MALSTERS & BLENDERS (INDIA) PVT. LTD., Alwar V. ACIT, Alwar

ITA 550/JPR/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5277 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 07-08-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ROSHANTA MEENA CIT DHK
• Assessee Lawyers: KRANTI MEHTA
• Keywords: Reopening of assessment; Rejection of books of accounts; Business income; Opportunity of being heard; Deemed to accrue or arise in india; Difference of opinion; Deemed dividend; Change of opinion; Reassessment proceedings
• Section: 143(3); 145; 148

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS [KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YAD AV, AM VK;DJ VIHY LA-@ ITA NO. 550/JP/2014 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2005-06 M/S MALSTERS & BLENDERS (INDIA) PVT. LTD., 6 TH KM STONE,VILLAGE- BHANKHERA, ALWAR (RAJ.) CUKE VS. ACIT, CIRCLE-01, ALWAR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO.: AADCM9600N VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI KRANTI MEHTA (CA) JKTLO DH VKSJ LS@ REVENUE BY : SMT. ROSHANTA MEENA (ADDL. CIT ) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 07/06/2017 ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT: 28 /06/2017. VKNS'K@ ORDER PER: SHRI VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A), 22, ALWAR DATED 30.05.2014 WHEREIN THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS OF APPEAL: 1. THAT THE LD. CIT(APPEALS), ALWAR ERRED IN CONFI RMING THE ACTION OF THE AO IN INITIATING REASSESSMENT PROCEEDINGS U/S 1 48 EVEN WHEN UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THERE WAS NO REASON FOR THE AO TO BELIEVE THAT SO CALLED DEEMED DIVIDEND RECEIV ED BY THE APPELLANT COMPANY ESCAPED ASSESSMENT WHILE IN FACT THERE WAS NO DEEMED DIVIDEND. HENCE, THERE WAS NO JUSTIFICATION FOR MAK ING THE IMPUGNED REASSESSMENT U/S 143(3)/148. ACCORDINGLY, THE IMPUG NED REASSESSMENT ORDER U/S 148 OF IT ACT IS BAD IN THE EYES OF LAW A ND DESERVES TO BE QUASHED. ITA NO. 550/JP/2014 M/S MALSTERS & BLENDERS (INDIA) PVT. LTD., VS ACIT, CIRCLE-01, ALWAR 2 2. THAT WITHOUT PREJUDICE TO GROUND NO. (1) ABOVE, THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF THE AO TREATING THE ADV ANCE OF RS. 5,25,000/- AS DEEMED DIVIDEND TOTALLY OVERLOOKING T HE LEGAL POSITION, FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS THE DECIDED COURT CASES. THE LD. CIT(A) FURTHER ERRED IN NOT APPRECIATING TH E FACT THAT THE ADVANCE OF RS. 5,25,000/- TO THE APPELLANT COMPANY WAS SIMPLY A LOAN AND NOT DEEMED DIVIDEND. 3. THAT THE LD. CIT(A) ERRED IN SUSTAINING THE TRADING ADDITION OF RS. 53,749/- (ADDITION MADE BY AO RS. 1,09,735/- OUT OF WHICH RELIEF ALLOWED RS. 55,986/-) EVEN WHEN THERE WAS NO COGENT JUSTIFICATION FOR SUSTAINING THE SAME. 4. THAT THE LD. CIT(A) ERRED IN SUSTAINING THE DISALLO WANCE OF RS. 30,000/- ON ACCOUNT OF EXPENSES DEBITED IN P&L ACCO UNT (ADDITION MADE BY AO RS. 50,000/- OUT OF WHICH RELIEF ALLOWED RS. 20,000/-) EVEN WHEN THERE WAS NO COGENT JUSTIFICATION FOR SUSTAINI NG THE SAME. 2. THE SUBJECT APPEAL WAS EARLIER DISMISSED EX-PART E BY THE ORDER OF THE COORDINATE BENCH DATED 30.05.2016 AND ON APPLICATIO N FILED BY THE ASSESSEE, THE EX-PARTE ORDER WAS RECALLED BY ORDER DATED 9.12 .2016 AND IT HAS NOW COME UP FOR HEARING BEFORE THIS BENCH. 3. REGARDING GROUND NO. 1 OF ASSESSEES APPEAL CHAL LENGING THE ACTION OF THE AO U/S 148 OF THE ACT, THE RELEVANT FINDING OF THE CIT(A) IS REPRODUCED AS UNDER:- 4.5 I HAVE PERUSED THE ASSESSMENT ORDER AS WELL AS SUBMISSIONS MADE BY THE APPELLANT AND FIND THAT AN ADDITION OF RS. 5,25,000 HAS BEEN MADE BY THE AO ON ACCOUNT OF DEEMED DIVIDEND U /S 2(22)(E) OF THE IT ACT. THE REASSESSMENT PROCEEDINGS WERE INITI ATED U/S 147/148 OF THE IT ACT AS IT WAS FOUND BY THE AO THAT AN UNSECU RED LOAN OF RS. 5,25,000/- HAS BEEN RECEIVED BY THE APPELLANT COMPA NY FROM M/S ALWAR MALT & AGRO FOOD MANUFACTURER COMPANY LTD., THE SIS TER CONCERN OF THE APPELLANT COMPANY AND WHICH IS COVERED UNDER THE DE FINITION OF DEEMED DIVIDEND AS PROVIDED IN THE RELEVANT PROVISIONS OF THE IT ACT. THE APPELLANT HAS RAISED AN OBJECTION TO THE INITIATION OF REASSESSMENT ITA NO. 550/JP/2014 M/S MALSTERS & BLENDERS (INDIA) PVT. LTD., VS ACIT, CIRCLE-01, ALWAR 3 PROCEEDINGS AND STATED THAT IT IS NOT COVERED UNDER THE DEFINITION OF DEEMED DIVIDEND. 