Itta/733/2017 Of Principal Commissioner Of Income Tax v. S. Sivarama Reddy

THE HON’BLE SRI JUSTICE C.V.NAGARJUNA REDDY AND THE HON’BLE SRI JUSTICE T.AMARNATH GOUD I.T.T.A. No.733 of 2017 Between: 28.11.2017 The Principal Commissioner of Income Tax-I, Visakhapatnam. And ..Appellant S.Sivarama Reddy, Proprietor of Sri Sivarama Sweets, Visakhapatnam ..Respondent Counsel for the appellant: Mr.K.Raji Reddy, senior standing counsel for Income Tax Department Counsel for the respondent: -- The Court made the following: :JUDGMENT (Per the Hon’ble Sri Justice C.V.Nagarjuna Reddy) The substantial questions of law raised by the appellant-Revenue pertain as to what is the proper percentage of estimated profit on unaccounted turnover. The Assessing Officer has assessed profit at 60%, the Commissioner of Income Tax (Appeals) has reduced it to 25% and the Tribunal has further reduced the same to 20%. With reference to the questions raised before it by the appellant-Revenue based on the fact that the respondent-assessee himself has declared gross profit at 60% in his financial statement, the Tribunal, in its order, has observed that though net profit is slightly on higher side in the unaccounted turnover, the possibility of overheads in the unaccounted turnover cannot be ruled out; that though the respondent-assessee has considered overheads in the regular books of accounts, the purchase component on unaccounted turnover and the possibility of the assessee incurring expenditure on other overheads cannot be ignored and that the respondent-assessee is in the business of sale of sweets, which are highly perishable in nature and that accordingly, the cost of manufacture of sweets is normally high. 2. On a careful scrutiny of the reasons assigned by the Tribunal, we are of the opinion that they are not only convincing but also rational. It is not the pleaded case of the appellant-Revenue that neither the Income Tax Act, 1961 nor any Circular prescribed a particular percentage of profit with reference to the nature of the assessee’s business. In the absence of such norms, the estimation of profit must be based on the facts and circumstances of each case having regard to the nature of the business and the expenditure on overheads etc. The order of the Tribunal has turned on appreciation of facts rather than on interpretation of law. Therefore, the issues raised by the appellant-Revenue under the head of substantial questions of law do not actually arise. 3. For the aforementioned reasons, the Appeal is dismissed. __________________________ C.V.NAGARJUNA REDDY, J 28[th] November, 2017 GHN _______________________ T.AMARNATH GOUD, J