TMI Blog2022 (11) TMI 885X X X X Extracts X X X X X X X X Extracts X X X X ..... al of such loss partly was also not correct as the reasons for such withdrawal proposed by the assessee were duly explained and the fact that the assessee-company by entering into these transactions had availed finance for the purpose of business was duly established. Applicability of TDS provision - assessee has pointed out from the relevant details of transactions that the sale proceeds were received by the assessee-company from different entities while payment towards the purchase was made towards different entities. The cost of finance thus was not paid to the party from whom the finance was actually availed and the applicability of TDS, therefore, was not warranted. Moreover, the cost incurred by the assessee for availing finance was not strictly in the nature of interest and the party selling the goods having offered the same for taxation, there is no obligation of deduction of tax at source by the assessee. Having regard to all these facts of the case, we are of the view that the disallowance made by the Assessing Officer and confirmed by the learned CIT(A) on account of alleged speculation loss is not sustainable and deleting the same, we allow Ground No.4 of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ements including the decision of Ashima Syntex Ltd, [ 2000 (8) TMI 22 - GUJARAT HIGH COURT] the assessee is entitled for depreciation at full rate as the concerned plant was ready to use on 27.09.2010 itself as agreed by the authorities below also and the business of the assessee was already in existence. We accordingly direct the Assessing Officer to allow depreciation on the said plant at full rate as claimed by the assessee and allow Ground No.7 of the assessee s appeal. Unexplained expenditure - AO disallowed the assessee s claim on account of debit notes raised by NKPL and the amount of such debit notes was added by him to the total income of the assessee by treating the same as unexplained expenditure - HELD THAT:- Amount of debit note in question was duly recognized by NKPL as its profit which was offered to tax and keeping in view that the assessee-company was a BIFR company since 2002 incurring consistent losses, it cannot be said by any stretch of imagination that the debit notes were raised to reduce the taxable income of the assessee-company as alleged by the authorities below. There was a Memorandum of Understanding entered into between the assessee-company NKP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entire corresponding sales made by the assessee-company to the parties through NSEL was duly recognized as its income in the books of account and the proceeds against the same cannot be treated as income of the assessee again as the same would amount to double addition. We, therefore, delete the addition made by the Assessing Officer and confirmed by the learned CIT(A) on this issue and allow Ground No.8 of the assessee s appeal. Claim for business loss - action of AO in treating the loss in question as speculative loss instead of trading loss - HELD THAT:- Keeping in view the submission made by both the sides, we consider it fair and proper and in the interest of justice to restore this issue to the file of the Assessing Officer with the direction to decide the same afresh after giving the assessee an opportunity to establish that all the transactions resulting in the business loss in question were made at the prevailing market price and it was not a case where the goods purchased at higher rate were sold by the assessee-company at lower rate in order to claim trading loss. Non-genuine purchases - HELD THAT:- A confirmation of Shree Rajkot Lodhika Sahakari Kharid Vechan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3/Ahd/2018 - - - Dated:- 16-11-2022 - Shri Pramod M. Jagtap, Vice President And Ms. Suchitra Kamble, Judicial Member For the Assessee : Shri S.N. Soparkar, Sr. Advocate Shri Parin Shah, AR For the Revenue : Shri Sudhendu Das, CIT-DR ORDER PER MS. SUCHITRA KAMBLE, JUDICIAL MEMBER Out of these four appeals, two appeals being ITA Nos.329/Ahd/2017 1211/Ahd/2018 filed by the assessee N.K. Industries Ltd. are filed against the order of the learned Commissioner of Income-tax (Appeals)-9 7, Ahmedabad [ CIT(A) in short] dated 22/11/2016 12/03/2018 for Assessment Years (AYs) 2011-12 2012-13 respectively, one appeal being ITA No.328/Ahd/2017 filed by the assessee namely N.K. Proteins Pvt. Ltd. is directed against the order of the CIT(A)-9, Ahmedabad dated 23/11/2016 for AY 2011-12 while the remaining one appeal being ITA No.1213/Ahd/2018 filed by the assessee namely Tirupati Proteins Pvt. Ltd. is against the order of the CIT(A)-7, Ahmedabad dated 12/03/2018 for AY 2011-12. Since these appeals filed in the case of assessees belonging to the same group involve some common issues, the same have been heard together and are being disposed of by a s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for the year under consideration was filed by it on 25.10.2011 declaring a total income of Rs.25,68,73,038/-. Although the said return was originally processed by the Assessing Officer under Section 143(1) of the Income-tax Act, 1961 ( the Act in short), the case was subsequently selected for scrutiny and a notice under Section 143(2) of the Act was issued by him to the assessee on 14.09.2012. During the course of assessment proceedings, complexities and doubts about the accounts of the assessee-company were noticed as it was a group concern of N.K. Proteins Group which was involved in transactions with National Spot Exchange Ltd. ( NSEL in short) and the assessee-company had also carried out certain transactions on NSEL platform. In order to ascertain whether the transactions with its sister-concerns were completed by the assessee-company by actual delivery of stocks or merely multiple transactions of the same stocks were done with a view to artificially inflate turnover, Special Audit of the books of accounts of the assessee-company for the year under consideration was ordered under Section 142(2A) of the Act by the competent authority. Due to financial irregularities and def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is disallowable. Further as till date the assessee group has not been able to discharge the onus of explaining the use of the funds to the extent of Rs.43.80 Crores, that it got from the so called financing transactions, for the purpose of its business the interest expenses claimed to have been incurred on the said finance is disallowed. 