4.6 I HAVE GONE THROUGH THE DETAILED SUBMISSIONS MA DE IN THIS REGARD ALONG WITH JUDICIAL DECISIONS CITED THEREIN ALONG W ITH OTHER RELEVANT MATERIAL AVAILABLE ON RECORD AND FIND THAT DUE OPPO RTUNITY WAS GIVEN BY THE AO BEFORE ISSUE OF NOTICE AND A COPY OF THE REA SONS RECORDED HAS ALSO BEEN GIVEN TO THE APPELLANT. RE-ASSESSMENT PRO CEEDINGS WERE STARTED AFTER CONSIDERING THE OBJECTIONS RAISED BY THE APPELLANT AND ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. I FIND T HAT AO HAD GIVEN REASONABLE OPPORTUNITY OF BEING HEARD TO THE APPELL ANT BEFORE INITIATING THE RE-ASSESSMENT PROCEEDINGS. THE AO HAS DISCHARGE D THE DUTY WHICH LAY UPON HIM BEFORE INITIATING THE REASSESSMENT PRO CEEDINGS. 4.7 HOWEVER, THE CASE LAWS RELIED UPON BY THE APPEL LANT DOES NOT HAVE APPLICABILITY TO THE FACTS OF THE PRESENT CASE . THE FUNCTION OF THE ASSESSING OFFICER IS TO ADMINISTER THE STATUTE WITH SOLICITUDE FOR THE PUBLIC EXCHEQUER WITH AN IN-BUILT IDEA OF FAIRNESS TO TAXPAYER (ASST. CIT V. RAJESH JHAVERI STOCK BROKERS (P) LTD., [2007] 29 1 ITR 500 (SC). IN DETERMINING WHETHER COMMENCEMENT OF REASSESSMENT PR OCEEDINGS IS VALID, THE COURT HAS ONLY TO SEE WHETHER THERE IS P RIMA FACIE SOME MATERIAL ON THE BASIS OF WHICH THE DEPARTMENT OPENE D THE CASE. THE SUFFICIENCY OR CORRECTNESS OF THE MATERIAL IS NOT A THING TO BE CONSIDERED AT THIS STAGE AS HELD BY THE SUPREME COURT IN THE C ASE OF RAYMOND WOOLEN MILLS LTD. V. ITO [1999] 236 ITR 34 (SC), GR EAT ARTS (P) LTD. V. ITO [2002] 257 ITR 639 (DELHI). THE ASSESSEE CANNOT CHALLENGE SUFFICIENCY OF BELIEF-ITO V. LAKHMANI MEWAL DAS [19 76] 103 ITR 437 (SC). 4.8 IT HAS BEEN HELD BY VARIOUS COURTS THAT IT IS T HE DUTY OF THE ASSESSEE TO DISCLOSE PRIMARY FACTS FULLY AND TRULY. RELIANCE IN THIS REGARD IS PLACED UPON THE FOLLOWING: (A) ZOHAR SIRAJ LOKHANDWALA V. M.G.KAMAT [1994] 201 0 ITR 956 (BOM) ASSESSEE PRIMARILY MUST DISCLOSE PARTICULAR PORTIONS OF DOCUMENTS WHICH ARE MATERIAL. (B) PARASHURAM POTTERY WORKS CO. LTD. V. ITO [1977] 106 ITR 1 (SC). (C) INDIAN OIL CORPORATION V. ITO [1986] 159 ITR 95 6 (SC) (D) CALCUTTA DISCOUNT CO. LTD., V. ITO [1961] 41 IT R 191 (SC) (E) ITO V. LAKHMANI MEWAL DAS [1976] 103 ITR 437 (S C) IN THE ABOVE QUOTED CASES, MAINLY IT WAS HELD THAT THE ASSESSEE MUST DISCLOSE ALL PRIMARY FACTS FULLY AND TRULY. THE WOR DS OMISSION OR FAILURE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECE SSARY FOR HIS ASSESSMENT FOR THE YEAR, POSTULATE A DUTY ON EVERY ASSESSEE TO DISCLOSE FULLY AND ITA NO. 550/JP/2014 M/S MALSTERS & BLENDERS (INDIA) PVT. LTD., VS ACIT, CIRCLE-01, ALWAR 4 TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSME NT. WHAT FACTS ARE MATERIAL AND NECESSARY FOR ASSESSMENT WILL DIFFER F ROM CASE TO CASE. THERE CAN BE NO DOUBT THAT THE DUTY OF DISCLOSING A LL THE PRIMARY FACTS RELEVANT TO THE DECISION OR THE QUESTION BEFORE THE ASSESSING AUTHORITY, LIES ON THE ASSESSEE. 4.9 THUS, IN VIEW OF THESE FACTS, I HOLD THAT AO HAD RI GHTLY INITIATED THE PROCEEDINGS U/S 147/148 OF THE IT ACT. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PURSUED THE MATERIAL AVAILABLE ON RECORD. IN THIS CASE, THE RETURN OF INCOME WAS ORI GINALLY PROCESSED UNDER SECTION 143(1) OF THE ACT AND THE REASSESSMENT NOTI CE DATED 22.05.2008 HAS BEEN ISSUED WITHIN A PERIOD OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. THE LD AR HAS REITERATED THE SUBM ISSIONS MADE BEFORE THE LD CIT(A) AND SUBMITTED THAT THERE IS NO CASE FOR D EEMED DIVIDEND U/S 2(22)(E) OF THE ACT. AS RIGHTLY HELD BY THE LD CIT(A), IN DE TERMINING WHETHER COMMENCEMENT OF REASSESSMENT PROCEEDINGS IS VALID O R NOT, WHAT HAS TO BE SEEN IS WHETHER THERE IS PRIMA FACIE SOME MATERIAL ON THE BASIS OF WHICH THE DEPARTMENT OPENED THE CASE. THE SUFFICIENCY OR CORR ECTNESS OF THE MATERIAL IS NOT A THING TO BE CONSIDERED AT THIS STAGE. IN OUR VIEW, FOR REOPENING AN ASSESSMENT, THE ASSESSING OFFICER MUST FORM A TENT ATIVE OR PRIMA FACIE OPINION ON THE BASIS OF MATERIAL THAT THERE IS AN U NDERASSESSMENT OR ESCAPEMENT OF INCOME; HE MUST