M/s Prakash Oils Ltd., Dhar V. The ACIT ,Central-1, Indore

CO 3/Ind/2022

AI Insights

The case involves multiple appeals and cross objections related to the assessment years 2011-12, 2012-13, and 2015-16, concerning the disallowance of losses and adjustments made by the Assessing Officer (AO) and the Transfer Pricing Officer (TPO). The main issues revolved around the genuineness of losses claimed by Prakash Oils Ltd. on the NMCE platform and the appropriateness of the transfer pricing methods used by the TPO. The CIT(A) had earlier provided relief to the assessee by deleting the disallowances and adjustments made by the AO and TPO, which was contested by the Revenue in the Tribunal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 122596 (ITAT-INDORE)
• Duration Of Justice: 10 month(s) 28 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 29-01-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 16-11-2022
• Assessment Year: 2012-2013
• Appeal Filed On: 02-03-2022
• Other Referred Cases: ACIT vs. GRD Commodities Ltd., BEW Cable & Conductors Pvt Ltd vs. ACIT, K.R. Santosh Kumar vs. ACIT, ITO vs. M/s Sugar Chem, Swastik Coal Corporation Pvt. Ltd. vs. Pr. CIT, General Finance Company vs. CIT, Kolhapur Canesugar Works Ltd vs. Union of India, CIT vs. Valibhai Khanbhai Mankad, CIT vs. Marikamba Transport Co.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained expenditure; Transfer pricing; Rule of consistency; Transactions in derivatives; Corroborative evidences; Non compliance; TDS; Set aside
• Section: 147; 131; 68; 27; 148; 263; 69C; 143(3); 10AA; 40(a)(ia); 133(6); 194C; 80IA; 139(1); 48; 40a(ia); 72; 119; 92CA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI C.M. GARG, JUDICIAL MEMBER AND SHRI BHAGIRATH MAL BIYANI, ACCOUNTANT MEMBER ITA Nos.235, 226 & 227/Ind/2021 Assessment Years: 2011-12, 2012-13 & 2015-16 The ACIT, Central-1, Indore. Vs. Prakash Oils Ltd., Village-Kheda, Pithampur, Distt. Dhar -454775 PAN: AABCP8087G (Appellant) (Respondent) CO Nos.2 to 4/Ind/2022 (ITA Nos.235, 226 & 227/Ind/2021) Assessment Years: 2011-12, 2012-13 & 2015-16 Prakash Oils Ltd., Village-Kheda, Pithampur, Distt. Dhar -454775 PAN: AABCP8087G Vs. The ACIT, Central-1, Indore. (Cross Objector) (Respondent) Assessee by : Shri Ajay Tulsian, CA & Ms Ruchira Singhal Revenue by : Shri P.K. Mishra, CIT, DR Date of Hearing : 17.11.2022 Date of Pronouncement : 30.01.2023 ORDER PER C.M. GARG, JM: These appeals filed by the Revenue and the Cross Objections filed by the assessee are directed against the separate orders of the CIT(A)-3, Bhopal, relating to Assessment Years 2011-12, 2012-13 & 2015-16. ITA Nos.235, 226 & 227/Ind/2021 CO Nos.2 to 4/Ind/2022 2 ITA No.235/Ind/2021 (AY 2011-12) 2. Grounds No.1, 2 and 3 of the Revenue read as under:- “1. The ld. CIT(A) has erred in law and on facts in deleting the disallowance of contrived losses on NMCE (Rs.9,33,62,482/-) by overlooking the glaring evidences/findings of synchronized trades executed by the assessee with a cluster of brokers/ counterparties on NMCE exchange which had resulted in excessive losses which were then set-off against profits from other exchanges. 2. The ld. CIT(A) erred in ignoring that execution of trades on a recognized exchange (NMCE) as per rules, on screen based platform through banking channels and entries in books had no relevance in deciding the genuineness of losses which were inherently managed/contrived losses. 3. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in facts by placing reliance on allowance of algorithmic trading by SEBI while ignoring the facts that even such transactions resulted in continued losses which otherwise should have been profitable. The ample direct/ circumstantial evidences of synchronized trades indulged by the assessee have gone unnoticed in the CIT(A) order.” 3. Apropos the above grounds, the ld. CIT-DR submitted that the ld. CIT(A) has deleted the disallowance of contrived losses on NMCE (Rs.9,33,62,482/-) by overlooking the glaring evidences/findings of synchronized trades executed by the assessee with a cluster of brokers/ counterparties on NMCE exchange which had resulted in excessive losses which were then set-off against profits from other exchanges. Further, the ld. CIT-DR submitted that the ld. CIT(A) has also erred in ignoring that execution of trades on a recognized exchange (NMCE) as per rules, on screen based platform through banking channels and entries in the books had no relevance in deciding the genuineness of losses which were inherently managed/contrived losses. The ld. CIT-DR vehemently pointed out that the ld. First appellate authority has also erred in facts by placing reliance on allowance of algorithmic trading by SEBI while ignoring the facts that even such transactions ITA Nos.235, 226 & 227/Ind/2021 CO Nos.2 to 4/Ind/2022 3 resulted in continued losses which otherwise should have been profitable. The ld. CIT- DR submitted that the AO has rightly made disallowance in the hands of the assessee after considering the entire gamut of the transaction to avoid tax liability by rightly observing that the trades entered into by the assessee on NMCE were synchronized, pre-planned and executed for booking contrived losses by misusing NMCE platform. The ld. CIT-DR has also submitted that the ld.CIT(A) has granted relief to the assessee by deleting the substantive addition of Rs.3,89,04,955/- and protective addition of Rs.5,44,57,527/-. Therefore, the impugned first appellate order may kindly be set aside and the order of the AO may be restored. 4. Replying to the above, the ld. Assessee’s representative (ld. AR) submitted that the ld.CIT(A) considered the explanation and supporting documentary evidence of the assessee and, thereafter, concluded that no addition is called for in this regard. The ld. AR also submitted that nothing wrong was found during the course of assessment proceedings by the AO and he proceeded to make the addition on the basis of assumptions, surmises and conjectures. Therefore, the ld.CIT(A) was right in deleting the addition. The ld. AR also drew our attention to para 4.4 to 4.4.6 of first appellate order and submitted that after considering the order of the ITAT, Kolkata Bench passed under identical facts and circumstances, the ld.CIT(A) rightly concluded that the AO was not justified in making the impugned addition which include protective addition of Rs.5,44,57,527/- and the remaining part as substantive addition. 5. On careful consideration of the above rival submissions, first of all, we note that the AO invoked the provisions of section 147 of the Act and, thereafter, concluded that the losses obtained by the assessee on NMCE platform were contrived ITA Nos.235, 226 & 227/Ind/2021 CO Nos.2 to 4/Ind/2022 4 losses and those losses were incurred by executing the synchronized trades dealing in illiquid commodities only. He also alleged that the losses were incurred with a specific intention to reduce taxable income by setting off the same against the profits earned against other stocks/business activities. The assessee carried the matter before the ld.CIT(A) and the ld.CIT(A) granted relief to the assessee with the following observations and findings:- “Ground No. 3, 7 &10:- Through these grounds of appeal, the appellant challenged addition of Rs. 9,33,62,482/- made by the AO on account of disallowance of artificial losses. Out of this amount addition of JTs. 3,89,04,955/- has been made on substantive basis and balance addition of Rs. 5,44,57,527/- has been made on protective basis since this addition was already made by the AO on the same issue in the regular assessment order passed u/s 143(3) of the Act on 3 1.03.2014, as stated by the AO in Para 14 of the reassessment order. On perusal of assessment order passed u/s 143(3j~bf the Act, it was seen that the AO during assessment proceedings found that the appellant has declared profits and also claimed losses in respect of commodity trades conducted on various exchanges. Lateron a letter was received from ITO (Intelligence) Indore forwarding a copy of letter issued by DIT (I&CI) Mumbai dated 04.02.2014 wherein referring to certain observations of the enquiry report of Forward Market Commission (FMC) regarding artificial trading volume in commodity trades, the ITO (Intelligence) Indore was required to carry out necessary investigation, who in turn forwarded the said letter to the AO for information. Considering the fact that the appellant has suffered losses on trades on NMCE through brokers S. N. Commodities and Shubhlaxmi Commodities the appellant was required to file confirmed copy of accounts from both the brokers and to explain as to why the loss should not be disallowed. The submission filed by the appellant before the AO is also abstracted in the assessment order. It is further observed by the AO that both the brokers were summoned u/s 131 which were duly responded and copy of account and other documents including the copy of penalties order were obtained by the AO from the brokers. The AO found that the exchange has imposed penalties on the brokers and again issued show cause on 24.03.2014 to the appellant along with copies of replies received by the AO from both the brokers. The submission made by the appellant is also abstracted in the assessment order. The AO stated that