2023 (1) TMI 318 - AT - Income Tax

Estimation of turnover - CIT(A) estimated the profit @5% of the turnover - HELD THAT - When the learned CIT(A) estimated the profit @5% of the turnover, the same in our opinion is justified and the assessee now cannot plead to restrict the profit @ 3% of the turnover. So far as the decision in the case of Karla Srinivasa Rao 2022 (4) TMI 588 - ITAT VISAKHAPATNAM is concerned, we find the Assessing Officer in the said case estimated the income @ 5% by rejecting the books of account, since the assessee failed to furnish the details of expenses claimed in the P L account as well as the stock register. However, in the instant case, as mentioned by the AO, neither the assessee has maintained any books of accounts nor any books of accounts were produced for verification either at the time of search proceedings or during the post search proceedings or assessment proceedings. Therefore, the same decision, in our opinion, is not applicable to the facts of the present case. Even otherwise also, the assessee during the Course of assessment proceedings as well as appeal proceedings before the learned CIT(A) had requested to adopt the net profit rate of 5%. Under these circumstances, we do not find any infirmity in the order of the learned CIT(A) restricting the profit rate at 5% of the turnover. The ground raised by the assessee on this issue is accordingly dismissed. Addition being interest from sundry debtors - HELD THAT - Admittedly, the addition was made on the basis of statement recorded u/s 131 dated 15.3.2017 from Shri P. Hema Kumar Reddy who in his answer to question No.12 had stated that the assessee group charges interest @ 18% per annum uniformly. Statement was not recorded from the assessee and the statement was recorded only on 15.3.2017. There is no iota of any evidence found during the course of search that the assessee has received any interest during the impugned A.Y nor the Assessing Officer questioned Shri P. Hema Kumar Reddy for the impugned A.Y. Nothing has been brought on record by the Assessing Officer that the debtors were questioned/confronted and that they have admitted to have given any interest to the assessee. Under these circumstances we are of the considered opinion that the addition being interest @ 18% from sundry debtors as on 31.3.2011 is not justified being added on surmises and presumptions. We, therefore, set aside the order of the CIT (A) on this issue and the grounds raised by the assessee on this issue are allowed.

Summary

Issues Involved:
- Appeal against orders dated 25.04.2019 of CIT (A)-Tirupati for A.Ys.2011-12 to 2015-16
- Recalled matters due to opting for Vivad-se-Vishwas Scheme
- Assessment of income from liquor business for A.Y 2011-12
- Addition of interest income from sundry debtors
- Estimation of profit from liquor business
- Validity of order passed u/s 153C
- Challenge to estimation of profit at 5% on liquor business for A.Ys 2012-13 to 2014-15

Detailed Analysis:
1. The appeals were filed against orders of CIT (A)-Tirupati for A.Ys.2011-12 to 2015-16, which were heard together due to common issues. The Tribunal recalled its earlier dismissal of the appeals as the assessee opted for Vivad-se-Vishwas Scheme, making these recalled matters.

2. The primary issue pertained to the assessment of income from the liquor business for A.Y 2011-12. The Assessing Officer made additions to the total income, including interest income from sundry debtors and an adjustment in net profit percentage. The CIT (A) partially allowed the appeal, leading to the assessee's appeal before the Tribunal.

3. The first issue was the addition of interest income from sundry debtors. The Assessing Officer added Rs.1,17,200 as interest income, but the Tribunal found this addition unjustified as it was based on presumptions without concrete evidence. Hence, the Tribunal allowed the assessee's appeal on this issue.

4. The second issue was the estimation of profit from the liquor business. The Assessing Officer estimated profit at 8% of turnover due to lack of maintained books of accounts. The CIT (A) restricted it to 5% based on the assessee's request. The Tribunal upheld the CIT (A)'s decision, considering the circumstances and the absence of proper records.

5. The validity of the order passed u/s 153C was challenged, but the additional ground raised by the assessee was dismissed as not pressed, indicating no further challenge on this issue.

6. For A.Ys 2012-13 to 2014-15, similar issues of interest income from sundry debtors and profit estimation in the liquor business were raised. The Tribunal allowed the appeals based on the decision made for A.Y 2011-12, finding the grounds raised by the assessee justified.

7. In conclusion, the Tribunal partly allowed all 5 appeals filed by the assessee, addressing the issues of interest income from sundry debtors and the estimation of profit from the liquor business across multiple assessment years. The order was pronounced on 6th January 2023.