ACIT, UDAIPUR V. M/s. Nirmal Granites P. Ltd., UDAIPUR

ITA 250/JODH/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 82955 (ITAT-JODHPUR)
• Duration Of Justice: 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 1996-1997
• Appeal Filed On: 15-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N A JOSHI
• Keywords: Business income; Charitable institution; Rule of consistency
• Section: 145

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL : JODHPUR BENCH : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO. 250 /JODH/2014 (A.Y. 1996 - 97 ) ACIT, CIRCLE - 2, UDAIPUR. VS. M/S. NIRMAL GRANITES PVT. LTD., N.H 8, NATHUDWARA, UDAIPUR (RAJ.) (APPELLANT) PAN NO. ADFPM 6202 N (RESPONDENT) ASSESSEE BY : NONE. DEPARTMENT BY : SHRI N.A. JOSHI - D.R. DATE OF HEARING : 1 3 / 0 8 /201 4 . DATE OF PRONOUNCEMENT : 08 /0 9 /201 4 . O R D E R PER N.K. SAINI, A.M TH IS IS AN APPEAL BY THE DEPARTMENT AGAINST THE ORDER DATED 30 /01 /201 4 OF L D . CIT(A), UDAIPUR . 2 DURING THE COURSE OF HEARING, NOBODY WAS PRESENT ON BEHALF OF THE ASSESSEE NEITHER ANY ADJOURNMENT WAS SOUGHT, THEREFORE, WE PROCEEDED EXPARTE QUA THE ASSESSEE AND THE APPEAL HAS BEEN DECIDED ON MERIT AFTER 2 HEARING LEARNED D.R. THE O NLY EFFECTIVE GROUND RAISED IN THIS APPEAL READS AS UNDER: - ON THE FACTS AND IN THE PRESENT CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 24,00,000/ - ON ACCOUNT OF ESTIMATED PROFIT DIVERTED TO SISTER CONCERN BY INCORRECTLY OBSERVING THAT THE ADDITION TO BE MADE ON ACCOUNT OF PROFIT ON SALE TO SISTER CONCERN , COMES ONLY TO RS. 6,43,200/ - (INSTEAD OF RS. 24,00,000/ - ) WHICH IS VERY WELL INCLUDED IN THE ADDITION MADE OF RS. 18,00,000/ - . THAT THE APPELLANT CRAVES TO ADD, AMEND, ALTER, DELETE OR MODIFY ANY OR ALL THE ABOVE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. 3. FACTS RELATING TO THIS CASE, IN BRIEF, ARE THAT THE ASSESSEE FILED THE RETURN OF INCOME DECLARING A LOSS OF RS. 14,38,760/ - ON 29/11/1996 . LATER ON , THE CASE WA S SELECTED FOR S C R UTINY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS , THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD AFFECTED SALES OF RS. 16 LAC TO ITS SISTER CONCERN M/S. NEW MARBLE HOME . HE DISPUTED THE SELLING RATE ON WHICH SALES WERE MADE TO SISTER CONCER N. HE ALSO NOTED FROM THE COPIES OF THE ACCOUNTS OF THE SISTER CONCERN REVEAL ED THAT A CREDIT OF RS. 24 LAC WAS THERE IN THE NAME OF SHRI DEEPAK JAIN, SMT. NEELU JAIN, SHRI PAWAN KUMAR JAIN AND SHRI SANJAY JAIN. THE ASSESSING OFFICER MADE THE ADDITION OF RS. 24 LAC ON ACCOUNT OF ESTIMATED PROFIT DIVERTED TO THE SISTER CONCERN . THE ASSESSING OFFICER ALSO MADE A TRADING ADDITION OF RS. 79, 94 , 107 / - . AGAINST THE ADDITION S 3 MADE BY THE ASSESSING OFFICER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) , UDAIPUR , WHO ALLOWED