4.1 On the basis of the above findings/observations recorded by him, the Assessing Officer treated the amount of Rs.14,42,91,136/- as speculative loss and the claim of the assessee that the same being interest expenditure allowable as deduction was disallowed by him. 5. The action of the Assessing Officer in treating the amount of Rs.14,42,91,136/- as speculative loss was challenged by the assessee in an appeal filed before the learned CIT(A) and the following submissions were made on behalf of the assessee before the learned CIT(A) in writing in support of its case that the amount in question being finance charges/interest was deductible as business expenditure and the Assessing Officer was not justified in treating the same as speculative loss:- 5. Regarding addition on account of trading transactions on NSEL platform and loss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Income Tax Department. The Special Auditors appointed by him have given their report dated 26.9.2014. On the basis of Special Audit Report, it is stated by him that the appellant has incurred loss of Rs. 14,42,91,136/- on the transactions of cotton wash oil on NSEL through NK Proteins. The Party-wise summary of the transactions of sale and' purchase is reproduced on page 8 to 10 of the assessment order. The transactions stated by him are summarized as under:- Sale of NKIL Purchase of NKIL Goods traded Quantity Amount Quantity Amount Profits/losses Castor seeds 333154875 12778992143 333154875 13071300187 (-)292308045 Indian castor oil 47070000 4231635650 47070000 4309751760 (-)78116110 Cotton wash o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der. The same is summarized as under:- I) NK Proteins is Member Broker on NSEL. II) NK Inds. being client of NK Proteins executes T+3 contract on the electronic platform of NSEL, say for sale of 100 Kg. of castor oil to another client of another broker of NSEL for Rs. 100 per Kg. III) The other prospective client/ investor referred to above who has purchased the quantity as above executes another transaction on NSEL for sale of said quantity on T+36 contract on the electronic platform whereby it sells entire quantity purchased as above to another client of NK Proteins (say NK Corporation) for Rs.110 per kg. IV) NK Corporation carry out Intra group sale of same quantity to NK Inds., say for Rs.112 per kg. Thus, the entire quantity is set off for purchase of sale in the hands of each of the party. V) NK Inds. on the first sale receives the sale consideration within 3 days i.e. on settlement of T+3 contract. As against this, NK Corporation makes payment for purchase made by it under T+36 contract from the purchasing party of NK Inds. and it has to pay on the settlement date, after 36 days. The assesses pays to NK Corporation the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plained before the AO and even in the proceedings u/s.133A, the same is again explained by way of example as under:- i) The first step is, NKIL sells the castor oil for Rs.100 for a particular quantity to client of another broker, say to IBMA on a particular date for T+3 settlement contract. In that case, the settlement is to be carried out within 3 working days from the date of transaction. On that day of settlement, the NKIL gets payment from NKPL via NSEL. ii) The IBMA on the same day entered into contract under T+36 settlement contract with the concern related to NKIL, say NK Corporation for Rs.110. This settlement is to be made at the period of 36 working days. On the date of settlement NK Corporation pays Rs.110 to IBMA. iii) On the other end, NK Corporation sells the said material to NKIL on the same day for Rs.112 and its payment is to be made after the period of settlement of T+36 transaction. iv) Thus, the goods sold by NKIL are adjusted against goods purchased from NK Corpn. Similarly, goods purchased by IBMA are adjusted against goods sold to NK Corpn. and goods purchased by NK Corpn. from IBMA are adjusted against the goods sold to NKIL. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O's observation about considering it as speculative loss u/s. 43(5) is concerned, it may be submitted that the transactions are with a view to obtain funds, more so when even the Assessing Officer himself states the same and, therefore, the loss represents cost, and hence there is no question of invoking the provisions of section 43(5) of the Act. 5.1 The learned CIT(A) did not find merit in the submissions made on behalf of the assessee on this issue and proceeded to confirm the action of the Assessing Officer in treating the amount in question as speculative loss for the following reasons given in paragraph No. 7.2 of his impugned order:- 7.2 I have carefully considered the facts of the case, observation of the A.O as well as the case law relied upon by the appellant. It is observed that the A.O has made an addition of Rs. 14,42,91,136/- on account of loss arising out of fictitious transactions. It is observed at para-6.1 of the order that due to NSEL Scam various regulatory and law enforcement agencies are already investigating the role of the appellant as well as the N.K. Group concerns. The Investigation wing of Income-tax Department too had surveyed the N.K. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been maintained by the appellant. The books of accounts tell a different story. Even if the argument of the appellant that the transactions of NSEL platforms are financial transactions taken into account then the A.O at para- 7.16 has raised the issue of deduction of tax at source on payment of interest on these financial transactions. As no TDS has been made on such interest payment the whole quantum is liable to be added back to the income of the appellant u/s.40(a)(ia) of the Act. Therefore, the alternate argument of the appellant also fails. It is also seen that appellant has charged VAT on the purchases and sales in its books of accounts. Therefore, reliance is placed more on the nature of transactions as trade contracts and not financial transactions. I am of the considered opinion that irrespective of the contention of the appellant that these are financial transactions, I would like to rely upon what has been reflected in its books of accounts by the appellant. As all the transactions on NSEL platform conducted by the appellant were without any physical delivery these transactions are treated as speculative in nature and the loss incurred is speculative loss which cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the loss claimed is genuine having regard to the facts and circumstances of the case. The Ld.AR submitted that the funds received from NKPL are utilized for the purpose of making payment for purchases from suppliers. The funds utilized are for the purpose of business and, therefore, interest represented by loss should be allowed as deduction. For the purpose of financing, the NSEL has maintained a Settlement Account with HDFC bank in the name of N.K. Proteins Ltd. All the pay-in and payout transactions with National Spot Exchange Ltd. have taken place through this account only. Thus, the Ld.AR submitted that there was a difference between purchase and sales transactions which is considered as trading loss in the books, hence, there is no question of debiting the same as interest in the accounts. The Ld.AR submitted that moreover as will be observed from the example given by the assessee before the CIT(A), the receipt of proceeds from sale are from the different entity than the payment made towards the purchase which is from a different entity. As it is considered as trading loss, there is no question of applicability of section 40(a)(ia) of the Act. The Ld. A.R. relied upon the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nent to note here that the Ld. AR submitted before us that the transactions were entered into with a view to avail finance for the business requirements of the assessee and the loss represented the cost to get the funds to run the business. The trading facility available on NSEL attracted the assessee to enter into such transaction. But the Assessing Officer has observed that if the assessee s contention that it is a finance transaction, then it attracts the interest element which is not reflected in assessee s account. Though the contention of the assessee is that it should not be taken as speculative loss, the test of speculative loss can only be determined when the transaction itself is speculative, but in the present case the transaction was that of payment made by banking channel through account payee cheque for purchase and sale with the seller and buyers who are assessed to tax as per the contentions of the assessee. When the parties that of purchaser and seller are present and not artificial then the said transaction cannot be treated as speculative transaction and the loss incurred thereon cannot be speculative loss. The contention of the Ld. D.R. that the N. K. Proteins a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not sustainable and deleting the same, we allow Ground No.4 of the assessee s appeal. 