2022 (7) TMI 549 - AT - Income Tax

Rejection of books of accounts - Estimation of income @ 20% of the stock put to sale - HELD THAT - Admitted facts are that the assessee failed to produce any evidence in support of sales made and hence the AO rejected the books of account and estimated the income @ 20% of the stock put to sale. The reliance placed by the Ld. AR in the decision of the Coordinate Bench of the Tribunal in the case of Majji Naga ( 2016 (6) TMI 1449 - ITAT VISAKHAPATNAM and Tangadu Jogisetty 2016 (6) TMI 1449 - ITAT VISAKHAPATNAM deserves consideration. Respectfully following the decisions of the Coordinate Bench of the Tribunal we hereby direct the AO to estimate the net profit @ 5% of the purchase price of the stock which was put to sale which is net of deductions. Accordingly, ground no.3 raised by the assessee is partly allowed. Payment of license fee - AO has disallowed 1/3rd of the license fee based on the facts that no receipt was provided by the assessee - HELD THAT - The assessee also did not file any objections for the remand report by the AO. We note here that for running an IMFL shop any person needs to pay license fee to the Government on annual basis - AO has not disputed the fact that the assessee is in the business of running a wine shop and whereby the License fee is required to be paid in accordance with the guidelines of the respective State Government. Merely on the basis of absence of evidence in respect of the payment of license fee it cannot be said that the assessee has not paid any license fee for running the business. Therefore we are of the considered view that the Revenue Authorities erred in disallowing the same. Accordingly, the relevant ground raised by the assessee is allowed.

Summary

Issues:
1. Condonation of delay in filing the appeal before the Tribunal.
2. Estimation of income and unexplained investment in the assessment.

Condonation of Delay:
The appeal was filed by the assessee against the order of the Ld. CIT(A)-2, Guntur for the AY 2011-12 with a delay of 1528 days. The assessee cited reasons for the delay, including non-receipt of orders, unawareness of bank account attachment, and impact of the COVID pandemic. The Tribunal noted the inordinate delay but considered the peculiar circumstances, including the pandemic situation. Relying on legal precedents, the Tribunal decided to condone the delay and proceed with the appeal on merits.

Estimation of Income and Unexplained Investment:
The assessee, engaged in the liquor business, declared a low net profit percentage. The assessment by the Ld. AO included additions based on total purchases and license fee payment. The Ld. CIT(A) directed the AO to estimate income at 10% of purchase price and upheld the addition of unexplained investment. The assessee appealed, arguing for a 5% net profit estimation and challenging the disallowance of license fee payment. The Tribunal, considering precedents and the nature of the business, directed the AO to estimate net profit at 5% of purchase price and allowed the appeal regarding the license fee disallowance.

In conclusion, the Tribunal partially allowed the appeal, addressing issues related to the delay in filing, income estimation, and unexplained investment. The decision highlighted legal principles, factual considerations, and precedents to arrive at a reasoned judgment.