RECORD THE PRIMA FAC IE OPINION INTO WRITING; THE OPINION FORMED MAY BE SUBJECTIVE BUT THE REASON S RECORDED OR THE INFORMATION AVAILABLE ON RECORD MUST SHOW THAT THE OPINION IS NOT A MERE SUSPICION AND REASONS RECORDED AND/OR THE DOCUMENTS AVAILABLE ON RECORD MUST SHOW A NEXUS OR THAT IN FACT THEY ARE GERMANE AND RELEVANT TO THE SUBJECTIVE OPINION FORMED BY THE ASSESSING OFFICER REGARDING ESCAPEMENT OF INCOME. IN LIGHT OF THE SAME, WE DONOT FIND ANY ME RIT IN THE CONTENTION OF THE ASSESSEE REGARDING INVALIDITY OF THE SUBJECT REASSE SSMENT PROCEEDINGS. IN THE RESULT, GROUND NO. 1 OF THE ASSESSEES APPEAL IS DI SMISSED. ITA NO. 550/JP/2014 M/S MALSTERS & BLENDERS (INDIA) PVT. LTD., VS ACIT, CIRCLE-01, ALWAR 5 5. REGARDING GROUND NO. 2 OF THE ASSESSEES APPEAL RELATING TO DEEMED DIVIDEND, THE BRIEF FACTS OF THE CASE ARE THAT SH. O.P. YADAV IS BENEFICIAL OWNER OF SHARES IN M/S ALWAR MALT AND AGRO FOODS MA NUFACTURERS CO. LTD., WHEREIN HIS SHARE HOLDING DURING THE YEAR IS 39.14% . THE COMPANY HAS GIVEN LOAN TO M/S MALSTERS & BLENDER INDIA PVT. LTD. OF R S. 5,25,000/-. SINCE SH. O.P. YADAV ALSO HAVE SHARE HOLDING OF 36% IN M/S MA LSTERS& BLENDER INDIA PVT. LTD., ALWAR, THEREFORE, THE REPLY OF THE A.R. OF THE ASSESSEE THAT MALSTERS& BLENDER INDIA PVT. LTD, ALWAR IS NOT A ME MBER OF ALWAR MALT & AGRO FOODS MANUFACTURERS CO. LTD., ALWAR WAS NOT HELD SA TISFACTORY. THE REQUIREMENT OF THE PROVISIONS OF SECTION 2(22)(E) I S THE HOLDING OF VOTING POWER FOR NOT LESS THAN 10% IN ANY CONCERN WHERE SU CH SHARE HOLDER IS A MEMBER OR PARTNER HAVING SUBSTANTIAL INTEREST. FURT HER, IN VIEW OF THE ANOTHER CONDITION THAT THERE SHOULD BE ACCUMULATED PROFIT I N THE HANDS OF LENDER COMPANY. M/S ALWAR MALT & AGRO FOODS MANUFACTURERS CO. LTD. WHO HAVE SUFFICIENT ACCUMULATED PROFIT AT THE TIME FORWARDIN G UNSECURED LOANS TO THE ASSESSEE COMPANY WHICH CLEARLY ATTRACTS TO BE TAX A S DEEMED INCOME IN THE HANDS OF ASSESSEE COMPANY M/S MALASTER & BLENDER IN DIA PVT. LTD. IN VIEW OF THE ABOVE THE ADVANCE OF RS. 5,25,000/- RECEIVED BY M/S MALASTER & BLENDER INDIA PVT. LTD. WAS TREATED AS DEEMED INCOME U/S 2( 22)(E) OF THE I.T. ACT WHICH IS BEING ADDED TO THE INCOME OF THE ASSESSEE COMPANY. 6. WE NOW REFER TO THE FINDINGS OF THE LD CIT(A), R ELIED UPON BY THE LD DR AND WHICH ARE REPRODUCED AS UNDER: 4.10 AS REGARDS ISSUE OF TAXABILITY OF DEEMED DIV IDEND IN THE HANDS OF THE APPELLANT COMPANY IS CONCERNED, IT IS DENIED BY THE APPELLANT ON THE FOLLOWING GROUNDS: (I) THE APPELLANT COMPANY IS NOT A SHARE HOLDER OF THE COMPANY M/S ALWAR MALT & AGRO FOOD MANUFACTURER COMPANY LTD., F ROM WHOM THE UNSECURED LOAN WAS TAKEN. ITA NO. 550/JP/2014 M/S MALSTERS & BLENDERS (INDIA) PVT. LTD., VS ACIT, CIRCLE-01, ALWAR 6 (II) THE LENDER COMPANY I.E. M/S ALWAR MALT & AGRO FOOD MANUFACTURER COMPANY LTD. DID NOT HAVE SUFFICIENT ACCUMULATED PR OFITS. (III) THE FUNDS HAVE BEEN GIVEN BY THE LENDER COMPANY OUT OF THE PNB CC ACCOUNT AND THEREFORE THE FUNDS ARE NOT OUT OF T HE PROFITS OF THE COMPANY. 4.10 I HAVE CONSIDERED THE SUBMISSIONS MADE AND FIND THA T WHAT HAS NOT BEEN STATED BY THE APPELLANT IS A FACT THAT SH O.P. YADAV IS A BENEFICIAL OWNER HAVING MORE THAN 30% SHARE HOLDING IN BOTH THE COMPANIES, THE LENDER COMPANY AS WELL AS THE RECIPI ENT COMPANY SH. O.P. YADAV HOLDS 39.14% SHARES IN M/S ALWAR MALT & AGRO FOOD MANUFACTURER COMPANY LTD. AND 36% SHARES IN THE REC IPIENT COMPANY I.E. THE APPELLANT. THE APPELLANT HAS FAILED TO APP RECIATE THE PROVISIONS OF SECTION 2(22) (E) OF THE IT ACT WHICH ARE REPROD UCED HEREUNDER THE SAKE OF CONVENIENCE:- (E) ANY PAYMENT BY A COMPANY, NOT BEING A COMPANY I N WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED, OF ANY SUM (WH ETHER AS REPRESENTING A PART OF THE ASSETS OF THE COMPANY OR OTHERWISE) [ MADE AFTER THE 31 ST DAY OF MAY, 1987, BY WAY OF ADVANCE OR LOAN TO A SH AREHOLDER, BEING A PERSON WHO IS THE BENEFICIAL OWNER OF SHARES (NOT B EING SHARES ENTITLED TO A FIXED RATE OF DIVIDEND WHETHER WITH OR WITHOUT A RIGHT TO PARTICIPATE IN PROFITS) HOLDING NOT LESS THAN PER CENT OF THE V OTING POWER, OR TO ANY CONCERN IN WHICH SUCH SHAREHOLDER IS A MEMBER OR A PARTNER AND IN WHICH HE HAS A SUBSTANTIAL