9. As regards the next issue raised in Ground No.5 relating to the disallowance of Rs.2,65,865/- made by the Assessing Officer and confirmed by the learned CIT(A) on account of transaction charges under Section 40(a)(ia) of the Act, it is observed that even though the details of tax deducted at source from the payment of transaction charges aggregating to Rs.1,21,29,843/- were furnished by the assessee, the Assessing Officer found that the same did not relate to the transaction charges in question amounting to Rs.2,65,865/-. He, therefore, disallowed the transaction charges to that extent by invoking Section 40(a)(ia) of the Act. As noted by the learned CIT(A) in paragraph No. 8.2 of his impugned order, the assessee failed to furnish any details or make any submission to show that tax at source was deducted from the payment of Rs.2,65,865/- made on account of transaction charges paid to IBMA. He, therefore, confirmed the disallowance made by the Assessing Officer under Section 40(a)(ia) of the Act. Even at the time of hearing before us, nothing has been brought on record on behalf of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the NSEL client. It is stated by the AO that the transaction charges are debited to the purchase of commodities and are charged to P L A/c. and no recovery thereof has been made from the client. The appellant had explained that it is a practice followed by the appellant-company broker. It is not obligatory on the part of broker to recover the amount of transaction charges. The Assessing Officer has not accepted this contention of the appellant on the ground that before the Special Auditor, the appellant had explained that such transaction charges are not accepted, and hence, not recorded in the books. According to the AO, therefore, the appellant was of the view that the said charges are liable for recovery from the clients. Thereafter, he has stated that the transaction charges are debited in the P L A/c. as accepted by the assessee and assessee could not produce documentary evidence to show that it was not its obligation to recover its transaction charges. Thus, he has made the addition. The Assessing Officer has further observed that before the auditors in the course of special audit, it was stated that the payment had not accepted such transaction charges and not reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /c. The A.O pointed out that the transaction charges amounting to Rs. 1,30,29,338/- are indirectly charged to P L A/c. and no recovery has been made from its clients. The appellant submitted to the A.O on 31/10/2014 that it has debited Rs.1,30,29,338/- to its purchase accounts as transaction charges and such charges should have been recovered from its clients. However, it contended that it is upto the broker whether to recover transaction charges from its clients or not. However, the A.O has not agreed with the contention of the appellant that it is not necessary for it to recover the charges from the clients. On admission of the fact that appellant can recover the transaction charges from the clients and admission of the appellant that the transaction charges have been debited in its purchase account indirectly, the A.O. has proceeded to disallow Rs.1,30,29,338/- on account of transaction charges. It is normal practice of any broker of any exchange that the only income that the broker earns is the commission income for the transactions taken place on the platform of exchange. Over a period of time the % of said brokerage or commission has gone down. Here, the appellant is furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... served that the transaction charges in question were actually paid/incurred by the assessee-company and this position was not disputed or doubted even by the authorities below. They, however, still disallowed the deduction claimed by the assessee on account of transaction charges on the ground that the same ought to have been recovered by the assessee from the clients. As submitted on behalf of the assessee-company before the authorities below as well as before the Tribunal, there was no such obligation on the part of the assessee to recover the transaction charges from the customers and the decision not to recover the same from the clients was taken as a matter of business expediency. The transaction charges actually represented additional cost of funds raised by the assessee-company for the purpose of its business and the expenditure incurred on account of the same was wholly and exclusively for the purpose of business of the assessee as rightly contended by the learned Counsel for the assessee. In the case of Khambhatta Family Trust (supra) cited by the learned Counsel for the assessee, the Hon ble Gujarat High Court has held that the requirement for allowability of any expendit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the circumstances of the case, the Ld.CIT(A) has erred by confirming the AO's decision that the loss of Rs.44,77,69,621/- is speculative in nature. 5. In law and in the facts and circumstances of the appellant s case, the learned CIT(A) has grossly erred in confirming the disallowance made by the Ld. Assessing Officer of Rs.32,79,68,772/- on account of debit note received from N.K. Proteins Ltd treating the same as Unexplained expenditure without appreciating the facts that the same was raised in respect of the Sale difference and trade margin charged by NKPL on appellant for the exports carried on its behalf by NKPL. Furthermore, the said amount of Rs.32,79,68,772/- has already been offered for tax by NKPL and the impugned addition thus amounts to double taxation which is not permissible in law. 6. In law and in the facts and circumstances of the appellant s case, the learned CIT(A) has grossly erred in confirming the disallowance of Rs.1,45,18,708/- made by the Ld. Assessing Officer u/s.36(1)(iii) of the Act on good as well as doubtful debt and the same is not warranted since the advances are for the business purpose only. The same deserves to be deleted. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account of such debit notes firstly on 28.02.2011 for Rs.18,18,62,275/- and then on 31.03.2011 for Rs.14,61,06,496/-. In this connection, the following explanation was offered by the assessee-company before the Assessing Officer to support and substantiate the debit notes raised by the NKPL. 5. It is stated that NKPL has raised a debit note in favour of NKIL for Rs, 32,79,68,772 for poor Quality of FSG oil and that the NKPL has made exports on behalf of NKIL. 5.1 In this connection, it may please be noted that the debit note is not for the poor quality of FSG oil sold to NKPL and that the NKPL has not made any exports on behalf of NKIL. 5.2 The Debit Note [Page No. 81 to 93] is raised by NKPL in favour of NKIL as per MOU dated 20-04-2010 [Page No. 101 to 103] and as per the correspondence exchanged between NKIL and NKPL /Page No. 94 to 100] (the copy of MOU and correspondence are enclosed]. The transaction of sale of castor oil to NKPL is strictly a commercial transaction. 5.3 NKIL is the manufacturer of castor oil FSG export quality. The assesses company is not likely to fetch the sale price from the domestic market and therefore requested NKPL who is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nies and are liable to tax @ 30% with surcharge. NKIL has returned the loss. Whereas NKPL has returned the profit and paid the taxies thereon meaning by there is no question of any favour or disfavor by NKPL to NKIL. The transactions are entirely strictly commercial transactions and that the same was entered in the beginning of the year, No party was aware about the outcome of transaction at the end of the year. One may lose or one may gain which all depends upon the MOU entered into between the parties. 