ITAT Hyderabad: Estimation of Retail Trader's Income at 3% of Cost of Sales

The Appellate Tribunal ITAT Hyderabad allowed the appeal in part, directing the estimation of the income of the assessee, a retail trader in liquor, at 3% of the cost of sales of stock for the assessment year 2014-15. This decision was based on the judge's consideration of conflicting decisions from different ITAT benches and following the precedent set by specific cases like Shri Late Mushkam, Adilabad. The judgment was pronounced on 9th May 2018.

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Issues Involved: Estimation of profit percentage as a retail trader in liquor - Whether 3% or 5% should be considered.

Analysis:
1. Estimation of Profit Percentage: The main issue in this appeal was to determine the appropriate percentage for estimating the profit of the assessee, a retail trader in liquor, for the assessment year 2014-15. The dispute revolved around whether the profit should be calculated at 3% or 5% of the cost of sales of stock. The Ld. CIT(A) and the Assessing Officer (A.O) had previously referred to different orders of the Hyderabad Bench of the ITAT, where the profit was estimated at 5% of the cost of sales of stock. However, the assessee relied on various orders, including the case of Shri Late Mushkam, Adilabad, arguing that the income should be estimated at 3% of the cost of sale of stocks for the year.

2. Cleavage of Opinion: Upon considering the conflicting decisions of different benches of the ITAT on whether the profit percentage should be 3% or 5%, the judge noted the divergence of views on this matter. Referring to the case of Shri Late Mushkam, Adilabad, and the case of Shri Badri Srinivas and others Vs. ITO, the judge decided to follow the precedent set by these cases. Consequently, the judge directed the A.O to estimate the income of the assessee at 3% of the cost of sales of stock for the relevant assessment year.

3. Decision and Outcome: After examining the arguments presented by both parties and considering the conflicting decisions of different benches of the ITAT, the judge allowed the appeal of the assessee in part. The judgment was pronounced in open court on 9th May 2018, with the direction to estimate the income of the assessee at 3% of the cost of sales of stock for the assessment year in question.

In conclusion, the judgment by the Appellate Tribunal ITAT Hyderabad resolved the issue of estimating the profit percentage for a retail trader in liquor, opting to follow the precedent set by specific cases and directing the estimation of income at 3% of the cost of sales of stock.

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