A RELIEF OF RS. 16,35,401/ - OUT OF THE TRADING ADDITIONS AND DELETED THE ADDITION OF RS. 24 LAC MADE BY THE ASSESSING OFFICER ON ACCOUNT OF ESTIMATED PROFIT DIVERT ED TO SISTER CONCERN . AGAINST THE SAID ORDER OF THE LD. CIT(A), DEPARTMENT FILED APPEAL BE F ORE THE ITAT IN APPEAL NO. 2 24/JU/2000 AND THE MATTER WAS RESTORED TO THE LD. CIT(A) BY OBSERVING THAT THE AMOUNT OF RS. 24 LAC COULD NOT BE SAID TO BE COVERED UNDER SUSTAINED ADDITION OF RS. 18 LAC AND ODD . T HE ASSESSEE IN THE SECOND INNING MADE THE FOLLOWING SUBMIS SIONS BEFORE THE LD. CIT(A) WH ICH ARE INCORPORATED AT PAGE NOS. 3 TO 7 OF THE IMPUGNED ORDER AND ARE REPRODUCED VERBATIM AS UNDER: - 1. THAT DURING THE ASSESSMENT PROCEEDINGS THE APPELLANT SUBMITTED SALES BILLS PERTAINING TO SALES MADE TO SISTER CONCERN M/S NEW MARBLE HOME. THAT AVERAGE RATE OF SALES MADE WORKED OUT TO RS.151.79 PER SQ . MTR. WHEREAS AVERAGE RATE OF SALES MADE TO M/S NEW MARBLE HOME WORKED OUT TO BE RS.153.19 PER SQ. MTR. I . E . , TOTAL QUANTITY SOLD COMES TO RS. 16,00,000/ 153.19= 10,445 S Q MTR. IT WAS SUBMITTED THAT THE QUALITY OF MATERIAL SOLD TO SISTER CONCERN WAS INFERIOR WHICH WAS NOT SALEABLE AT HIGHER RATES IN OPEN MARKET. THE AO COMPLETELY IGNORED THIS ASPECT OF THE CASE & TOOK HIGHEST PRICE RAN GING FROM RS.250/ - PER SQ MTR. T O RS. 600/ - PER SQ MTR. THE LEARNED AO WITHOUT BRINGING ANY MATERIAL ON RECORD CONTRARY TO ASSESSEES CONTENTION AND SIMPLY ON BASIS OF PRESUMPTION THAT ASSESSEE HAS DIVERTED PROFITS TO SISTER CONCERN AND MADE ADDITIONS TO THE TUNE OF RS. 24 LAKHS. THUS AO COMPL ETELY IGNORING THE IMPORTANT FACT ABOUT THE SALE OF INFERIOR QUALITY MADE AN ASSUMPTION THAT ASSESSEE HAS DIVERTED PROFITS TO SISTER CONCERN. THIS FACT WAS ALREADY STATED TO AO WIDE LETTER DT. 12.03.1999 AND RELEVANT EXTRACT IS REPEA T ED AS UNDER - 4 WE ARE ENCLOSING HEREWITH THE SALES ACCOUNT OF M/S NEW MARBLE HOME FOR YOUR READY REFERENCE. YOU WOULD OBSERVE FROM THE DIFFERENT SALE ACCOUNT THAT THE FIRM IS ALSO DEALING IN GLASS, WHITE CEMENT AND KOTA STONE AND OTHER GRADE WHICH IS COMPRISED UNDER MALKHATA AC COUNT. THE SALES ARE DONE MOSTLY TO THE END CONSUMERS; ACCORDINGLY MOSTLY IT WOULD BE IN CASH. WE ARE ENCLOSING HEREWITH DETAILS OF SALES MADE DURING 1995 - 96 SHOWING THEREIN BILL NO, NUMBER OF BOXES, QUANTITY IN SQ. FT./SQ.MTR, RATE EITHER IN SQ. FT/MTR . T OTAL AMOUNT OF INVOICE, EXCISE DUTY PAYABLE THEREON, TOTAL AMOUNT AFTER EXCISE ETC. YOU WOULD OBSERVE THEREIN THAT THE RATE VARIES FROM RS. 76.36 PER SQ. MTR (INVOICE NO. 67 DT. 17.6.95) TO RS. 600/ - PER SQ. MTR (INVOICE NO. 68 DT. 17.6.95). THE TOTAL QUAN TITY WHICH HAS BEEN SOLD IN SQ. MTR. WORKS OUT TO 45288.54 AND IN VALUE TERM IT COMES TO RS. 6874380/ - , THUS GIVING AN AVERAGE RATE OF RS. 151.79 PER SQ. MTR. WE HAD ALREADY SUBMITTED PHOTOCOPY OF THE