5.9 NKPL has charged 1% trade margin on average purchase price as per MOU dated 20-04-2010. 5.10. From the above, it may please be seen that the entire transaction is entered into by NKIL with NKPL on account of commercial expediency in as much as NKIL was not able to export since it has no credit facilities since it is BIFR company and that it has no brand name in the overseas market. Whereas in case of NKPL it is not the manufacturer of castor oil FSG and that it is star trading export house and that for the continuation of status as star trading export house it is necessary to have minimum exports. NKPL got opportunity to maintain the status and also to make some p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of poor quality of FSG Oil sold to NKPL, is conflicting statements of the assessee which establishes the modus operandi of the assessee to reduce its profit. iv) The notes on accounts are silent on this aspect. The MOU has neither been mentioned in the auditor s report nor in the Director s Report. Thus this is an afterthought of the assessee to reduce the tax liability of the company. v) Further the auditor has during the course of special audit has observed that the assessee has introduced such debit notes to reduce income of the assessee. . . v) On perusal of the debit notes issued by the NKPL and submitted by the assessee vide its submissions dated 03.11.2014, it is noticed that the debit notes are issued monthly. However, the assessee has credited the sums only on 28.02.2011 and 30.03.2011 i.e. at the end of the financial year stating that on account of debit note issued on 28.02.2011 which is factually untrue and proves the assessee s intention to reduce of reducing profit. vi) The MOU entered into by the NKPL and NKIL is nothing but an afterthought of the assessee to hide the modus operandi of reducing profit by issuing debit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which may arise to them on further sale by them for export would be belonging to the appellant. Thus, any difference between the price charged by the appellant and the price realised by the NKPL is transferred to the appellant. A perusal of the chart would show that for the month of April, May and June there was credit given by them for such rate difference. This itself shows that there was no intention of transfer of profit from the appellant, and the debit notes were raised as per the understanding between the parties. It does not represent transfer of any profit. The entry in the books of account narrating the same as debit on account of poor quality of FSG oil does not differentiate the fact that the debit note is raised on account of trade margin and price difference and that too as per the MOU. Further, it is stated that merely because MOU is not referred to in the auditors report or directors report, it does not establish that there was no such arrangement There is no requirement in audit standards to report the supporting documents for debit to P L Account in audit report unless the auditors find it to be not reliable. In fact, one has to appreciate that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as unexplained expenses on account of debit note received from N.K. Proteins Ltd. At para-8 of the order of assessment the A.O has mentioned that as per the special audit report that NKPL has raised debit note for poor quality of FSG Oil on the appellant. The rate difference on this account was not directly debited to the P L A/c. On scrutiny by the special auditor it was observed by the special auditor that the credit is given to M/s. NKPL through debit notes firstly on 28/2/2011 for Rs. 18,18,62,275/- and on 31/3/2011 for Rs. 14,61,06,496/-. According to appellant it is a manufacturer of caster oil but it has no facilities for exporting the same. Therefore, it had asked its sister concern NKPL to export on its behalf. As per the memorandum of understanding entered between the two whatever losses or profits are incurred would be borne by appellant and the NKPL would charge 1% trade margin as well as would be the beneficiary of export incentive to be received by the appellant. As per the said understanding the total export benefit received by NKPL on the export of caster oil was of Rs. 60.38 crores. During the assessment proceedings the appellant has submitted that NKPL had raise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has resulted into loss of Rs. 32.80 crores to the appellant. The special auditor has also doubted and considered the debit note as a colourable device to maximize loss of the appellant company. Further the special auditor has also pointed out that the appellant had sold caster oil to Tirupati Proteins Pvt. Ltd, which in turn had sold caster oil to another concern namely Hathibhai Bhulakhidas Pvt. Ltd. for exports as well as to M/s. NKPL (exporter for the appellant). However, Tirupati Proteins has not charged any trade margin or rate difference for the said transactions with the appellant. The different stands taken by the appellant with regard to the debit note for exports as well as for poor quality of FSG oil that too at the end of the financial year lead the A.O to doubt the genuineness of the MOU itself. The A.O has considered it as an afterthought to hide the modus operandi of the appellant to increase its loss. Accordingly, the A.O has made a disallowance of Rs. 32,79,68,772/- to the income of the appellant. During the appellate proceedings the appellant has relied upon the arguments made before the A.O during the assessment proceedings. No new argument was put forth by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithout appreciating the case of the assessee. He also invited our attention to the details of credit/debit notes issued by NKPL and submitted that the disallowance made by the authorities below, which has resulted in double taxation of the said amount, is not sustainable. 22. Learned DR, on the other hand, submitted that although it has now been claimed by the assessee that the debit notes were raised on account of price difference actually charged and realized, the same was debited in the books of account on account of poor quality of goods exported. He contended that the genuineness of the debit notes thus was doubted by the Special Auditor and the same was considered as a colourable device to maximize the loss of the assessee-company. He contended that the stand taken by the assessee on this issue thus is different from the treatment given in the books of account and the same, therefore, cannot be accepted as rightly held by the authorities below. 23. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that there is exchange correspondence between assessee and N. K. Proteins Ltd. and Memorandum of Understand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rresponding exports as the same was to be transferred to the assessee-company. Keeping in view all these facts and circumstances of the case, we are inclined to accept the claim of the assessee that the amount of debit notes in question was its business expenditure being the difference in sale price charged and actually realized which is allowable as deduction. In that view of the matter, we delete the disallowance made by the Assessing Officer and confirmed by the learned CIT(A) on this issue and allow Ground No.5 of the assessee s appeal. 