INTEREST (HEREAFTER IN T HIS CLAUSE REFERRED TO AS THE SAID CONCERN)] OR ANY PAYMENT BY ANY SUCH CO MPANY ON BEHALF, OR FOR THE INDIVIDUAL BENEFIT, OF ANY SUCH SHAREHOL DER, TO THE EXTENT TO WHICH THE COMPANY IN EITHER CASE POSSESSES ACCUMULA TED PROFITS; DIVIDEND DOES NOT INCLUDE- (I) A DISTRIBUTION MADE IN ACCORDANCE WITH SUB-CLAUSE ( C) OR SUB- CLAUSE (D) IN RESPECT OF ANY SHARE ISSUED FOR FULL CASH CONSIDERATION, WHERE THE HOLDER OF THE SHARE IS NOT ENTITLED IN THE EVENT OF LIQUIDATION TO PARTICIPATE IN THE SURPLUS ASSETS; [(IA) A DISTRIBUTION MADE IN ACCORDANCE WITH SUB-CL AUSE (C) OR SUB- CLAUSE (D) IN SO FAR AS SUCH DISTRIBUTION IS ATTRIB UTABLE TO THE CAPITALISED PROFITS OF THE COMPANY REPRESENTING BON US SHARES ALLOTTED TO ITS EQUITY SHAREHOLDERS AFTER THE 31 ST DAY OF MARCH, 1964, [AND BEFORE THE 1 ST DAY OF APRIL, 1965];] (II) ANY ADVANCE OR LOAN MADE TO A SHAREHOLDER [OR THE S AID CONCERN] BY A COMPANY IN THE ORDINARY COURSE OF ITS BUSINESS, ITA NO. 550/JP/2014 M/S MALSTERS & BLENDERS (INDIA) PVT. LTD., VS ACIT, CIRCLE-01, ALWAR 7 WHERE THE LENDING OF MONEY IS A SUBSTANTIAL PART OF THE BUSINESS OF THE COMPANY; (III) ANY DIVIDEND PAID BY A COMPANY WHICH IS SET OFF BY THE COMPANY AGAINST THE WHOLE OR ANY PART OF ANY SUM PR EVIOUSLY PAID BY IT AND TREATED AS A DIVIDEND WITHIN THE MEA NING OF SUB- CLAUSE (E), TO THE EXTENT TO WHICH IT IS SO SET OFF ; (IV) ANY PAYMENT MADE BY A COMPANY ON PURCHASE OF ITS OW N SHARES FROM A SHAREHOLDER IN ACCORDANCE WITH THE PR OVISIONS OF SECTION 77A OF THE COMPANIES ACT, 1956 (1 OF 1956); (V) ANY DISTRIBUTION OF SHARES PURSUANT TO A DEMERGER B Y THE RESULTING COMPANY TO THE SHAREHOLDERS OF THE DEMERG ED COMPANY (WHETHER OR NOT THERE IS A REDUCTION OF CAPITAL IN THE DEMERGED COMPANY).] EXPLANATION 1. THE EXPRESSION ACCUMULATED PROFIT S, WHEREVER IT OCCURS IN THIS CLAUSE, SHALL NOT INCLUDE CAPITAL GAINS ARISING BEFORE THE 1 ST DAY OF APRIL, 1946, OR AFTER THE 31 ST DAY OF MARCH, 1948, AND BEFORE THE 1 ST DAY OF APRIL, 1956. EXPLANATION 2.- THE EXPRESSION ACCUMULATED PROFITS IN SUB- CLAUSES (A), (B), (D) AND (E), SHALL INCLUDE ALL PR OFITS OF THE COMPANY UP TO THE DATE OF DISTRIBUTION OR PAYMENT R EFERRED TO IN THOSE SUB-CLAUSES, AND IN SUB-CLAUSE (C) SHALL INCL UDE ALL PROFITS OF THE COMPANY UP TO THE DATE OF LIQUIDATION, [BUT SHA LL NOT, WHERE THE LIQUIDATION IS CONSEQUENT ON THE COMPULSORY ACQ UISITION OF ITS UNDERTAKING BY THE GOVERNMENT OR A CORPORATION OWNE D OR CONTROLLED BY THE GOVERNMENT UNDER ANY LAW FOR THE TIME BEING IN FORCE, INCLUDE ANY PROFITS OF THE COMPANY PRIOR TO THREE SUCCESSIVE PREVIOUS YEARS IMMEDIATELY PRECEDING THE PREVIOUS Y EAR IN WHICH SUCH ACQUISITION TOOK PLACE]. [EXPLANATION 3.- FOR THE PURPOSES OF THIS CLAUSE,- (A) CONCERN MEANS A HINDU UNDIVIDED FAMILY, OR A FIRM OR AN ASSOCIATION OF PERSONS OR A BODY OF INDIVIDUALS OR A COMPANY; (B) A PERSON SHALL BE DEEMED TO HAVE A SUBSTANTIAL INTE REST IN A CONCERN, OTHER THAN A COMPANY, IF HE IS, AT ANY T IME DURING THE PREVIOUS YEAR, BENEFICIALLY ENTITLED TO NOT LESS TH AN TWENTY PER CENT OF THE INCOME OF SUCH CONCERN;] 4.11 IT MAY BE SEEN FROM THE ABOVE, IT CLEARLY SPECIFIES THAT A PERSON WHO IS THE BENEFICIAL OWNER OF THE SHARES HO LDING NOT LESS ITA NO. 550/JP/2014 M/S MALSTERS & BLENDERS (INDIA) PVT. LTD., VS ACIT, CIRCLE-01, ALWAR 8 THAN 20% OF THE VOTING POWER, OR TO ANY CONCERN IN WHICH SUCH SHARE HOLDER IS A MEMBER OR A PARTNER AND IN WHICH HE HAS SUBSTANTIAL INTEREST. THIS, THE APPELLANT HAS BEEN TAKING UMBRAGE UNDER THE WRONG NOTION THAT THE APPELLANT COMPANY I S NOT A MEMBER/SHARE HOLDER OF THE COMPANY FROM WHOM THE LO AN HAS BEEN TAKEN DURING THE YEAR. THE APPELLANT HAS CHOSE N TO IGNORE THE FACT THAT SH. O.P. YADAV HOLDS SUBSTANTIAL INTE REST IN BOTH THE COMPANIES I.E. THE LENDER AND THE BORROWER AND THER EFORE, THE PROVISIONS OF SECTION 2(22)(E) OF THE IT ACT ARE AT TRACTED IN THIS CASE. THE APPELLANT HAS ALSO STATED IN THE SUBMISSI ONS MADE IN THE COURSE OF REMAND PROCEEDINGS THAT THE DEEMED DIVIDE ND LIABILITY ARISES IN THE HANDS OF THE INDIVIDUAL I.E. SH. O.P. YADAV. THIS CONTENTION OF THE APPELLANT IS NOT CORRECT AS THE M ONEY HAS BEEN ADVANCED BY ONE COMPANY TO ANOTHER COMPANY AND IN B OTH THE COMPANIES SH. O.P. YADAV HOLDS SUBSTANTIAL INTEREST . THEREFORE, THE PROVISIONS OF SECTION 2(22)(E) ARE CLEARLY ATTR ACTED IN THE CASE OF RECIPIENT COMPANY. 