INVOICES OF SOME OF THE BILLS DESIRED BY YOU. DURING TH E COURSE OF DISCUSSIONS YOU HAD RAISED THAT THE SALES WHICH HAS BEEN MADE TO SISTER CONCERNS IS ON LOWER SIDE IN COMPARISON TO SALES MADE TO SOME OF THE OTHER CONCERNS. IN THIS REGARD WE WOULD LIKE TO DRAW YOUR ATTENTION THAT SALES WHICH HAS BEEN EFFECTED TO SISTER CONCERNS ARE NORMALLY LEFTOUT ITEMS OR DEFECT QUALITY WHICH IS NOT EASILY SALEABLE TO THE CUSTOMER DIRECTLY, AS A RESULT IT IS SOLD TO THE SISTER CONCERN WHREIN IT COULD BE SOLD IN SMALLER LOTS AS AND WHEN THERE IS REQUIREMENT SINCE SISTER CONCER NS IS HAVING THEIR OWN GODOWN AT MEERUT. FURTHER, AS YOU ARE AWARE THAT UDAIPUR AND RAJSAMAND IS CONSIDERED TO BE BIG MARKET OF MARBLE, AS A RESULT CUSTOMERS FROM ALL OVER INDIA VISITS THESE PLACES, ACCORDINGLY CUSTOMERS WHO ARE MAINLY DEALERS OR BIG CUSTO MERS OR END CUSTOMERS VISIT THE PLACE TO BUY THEIR MARBLE REQUIREMENT AFTER SEEING VARIOUS UNITS. THE QUALITY WHICH IS SUPERIOR IS PICKED BY CUSTOMER VISITING THE FACTORY WHEREAS MATERIAL WHICH IS NOT IMMEDIATELY SALEABLE OR WHICH IS LEFTOUT IS MAINLY SOLD TO SISTER CONCERN OR IF THERE IS REQUIREMENT OF A PARTICULAR CUSTOMER THEN MATERIAL IS SOLD. NOTWITHSTANDING WHAT IS STATED HEREIN ABOVE, WE WOULD LIKE TO DRAW YOUR ATTENTION THAT OUR COMPANY IS RUNNING IN LOSSES AND THERE IS NO REASON WHY OUR COMPANY MUS T NOT SELL GOODS ON REASONABLE RATE AT WHICH IS BEING SOLD TO OTHERS SINCE SISTER CONCERN IS ALREADY GENERATING PROFIT AND PAYING TAXES, AS A RESULT IF ASSUMING THAT MATERIAL IS SOLD ON LOWER RATE, THEN THE TAX LIABILITY 5 WOULD GO UP. HOWEVER, THE AVERAGE R ATE WHICH HAS BEEN WORKED OUT AT RS. 151.79 PER SQ. MTR AND AVERAGE RATE FOR SALES WHICH HAS BEEN MADE TO M/S NIRMAL MARBLE HOME WORKS OUT TO RS. 153.79 WHICH IS REASONABLE LOOKING TO THE OVERALL SALES MADE BY THE COMPANY. NO MATTER HOW STRONG THE SUSPICIO N IS, IT CANNOT PARTAKE THE CHARACTER OF ADDITIONS TO INCOME. WE RELIED ON THE FOLLOWING CASE LAWS - A. DHAKESHWARI COTTON MILLS LTD VS CIT (SC 26 ITR 775) B. ASHOK KUMAR RASTOGI VS CIT (ALL. 55 TAXMANN 433) 2. THAT DURING THE ASSESSMENT PROCEEDINGS THE APPELLANT SUBMITTED THE ACCOUNT CONFIRMATION ALONG WITH BANK ACCOUNT OF ALL THE UNSECURED LOANS. IT WAS ALSO SUBMITTED THAT NO NEW LOANS WERE TAKEN DURING THE YEAR AND THE AMOUNT OF LOAN WAS CONSTANT FROM PAST SO MANY YEARS. THUS, RS. 24 LAKHS WAS OPENING BALANCE OF UNSECURED LOANS WHICH HAS BEEN ACCEPTED BY THE DEPARTMENT IN PAST ASSESSMENTS TOO. THE AMOUNT STOOD CONSISTENTLY AND SAME WAS ACCEPTED BY THE DEPART MENT EARLIER ALSO. THUS , ON THE BASIS OF RULE OF CONSISTENCY NO ADDITIONS CAN BE MADE IN LIGHT OF FOLLOWING DECISIONS - A. RADHASAOMI SATSANG VS CIT (SC 193 ITR 321) B. CIT VS RADHA SWAMI SATSANG (ALL. 201 ITR 449) C. CIT VS J.K.CHARITABLE TRUST (SC 308 ITR 161) 2.1 