24. As regards the issue raised in Ground No.6 relating to the disallowance of Rs.1,45,18,708/- made by the Assessing Officer and confirmed by the learned CIT(A) on account of interest under Section 36(1)(iii) of the Act, the relevant facts are that it was noticed by the Assessing Officer from the balance-sheet of the assessee-company as on 30.03.2011 that various advances were given by the assessee aggregating to Rs.12.10 crores to certain parties which were considered as doubtful. Since no interest was charged by the assessee on the said advances, the Assessing Officer required the assessee to show-cause as to why interest attributable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come on such sticky advances. The Assessing Officer was, therefore, requested not to take any adverse view u/s.36(1)(iii) of the Act. The appellant had also explained the nature of other balances and explained that those were opening balances and that no new advances were given. Relevant explanations of those balances are reproduced on page 31 32 of the assessment order. The Assessing Officer has, however, not accepted the said explanation and stated that the appellant has not charged interest on such advances and on the other hand it has paid interest @ 12% to 18%. The assessee had not established that the amounts were given for the business purpose. Therefore, he was justified to disallow proportionate interest. He has worked out the interest @ 12% on such balances which is disallowed at Rs. 1,45,18,708. 8.2 In this connection, the appellant may refer to the submissions filed before the Assessing Officer, copy of which is attached in the paper book, it may be noticed that the balance had arisen in the account of those parties in the past on account of trade transactions or business transactions. It is submitted that the Assessing Officer has not established that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rough following decisions is that that once it is found that the capital is borrowed for the purposes of business, the appellant is entitled to claim the interest paid thereon as deduction u/s. 36(i)(iii) of the Income-tax Act regardless of the fact that the appellant himself charges interest at the lower rates on moneys advanced out of such borrowed loans or even provides interest free advances to the sister concerns etc. The only condition which sec. 36{i)(iii) of the I. T. Act prescribes is that the capital must be borrowed for the purposes of business and the appellant must have paid the interest on the said amount and claimed it as a deduction (i) Madhya Pradesh High Court in the case of Birla Gwalior Pvt. Ltd. v/s. CIT (1962)44 ITR 847 (ii) The Madras High Court in the case of CIT v/s. Pudukottal Co. (P) Ltd. (1972)84 ITR/788 (iii) The Madhya Pradesh High Court in the case D H Secheron Electrodes Pvt. Ltd. v/s. CIT 142 ITR 528 (iv) The I.T.A.T., Ahmedabad Bench, in the case of Sahibaug Enterprise vs. I.T.O. As stated above, advances were given for business purposes in the past. The appellant being BIFR company, further transactions were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellate proceedings the appellant has submitted that the advances given to 9 persons as mentioned by the A.O are difficult to be recovered, therefore, these advances are doubtful. During the appellate proceedings the appellant could not produce any argument or cogent evidence to substantiate that the advances given were for the business purposes or not. Therefore, I agree with the contention of the A.O that in absence of any proof submitted by the appellant to establish that the sums advanced were for the business purposes and hence were given interest free, the appellant would be liable for disallowance @12% per annum on the quantum of interest u/s. 36(1)(iii) of the Act. Therefore, addition of Rs. 1,45,18,708/- is hereby confirmed and the grounds of appeal is dismissed. 27. The learned Counsel for the assessee submitted that the advances in question are old advances which were given by the assessee-company in the earlier years for business purpose. He submitted that the recovery of these advances had become doubtful and, therefore, there was no question of charging any interest thereon. He contended that the learned CIT(A), however, ignored this vital aspect and confirmed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Hon ble Apex Court, we uphold the impugned order of the learned CIT(A) confirming the disallowance made by the Assessing Officer on this issue. Ground No.7 is accordingly dismissed. 31. As regards the issue raised in Ground No.8 relating to the addition made by the Assessing Officer under Section 68 of the Act which is sustained by the learned CIT(A) to the extent of Rs.52.01 crores, the relevant facts are that the assessee-company had undertaken the transactions of Castor Seed, Castor Oil and Cotton Wash Oil with NSEL through M/s. NKPL a member of NSEL. Against the said transactions, NKPL had received payment from NSEL and a sum aggregating to Rs.244.98 crores was transferred to the bank account of the assessee-company. From the fund flow chart prepared by the Special Auditor, it was noted by the Assessing Officer that out of the said amount of Rs.244.98 crores, a major portion amounting to Rs.205.86 crores was transferred by the assessee-company to M/s. NK Corporation and the remaining amount was used for business purposes. Since the transactions with NSEL by assessee s own claim were financial in nature and no delivery of any goods was either taken or given, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the appellant company had undertaken transactions of castor seeds, castor oil and cotton wash oil on NSEL with the Member of NSEL viz NKPL. It is stated by him that NKPL has received the payment from NSEL in HDFC, NSEL Client A/c being A/c. No. 00076340013639 and from this account, the appellant NKIL has received Rs.244,98,04,635. He has referred to the observation of Special Auditors and stated that the date-wise details of payment received from NKPL - NSEL Client A/c as above and the details of utilization of such funds received were prepared from the books of the appellant and bank statement in the form of a chart submitted with special audit report. The auditors have observed that the appellant received Rs.244.98 crores and had made payment of Rs.205.86 crores to NK Corporation and the remaining amount was used for the business purpose. The appellant was, therefore, asked to explain the nature of funds received. The appellant had submitted the detailed explanation which is referred to in the assessment order. It was explained by the appellant that company had received the above amount and used Rs.244.98 crores for making the payment to the suppliers for m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e remand report dated 08.07.2016 submitted to the learned CIT(A), the Assessing Officer offered his comments as under:- 2. The assessee's request under Rule 46A is with reference to their submissions against the addition of Rs.244,98,04,635 made in the assessment order u/s.68 of the Act, holding that the said amount represents unexplained credits received in the bank account of the assessee. The Special Auditor in their Report u/s. 142(2A) had stated that out of the funds so received Rs.205.86 crores was transferred to M/s. N.K. Corporation(NKC) and the balance amount was used for the purpose of business. The assessee had contended at the time of assessment that the amount was received on account of sales made on NSEL and it was utilized for making payment for purchase of raw-material. The said submissions were not accepted as the assessee could not co-relate it with