4.12 FURTHER, AS REGARDS THE ARGUMENTS OF THE APPELLANT IS CONCERNED THAT THERE WERE NO ACCUMULATED PROFITS IN THE HANDS OF THE LENDER COMPANY I.E. M/S ALWAR MALT & AGRO FOOD MANUFACTURER COMPANY LTD., IT IS FOUND TO BE NOT CORRECT AND MIS LEADING AS MAY BE SEEN FROM THE COPY OF THE SCHEDULE 2 (TO THE BAL ANCE SHEET OF THIS COMPANY)- RESERVES AND SURPLUS FOR THIS COMPAN Y AS ON 31.03.2005, 4.13 IT IS SEEN FROM THE ABOVE THAT M/S ALWAR MALT & AGR O FOOD MANUFACTURER COMPANY LTD., HAD ACCUMULATED PROFITS OF RS. 1,19,41,262 AT THE BEGINNING OF THE YEAR I.E. 01.04 .2004 AND OF RS. 90,96,946 AS ON 31.03.2005 AND THEREFORE, THE UNSEC URED LOAN GIVEN BY THIS COMPANY TO THE APPELLANT OF RS. 5,25, 000 DURING THE YEAR IS CLEARLY COVERED UNDER THE PROVISIONS OF SEC TION 2(22)(E) OF THE IT ACT AS THIS AMOUNT IS LESS THAN THE ACCUMULA TED PROFITS OF THE COMPANY AT THE BEGINNING OF YEAR AS WELL AS AT THE END OF THE YEAR. 4.14 FURTHER, AS REGARDS THE ISSUE OF GIVING MONEY OUT O F THE BANK ACCOUNT IS CONCERNED, THERE IS NO SUCH REQUIRE MENT SPECIFIED IN THE PROVISIONS OF SECTION 2(22)(E) OF THE IT ACT IS CONCERNED. IT IS A COMMON SENSE LOGIC THAT MOST OF THE COMPANIES MAINTAIN A CC ACCOUNT WITH THE BANK FOR CARRYING OUT ALL ITS BUSI NESS TRANSACTIONS AND THEREFORE, THE ARGUMENT GIVEN BY THE COMPANY TH AT THESE ARE BORROWED FUNDS DOES NOT HOLD GOOD. THE FUNDS ARE FU NGIBLE AND THE EXISTENCE OF ACCUMULATED PROFITS IN THE HANDS O F THE LENDER ITA NO. 550/JP/2014 M/S MALSTERS & BLENDERS (INDIA) PVT. LTD., VS ACIT, CIRCLE-01, ALWAR 9 COMPANY HAS ALREADY BEEN PROVED BEYOND DOUBT. THE E XISTENCE OF ACCUMULATED PROFITS IS THE ONLY REQUIREMENT SPECIFI ED IN THE PROVISIONS OF SECTION. 4.15 IN VIEW OF THE ABOVE DISCUSSION, I HOLD THAT THE PR OVISIONS OF SECTION 2(22)(E) OF THE IT ACT HAVE BEEN RIGHTLY APPLIED BY THE AO AND ACCORDINGLY CONFIRM THE ADDITION OF RS. 5,25 ,000 MADE BY THE AO UNDER THIS HEAD. 7. DURING THE COURSE OF HEARING, THE LD AR DRAWN O UR REFERENCE TO THE DECISION OF THE LD CIT(A) FOR AY 2005-06 WHEREIN TH E SAME ADDITION MADE BY THE AO UNDER DEEMED DIVIDEND HAS BEEN DELETED BY TH E LD CIT(A). FURTHER, HE SUBMITTED THAT THE ASSESSEE COMPANY IS NOT A SHA REHOLDER IN M/S ALWAR MALT & AGRO FOOD MANUFACTURER CO LTD AND HENCE, THE PROVISIONS OF SECTION 2(22)(E) ARE NOT ATTRACTED IN THE INSTANT CASE. IN SUPPORT, HE PLACED RELIANCE ON HONBLE RAJASTHAN HIGH COURT DECISION IN CASE OF HOTEL HILLTOP (313 ITR 116 (RAJ)) AND CIT VS SURAM HOLDINGS (P) LTD (D.B A PPEAL NO. 62/2011 DATED 29.03.2013, THE DECISION OF HONBLE BOMBAY HIGH COU RT IN CASE OF CIT VS IMPACT CONTAINERS (P) LTD (270 CTR 337) AND THE DEC ISION OF HONBLE DELHI HIGH COURT IN CASE OF CIT VS ANKITECH (P) LTD (242 CTR 129). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PURSUED THE MATERIAL AVAILABLE ON RECORD. THE UNDISPUTED FACTS ARE THAT THE ASSES SEE COMPANY HAS RECEIVED UNSECURED LOAN OF RS 5,25,000 FROM M/S ALWAR MALT & AGRO FOOD MANUFACTURER CO LTD. THE ASSESSEE COMPANY DOESNT HOLD ANY SHARES IN M/S ALWAR MALT & AGRO FOOD MANUFACTURER CO LTD AND IS T HUS, NOT A SHAREHOLDER IN THE SAID LENDING COMPANY. SHRI O.P YADAV IS A COMM ON SHAREHOLDER IN BOTH THE COMPANIES. HE HOLDS 36% EQUITY IN THE ASSESSEE COMPANY AND 39.14% EQUITY IN M/S ALWAR MALT & AGRO FOOD MANUFACTURER C O LTD. ON ACCOUNT OF COMMON SHAREHOLDING BY SHRI O.P YADAV AND THE FACT THAT M/S ALWAR MALT & AGRO FOOD MANUFACTURER CO LTD HAS ACCUMULATED PROFI TS AT THE TIME OF ADVANCING SUCH LOANS, IT WAS HELD BY THE AO THAT TH E PROVISIONS OF SECTION 2(22)(E) ARE ATTRACTED IN THE INSTANT CASE. ITA NO. 550/JP/2014 M/S MALSTERS & BLENDERS (INDIA) PVT. LTD., VS ACIT, CIRCLE-01, ALWAR 10 9. IN ORDER TO APPRECIATE THE CONTENTION RAISED BY THE REVENUE, IT WOULD BE RELEVANT TO REFER TO THE PROVISIONS OF SECTION 2 (22)(E) WHICH READS AS UNDER: ANY PAYMENT BY A COMPANY, NOT BEING A COMPANY IN W HICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED, OF ANY SUM (WHETHER AS RE PRESENTING A PART OF THE ASSETS