ALTERNATIVELY, RS.24 LAKHS AS UNSECURED LOANS CANNOT BE ADDED TO INCOME AS THE APPELLANT HA S ALREADY PROVED THE IDENTITY, GENUINENESS & CREDITABILITY OF ALL THE UNSECURED LOANS. THAT THE RELEVANT DETAILS WERE SUBMITTED TO AO WIDE LETTER DT. & 10.03.1999. RELEVANT EXTRACT IS AS UNDER DT.10.3.99 UNSECURED LOAN: WE HAD SUBMITTED COPIES OF THE CONFIRMATION ALONGWITH COPIES OF BANK ACCOUNT WHEREVER APPLICABLE ALONGWITH COPIES OF BANK ACCOUNT FROM WHERE THE FUNDS HAVE BEEN TRANSFERRED BY DEPOSITOR. FURTHER DURING THE COURSE OF HEARING ATTENDED ON 25.2.99, WE HAD EVEN FURNISHED BANK ACCOUNT OF ALL THE ASSOCIATE CONCERNS FROM WHERE THE FUNDS OF THE DIRECTORS WERE TRANSFERRED. 6 JAIN MARBLE HOME - IN THIS REGARD WE WOULD LIKE TO INFORM YOU THAT BECAUSE OF FAMILY DISPUTE AMONGST PARTNERS AND DIRECTORS OF NIRMAL GRANITES PVT LTD, IT IS NOT POSSIBLE TO OBTAIN COPIES OF SALES BILLS OF JAIN MARBLE HOME. HOWEVER, THE FIRM IS ASSESSED TO INCOME TAX UNDER GIR NO. PA - 20 - 743 - FX - 7197 - ACIT(CIR - 1) MEERUT. FURTHER THERE IS NO TRANSACTION OF ANY PURCHASE AND SALES OF JAIN MARBLES HOME. FURTHER, THE COMPANY HAS NOT T AKEN ANY LOAN FROM JAIN MARBLE HOME. DT.25.02.99 UNSECURED LOAN: - WE ARE SUBMITTING FOLLOWING COPY OF CONFIRMATION OF UNSECURED LOAN ALONGWITH COPY OF BANK ACCOUNTS FROM WHERE WITHDRAWAL MADE - B. SANJAY KUMAR JAIN C. PAWAN KUMAR JAIN D. PRADEEP KUMAR GUPTA E. PRADEEP KUMAR SINGHANIA F. PAWAN KUMAR G. PALAK DHARI H. KHAGHESH CHAND SINGHANIA I. HARISH CHAND SINGHANIA J. SHRAWAN KUMAR GUPTA IT WAS NOT THE CASE OF AO TO ADD THE ABOVE RS. 24 LAKHS WHICH APPEARED IN BOOKS OF ACCOUNTS AS UNSECURED LOANS AS DIVERSION OF PROFITS TO SISTER CONCERN . WE RELIED ON FOLLOWING CASE LAWS - A. CIT VS SHALIMAR BUILDWELL PVT LTD. (220 TAXMANN 138 ALL) B. ITAT JODHPUR IN CASE OF ITO VS PUSHPA DEVI VADERA (57 SOT 138) 3. THAT THE FIRM M/S NEW MARBLE HOME WAS ASSESSED TO TAX AS A PARTNERSHIP FIRM UNDER THE TAX RATE OF 40% AND THE APPELLANT AS A DOMESTIC COMPANY WAS ALSO ASSESSED TO TAX AT THE RATE OF 40% DURING THE RELEVANT ASSESSMENT YEAR. SINCE BOTH THE ENTITIES ARE ASSESSED TO MAXIMUM MARGINAL TAX RATE, THEREFORE THERE IS NO DIVERSION OF PROFITS AS IT LEADS TO REVENUE NEUTRALITY. WE RELIED ON FOLLOWING CASE LAWS - 7 A. CIT VS V.S. DEMPO & CO. (P.) LTD. (BOMBAY HC 196 TAXMAN 193) B. CIT VS RAMAN BOARDS LTD. (KARNATAKA HC 35 TAXMANN.COM 4) C. CIT VS INDO SAUDI SERVICES TRAVEL PVT LTD. (310 ITR 306 MUMBAI) D. ABBAS WAZIR (P) LTD. VS CIT 265 ITR 77 (ALL.) E. WALCHAND & CO. , 65 ITR 381 (SC) F. SHAJZADA NAND & SONS , 108 ITR 358 (SC) G. SA BUILDERS VS CIT, 288 ITR 1 (SC) H. CIT VS DALMIA CEMENT PVT. LTD. , 254 ITR 377 (DEL.) I. CIT VS BHARATI TELEVENTURE LTD. , 331 ITR 502 (DEL.) 4. ALTERNATIVELY, THAT TOTAL SALES MADE TO SISTER CONCERN DURING THE YEAR RS. 16,00,000/ - AND AMOUNT SUSTAINED AS TRADING ADDITION RS. 18,00,000/ - AND THE AMOUNT ADDED RS.24,00,000/ - AS DIVERSION OF PR OFITS TO SISTER CONCERN. YOUR HONOR THAT SINCE TOTAL SALES MADE TO SISTER CONCERN OF RS. 16,00,000/ - AND EVEN IF WE TAKE A MAXIMUM GP RATE OF 40.20% THE ADDITION TO BE MADE ON ACCOUNT OF PROFIT ON SALE TO SISTER CONCERN IS ONLY RS. 6,43,200/ - WHICH IS VERY WELL INCLUDED IN ADDITION MADE OF RS.18,00,000/ - . WE RELIED ON DECISION OF HONBLE DELHI HC IN CASE OF CIT VS JOHRI MA L GUPTA & CO. 4 TAXMAN 26. THEREFORE, IN LIGHT OF ABOVE FACTS. CIRCUMSTANCES & JUDICIAL PRONOUNCEMENTS, THE APPEAL OF THE APPELLANT IS TO BE ALLOWED. 4. THE LEARNED CIT(A), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, DELETED THE ADDITION BY OBSERVING AS UNDER: - I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT AS WELL AS THE FINDINGS OF THE LD. AO. KEEPING INTO CONSIDERATION THE VARIOUS CASE LAWS OF THE HIGHER APPELLATE AUTHORITIES AND THE HONBLE COURTS THE FOLLOWING FACTS AND CIRCUMSTANCES OF THE CASE ARE RELEVANT TO DECIDE THE ISSUE I) DURING THE ASSESSMENT PROCEEDINGS THE APPELLANT SUBMITTED SALE BILLS PERTAINING TO SALES MAD E TO SISTER CONCERN M/S NEW MARBLE HOME. THE AVERAGE RATE OF SALES MADE WORKED OUT TO RS.151.79 PER SQ . MTR. WHEREAS AVERAGE RATE OF SALES MADE TO M/S NEW MARBLE HOME WORKED O UT TO BE RS.153.19 PER SQ. MTR. I . E . TOTAL QUANTITY SOLD COMES 8 TO RS. 16,00,000/ - . II) THE LD. AO TOOK HIGHEST PRICE RANGING FROM RS.250/ - PER SQ MTR. TO RS. 600/ - PER SQ MTR AND THE LD. AO MADE ADDITIONS TO THE TUNE OF RS. 24 LAKHS. III) IT IS ALSO FACT ON RECORD THAT NO FRESH LOAN WAS TAKEN BY THE APPELLANT FROM ITS ASSOCIATED PART IES OR SISTER CONCERNS. IV) THE HONBLE ITAT IN ITS ORDER MENTIONED ABOVE HAS OBSERVED AT PARA 5 OF PAGE 2 AS UNDER : - THE FACTS OF THIS ISSUE ARE THAT THE ASSESSEE DECLARED GROSS PROFIT OF RS. 10,41,99/ - ON TOTAL SALES OF RS. 68,74,381/ - WHICH IN TERMS OF PE RCENTAGE COMES T O 15% . IN THE IMMEDIATELY PRECEDING YEAR, THE ASSESSEE HAS SHOWN GROSS PROFIT RATE OF 38% ON SALES OF RS. 81,80,350/ - WHICH WAS ALSO INCLUDED IN THE CLOSING STOCK . F OR THE SHARP DECREASE IN THE GROSS PROFIT RATE , T HE ASSESSEE EXPLAINED VIDE LETTER DATED 20.01.1999 THAT THE CONSUMPTION OF RAW MATERIAL HAS INCREASED IN THIS YEAR. THE LD. AO DID NOT ACCEPT THE SAME AND WITHOUT FINDING OUT ANY MATERIAL DEFECTS IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE MAINTAINED REGULARLY DURING THE COURSE OF BUSINESS, INVOKED THE PROVISIONS OF SECTION 145(2) OF THE ACT. THE LD. AO ESTIMATED SALES BY ADOPTING FORMULA THAT THE NUMBER OF MARBLE BLOCKS CONSUMED SHOULD BE MULTIPLIED BY 9.6 AND THUS MADE AN ADDITION OF RS. 79,94,107/ - BY APPLYING A GROSS PROFIT RAT E OF 40.20%. THE LD. CIT(A) IN HIS WISDOM DELETED AN AMOUNT OF RS. 61,35,401/ - ON THE