the sales made by the group and had failed to explain the nature of funds. It had simply explained the utilization of funds. It was further observed that genuineness of trade and nature of payment received which was in the nature of accommodation entries for the huge amount received was not established. It w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey have made the purchases in the trade cycle. The amount has been paid against the sales made through NKPL as broker in NSEL and against that amount NSEL had made payment in the Settlement Account of NKPL and from that account NKPL has transferred the funds to NSEL Client A/c and from such account the assessee has received funds. The assessee has further stated that as observed by the Auditor against the amount of Rs.244.98 crores received from NKPL Client A/c. they have paid Rs.205.86 crores to NKC from whom they have made purchases as reported in the Special Audit Report. Thus, it is stated that the funds are received on account of sales and it is utilized for the purpose of business. The funds are raised through trade cycle for the 'purpose of business and that assessee has also repaid the funds in the trade cycle by making payment to NKC who has made the sales. This has been explained by giving details as under:- i) Reference is made to the Special Auditor Report page 22 to 26 wherein it is reported that the funds of Rs. 244.98 crores are received by the assessee from NKPL Client A/c and against the same, the payment is made to NKC. Here, the assessee has in the cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso seen that the same quantity of goods are purchased by NKC from NSEL platform in T+36 transaction. NKC has thereafter made sales of the same quantity of goods which is purchased by them to the assessee company. Thus, the quantity of sales made by the assessee and purchases made in the cycle is the same. 31.3 When the remand report submitted by the Assessing Officer was confronted by the learned CIT(A) to the assessee, the latter submitted its rejoinder thereon as under:- 1. In the above assessment order various additions were made to the returned income which are the subject matter of appeal before your honour. One of the additions is on account of unexplained credit in the bank account amounting to Rs. 244,98,04,635 considered u/s. 68 of the I. T. Act for which on our submissions the A O has submitted remand report. 1.1 In this connection, the Assessing Officer had while considering the appellant's explanation that this amount was received against the sales made on NSEL platform by way of trade cycle in the form of T3 transactions and T36 transactions entered into by the appellant and other concerns. The Assessing Officer had in the assessment order, ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res are received by the assessee from NKPL Client A/c and against the same, the payment is made to NKC. Here, the assessee has in the course of remand proceedings explained that the correct amount of the funds paid to NKC during the year against the purchases is Rs. 193.86 crores, and there is mistake in the figure taken in the Audit Report to the extent of Rs. 12 crores. This is verified from the bank statement and also from account of NKC. ii) The assessee has further given a chart and the bank statement to show that NKC who has made the purchases from NSEL platform in the above trade cycle has made the payment to NKPL as broker. As the NKC has made the purchases from NSEL parties through NKPL being broker, they have made payment to NKPL by cheque, the amount so paid by NKC to NKPL during the year is Rs. 192.97 crores. iii) The assessee has further given chart of payment made by NKPL to NSEL Settlement A/c during the year which also includes the funds received from NKC. During the year under consideration, they have made payment of Rs. 134.01 crores to NSEL Settlement Ac from their bank account. 3.2 The above 3 charts are verified with reference to bank state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red into by the appellant on NSEL platform were in the nature of paired contracts. There was no physical delivery of goods involved in these paired contracts. The A.O has mentioned in the remand report that the appellant has made a payment of the remaining amount to N.K. Corporation in the subsequent years. However, in the remand proceedings the obligation on the appellant to repay back Rs. 52.01 crores has not been established at all. In absence of such obligation the quantum of Rs. 52.01 crore is the receipt of the appellant. As there was no actual delivery of goods for the contracts entered into by the appellant, the amount of Rs. 52.01 crores (Rs. 244.98 - 192.97 crores) is treated hereby as the income of the appellant. The appellant may have used the said amount for purchases from N.K. Corporation in subsequent years. However, as there was no payment obligation on amount of Rs. 52.01 crores the said amount is treated as income of the appellant as unexplained credit received in the NSEL client account. Accordingly, based on the findings given by the A.O in the remand report, the addition to the extent of Rs. 52.01 crores is hereby confirmed and the addition of Rs. 192.97 crores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee-company. It appears that the learned CIT(A), however, completely ignored the fact that this balance amount of Rs.52.01 crores was carried over to the next year and the same was paid by assessee-company to NKPL in the subsequent year as found by the Assessing Officer himself on verification. It is thus clear that the entire amount of Rs.244.98 crores was utilized by the assessee-company for making payment against purchase as a part of the trade cycle and consequently even the balance amount of Rs.52.01 cores cannot be treated as unexplained cash credit under Section 68 of the Act merely on the ground that the same had remained unpaid. Moreover, the entire corresponding sales made by the assessee-company to the parties through NSEL was duly recognized as its income in the books of account and the proceeds against the same cannot be treated as income of the assessee again as the same would amount to double addition. We, therefore, delete the addition made by the Assessing Officer and confirmed by the learned CIT(A) on this issue and allow Ground No.8 of the assessee s appeal. 35. Therefore, ITA No. 329/Ahd/2017 for A.Y. 2011-12 in case of N. K. Industries Ltd. is partly allowe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l the material facts relevant thereto as well as the arguments of both the sides are similar to the case of N.K. Proteins Pvt. Ltd. (supra), we follow our conclusion drawn in the case of N.K. Proteins Pvt. Ltd. (supra) and decide the issue involved in Ground No.4 in favour of the assessee. 39. As regards the issue raised in Ground No.4 of this appeal relating to the disallowance made by the Assessing Officer and confirmed by the learned CIT(A) on account of assessee s claim for business loss of Rs.20,62,50,456/-, the relevant facts are that the assessee-company had undertaken transactions of caster seeds, soya bean seeds, castor oil and cotton wash oil with group/associated concerns. As per the summary given in the Audit Report, such transactions of purchase and sales had resulted in a loss of Rs.20,62,50,456/- which according to the Special Auditor were fictitious/paper transactions without delivery. During the course of assessment proceedings, the assessee-company was called upon by the Assessing Officer to show-cause as to why the said loss should not be disallowed. In reply, the following submission in writing was offered by the assessee:- Vide point no. 2 of the no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rns are in profit which would turn into losses and / or reduce the taxable income making them liable to pay lesser amount of tax. Looking at the above explanation, it will be noticed by your good selves that the assessee had no control over the prices that it fetched as a result of the transactions entered into by it with TPPL. NKC and NKPL and therefore, the contention of Special Auditor that it is paper loss is factually erroneous. 