OF THE COMPANY OR OTHERWISE) [MADE AFTER THE 31 ST DAY OF MAY, 1987, BY WAY OF ADVANCE OR LOAN TO A SHAREHOLDER, BEING A PERSON WHO IS THE BENEFICIAL OWNER OF SHARES (NOT BEING SHARES ENTITL ED TO A FIXED RATE OF DIVIDEND WHETHER WITH OR WITHOUT A RIGHT TO PARTICI PATE IN PROFITS) HOLDING NOT LESS THAN PER CENT OF THE VOTING POWER, OR TO ANY C ONCERN IN WHICH SUCH SHAREHOLDER IS A MEMBER OR A PARTNER AND IN WHICH H E HAS A SUBSTANTIAL INTEREST (HEREAFTER IN THIS CLAUSE REFERRED TO AS T HE SAID CONCERN)] OR ANY PAYMENT BY ANY SUCH COMPANY ON BEHALF, OR FOR THE I NDIVIDUAL BENEFIT, OF ANY SUCH SHAREHOLDER, TO THE EXTENT TO WHICH THE COMPAN Y IN EITHER CASE POSSESSES ACCUMULATED PROFITS. 10. A PERUSAL OF THE ABOVE PROVISIONS ENVISAGES THR EE SITUATIONS: - ANY PAYMENT BY A COMPANY, NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED, OF ANY SUM BY WAY OF ADVANCE OR LOAN TO A SHAREHOLDER, BEING A PERSON WHO IS THE BENEFICIAL O WNER OF SHARES HOLDING NOT LESS THAN PER CENT OF THE VOTING POWER. THE ASSESS EE COMPANY DOESNT HOLD ANY SHARES IN M/S ALWAR MALT & AGRO FOOD MANUFACTUR ER CO LTD AND IS THUS, NOT A SHAREHOLDER IN THE SAID LENDING COMPANY AND H ENCE, THIS LIMB IS NOT ATTRACTED. - TO ANY CONCERN IN WHICH SUCH SHAREHOLDER IS A MEM BER OR A PARTNER AND IN WHICH HE HAS A SUBSTANTIAL INTEREST. THIS LIMB ENVISAGES A SITUATION WHERE ITA NO. 550/JP/2014 M/S MALSTERS & BLENDERS (INDIA) PVT. LTD., VS ACIT, CIRCLE-01, ALWAR 11 THE ASSESSEE COMPANY IS A SHAREHOLDER OF M/S ALWAR MALT & AGRO FOOD MANUFACTURER CO LTD AND ALSO A SHAREHOLDER IN ANY O THER CONCERN HAVING SUBSTANTIAL INTEREST THEREIN AND M/S ALWAR MALT & A GRO FOOD MANUFACTURER CO LTD ADVANCES LOAN TO THE SAID CONCERN. THIS LIMB I S ALSO NOT SATISFIED AS WE HAVE ABOVE THAT THE ASSESSEE COMPANY IS NOT A SHARE HOLDER OF M/S ALWAR MALT & AGRO FOOD MANUFACTURER CO LTD. - ANY PAYMENT BY ANY SUCH COMPANY ON BEHALF, OR FOR THE INDIVIDUAL BENEFIT, OF ANY SUCH SHAREHOLDER, TO THE EXTENT TO WHICH THE COMPANY IN EITHER CASE POSSESSES ACCUMULATED PROFITS. THIS LIMB IS AL SO NOT SATISFIED IN THE INSTANT CASE. 11. IN LIGHT OF ABOVE DISCUSSIONS AND RESPECTFULLY FOLLOWING THE DECISIONS AS QUOTED BY THE LD AR IN CASE OF HOTEL HILLTOP AND OT HERS (SUPRA), WE ARE OF THE VIEW THAT THE PROVISIONS OF SECTION 2(22)(E) ARE NO T ATTRACTED IN THE INSTANT CASE. IN THE RESULT, THE ORDER OF THE LD CIT(A) IS SET ASIDE AND THE GROUND TAKEN BY THE ASSESSEE IS ALLOWED. 12. REGARDING THE 3 RD GROUND OF ASSESSEES APPEAL, THE BRIEF FACTS OF TH E CASE ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN MA NUFACTURING OF MALT AND MALT SPROUTS DURING THE YEAR UNDER CONSIDERATION. T HE COMPANY HAS SHOWN GROSS PROFIT OF RS. 3,00,611/- ON THE TOTAL SALES O F RS. 70,87,185/- GIVING G.P. RATE OF 4.23%. DURING ASSESSMENT PROCEEDING IT IS N OTICED THAT ASSESSEE COMPANY HAS SOLD BARLEY MALT TO HIS SISTER CONCERN M/S KAVITA ENTERPRISES @ RS. 11,020/- PMT AGAINST ONE DAY EARLIER SALE TO OT HER PARTY M/S KOOL BREWERIES LTD. @ RS. 12,760/- PMT. SAME IN THE CASE OF PURCHASES, THE ASSESSEE COMPANY HAS PURCHASED BARLEY FROM M/S KAVI TA ENTERPRISES ON THE HIGHER RATE AS AGAINST THE PURCHASES MADE FROM OTHE R CONCERN. IN VIEW OF THE ABOVE THE TRADING RESULT DISCLOSED BY THE ASSESSEE ARE NOT ACCEPTABLE. IN THE ITA NO. 550/JP/2014 M/S MALSTERS & BLENDERS (INDIA) PVT. LTD., VS ACIT, CIRCLE-01, ALWAR 12 CASE OF ASSESSEE FOR ASSESSMENT YEAR 2004-05 THE GR OSS PROFIT RATE OF M/S THE MALT MANUFACTURING PVT. LTD INVOLVED IN THE SAME MA NUFACTURING ACTIVITY WAS APPLIED THEREFORE IN THE YEAR UNDER CONSIDERATION, I APPLY THE G.P. RATE DISCLOSED BY THE M/S THE MALT MANUFACTURING P. CO. LTD. IN A.Y. 2005-06. THE ABOVE COMPANY HAS DISCLOSED GROSS PROFIT OF RS. 4,7 1,276/- ON THE TOTAL RUN OVER OF RS. 1,28,07,199/- GIVING G.P. RATIO OF 5.79 % IN A.Y. 2005-06. I THEREFORE APPLY G.P. RATIO OF 5.79% ON THE TOTAL SA LES DECLARED BY THE ASSESSEE AT RS. 70,87,165/- AFTER INVOKING THE PROVISION OF SECTION 145(3) OF I.T. ACT WHICH RESULTANT AN ADDITION OF RS. 1,09,735/- WHICH WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 13. THE RELEVANT FINDING OF THE CIT(A) ARE REPRODUC ED AS UNDER:- 5.3 I HAVE