TaxTMI 
TaxTMI 
2016 (7) TMI 379
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....tains to the assessment year 2011-12. Since, the facts are identical and issues are common, they are clubbed, heard together and disposed off, by way of this common order for the sake of convenience. 2. The facts extracted from ITA No.96/Vizag/2016 are that the assessee is a HUF carrying on the business of purchase and sale of IMFL in the name and style of "M/s. Appannammatalli Wine Shop" has filed its return of income for the assessment year 2011-12 on 28.12.2011 declaring total income of Rs. 6,53,240/-. The 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 appeare....
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....mation of net profit of 20% on purchases, the assessee submitted that the proposed estimation of net profit of 20% is quite high and also contrary to the decision of jurisdictional ITAT. It was further submitted that it is in the business of dealing in IMFL products 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....
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.... gross profit of 26% 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 law relied upon by the A.O. cannot made applicable to the business of the assessee. 6. The CIT(A) after considering the explanations furnished by the assessee, scaled down the estimation of net profit from 20 to 10%. The CIT(A)....
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....e 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 support of purchases and sales. The A.O. further observed that the assessee has failed to maintain stock registers and books of accounts maintained by the assessee are not susceptible for verification, therefore rejected the books of accounts and estimated net profit of 20% by relying upon the decision of Hon'ble A.P. High Court. It is the contention of the assessee that the net profit estimated by the A.O. is quite high when compared to the nature of business carried on b....
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....ribunal, under similar circumstances held that estimation of 5% net profit on purchases is reasonable. The relevant portion of the order is reproduced hereunder: "3. We have heard the parties, perused the orders of the revenue authorities as well as other materials on record. It is the contention of the Ld. A.R. that the estimation of profit at 16% is high and excessive considering the normal rate of profit in this line of business. Whereas, the Ld. D.R. supported the order of the CIT(A). Having considered the submissions of the assessee, we are of the view that the issue is no more res integra in view of a series of decisions of the ITAT Hyderabad bench in similar cases. The coordinate bench in case of ITA No.127/Hyd/12 and others dated....