39.1 The submission made by the assessee was not found acceptable by the Assessing Officer. According to him, the assessee-company could not provide any supporting evidence relating to the alleged sale or purchase transactions with group/associated concerns in respect of which the trading loss of Rs.20,62,50,456/- was claimed. He held that the said transactions were effected without actual delivery of goods and the loss incurred in the said transactions by the assessee thus was a speculative loss and not a trading loss as claimed by the assessee. 39.2 The action of the Assessing Officer in treating the loss in question as speculative loss instead of trading loss was challenged by the assessee in an appeal filed before the learned CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 720 648000000 Total purchase= (A) 19500000 1405050000 Sales parties (Group) N.K. Corporation 10500000 590 619500000 N.K. Proteins Pvt. Ltd. 9000000 650 585000000 Total sales =(B) 19500000 1204500000 (-)20,0550,000 4.2 In reply to above proposal of the Assessing Officer, it was specifically explained by the appellant that in so far as caster seeds purchase and sale is concerned, there are transactions with other than group concerns also, and that therefore, the observation that the transactions are duly with group concerns was incorrect. It was also explained before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus, there is no basis for presumption that the transactions with group concerns are entered into only with an intention of creating loss or transferring any profit. 4.4 Without prejudice to the above contention as stated before the AO the group concerns, i.e. Tirupati Proteins Pvt. Ltd. or N.K. Proteins Pvt. Ltd, or N.K. Corporation with whom transaction of Cotton Wash Oil are entered into are liable to tax at the maximum marginal rate, and that they have shown profit in their returns. The appellant is liable to maximum and marginal rate? Thus, there is no loss of Revenue in such transactions, and that therefore, the disallowance made merely on the ground that it is with group concern and further on presumption basis that it is diversion of income is totally unjustified and unwarranted. In connection with this contention, the appellant relies upon the following cases:- i) Reference is drawn towards the decision of Apex Court in case of CIT vs. Glaxo Smithkline (Asia) reported in 195 Taxman 35. The facts of the case are that the assessee did not have any employee other than a company secretary and all administrative services relating to marketing, finance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot only was it fruitless (on merits) but also that it may not have added anything much to the public coffers. 4.5 Apart from the above contention, it is submitted that the AO had never called upon the appellant to submit any details regarding delivery of such goods. Such transactions are reflected in stock. In the circumstances, the presumption made by him is only basis on the report of the Special Auditor who had also never called upon the appellant to give such details. Thus, the addition made in the present case is without providing adequate opportunity. 39.3 The learned CIT(A) did not find merit in the submission made by the assessee-company on this issue and proceeded to uphold the action of the Assessing Officer in treating the loss in question as speculative loss instead of trading loss for the following reasons given in paragraph Nos. 9.2 to 9.2.1 of his impugned order:- 9.2 I have carefully considered the assessment order, remand report of the Assessing Officer, rejoinder, facts of the case and the submissions made by the appellant. The AO made the impugned addition after a detailed discussion in his order which is reproduced above. It was held by him ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not raise any objection for sending the matter back to the Assessing Officer for verifying the claim of the assessee that all the transactions in question with associated concerns were effected by the assessee-company at the prevailing market rate. 42. We have heard both the parties and perused all the relevant material available on record. Keeping in view the submission made by both the sides, we consider it fair and proper and in the interest of justice to restore this issue to the file of the Assessing Officer with the direction to decide the same afresh after giving the assessee an opportunity to establish that all the transactions resulting in the business loss in question were made at the prevailing market price and it was not a case where the goods purchased at higher rate were sold by the assessee-company at lower rate in order to claim trading loss. 43. As regards Ground No.5 raised by the assessee in this appeal, it is observed that the issue involved therein relating to the disallowance made by the Assessing Officer and confirmed by the learned CIT(A) on account of assessee s claim for deduction towards debit notes raised by N.K. Proteins Limited is similar t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. On the facts and in the circumstances of the case, the Ld.CIT(A) has erred in accepting the contentions of the Assessing Officer that he had reasons to believe that special audit was required in the given case. 3. In law and in the facts and circumstances of the appellant s case, the learned CIT(A) has grossly erred in confirming the addition made by the Ld. Assessing Officer of Rs.108,97,00,000/- by treating the same as unexplained credit u/s.68 of the Act. 4. In law and in the facts and circumstances of the appellant s case, the learned CIT(A) has grossly erred in confirming the addition of Rs.59,69,58,528/- made by the Ld. Assessing Officer on account of nongenuine purchase. The impugned addition deserves to be deleted. 5. In law2 and in the facts and circumstances of the appellant s case, the learned CIT(A) has grossly erred in confirming the addition of Rs.2,04,63,344/- made by the Ld. Assessing Officer as unexplained sales. The impugned addition deserves to be deleted. 6. In law and in the facts and circumstances of the appellant s case, the learned CIT(A) has grossly erred in confirming the addition of Rs.10,04,170/- made by the Ld. Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer under Section 143(3) of the Act. It is also observed that a similar issue was involved in the case of N.K. Industries Limited for AY 2011-12 and the same has already been decided by us in favour of the assessee in the foregoing portion of this order deleting the similar addition made by the Assessing Officer and sustained by the learned CIT(A). Keeping in view the conclusion drawn in the case of N.K. Industries Ltd. (supra) and having regard to the facts of the case discussed above, we are of the view that the addition made by the Assessing Officer and confirmed by the learned CIT(A) on this issue under Section 68 of the Act is not sustainable and deleting the same, we allow Ground No. 3 of the assessee s appeal. 