PERUSED THE ASSESSMENT ORDER AS WELL AS SUBMISSIONS MADE BY THE APPELLANT AND FIND THAT A TRADING ADDITION OF R S. 1,09,735/- HAS BEEN MADE BY THE AO AFTER APPLYING THE GP RATE OF 5.79% ON TH E DECLARED SALES OF THE APPELLANT COMPANY. THE BASIS FOR ADOPTION OF GP RAT E OF 5.79% IS THAT THIS RATE HAS BEEN DECLARED BY THE SISTER CONCERN OF THE APPELLANT COMPANY (M/S MALT MANUFACTURING COMPANY PVT. LTD.) FOR THIS YEAR AND THAT COMPANY IS ALSO ENGAGED IN THE SAME BUSINESS. THE PROVISIONS OF SEC TION 145 OF THE IT ACT HAVE BEEN INVOKED BY THE AO AS CERTAIN DISCREPANCIE S WITH REGARD TO THE SALE AND PURCHASE TRANSACTIONS EXECUTED BY THE APPELLANT WITH ANOTHER SISTER CONCERN M/S KAVITA ENTERPRISES WERE NOTICED IN THE COURSE OF EXAMINATION OF BOOKS OF ACCOUNTS. THESE DETAILS HAVE BEEN DISCUSSE D IN THE ORDER OF THE AO AS REPRODUCED ABOVE. 5.4 THE APPELLANT HAS STATED THAT AO WAS NOT RIGHT IN INVOKING THE PROVISIONS OF SECTION 145 OF THE IT ACT AS THE REAS ONS FOR REOPENING OF ASSESSMENT WERE BASED ON DEEMED DIVIDEND AND THEREF ORE, NO ADDITION COULD BE MADE UNDER THIS HEAD. IT IS ALSO SUBMITTED THAT BOOKS OF ACCOUNTS ARE DULY AUDITED AND COMPLETE VOUCHERS HAVE BEEN MAINTAINED AND NO DISCREPANCY HAS BEEN POINTED OUT. FURTHER, THE COMPANY, WHOSE GP RA TE HAS BEEN ADOPTED BY THE AO IS LOCATED IN NEEMRANA AND THE APPELLANT IS BASED IN ALWAR AND THEREFORE, THE RESULTS ARE NOT COMPARABLE. 5.5 I HAVE CONSIDERED THE SUBMISSIONS MADE ON THIS ISSUE, AND FIND THAT THERE IS NO FORCE IN THE CONTENTIONS OF THE APPELLA NT AS REGARDS THIS ISSUE IS CONCERNED. THE APPELLANT HAS NOT TAKEN A STAND THAT THIS ISSUE WAS CONSIDERED EARLIER BY THE AO AND THERE IS A CHANGE OF OPINION ON HIS PART. IN A NUMBER OF ITA NO. 550/JP/2014 M/S MALSTERS & BLENDERS (INDIA) PVT. LTD., VS ACIT, CIRCLE-01, ALWAR 13 JUDICIAL DECISIONS, IT HAS BEEN UPHELD THAT ONCE AS ASSESSMENT HAS BEEN REOPENED THAN THE POWER OF THE AO EXTENDS TO THE WH OLE ASSESSMENT WHICH IS BEFORE HIM AND IS NOT ONLY CONFINED TO THE ISSUES W HICH HAVE BEEN RECORDED IN THE REASONS. FURTHER, I FIND THAT THERE WAS NO SCRU TINY ASSESSMENT MADE UNDER SECTION 143(3) OF THE IT ACT IN THIS CASE. TH E RETURN FILED EARLIER HAS BEEN PROCESSED U/S 143(1) OF THE IT ACT. 5.6 THE AO HAS CLEARLY POINTED OUT THE DEFICIENCIE S, WHICH WERE NOTICED IN THE COURSE OF EXAMINATION OF BOOKS OF ACCOUNTS AND THE TRANSACTIONS CARRIED OUT WITH THE SISTER CONCERN WERE CLEARLY NOT AT THE ARMS LENGTH AND WERE AIMED AT REDUCTION OF TAX LIABILITY IN THE HANDS OF THE APPELLANT. IN FACT, APPELLANT HAS FAILED TO ADDRESS THIS ISSUE IN THE A RGUMENTS TAKEN IN THE COURSE OF PRESENT PROCEEDINGS AND ALSO FAILED TO FILE EVEN A SHRED OF EVIDENCE TO THE CONTRARY BEFORE THE AO OR AT THIS STAGE. THEREFORE, AO HAS RIGHTLY INVOKED THE PROVISIONS OF SECTION 145 OF THE IT ACT. HOWEVER, A S REGARDS THE ESTIMATION OF PROFITS IS CONCERNED THE ADOPTION OF GP RATE OF 5.7 9% BASED ON THE PROFIT DECLARED BY ANOTHER SISTER CONCERN OF THE APPELLANT . CONSIDERING THE SUBMISSIONS MADE BY THE APPELLANT AND HAVING DUE RE GARD TO THE FACTS OF THE CASE, I HOLD THAT IT WOULD BE JUST AND FAIR TO ADOP T A GP RATE OF 5% ON THE DECLARED SALES, WHICH WOULD COME TO RS. 3,54,360 AN D THUS THE TRADING ADDITION MADE BY THE AO WOULD BE RESTRICTED TO RS. 53,749/- (RS. 354360- 300611). THE APPELLANT WOULD GET A RELIEF OF RS. 55 ,986 ON THIS ACCOUNT. 14. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PURSUED THE MATERIAL AVAILABLE ON RECORD. THE BOOKS OF ACCOUNTS HAVE BEEN REJECTE D U/S 145(3) AND ADDITION HAS BEEN MADE ESTIMATING G.P @ 5.79% AS AGAINST 4.2 3% ON DECLARED SALES OF RS 70,87,185. THE LD CIT(A) HAS UPHELD THE REJE CTION OF BOOKS OF ACCOUNTS AND G.P ESTIMATION HAS BEEN MODIFIED @ 5% RESULTING IN SUSTAINING THE TRADING ADDITION OF RS 53,749. THE REASONS FOR REJ ECTION OF THE BOOKS OF ACCOUNTS HAS BEEN STATED TO BE THE TRADING TRANSACT IONS CARRIED OUT WITH THE SISTER CONCERN WHICH WERE HELD NOT AT THE ARMS LENG TH AND WERE AIMED AT REDUCTION OF TAX LIABILITY IN THE HANDS OF THE APPE LLANT. THE BUSINESS OF THE APPELLANT HOWEVER HAS BEEN STATED BY THE AO IN THE ASSESSMENT ORDER AS THAT OF MANUFACTURING OF MALT AND MALT SPROUTS DURING