as per Government of A.P. Prohibition & Excise GOMs.184 dated 07.02.2005. The Revenue contended that the comparison with other cases was not valid due to different business aspects. However, the Tribunal upheld the CIT(A)'s order, citing consistency in adopting a 5% rate for estimating profits in similar liquor business cases.

Judgment:
The Tribunal found no reason to interfere with the CIT(A)'s order, as it followed the decisions of the Coordinate Bench and maintained consistency in adopting a 5% rate for profit estimation. Referring to a specific case, the Tribunal highlighted that the issue was covered by consistent views of the Tribunal in similar matters. The Tribunal upheld the CIT(A)'s order, rejecting the grounds raised by the Revenue and ultimately dismissing the Revenue's appeals. The judgment was pronounced on 25.04.2014, affirming the CIT(A)'s decision on the rejection of books of accounts and the estimation of profits.