REASONING THAT THE PROVISIONS OF SECTION 145 OF THE ACT ARE NOT APPLICABLE IN THIS CASE.' KEEPING INTO CONSIDERATION THE ENTIRETY OF FACTS AND CIRCUMSTANCES OF THE CASE I INCLINE TO AGREE WITH THE ALTERNATIVE PLEA OF THE LD. AR THAT TOTAL SALES MADE TO SISTER CONCERN DURING THE YEAR IS OF RS. 16,00,000/ - AND EVEN IF WE TAKE A MAXIMUM GP RATE OF 40.20%, ADOPTED BY THE LD. AO, THE ADDITION TO BE MADE ON ACCOUNT OF PROFIT ON SALE TO SISTER CONCERN COMES ONLY TO RS. 9 6,43,200/ - WHICH IS VERY WELL INCLUDED IN THE ADDITION MADE OF RS. 18,00,000/ - . ACCORDINGLY , I HAVE NO REASON TO DEVIATE FROM THE ORDER DATED 21/02/2002 OF MY LD. PREDECESSOR WHERE HE HAD DELETED THE ADDITION OF RS. 24 LAKHS ON ACCOUNT OF ESTIMATED PROFIT DIVERTED TO SISTER CONCERN AND THE GROUND OF APPEAL IS ALLOWED. IN THE RESULT, THE APPEAL IS ALLOWED. NOW THE DEPARTMENT IS IN APPEAL. 5. LEARNED D.R. STRONGLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER . 6 . WE HAVE CONSIDERED THE SUBMISSIONS OF THE LEARNED D.R. AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN THE PRESENT CASE, THE L D. CIT(A) CATEGORICALLY STATED THAT THE TOTAL SALES MADE TO THE SISTER CONCERN DURING THE YEAR WAS OF RS. 16 LAC EVEN IF MAXIMUM GROSS PROFIT RATE OF 40.20% ADOPTED BY THE ASSESSING OFFICER WAS TO BE APPLIED, THE ADDITION TO BE MADE ON ACCOUNT OF PROFIT ON SALE TO SISTER CONCERN CAME ONLY TO RS. 6,43,200/ - WHICH WAS VERY WELL INCLUDED IN THE ADDITION MADE OF RS. 18 LAC AND ODD. HE THEREFORE, DELETED THE ADDITION OF RS. 24 LAC AS WAS DONE BY HIS PREDECESSOR VIDE ORDER DATE D 21/02/2000. IN OUR OPINION, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THIS ADDITION PARTICULARLY WHEN THE ASSESSEE PROVED THE IDENTITY OF THE CREDITORS AND THEIR CREDITWORTHINESS AND GENUI NENESS, HOWEVER, THE LD. CIT(A) ACCEPTED THE 10 A L TERNATIVE PLEA OF THE ASSESSEE THAT THE TOTAL SALES MADE TO THE SISTER CONCERN AMOUNTING TO RS. 16 LAC WAS INCLUDED IN THE TRADING ADDITION SUSTAINED BY THE THEN LD. CIT(A). THIS OBSERVATION OF THE LD. CIT(A) THAT EVEN IF MAXIMUM GROSS PROFIT RATE ADOPTED BY THE ASSESSING OFFICER AT 40.20% APPLIED TO THE TOTAL SALES TO THE SISTER CONCERN , THE FIGURE CAME TO RS. 6,43,200 / - WHICH WAS VERY WELL INCLUDED IN THE TRADING ADDITION SUSTAINED BY THE LD. CIT(A) HAS NOT BEEN REBUTTED . WE THEREFORE, CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE, DO NOT SEE ANY MERIT IN THIS APPEAL OF THE DEPARTMENT. 7 . IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISMISSED . ( ORDER PRONOUNCED IN THE COURT ON 08 TH SEPTEMBER , 201 4) . S D/ - SD/ - ( HARI OM MARATHA ) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 08 TH SEPTEMBER , 201 4 . VR/ - COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE LD. CIT 4. THE CIT(A) 5. THE D.R SR. PRIVATE SECRETARY , ITAT, JODHPUR .