TH E YEAR UNDER CONSIDERATION. IT IS LIKELY THAT THE APPELLANT HAS CARRIED OUT THE SUBJECT TRADING TRANSACTION WITH ITS SISTER CONCERN DURING THE YEAR BESIDES THE MANUFACTURING ACTIVITY BUT THE QUESTION IS TO WHAT EXTENT, IT HAS CONTRIBUTED TO ITS OVERALL ITA NO. 550/JP/2014 M/S MALSTERS & BLENDERS (INDIA) PVT. LTD., VS ACIT, CIRCLE-01, ALWAR 14 TURNOVER AND PROFITABILITY. WHETHER THE SAID TRANS ACTION HAS CONTRIBUTED TO SUCH AN EXTENT THAT EVEN THE PROFITS IN RELATION TO THE MANUFACTURING ACTIVITIES HAVE BEEN EFFECTED AND THE BOOK RESULTS HAVE TO BE REJECTED IN ENTIRETY. THERE IS NO CLEAR FINDING BY THE AO OR EVEN BY THE LD CIT(A) IN THIS REGARD. IN OUR VIEW, WHERE THE AO HAS CONCERNS REGARDING THE T RADING TRANSACTIONS AND THE RESULTS IN RESPECT OF TRADING TRANSACTIONS ARE NOT CLEARLY ASCERTAINABLE OR DOESNT REPRESENT THE CORRECT PICTURE, HE IS WELL W ITHIN HIS POWERS TO REJECT THE BOOKS OF ACCOUNTS TO THE EXTENT OF TRADING ACTIVITI ES. IN THE INSTANT CASE, WHERE THERE IS NO DISPUTE REGARDING THE MANUFACTURI NG ACTIVITY, IT IS NOT CORRECT ON THE PART OF THE AO TO REJECT THE MANUFAC TURING RESULTS. FURTHER, IT IS NOTED THAT AFTER REJECTION OF WHOLE OF THE BOOKS OF ACCOUNTS INCLUDING TRADING AND MANUFACTURING ACTIVITIES, THE G.P DECLA RED BY THE ASSESSEE HAS BEEN REPLACED BY THE G.P DECLARED BY ANOTHER SISTER CONCERN ENGAGED IN THE SAME MANUFACTURING ACTIVITY. IT IS UNCLEAR WHETHER THE OTHER SISTER CONCERN IS ALSO UNDERTAKING TRADING IN ADDITION TO MANUFACTURI NG OR PURELY MANUFACTURING ACTIVITY. ALSO, THE REASONS FOR REJECTION OF THE BO OKS OF ACCOUNTS AND ESTIMATION OF G.P RATE HAS NO RATIONAL CONNECT. IN OUR VIEW, THE WHOLE APPROACH OF THE AO IS FROUGHT WITH INCONSISTENCY AN D LACKS APPLICATION OF A RATIONAL AND LOGICAL BASIS AND THUS CANNOT BE ACCEP TED. IN THE RESULT, WE SET- ASIDE THE ORDER PASSED BY THE AO AND REJECT THE STA ND TAKEN BY THE AO IN REJECTION OF BOOKS OF ACCOUNTS AND MAKING TRADING A DDITION. THE GROUND TAKEN BY THE ASSESSEE IS ACCORDINGLY ALLOWED. 15. REGARDING THE 4TH GROUND OF ASSESSEES APPEAL, THE RELEVANT FINDING OF THE CIT(A) IS REPRODUCED AS UNDER:- 6.3 I HAVE PERUSED THE ASSESSMENT ORDER AS WELL AS SUBMISSIONS MADE BY THE APPELLANT AND FIND THAT A DISALLOWANCE OF RS. 5 0,000/- WAS MADE BY THE AO ON ACCOUNT OF VARIOUS EXPENSES. THE AO HAS SUBMI TTED THAT NO EXPENSE VOUCHERS WERE PRODUCED FOR VERIFICATION. THE APPELL ANT HAS REITERATED THE SUBMISSIONS AND STATED THAT BOOKS OF ACCOUNTS ARE D ULY AUDITED AND NO SPECIFIC DISCREPANCY HAS BEEN POINTED OUT BY THE AO . ITA NO. 550/JP/2014 M/S MALSTERS & BLENDERS (INDIA) PVT. LTD., VS ACIT, CIRCLE-01, ALWAR 15 6.4 CONSIDERING THE SUBMISSIONS MADE AND THE FACT T HAT THE APPELLANT HAS FAILED TO FILE ANY EVIDENCE TO SUPPORT HIS CONTENTI ONS & CONTRADICT THE FINDINGS OF THE AO, I HOLD THAT IT WOULD BE FAIR TO RESTRICT THE ADDITION TO RS. 30,000/- OUT OF RS. 50,000/- UNDER THIS HEAD. 16. WE HAVE GONE THROUGH THE ORDER OF THE LD CIT(A) AND DONT SEE ANY REASON TO INTERFERE WITH THE SAME. IN ABSENCE OF PR ODUCTION OF RELEVANT VOUCHERS FOR VERIFICATION, THE AO WAS WELL WITHIN H IS RIGHT TO DISALLOW THE EXPENSES. IT IS INCUMBENT UPON THE ASSESSEE TO SUBM IT THE NECESSARY EVIDENCES AS CALLED FOR BY THE AO BUT STATING THAT THE BOOKS OF ACCOUNTS ARE AUDITED WOULD NOT ABSOLVE THE ASSESSEE FROM ITS RES PONSIBILITY TO SATISFY THE AO WHO IS WELL WITHIN HIS RIGHTS TO ENQUIRE AND CAL L FOR INFORMATION. HENCE, GROUND OF THE ASSESSEE IS DISMISSED. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28/06/2017. SD/- SD/- DQY HKKJR FOE FLAG ;KNO (KUL BHARAT) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER JAIPUR DATED:- 28/06/2017 *GANESH VKNS'K DH IZFRFYFI VXZSF'KR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT - M/S MALSTERS & BLENDERS (INDIA) PVT. LTD., 2. IZR;FKHZ@ THE RESPONDENT - ACIT, CIRCLE-01, ALWAR 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDRVIHY@ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR ITA NO. 550/JP/2014 M/S MALSTERS & BLENDERS (INDIA) PVT. LTD., VS ACIT, CIRCLE-01, ALWAR 16 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 550/JP/2014) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR.