IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES “B” : HYDERABAD (THROUGH VIDEO CONFERENCE)

BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER I.T.A. No. 562/HYD/2016 Assessment Year: 2011-12 M/s.Kapitan Distillery, Addl. Commissioner HYDERABAD Vs of Income Tax, [PAN: AAEFK5917A] Range-11, HYDERABAD (Appellant) (Respondent)

For Assessee : Shri A. Srinivas, AR For Revenue : Shri Rajat Mitra, DR Date of Hearing : 16-11-2020 Date of Pronouncement : 18-11-2020

O R D E R

PER D.S. SUNDER SINGH, A.M. :

This appeal filed by the assessee is directed against the order of the Commissioner of Income Tax(Appeals)-5, Hyderabad, for the AY.2011-12.

2. All the Grounds of Appeal are related to the addition of Rs.16,56,225/- as short admission of bottling charges.

3. During the assessment proceedings, the AO found that the firm has admitted the sum of Rs.1,52,27,635/- towards bottling charges, whereas the actual bottling charges said to be received from M/s. Sovereign Distilleries Pvt. Ltd., (SDL) is to the tune of Rs.1,68,83,860/- as per Form 26AS resulting in short admission of Rs.16,56,225/-. During the assessment proceedings, assessee explained that the short admission was due to reduction in contracted bottling of SDL. As against the contracted bottling of 23,30,000 Proof Liters (PLs) equivalent to about 3,59,568 cases, the SDL negotiated and reduced the bottling to 21,30,000 PLs by surrendering of 2 Lakhs PLs to Kapitan i.e. the assessee. This fact is supported by the permission granted by the Commissioner of Prohibition & Excise vide his 04/03/2011. Thus, the assessee submitted that the contractor, SDL transacted only 21,30,000 PLs consisting of 328706 cases and the corresponding bottling charges worked out to Rs.1,52,27,635/- which was received by the assessee. The assessee further submitted that the SDL neither paid the balance amount nor transacted the remaining 2 Lakhs PLs, therefore, argued that the assessee has rightly admitted the bottling charges of Rs.1,52,27,635/-.The AO not being convinced with the explanation offered by the assessee treated the difference as income and added back to the retuned income.

4. Against the order of the AO, the assessee went on appeal before the CIT(A) and reiterated the submissions made before the AO. The CIT(A) also gone with Form No.26AS and confirmed the addition made by the AO. Hence, the assessee is in appeal before the Tribunal.

5. During the appeal hearing, Ld.AR submitted that the assessee is in the manufacture of bottling of IMFL. For the AY.2011-12, assessee had the licensed capacity of 62,20,800 PLs which is equivalent to 6.48 per case as per IMFL, it works out to 9,60,000 cases and out of which permission was granted by the Commissioner of Prohibition & Excise, A.P., to enter into tie up agreement with SDL for bottling of IMFL to the tune of Rs.23,30,000 PLs equivalent to 3,59,568 cases. As SDL could not bottle as per the tie up agreement, it had requested Commissioner of Prohibition & Excise, for surrender of allotted capacity to the extent of 2 Lakhs PLs to the assessee and the same was approved by the commissioner vide order dated 04/03/2011. Accordingly, the SDL was debited with 328706 cases of of IMFL and received the sum of Rs.. 1,52,27,635/- The assessee submitted the information with regard to licensed capacity, and bottling charges, PLs debited to SDL as under:

5.1. The assessee further submitted that sum of Rs.1,68,83,360/- was never received by the assessee and the same was neither backed by the factual nor based on production, hence argued that there is no case for making the addition and accordingly, requested to delete the addition and allow the appeal.

6. On the other hand