50. As regards Ground No.4 of this appeal relating to the addition of Rs.59.70 crores made by the Assessing Officer and confirmed by the learned CIT(A) on account of non-genuine purchases, the relevant facts of the case are that the assessee had undertaken transactions of Cotton Wash Oil (CWO) on NSEL platform through its Member M/s. N.K. Proteins Ltd. As pointed out in the Special Audit Report, the assessee-company had shown purchases of CWO amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs.59.70 crores were claimed by the assessee in excess of sales actually made and by treating the same as non-genuine, he made an addition of Rs.59.70 crores to the total income of the assessee. 50.2 The addition of Rs.59.70 cores made by the Assessing Officer on account of alleged non-genuine purchases was challenged by the assessee in an appeal filed before the learned CIT(A) and the following submission was made on behalf of the assessee before the learned CIT(A) in support of its case on this issue. 6.1 This addition has been discussed in para 7 of the assessment order. It is stated by the AO that on scrutiny of the transaction of cotton wash oil on NSEL Platform through broker NKPL, entered into by the appellant. It is noticed that the appellant had shown total purchases of cotton wash oil from NKPL at Rs. 1350,43,10,147 (for 25,99,17,979 Kgs) whereas on verification of details from NSEL transaction of NKPL it was seen that the NKPL has shown sale of cotton wash oil of Rs.1290,73,51,619 (for 24,97,37,981 Kgs), According to the AO, since all the transactions are without delivery and paper transactions, the difference in purchase by assessee and sale of NKPL is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12952 15575715420 The Assessing Officer has, however, not accepted the said contention. He has referred to details of total purchase and sale of cotton wash oil by appellant which as per the report of Auditors is as under:- The Assessing Officer has while rejecting the contention of the appellant observed that i) The total purchase of cotton wash oil on NSEL platform was of Rs. 1350.43 crores, whereas corresponding sale by NKPL is of Rs.1290.73 crores. It is stated by the Assessing Officer that the appellant had submitted soft copy of purchase and sale register to prove the transactions. However, according to him, in absence of profit for actual delivery of goods and confirmation of the parties, the register is not acceptable to him. ii) The appellant has not submitted proof for actual delivery of goods purchased from NKPL. iii) Assessee as well as Nilesh Patel has already accepted that NSEL transactions are only paper transactions and no actual delivery has taken place. Therefore, he questions delivery of goods sold through NSEL. iv) The appellant had submitted reconciliation before Auditors showing that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant and the assessee has not reconciled the actual sale purchase carried out on NSEL platform. 6.4 In this connection, the appellant submits as under:- i) The Assessing Officer has referred to purchases shown by the assessee from NKPL which were sold on NSEL platform, it was specifically explained that these sales include sale of 10,180 MT referred to earlier which is received by physical delivery. The AO has referred to cross verification of the details of NSEL transactions of cotton wash oil by NKPL for sale to the assessee. However, he has failed to appreciate that the cotton was oil purchased from NKPL which is referred to by the Assessing Officer, is with reference to transaction by way of trade cycle referred to above. However, it does not include the physical delivery of stock from NKPL which is sold on NSEL platform to the respective parties through NKPL. Thus, AO and the Auditors have ignored the actual delivery of stock of 10,180 MT purchased from NKPL. The appellant had explained that this physical stock was sold to different parties of NSEL and, that therefore, the sale to those parties was on account of this physical stock as also the stock on acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nting to Rs. 13,50,43,10,147/- (weighing 259917979 kgs) whereas on cross verification, it was seen that NKPL had shown sale of CWO to the appellant amounting to Rs.12,90,73,51,619/- [weighing 249737981 kgs). Thus, the appellant i.e. Tirupati Proteins Pvt. Ltd. (TPPL) had shown excess purchases amounting to Rs.59.70 crores over the sales shown by NKPL. The AO after a discussion in his order, held that it was an undisputed fact that all the transactions entered into by the appellant and its group concerns on the NSEL platform were paper transactions and also that the appellant could not furnish any proof of actual delivery of goods as claimed. The appellant on the other hand during the assessment as well as appellate proceedings .including vide its rejoinder to the remand report has stated that evidences in respect of the transactions entered into by it and the purchases and sales made to different parties had been furnished to the AO by way of a certificate stating that goods were actual delivered. On a perusal of all the material available on record, I find that the appellant submitted a certificate from Shree Rajkot Lodhika Sahkari Kharid Vechan Sangh Ltd. of Rajkot which stated t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of goods and it was not a part of trading cycle effected by the assessee-company through NSEL for raising finance. As submitted on behalf of the assessee-company, NKPL was having one functionary unit at Rajkot Lodhika Sahkari Kharid Vechan Sangh, situated at Rajkot and they had sold 10,180 CWO to the assessee-company on actual delivery basis. The said sale was duly recorded and recognized in the books of NKPL as verified by the Assessing Officer and the corresponding sale of 10,180 MT of CWO made by the assessee-company from the purchases made from NKPL was duly supported by the party-wise details furnished by the assessee-company. The said sale recorded and recognized by the assessee-company in its books of account was accepted by the authorities below and we find merit in the contention raised by the learned Counsel for the assessee that the corresponding purchases cannot be disallowed when the sale was accepted. A confirmation of Shree Rajkot Lodhika Sahakari Kharid Vechan Sangh Ltd. was also filed by the assessee confirming delivery of CWO made to the concerned parties on various dates. Moreover, the quantitative details furnished by the assessee also revealed that the quanti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, cannot be treated as unexplained cash credit and Section 68 of the Act has no application. We find merit in this contention of the learned Counsel for the assessee and since the learned DR has not been able to dispute the position that the amount in question represented sale proceeds realized by the assessee-company, we accept the contention of the learned Counsel for the assessee that Section 68 of the Act has no application and the addition made by the Assessing Officer and confirmed by the learned CIT(A) on this issue by invoking Section 68 of the Act cannot be sustained. Ground No.6 of assessee s appeal is accordingly allowed. 56. As regards the issue raised in Ground No. 7 relating to the disallowance of Rs.3,17,346/- made by the Assessing Officer and confirmed by the learned CIT(A) on account of interest expenses, it is observed that interest free advances were given by the assessee to five parties during the year under consideration. Since the assessee failed to establish that the said advances were given for the purpose of business, the interest attributable to the said advances as worked out at Rs.3,17,346/- was disallowed by the Assessing Officer. At the ti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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