detailed enquiries were conducted by the Director of Income Tax (I&CI) Mumbai who has established that some brokers were involved in non-genuine and have booked bogus losses or gain for the beneficiaries / clients and relying on such reports of DIT (I&CI) dated 04.02.2014 and the fact that the NMCE exchange has imposed penalties on the brokers for ITA Nos.235, 226 & 227/Ind/2021 CO Nos.2 to 4/Ind/2022 5 their misconduct and disallowed the loss of Rs. 5,44,57,527/- through these brokers as non-genuine claim. Thereafter, during the course of reassessment proceedings the AO noticed that a search and survey operation was conducted on commodity traders group including the assessee by the Investigation Wing Ahmadabad on 18.12.2014. During this operation it was found that with the help of members of NMCE exchange, the appellant has booked artificial losses in commodity trades on NMCE platform, which have been set off against profits from trading in other exchanges / business activities. A show cause notice on this issue was issued on 30.10.2018 proposing to disallow such losses and after considering the submissions made by the assessee, it was held by the AO that the trades under consideration are synchronized trades on screen based trading platform. All such trades were executed in a short time and always resulted in a loss, therefore, cannot be held to be mere coincidence. It is further stated by the AO that the assessee has made profits in commodity trades on other exchanges and exclusively made losses on NMCE only. The AO found that the appellant was registered as a client with four different brokers for trades on NMCE and these brokers were penalized by NMCE due to one or the other reasons. It was found that the members of NMCE i.e. the brokers have inconsistently increased the volume of trades towards end of the financial year and therefore, the NMCE had imposed penalties on such members which is in the range of Rs. 25,000/- to Rs. 1,00,000/- in FYs 2010-11 and 2011-12. Further enquiries were conducted with regard to some of the brokers and it was found that either the given addresses were closed or the brokers were not available on such addresses. Thereafter, the AO has abstracted some analysis of trade and drew the conclusion that the trades executed by the appellant resulting into consisting losses were synchronized trade. It is further stated in the assessment order that the director of the company Shri Anandram Chothwani was confronted and he gave evasive replies and one line answer that he is working in different exchange and there is no mala-fide intention from such trades. The AO has also given a tabular working of profit / losses in respect of commodity trades in FYs 2009-10 to 20.11-12 in the assessment order and has stated that during the financial years 2010-11 and 2011-12 the assessee has booked losses to the tune of Rs. 18,87,47,472/- and also mentioned that as per pre-search working the loss figure was at Rs. 14,50,12,857/- and the figure of brokerage, service tax and profit figure was not included therefore there is a difference in the figure. The AO finally reached to the conclusion that the appellant has earned sufficient profits on MCX and NCDEX and incurred losses on NMCE platform so as to set off the profits against such losses and disallowed an amount of Rs. 9,33,62,482/-. The AO further stated that and addition of Rs. 5,44,57,527/- was already made on the same issue in the regular assessment order passed u/s 143(3) of the Act dated 31.03.2014 the addition to that extent was made on protective basis and would become substantive if the addition as per earlier order u/s 143(3) of the Act is deleted. ITA Nos.235, 226 & 227/Ind/2021 CO Nos.2 to 4/Ind/2022 6 4.4.1 The appellant through the written submission for appeal filed against order u/s 143(3) of the Act has submitted that it had earned a net income of Rs. 8,80,23,836/- in respect of trading of commodities and derivatives and has earned profit as well as losses through NCDEX, NMCE and MCX exchanges through various brokers. The appellant filed the contract notes / bills of transactions, copies of ledger accounts of the brokers, confirmations, copies of bank statements and submitted that all the transaction were carried out on the recognized exchanges through registered brokers and also stated that the penalties were imposed on the brokers for their misconduct and also that the sole reason of disallowing the loss by the AO was the report of the DIT(I&CI) Mumbai. It is the case of the appellant that the enquiry commission report was with reference- to the members of NMCE and not with regard to the clients, whereas the appellant was only a client and not a member of NMCE. Neither enquiry commission report nor the report of DIT (I&CI) was provided to the appellant and if at all anything has happened, at the Exchange level, only the said Exchange i.e.NMCE or its registered brokers could have explained the same and could have been held responsible and not the appellant. Referring to the independent enquiries conducted by the AO by issuing the summons u/s 131 to both the brokers, the appellant contended that the same were duly complied and the replies received from these brokers by the AO were also provided to the appellant who have independently confirmed the transactions done by them at NMCE. The appellant further through its written submission, filed against order passed u/s 147 r.w.s 143(3) of the Act, has contended that this issue was not forming part of the ‘reasons to believe' as recorded by the AO for initiating these reopening proceedings, further this issue was categorically examined during the regular assessment proceedings and in fact part of the losses amounting to Rs. 5,44,57,527/-was also disallowed in the regular assessment order, therefore, the issue stood examined and cannot be a subject of reassessment order more over when there was no failure on the part of the appellant to disclose all material facts fully and truly. The appellant has also contended that all the allegations made in the reassessment order are baseless and the addition has been made purely on surmises and conjectures. The brokers through whom the appellant has transacted were registered broker at the NMCE exchange and the trades are duly substantiated by proper contract notes which include order no., trade no., trade time, quantity, purchase price, sale price, contract specification, brokerage charged etc which were also filed during the course of assessment proceedings along with the ledger account of the brokers. It is also submitted by the appellant that all the financial transactions are through proper banking channels. It is also contended that the detailed allegations made in the reassessment order were never confronted with the appellant which fact is also evident from the show cause notice dated 30.10.2018 which is also reproduced in the reassessment order. The appellant has contended that the transactions of commodity trades has resulted into a net gain of Rs. 8,80,23,836/- to the ITA Nos.235, 226 & 227/Ind/2021 CO Nos.2 to 4/Ind/2022 7 appellant which has been duly offered for taxation. Further, the trades carried out at NMCE through registered brokers were on screen based trading platform to which the appellant had no access and the counter party to such trades is never known to the appellant. With regard to the observation that the brokers were not found at the given addresses, the appellant has submitted that this stand of the AO is wrong and contradictory. On one hand the AO has stated that the brokers were registered at NMCE and NMCE has also levied penalties on such brokers therefore, their existence should not have been doubted. The AO never confronted this fact with the appellant. The appellant referring to the regular assessment proceedings stated that during those proceedings summons/notice u/s 133(6) were issued by the AO to the brokers who duly complied with the same and represented their matters before the then AO. It is further submitted by the appellant that the entire discussion made by the AO in the reassessment order is with respect to brokers namely S. N. Commodities, Shubhlaxmi Commodities, Subhlamxi Traders and Sairam Commodities and there is no reference or any discussion of a broker M/s Kissan Commodities, through whom also the appellant carried out trades at NMCE and still adverse view has been taken even in respect of trades through this broker. With regard to the penalties imposed on the brokers, it is contended by the appellant that no details of such penalty orders is given by the AO, however, as evident from the reassessment order itself very nominal and token penalties were imposed by NMCE on these brokers. It is the case of the appellant that no default was pointed out by the AO in the contract notes or the transactions of the appellant with these brokers. It is also vehemently contended that during the survey conducted upon the appellant by the Ahmedabad Investigation Wing along with other commodity traders nothing incriminating or adverse was found which could even remotely suggest any wrong doing on the part of the appellant. With regard to the various workings and tables given by the AO in the assessment order, the appellant has submitted that the same were never confronted with the appellant and all the analysis of the trade data obtained from NMCE are self serving observation of the Investigation Wing and there is nothing on record to establish the reliability of such data and also the authenticity and correctness of various analysis and the mandatory provisions contained in section 65A and 65B of the Indian Evidence Act 1872 providing for admissibility of electronic records as evidence have not been followed. The appellant has also placed reliance on certain decisions wherein on identical facts, similar addition made have been deleted. The appellant has also challenged the addition made on protective basis on the contention that the said amount was already added in the assessment u/s 143(3) and the addition so made on protective basis has resulted into again levying tax on the same and also charging of excessive interest. 4.4.2 After considering the observation made in the assessment order and also taking into consideration the written submissions of the appellant carefully it is seen that the regular assessment in this case was made u/s ITA Nos.235, 226 & 227/Ind/2021 CO Nos.2 to 4/Ind/2022 8 143(3) wherein part of such losses suffered by the appellant were already disallowed. It is also seen that this issue under consideration was not the reason for reopening as this case was reopened only on the issue of disallowance of freight expenses u/s-40(a)(ia), which addition has already been deleted above. Coming to the next issue of addition it is seen that appellant has carried out trading in commodities and derivatives on various exchanges such as MCX, NCDEX and NMCE and has earned net income from such trading. However, the AO is of the view that the appellant has incurred only losses on NMCE which are artificial losses through synchronize trades undertaken for reducing the profits earned on similar trades on other exchanges. It is undisputed fact that such trading was done by the appellant through registered brokers of the exchange and on screen based trading platform. It is also not disputed that the appellant has filed all the relevant documents such as contract notes of the registered brokers showing order No., trade no., trade time, quantity, purchase price, sale price, contract specification, brokerage charge etc along with ledger accounts of the brokers and all the transactions are through normal banking channels. The respective exchange has also confirmed the trades carried out by the appellant. It is categorically mentioned in Para 9.1 of the reassessment order that there is no denying to the fact that the assessee has traded on NMCE through registered brokers as their client and the trading details are as per the contract notes issued by them for NMCE transactions. As a matter of fact during the course of assessment proceedings, independent enquiries were also conducted by the then AO from the brokers M/s S. N. Commodities and M/s Shubhlaxmi Commodities by issuing summons u/s 131 and the copies of replies received by the AO from these brokers were also provided to the appellant as stated in Para 4.6 of the impugned assessment order. The brokers have confirmed that the appellant has carried out the trades through them and have also filed the ledger account of the appellant in their books of accounts.The only basis for disallowing the loss and making the addition seems to be the report of DIT (I&CI) Mumbai dated 04.02.2014 which was never provided to the appellant for rebuttal. So far as the issue of levying penalty by the NMCE on the brokers, it is seen that the same was properly explained by the appellant to the AO through its written submission dated 26.03.2014 filed on 27.03.2014 which is also abstracted in para 4.5 in the assessment order wherein it was explained by the appellant that penalties of Rs. 25,000/- each was levied on two occasion on both the brokers in respect of the trades of these brokers undertaken on 18.02.2011 and 10.03.2011 and that there is no reference of any particular trade or client in respect of which such penalties were levied. The appellant also submitted before the AO that the assessee has not undertaken any trade through the broker M/s Shubhlaxmi Commodities on 18.02.2011 on which a penalty of Rs. 25,000/- was levied for trades undertaken on 18.02.2011. This fact in itself shows that the penalty levied on the broker cannot be correlated with the trades of the appellant. ITA Nos.235, 226 & 227/Ind/2021 CO Nos.2 to 4/Ind/2022 9 4.4.3 A survey was conducted on the appellant on 18.12.2014 by the Investigation Wing Ahmadabad along with search / survey operations in commodity traders group. There is nothing on record to suggest that any incriminating material was found in this survey from the appellant indicating any wrong doing on the part of the appellant. It is also seen that the director of the appellant was examined and the relevant part of his statement has also been abstracted by the AO in the assessment order however, there is nothing in the statement which reveals that the appellant had admitted of any wrong doing or had agreed to book contrived losses. The appellant has filed complete details of the commodity transactions with requisite documentary evidences and there is no self-incriminating averment at any stage by the appellant. 1 also find that independent enquiries were conducted from certain brokers of the appellant by the erstwhile AO during the regular assessment proceedings wherein the brokers have confirmed the transactions of the appellant. Relevant documents to this effect are filed in the paper book. Further the undisputed fact that the brokers were registered at NMCE and NMCE has also penalized therefore their identity cannot be doubted. Even the fines levied by NMCE on these broker is very nominal. There is nothing on record that the appellant was ever held guilty of committing any wrong doing by the FMC or by the NMCE or that the transactions of the appellant through the brokers were held to be ingenuine by any regulatory authority so as to have any doubt on the same. The transactions were carried out on screen based trading platform and there is nothing on record to suggest that the counter party to such trades was acquainted with the appellant. The allegations made against the appellant are not based on any sound footing and there is no evidence on record that such commodities transactions are bogus. On the contrary, the documentary evidences substantiating the transactions filed by the appellant remain uncontroverted. The onus casted upon the appellant to prove the genuineness of the transactions has been properly discharged. Similar documentation was maintained by the appellant in respect of commodities trades on other exchanges which was accepted by the AO. 4.4.4 On perusal of the chart reproduced on page 18 of the reassessment order it is seen that in the year 2009-10 the appellant has suffered heavy losses even on other exchange in respect of which no adverse view has been taken. Further in Para 11.22 of the reassessment order, the AO himself has stated that in some transactions the appellant has also earned profits though the amount is meager. It is also the case of the AO that the price discovery mechanism on NMCE platform was rigged and the brokers / clients operated in the clusters with mutual understanding. However, in screen base trading mechanism of any exchange the client or the customer has no excess and the counter party to the trade is never known. 4.4.5 I find that on identical facts the Honourable ITAT Kolkatta Bench in the cases of AC1T V/s GRD Commodities Ltd. in JT(SS)A No. 120 to ITA Nos.235, 226 & 227/Ind/2021 CO Nos.2 to 4/Ind/2022 10 123/Kol/2018 vide order dated 04.12.2020 had an occasion to deal with the identical case. The sole issue involved was the disallowance of loss incurred by the assessee in trading of commodities on the NMCE treating it to be bogus. In this case also survey u/s 133 A of the Act was conducted on 18.12.2014 by the Investigation Wing Ahmedabad in connection with search in the case of commodities traders and the assessment concluded u/s 143(3) of the Act were reopened u/s 148 of the Act and on the basis of the same set of analysis of trade data and enquiries of the brokers conducted by the Investigation Wing Ahmedabad and the losses incurred by the assessee in commodity transactions conducted on the NMCE platform were disallowed. The disallowances were deleted in the first appeal and the department filed second appeal before the Honourable ITAT. It is also to note that even the assessment years involved are also AY 2010-11 and AY 2011-12. The Honourable ITAT not only quashed the reopening proceedings but also decided the appeal on merits and held that it did not find any infirmity in the order of the C1T(A) deleting the said disallowance. The facts of the case before the Honourable ITAT were pari-materia identical in so far as the allegations in this case were also that synchronize transactions were executed by the assessee in illiquid commodities, 97% transactions were executed within a minute, almost all the transactions were squared off within the same day, the transactions were synchronized and executed with a clear intention to book the contrived losses in the last four months of the respective financial years, 70% of the volume of the trades has been created by only 25 brokers with further concentration to 10 brokers, most of the volume was created by top 100 clients out of which top 25 clients were creating almost 60% volume and clear clustering among the brokers was found. All the brokers through whom the assessee has traded were penalized by NMCE for their involvement in non-genuine trade and some of them were not available on the given addresses etc. In the case before the Honourable ITAT the statement of the director of the assessee company was recorded who did not give any reasonable explanation and submitted only mechanical reply. Thus I find that the observations made by the AO in the present appeal before me arc replica of the observations and allegations made by the AO in the case before the Honourable ITAT. The Honourable ITAT affirmed the findings of the Id CIT(A) and observed and held as under:- “47. As far as the Revenue’s grievance viz., the assessee had obtained loss through synchronized trading with a set of counter-party brokers is concerned, we note that except for making unsubstantiated averments, the AO did not bring on record any evidence/material which could have supported his conclusion that the commodity transactions conducted by the assessee were bogus. It is noted that the AO did not even spell out the names of these counter-party brokers nor did he bring on record any material which could go on to show that these counter party brokers were engaged in synchronized trading. On the other hand, it is noted that the documentary evidences substantiating the commodity transactions, as ITA Nos.235, 226 & 227/Ind/2021 CO Nos.2 to 4/Ind/2022 11 submitted by the assessee, were neither controverted by the AO or the Ld. CJT, DR. Each and every commodity transaction, which the assessee conducted through NMCE members, was supported by time stamped contract notes which were issued in conformity with the regulations formulated by NMCE. The contract notes provided the specific particulars as required to be spelt out as per NMCE regulations. It is noted that each transaction was followed by the payment in due course and in the manner required by the Exchange regulations. We therefore find that all the primary documents and evidences, which the assess-re in its capacity as regular dealer in securities was expected to maintain, had been maintained and the same was furnished before the AO. We find that there is nothing brought on record by the Revenue which establishes that the assessee was acquainted with any counter party brokers which indulged in orchestrated wrong doing for the purpose of claiming bogus losses, instead we note that the onus casted upon assessee to prove the genuineness of the transactions has been discharged by it and neither the AO/Ld. CIT, DR could point out any infirmity in the document produced nor could adduce any adverse material to shift the burden/onus back on assessee or could disprove the evidence adduced by the assessee to substantiate the transaction. So, the assessee has discharged the primary onus on it to prove the genuineness of the transaction. 48. The Id. AR further invited our attention to the fact that, similar documentation was maintained by the assessee in respect of its commodity transactions on other exchanges as well. It is interesting to find that, all these transactions which were supported by similar documentation, were considered to be genuine and bonafide by the AO because the assessee had reported net gains therein. We thus note that the sole reason for which the AO questioned the genuineness of the transactions conducted on NMCE was only because the assessee reported overall loss. In our view, this approach of the AO was clearly untenable on the facts as well as in law. We are of the opinion that AO could not have blown hot and cold at the same time. On one hand, he on similar set of documentation accepts the transaction which yielded gains, whereas on similar set of document carried out in electronic platform, when loss occurred, he did not accept. In such a scenario, the AO is stopped from picking and choosing without having in his possession material or evidence to take a different/adverse view. Such action of AO cannot be countenanced unless the AO was able to establish any link between the assessee and the counter party brokers and bring on record some evidence/material to show that the assessee was party to synchronized trading which the AO failed to do so, so we are of the opinion that the AO could not have disputed the genuineness of the loss. 49. We note that the Ld. CIT(A) had examined the relevant data referred to by the AO in the impugned order to infer the act of synchronized trading and found that this information referred to by the AO was a smoke screen and that it did not in any manner suggest that the ITA Nos.235, 226 & 227/Ind/2021 CO Nos.2 to 4/Ind/2022 12 assessee or any of the counter-party brokers were guilty of synchronized trading. The relevant findings recorded by the Ld. CIT(A) in this regard is as follows: 10. ... In the entire order the Ld. AO has made general and sweep remarks based on certain irrelevant materials. 111’. The Ld. AO has doubled the genuineness because the transactions were squared off at short durations However the mere fact that the transactions were squared off in short duration resulting in loss cannot by itself be the reason to question the genuineness oj the loss, if the facts on record proved that such transactions had in fad been carried out on the Exchange and these were reflected in the records of the Exchange at the material time and no falsity or infirmity is shown therein. The mere fact that the assessee squared off the transactions within a short period resulting in loss may raise the question about the assessee’s prudence but for such reason one cannot hold that the loss was not genuine or bogus. In the impugned order the Ld. AO also emphasized on the fuel that the assessee had conducted its commodity transactions during the period FY 2008-09 to EY 2013-14 principally through four brokers and the analysis of trades showed that the counter party brokers involved in these transactions numbered twenty. By referring to this statistic the Ld. AO concluded that these twenty-four parties had formed a cartel and through synchronized trading the cartel members had created contrived losses to benefit the appellant. I however find that in the same order the Ld. AO himself has admitted that seventy percent of the entire trade volume during this period on NMCE was conducted by twenty five members. If that be the case, then there was empirical data available on record that substantially major part of the trading on NMCE was conducted by these twenty five members and therefore any member of public who conducted the commodity transactions on this Exchange necessarily transacted through any one of them and therefore no adverse inference could be drawn only against the appellant on the ground that the assessee engaged one of such Members for conducting its commodity transactions. Rather this information shows that the appellant chose to conduct its commodity transactions on NMCE through its Members who were actively involved in conducting trades and in a position to provide better service being well conversant with the market. The mere fact that the appellant’s transactions involved 24 active members does not lead to conclusion that these active Members by themselves had formed a cartel.... ” 50. The Ld. CIT, DR appearing on behalf of the Revenue was unable to controvert the above findings of the Ld. C1T(A). 51. The settled proposition of law is that, suspicion howsoever strong cannot partake the character of evidence. As held by the Hon ’ble Supreme Court in the case of Uma Charan Shaw & Bros Vs CIT reported in 37 ITR 271, howsoever grave the suspicion the AO may entertain, the suspicion cannot take place of the evidence or finding of fact. The ITA Nos.235, 226 & 227/Ind/2021 CO Nos.2 to 4/Ind/2022 13 suspicion on the AO’s part can certainly prompt him to conduct enquiry & investigation but ultimate finding of the authority must be based on the material or evidences gathered by him and which has live nexus with the finding recorded by the authority after objective consideration of facts and evidences gathered. If the material or evidence gathered does not have any proximate cause with the finding ultimately reached, then the finding of the authority has to be held to be perverse and unsustainable. Here in the present case, as noted in the foregoing, the reasoning given by the AO to justify the impugned disallowance was based on mere suspicion and hearsay without bringing on record any tangible evidence/material to support the same. On the contrary, we note that the assessee had placed on record sufficient documentary evidences which substantiated its commodity transactions on NCME. As noted earlier, both the Director of the assessee as well as the broker were examined u/s 131 of the Act and both of them substantiated the commodity transactions and there was no self incriminating averment made by either of them or there were any material in the possession of AO or that could be pointed out by Ld. CIT, DR during hearing before us, which would suggest that the assessee’s transactions on the NMCE platform was fictitious. Moreover, even the enquiries made by the AO from the brokers u/s 133(6) of the Act, revealed that each of the brokers herd affirmed the assessee's transactions with supporting evidences. 52. Tor the reasons discussed in the foregoing, we therefore do not find any merit in the grievance raised by the Revenue in the grounds taken in the present appeal. In support of these findings we may gainfully refer to the decision in the case of BEW Cable & Conductors Pvt Ltd in'lTA No.l070/Kol/2012 dated 03.02.2016 wherein on similar facts and circumstances, the co-ordinate Bench of this Tribunal had deleted the disallowance ofk loss incurred by the assessee in commodity transactions on NMCE during FY 2008-09, which was disallowed by the AO on the ground of being bogus in nature. The relevant findings of this Tribunal are as follows: “4. We have heard both the side and perused the materials available on record. The Id. AR submitted two papers books. First book is running in pages no. 1 to 88 and 2nd paper book is running in pages 1 to 34. Before us the Id. AR submitted that the order of the AO is silent about the date from which the broker was expelled. There is no law that the off market transactions should be informed to stock exchange. All the transactions are duly recorded in the accounts of both the 'parties and supported with the account payee cheques. The Id. AR has also submitted the IT return, ledger copy, letter to AO and PAN of the broker in support of his claim which is placed at pages 72 to 75 of the paper book. The Id. AR produced the purchase & sale contracts notes which are placed on pages 28 to 69 of the paper book. The purchase and sales registers were also submitted in the form of the paper book which is placed at pages 76 to 87. The Board resolution passed by the company for the transactions in ITA Nos.235, 226 & 227/Ind/2021 CO Nos.2 to 4/Ind/2022 14 commodity was placed at page 88 of the paper book. On the other hand the Id. DR relied in the order of the lower authorities. 4.1 From the aforesaid discussion we find that the assessee has incurred losses from the off market commodity transactions and the AO held such loss as bogus and inadmissible in the eyes of the law. The same loss was also confirmed by the Id. C1T(A). However we find that all the. transactions through the broker were duly recorded in the books of' the assessee. The broker has also declared in its books of accounts rind offered for taxation. In our view to hold a transaction as bogus, there has to be some concrete evidence where the transactions cannot be proved with the supportive evidence. Here in the case the transactions of the commodity exchanged have not only been explained but also substantiated from the confirmation of the party. Both the parties are confirming the transactions which have been duly supported with the books of accounts and bank transactions. The ld. AR has also submitted the board resolution for the trading of commodity transaction. The broker was expelled from the commodity exchange cannot be the criteria to hold the transaction as bogus. In view of above, we reverse the order of the lower authorities and allow the common grounds of assessee’s appeal. " 53. It is rioted that the Hon’ble jurisdictional Calcutta High Court has dismissed the appeal preferred by the Revenue against the above order by their judgment dated 19.06.2018 in GA No.747 of 2017.Respectfully following the law laid down in the aforesaid judgment (supra) which is binding upon us, and applicable to the facts of the present case, thus we do not find any infirmity in the impugned order of the Ld. C1T(A). ” 4.4.6 In view of the detailed discussions made above and also considering the above order of the Honourable ITAT Kolkata Bench given in a similar case on identical facts, the AO was not justified in making impugned addition of Rs. 9,33,62,482/- which includes addition of Rs. 5,44,57,527/- made vide order passed u/s 143(3) of the Act. Thus, entire addition made by the AO amounting to Rs. 9,33,62,482/- is Deleted. Therefore, appeal on these grounds is Allowed.” 6. On careful perusal of the orders of the authorities below, we find that the ld.CIT(A), after considering the stand of the AO and written submissions of the assessee, noted that the assessee had earned net income of Rs.8,80,23,836/- in respect of trading of commodities and derivatives and has earned profit as well as losses through NCDEX, NMCE and MCX exchanges through various brokers. We also note that the ld. CIT-DR has not controverted the factual position that the assessee ITA Nos.235, 226 & 227/Ind/2021 CO Nos.2 to 4/Ind/2022 15 filed contract notes/bills of transactions, copies of the ledger accounts of brokers, confirmations, copies of bank statements and, thereafter, on the strength of the same submitted that all the transactions were carried out on the recognized exchanges through registered brokers and the sole reason for disallowing the losses by the AO was the report of the DIT(I&CE), Mumbai. We are in agreement with the contention of the assessee, before the ld. first appellate authority that the stand taken by the AO was contradictory as at the first instance, he noted that the brokers were not found at the given address and, simultaneously, he also stated that the brokers were registered at NMCE and penalties were also levied on such brokers. Therefore, the existence of brokers through whom the assessee effected transactions should not have been doubted. It is a matter of fact that the notices issued to the brokers u/s 133(6) of the Act by the AO were duly complied and represented before the AO during the assessment proceedings. This fact has also not been controverted by the ld.CIT-DR. From the assessment order, we observe that the main allegation of the AO was that the assessee has incurred only losses on NMCE which are artificial losses through synchronized trades undertaken to reduce the tax liability arose on the profits earned on similar trades of other exchanges. At the same time, it is also not in dispute that the assessee undertaken many transactions through registered brokers of the exchange on screen based trading platform. The ld.CIT(A) also noted another disputed fact that the assessee had filed all the relevant documents such as contract notes of the registered brokers showing order number, trade number, trade time, quantity, purchase price, sale price, contract specifications, brokerage charges, etc., along with ledger accounts of the brokers and all the transactions were effected through normal banking channels. ITA Nos.235, 226 & 227/Ind/2021 CO Nos.2 to 4/Ind/2022 16 6.1 From the assessment order, we also note that the AO has also not controverted the fact that the assessee had traded on NMCE through registered brokers as their client and their trading details are as per contract notes issued by NMCE transactions. We also note that the AO conducted inquiries during the assessment proceedings from M/s S.N. Commodities, Shubhlaxmi Commodities by issuing summons u/s 131 of the Act which were also replied to and the AO himself provided copy of the replies to the assessee. This fact is amply clear from para 4.6 of the assessment order. This fact was also brought to the notice of the AO that the assessee had not undertaken any trade through M/s Shubhlaxmi Commodities on 18.02.2012 on which a penalty of Rs.25,000/- was levied for trades undertaken on 18.02.2011 and merely because the penalty was levied on the broker, it cannot be correlated with the trades of the assessee. 7. It is also an undisputed fact that the brokers through whom the assessee undertaken transactions were registered at NMCE and NMCE also penalized them. Therefore, their identity cannot be doubted. The ld.CIT(A) noted that the fines levied by NMCE on the brokers were very clear and there is nothing on record to show that the brokers were held guilty of committing any wrong on NMCE or that the transactions of the assessee through the brokers were held ingenuine by any regulatory authorities, so as to have any doubt on the same. On being asked by the Bench, the ld. CIT-DR could not controvert that the impugned transactions were carried out on screen based trading platforms and there was nothing on record to suggest that counterparties to such trades were acquainted or known to the assessee. In view of the above, we are compelled to hold that the documentary evidences ITA Nos.235, 226 & 227/Ind/2021 CO Nos.2 to 4/Ind/2022 17 substantiating the transactions undertaken by the assessee have remained uncontroverted and, thus, we safely presume that the onus cast upon the assessee to prove the genuineness of the transactions and identity of the brokers have been properly discharged. We may also point out that the documentation maintained by the assessee in respect of the commodity trades on other exchanges out of which profits have been earned to the assessee have been accepted by the AO without any controversy, then, the AO cannot have a method of pick and choose to accept profit making transactions and to disallow loss making transactions without any reasonable basis. 8. At this juncture, we may also point out that the ld.CIT(A) has relied on the order of the ITAT, Kolkata Bench in the case of ACIT vs. GRD Commodities Ltd. in IT (SS) A No.120 to 123/Kol/2018, order dated 04.12.2020 wherein identical and similar issue was placed for adjudication, and, on legal grounds the appeal was decided in favour of the assessee not only quashing the reopening of the proceedings, but also allowing the grounds of the assessee on merits. The relevant part of the said order has been reproduced by the ld.CIT(A) in para 4.4.5 (supra). From careful perusal of the said order of the ITAT, Kolkata Bench, we observe that the Kolkata Bench has relied on its order in the case of BLB Cable & Conductors Pvt. Ltd. in ITA No.1070/Kol/2012, order dated 03.02.2016 wherein the grounds of the assessee has been allowed and against the said order, the appeal preferred by the Revenue has been dismissed by the Hon’ble jurisdictional Kolkata High Court by the judgement dated 19.06.2018 in GA No.747 of 2017. ITA Nos.235, 226 & 227/Ind/2021 CO Nos.2 to 4/Ind/2022 18 9. In view of the foregoing, we are unable to see any valid reason to interfere with the findings arrived and recorded by the ld.CIT(A) on this issue. Thus, we uphold the same. Accordingly, grounds no.1, 2 and 3 of the Revenue are dismissed. 10. Grounds No.4 and 5 raised by the Revenue read as under:- “4. Whether, the Ld. CIT(A) has not erred in law and on facts in deleting the addition of Rs.5,21,63,633/-made u/s 40(a)(ia) of the Act and has overlooked the findings of the AO mentioned in the Assessment order. 5. Whether, the Ld. CIT(A) has not erred in law and on facts by holding fulfillment of conditions u/s 194C(6) is isolation as sufficient while condition u/s 194C(7) were not fulfilled while deleting disallowance made by AO u/s 40a(ia) of Rs.5,21,63,633/-” 11. The ld. CIT-DR submitted that the ld. First appellate authority has erred in law and on facts in deleting the addition made u/s 40(a)(ia) of the Act by overlooking the findings of the AO. The ld. CIT-DR further submitted that the the Ld. CIT(A) has also erred in law and on facts by wrongly holding fulfillment of conditions u/s 194C(6) of the Act in isolation as sufficient while condition u/s 194C(7) were not fulfilled, therefore, the CIT-DR submitted that the ld.CIT(A) has erred in deleting disallowance made by AO u/s 40(a)(ia) of the Act on sound footings. 12. Drawing our attention to the relevant part of the assessment order, the ld. CIT- DR vehemently pointed out that the provisions of section 194C(7) and section 40(a)(ia) of the Act are very clear and unambiguous and when it is an undisputed fact that the assessee has not deducted TDS on freight expenses and has not filed documents required in terms of section 194C, then, the AO was right in making disallowance on account of freight expenses on transportation of oil and freight expenses on transportation of DOC u/s 40(a)(ia) of the Act. The ld.CIT-DR ITA Nos.235, 226 & 227/Ind/2021 CO Nos.2 to 4/Ind/2022 19 strenuously contended that the ld.CIT(A) has gone wrong in deleting the disallowance made by the AO without any justified reason and basis. Therefore, the impugned first appellate order may kindly be set aside and the order of the AO may be restored. 13. Replying to the above, the ld. AR took us through the relevant part of the first appellate order as well as the assessment order and submitted that the AO proposed to disallow the freight expenses u/s 40(a)(ia) for non-compliance of provisions of section 194C(7) of the Act and the AO made disallowance by observing that the assessee was required to comply with the provisions of section 194C(6) and 194C(7) of the Act and the assessee has only complied with the provisions of section 194C(6) of the Act and section 194C(7) of the Act remained uncomplied with and on said basis the AO made disallowance u/s 40(a)(ia) of the Act. 13.1 The ld. AR further submitted that it was the case of the AO that though the assessee had obtained PAN and declaration of transportation as per the requirement of section 194C(6), but, such particulars were also required to be furnished to the prescribed income-tax authority within the prescribed time u/s 194C(7) which has not been done by the assessee and, therefore, the AO made the impugned disallowance. The ld. AR submitted that in various orders of coordinate Benches of ITAT including the recent order of ITAT, Bangalore Bench in the case K.R. Santosh Kumar vs. ACIT, ITA No.20/Bang/2020, order dated 04.12.2020 it was held that if the assessee complies with section 194C(6), disallowance u/s 40(a)(ia) does not arise just because there is violation of section 194C(7) of the Act. In these orders, it was also held that the provisions of section 194C(6) and 194C(7) of the Act are separate and independent of each other and cannot be read together to attract disallowance u/s ITA Nos.235, 226 & 227/Ind/2021 CO Nos.2 to 4/Ind/2022 20 40(a)(ia) read with section 194C of the Act. The ld. AR also relied on the order of the ITAT, Mumbai Bench in the case of ITO vs. M/s Sugar Chem in ITA No.2071/Mum/2016, to support the said proposition. 14. The ld. AR submitted that the ld.CIT(A) has granted relief to the assssee on justified and legal basis, therefore, the first appellate order may kindly be upheld by dismissing the grounds of the Revenue. 15. On careful consideration of the above submissions, we note that the ld.CIT(A) has granted relief to the assessee with the following observations and findings:- “Ground No. 6: - Through this ground of appeal, the appellant as challenged addition of Rs.5,21,63,633/- on account of disallowance made u/s 40(a)(ia) of the Act of freight expenses incurred on transportation of oil and DOC. On perusal of reassessment order, it is seen that through the show cause notice dated 14.09.2018, the AO proposed to disallow the freight expenses u/s 40(a)(ia) of the Act for non compliance with the provisions of section 194C(7) of the Act. After considering the submissions of the appellant, the AO concluded that the appellant was required to comply with the provisions of section 194C(6) of the Act and also u/s 194C(7) of the Act, however the assessee has only complied with the provisions of Section 194C(6) of the Act and the provisions of section 194C(7) of the Act of the Act remained un-complied. Therefore, the A concluded that the assessee has neither deducted TDS on freight nor filed the requisite documents u/s 194C(7) of the Act and accordingly applied the provisions of section 40(a)(ia) of the Act and disallowed the freight expenses. The appellant through its written submissions has submitted that provision of section 194C(6) of the Act were duly complied with is undisputed fact and has been categorically accepted by the AO in the reassessment order. The only objection of the AO for making the impugned disallowance was non compliance of section 194C(7) of the Act. The appellant has submitted that section 194C(7) of the Act prescribes merely a procedural requirement requiring mechanical compliance, non compliance of which cannot trigger disallowance u/s 40(a)(ia) of the Act. The disallowance u/s 40(a)(ia) of the Act can be made only in respect of the amounts on which tax is deductable but has not been deducted and in the case of the appellant since no tax was deductable due to compliance of provisions of section 194C(6) of the Act, the disallowance contemplated by section 40(a)(ia) of the Act is not attracted. The appellant has placed reliance on various case laws for this proposition, which are already abstracted above. ITA Nos.235, 226 & 227/Ind/2021 CO Nos.2 to 4/Ind/2022 21 4.3.1 After going through the assessment order and the submissions of the appellant, it is seen that the appellant has not deducted TDS in respect of freight payment made by it to the transporters. The appellant has filed complete details of transporters before the AO and also during the appeal proceedings. The fact that provisions of section 194C(6) of the Act are complied by the appellant is also mentioned in the assessment order. It is the case of the AO that though the assessee has obtained the PAN and declaration of the transporters as required u/s 194C(6) of the Act however, such particulars were also required to be furnished to the prescribed Income Tax Authority within the schedule time u/s 194C(7} of the Act, which has not been done by the appellant and therefore the AO has made the disallowance by invoking provisions of section 40(a)(ia) of the Act. In my considered opinion, once the conditions of section 194C(6) of the Act are fulfilled, the appellant was not required to deducted TDS in respect of such payments and once there is no requirement to deduct TDS, disallowance u/s 40(a)(ia) of the Act would not attract. This view is supported by various judicial pronouncements of Honourable ITATs such as (i) the Hon’ble Bangalore Bench of ITAT in the case of DCIT v/s Murugarajendra Oil Industry in ITA No. 2094/Bang/2017 order dated 26th April, 2019, (ii) Honourable Ahmedabad Tribunal in the case of The ACIT, Circle-2(1)(1) v/s Eagle Steel Industries Pvt., ITA No.431 & 432/Ahd/2018 order dated on 28 June, 2018 (iii) the Honourable Income Tax Appellate Tribunal - Bangalore in the case of Shri K.R Santosh Kumar V/s ACIT Circle 2(2)(1) in ITA No.20/BANG/2020 order dated 04.12.2020 (iv) The Hon’ble Mumbai Bench of ITAT in Income Tax Officer -17(3)(4) v/s M/s. Sugar chem AY 2011-12 ITA No. 2071/Mum/2016, held that if the assessee complies with the provisions of Section 194C (6) of the Act disallowance under Section 40(a)(ia) of the Act does not arise just because there is violation of provisions of Section 194C (7) of the Act. It was also held that Section 194C (6) of the Act and section 194C (7) of the Act are independent of each other and cannot be read together to attract disallowance under Section 40(a)(ia) r.w.s. 194C of the Act. It is seen that this decision also relate to AY 2011-12 i.e. the year under consideration in the present appeal, (v) Similarly the Hon’ble Kolkata Bench of ITAT in Income Tax Officer vs. Soma Rani Ghosh v/s DCIT Kolkata for AY2012-13 ITA No.1420/KOL/2015 also held that subject to compliance with the provisions of Section 194C(6), immunity from TDS under sec. 194C(1) of the Act in relation to payments to transporters, applies and under Sec. 194C(6) of the Act, as it stood prior to the amendment in 2015, in order to get immunity from the obligation of TDS, obtaining of PAN of the Payee- transporter alone is sufficient and no further confirmation letters were required. It was also held that sections 194C(6) of the Act and Section 194C(7) of the Act are independent of each other, and cannot be read together to attract disallowance u/s 40(a)(ia) read with Section 194C of the Act; and that if the assessee complies with the provisions of Section ITA Nos.235, 226 & 227/Ind/2021 CO Nos.2 to 4/Ind/2022 22 194C (6) of the Act, no disallowance u/s 40(a)(ia) of the Act h permissible, even there is violation of the provisions of Section 194C (7) of the Act. In this case the Honourable Tribunal has placed reliance on the decisions in the cases of CIT v. ValibhaiKhanbhai Mankad [2013] 216 Taxman 18/[2012] 28 taxmann.com 119 (Gujarat High Court) and CIT v. Marikamba Transport Co. In 319 ITU 129 (Karnataka) and v at tons decisions of coordinates benches of Honourable ITAT and concluded that if the assessee compiles with the provisions of section 194C(6) of the Act, disallowance under section 40(a)(ia) of the Act does not arise just because there is violation of provisions of section 194C(7) of the Act. 4.3.2 In the instant case also the only reason stated by the AO for invoking the provisions of Sec.40(a)(ia) of the Act is that the appellant has failed to comply with the provisions of Sec.l94C(7) of the Act and this view has been held to be not correct in the aforesaid various decisions of Honourable High Courts and Honourable ITATs and the consistent view taken is that if the appellant has complied with the provisions of section 194G(6) of the Act, disallowance under section 40(a)(ia) of the Act does not arise just because there is violation of provisions of section 194C(7) of the Act. Thus, the AO was not justified in making disallowance u/s 40(a)(ia) of the Act and therefore, addition made by the AO amounting to Rs. Rs.5,21,63,633/- is Deleted. Therefore, appeal on this ground is Allowed.” 16. In view of the above, it is undisputed fact that the assessee complied with the provisions of section 194C(6) of the Act by submitting PAN and declaration of transporters, but, did not comply with the provisions of section 194C(7) of the Act by furnishing the same to the prescribed income-tax authority within the prescribed time limit. However, as per various orders of coordinate Benches of the Tribunal and judgement of the Hon’ble Gujarat High Court in the case of CIT vs. Valibhai Khanbhai Mankad (supra) and the judgement of the Hon’ble Karnataka High Court in the case of CIT vs. Marikamba Transport Co. (supra), if the assessee complies with the provisions of section 194C(6), then, disallowance u/s 40(a)(ia) does not arise just because here was non-compliance of provisions of section 194C(7). Thus, we are unable to see any valid reason to interfere with the findings of the ld.CIT(A) and, thus, we uphold the same. Accordingly, grounds No. 4 and 5 of the Revenue are also dismissed. ITA Nos.235, 226 & 227/Ind/2021 CO Nos.2 to 4/Ind/2022 23 17. Ground No.6 of the Revenue reads as under:- “6. On the facts and circumstances of the case, the Ld. ClT(A)erred in deleting the addition amounting to Rs.5,00,00,000/- u/s 68 of Income Tax Act, 1961.” 18. Apropos this ground, the ld.CIT-DR submitted that as the assessee company was unable to explain the credit worthiness of the share applicants, therefore, the AO was right in invoking the provisions of section 68 and making an addition of Rs.500 lakhs in the hands of the assessee. The ld.CIT-DR pointed out that the balance sheet of the M/s Trivedi Finsec Pvt. Ltd., M/s Malwa Trexim Pvt. Ltd., M/s Ahilya Trade Link Pvt. Ltd., clearly shows that the assessee made advances of Rs.500 lakhs to M/s Trivedi Finsec Pvt. Ltd. and M/s Trivedi Finsec Pvt. Ltd. made advance of Rs.500 lakhs to M/s Malwa Trexim Pvt. Ltd. and M/s Ahilya Trade Link of Rs.250 lakhs each. The ld. CIT-DR further pointed out that the same amount which was given by the assessee to M/s Trivedi Finsec Pvt. Ltd. was received or routed back to the assessee from M/s Malwa Trexim Pvt. Ltd., and M/s Ahilya Trade Link as share application money, therefore, the AO was right in making addition in the hands of the assessee u/s 68 of the Act. The ld.CIT-DR vehemently pointed out that the ld.CIT(A) has granted relief to the assessee without any basis, therefore, the impugned order may be set aside and the order of the AO may be restored. 19. Replying to the above, the ld. AR submitted that the AO made addition by invoking the provisions of section 68 and the ld.CIT(A) deleted the same by observing that both share applicants i.e., M/s Malwa Trexim Pvt. Ltd., and M/s Ahilya Trade Link have made the impugned investments out of funds borrowed from M/s Trivedi Finsec ITA Nos.235, 226 & 227/Ind/2021 CO Nos.2 to 4/Ind/2022 24 Pvt. Ltd., who, in turn, borrowed the money from assessee itself. The ld. AR also pointed out that the AO himself has rendered a very important finding of fact that the money emanated from the assessee itself came back to the assessee, therefore, the addition u/s 68 of the Act was not found to be sustainable by the ld.CIT(A). The ld. AR also drew our attention to the relevant part of the first appellate order and submitted that the requirement of substantiating the credit worthiness of investor is the establishing of the source of source which, in the present case has properly been explained and the initial source of investment was the assessee itself, therefore, no addition was called for in the hands of the assessee only for the rotation of its own money. Therefore, the ld. CIT(A) was right in allowing the relief to the assessee and deleting the baseless addition made u/s 68 of the Act. 20. On careful consideration of the first appellate order, we observe that the ld.CIT(A) has granted relief to the assessee with the following observations:- “4.1 Ground No 1 & 2:-Through these grounds of appeal, the appellant has challenged addition of Rs. 5,00,00,000/- made u/s 68 on account of shore application money received by the appellant during the year. On perusal of assessment order, it is seen that the appellant was required to file confirmation from the share applicants and to prove identity, creditworthiness and to file details of mode of transactions. The details were filed along with confirmation of accounts, balance sheet etc of the share applicants namely M/s Malwa Trcxim Pvt. Ltd. from whom an amount of Rs. 2,50,00,000/- was received, M/s Ahilya Trade Link Pvt. Ltd. from whom an amount of Rs. 2,50,00,000/- was received and Man Trading Corporation from whom an amount of Rs. 50,00,000/- was received. These documents are also abstracted by the AO in the assessment order. The AO further observed in Para 3.3 of the order that the share applicants were assessed to tax at Indore and it was explained by the assessee that M/s Malwa Trexim Pvt. Ltd. and M/s Ahilya Trade Link Pvt. Ltd. have taken unsecured loans from M/s Trivedi Finsec Pvt. Ltd. and also filed the bank statements and balance sheets of the share applicants to substantiate the same. The relevant bank statements have also been abstracted in the assessment order. Then in Para 3.5 & 3.6 it is observed by the AO that the appellant has given loan to M/s Trivedi , Finsec Pvt. Ltd. of Rs. 5,00,00,000/- and the deposit taken by M/s Trivedi ITA Nos.235, 226 & 227/Ind/2021 CO Nos.2 to 4/Ind/2022 25 Finsec Pvt. Ltd. was utilized in giving further loan to M/s Malwa Trexim Pvt. Ltd. and M/s Ahilya Trade Link Pvt. Ltd. Finally the AO concluded in Para 3.7 that the appellant made advance of Rs. 5,00,00,000/- to M/s Trivedi Finsec Pvt. Ltd. and in turn M/s Trivedi Finsec Pvt. Ltd. made advances of Rs. 5,00,00,000 /- M/s Malwa Trexim Pvt. Ltd. and M/s Ahilya Trade Link Pvt. Ltd. of Rs. 2.,50,00,000/- each and both these companies made advances of similar amount to the appellant company as share application money and therefore, the appellant was not able to explain the creditworthiness of share applicants. Accordingly, the AO held the share application of Rs. 5,00,00,000/- received from these two companies as unexplained and added u/s 68 of the Act. 4.1.2 The appellant through the written submission has stated that complete details regarding share application money including the share application form, the confirmation from the share applicants, their complete name and addresses and PAN, their financial statements and also form no. 2 and related board resolution substantiating the allotment of shares in F Y 2012-13 were filed before the AO and also in the paper book. It is also submitted by the appellant the shares of face value of Rs. 10 were allotted p at a premium of Rs. 40 per shares on 06.06.2012 on preferential basis after getting in principle approval from the Madhya Pradesh, Pune and Ahmadabad Stock Exchange. It is further submitted that both the companies i.e. M/s Malwa Trexim Pvt. Ltd. and M/s Ahilya Trading Pvt. Ltd. were the existing share holder of the company and their identity and genuineness of the transactions stand accepted by the AO. It is explained by the appellant that the appellant gave a loan of Rs. 5,00,00,000/- to M/s Trivedi Finsec Pvt. Ltd. and M/s Trivedi Finsec Pvt. Ltd. advanced loans to M/s Malwa Trexim Pvt. Ltd. and M/s Ahilya Trading Pvt. Ltd. of Rs. 2,50,00,000/- each. These companies then out of the borrowed funds from M/s Trivedi Finsec Pvt. Ltd. deposited amount as share application money with the appellant. The appellant contended that this is the sole objection of the AO on the basis of which the AO stated that the creditworthiness of the share applicants is not established. Referring to the financials of the share applicants, it is contended by the applicant that both these companies are regular assessees at Indore and were already existing share holders of the appellant. Further, the source of share application money extended to the appellant is proved beyond doubt which fact is also not disputed by the AO. Therefore, the addition made by the AO u/s 68 doubting the creditworthiness of the share applicants is not justified. 4.1.2 After taking into consideration the observation of the AO and the written submissions of the appellant it is seen that the addition u/s 68 has been made solely for the reason that both the share applicants i.e. M/s Malwa Trexim Pvt. Ltd. and M/s Ahilya Trading Pvt. Ltd. have made the impugned investment out of funds borrowed from M/s Trivedi Finsec Pvt. Ltd. who in turn had borrowed loan from the appellant itself. Both the share applicants were the existing share holders of the appellant and the ITA Nos.235, 226 & 227/Ind/2021 CO Nos.2 to 4/Ind/2022 26 appellant, M/s Trivedi Finsec Pvt. Ltd. and both the share applicants are also related concerns^ The share applicants have -properly substantiated the source of their money invested in the appellant as share application money which is by way of loans taken from another group company M/s Trivedi Finsec Pvt. Ltd. The requirement of substantiating the creditworthiness is inextricably linked with establishing the source of source, which in this case is properly substantiated as evident from para 3.7 on page 17 of the assessment order itself, where the final source of the share application money is found to be the appellant itself. It is also seen that the share applicants have borrowed amounts from another sister concerns to make the investment in the appellant company. On these undisputed facts of the case, the creditworthiness of the share applicants could not have been doubted and could not have been made a basis for making addition u/s 68 of the Act. In fact, the AO himself has rendered a very important finding of fact that the money emanated from the appellant itself and came back to the appellant. Therefore, the addition made u/s 68 is wrong and thus, addition made by the AO amounting to Rs.5,00,00,000/- is deleted. Therefore, the appeal on these ground is allowed.” 21. In view of the above, on being asked by the Bench, the ld. CIT-DR, except relying on the order of the AO, could not controvert the facts and findings recorded by the ld.CIT(A) that the credit worthiness of share applicants could not have been doubted and addition could not have been made u/s 68 of the Act in the hands of the assessee because the AO himself, in the assessment order, noted a very relevant and important fact that the money was emanated from the assessee itself and came back to the assessee from Malwa Trexim Pvt. Ltd. and M/s Ahilya Trading Pvt. Ltd who received the same as advance from M/s Trivedi Finsec Pvt. Ltd., to whom the assessee made advance of Rs.500 lakhs. Therefore, the amount disputed by the AO was assessee’s own funds which came back to assessee through said two entities. Therefore, addition made by the AO u/s 68 of the Act, in such a factual position, cannot be held as sustainable and the ld.CIT(A) rightly adjudicated the issue in favour of the assessee deleting the addition. Finally we are unable to see any ambiguity, perversity and any other valid reason to interfere with the findings arrived at by the ITA Nos.235, 226 & 227/Ind/2021 CO Nos.2 to 4/Ind/2022 27 ld. CIT(A) and, therefore, we uphold the same. Accordingly, ground No.6 of the Revenue is also dismissed. Revenue’s appeal (ITA No.226/Ind/2021-AY 2012-13) 22. Grounds No.1, 2 and 3 of the appeal read as under:- “1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the disallowance of contrived losses on NMCE (Rs.9,53,84,990/-) by overlooking the glaring evidences/findings of synchronized trades executed by the assessee with a cluster of brokers/ counterparties on NMCE exchange which had resulted in excessive losses which were then set-off against profits from other exchanges. 2. The Ld. C1T(A) erred in ignoring that execution of trades on a recognized exchange (NMCE) as per rules, on screen based platform through banking channels and entries in books had no relevance in deciding the genuineness of losses which were inherently managed/contrived losses. 3. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in facts by placing reliance on allowance of algorithmic trading by SEBl while ignoring the facts that even such transactions resulted in continued losses which otherwise should have been profitable. The ample direct/ circumstantial evidences of synchronized trades indulged by the assessee have gone unnoticed in the CITfA} order.” Grounds No.1 to 3 of Revenue for AY 2012-13. 23. As agreed by the ld. Representatives of both the sides in the beginning of the hearing, the facts and circumstances of AY 2012-13 are quite similar and identical to the facts and circumstances of AY 2011-12 (ITA No.235/Ind/2021). Therefore, our conclusion drawn for AY 2011-12 pertaining to grounds of appeal No.1, 2 and 3 of the Revenue would apply mutatis mutandis to grounds No.1, 2 and 3 of the Revenue for AY 2012-13. Consequently, grounds No.1, 2 and 3 of the Revenue for AY 2012-13 are dismissed. ITA Nos.235, 226 & 227/Ind/2021 CO Nos.2 to 4/Ind/2022 28 24. Ground of appeal No.4 of the Revenue reads as under:- “4. Whether, the Ld. CIT(A) has not erred in law and on facts in deleting the addition of Rs.66,26,160/- made on account of additions u/s 68 and corresponding unexplained expenditure of Rs. 66,261/- u/s 69C has overlooked the findings of the AO mentioned in the Assessment order.” 25. Apropos ground of appeal No.4 of the Revenue for AY 2012-13, the ld. CIT-DR submitted that the ld. has erred in law and on facts in deleting the addition of Rs.66,26,160/- made on account of additions u/s 68 of the Act and corresponding unexplained expenditure of Rs. 66,261/- u/s 69C has overlooking the findings of the AO recorded in the Assessment order. The ld.CIT-DR also pointed out that the ld. AO, after considering the entire facts and circumstances, made disallowance u/s 68 of the Act pertaining to accommodation entry received by the assessee through shell entities and has also paid commission to the intermediaries @ 1%. The ld. CIT-DR submitted that the AO made addition by considering the statement of Director of Mega Money Commodities Pvt. Ltd. (MMCPL) which was deleted by the ld.CIT(A) without any basis. Therefore, the addition made by the AO may kindly be restored by setting aside the findings of the ld.CIT(A). 26. Replying to the above, the ld. AR submitted that the AO made addition in the hands of the assessee by stating that the assessee is a beneficiary of accommodation entries through layering transactions between the same entities, namely, Tanu Sales Corporation, Mega Money Commodities Pvt. Ltd., Manish Enterprises, etc., and it was the case of the AO that cash was deposited in certain accounts and then transferred to the accounts of Manish Enterprises. The ld. AR also submitted that in respect of another addition, the AO observed that the name of Nikhil Agencies was mentioned in the show cause whereas in the assessment order, it was stated that the bank account ITA Nos.235, 226 & 227/Ind/2021 CO Nos.2 to 4/Ind/2022 29 was held by M/s Govind Ram Chablani/Nikhil Agencies. The ld. AR submitted that neither in the show cause notice nor in the assessment order, there is no mentioning of the date on which such amount was stated to be received by the assessee and the assessee categorically denied to have received any amount in any form from M/s Govind Ram Chablani/Nikhil Agencies, therefore, the ld.CIT(A) was right in deleting the addition. 27. On careful consideration of the rival submissions, from the first appellate order, we observe that the ld.CIT(A) while dealing with ground No.7 and 8 of the assessee recorded the following observations and findings:- ITA Nos.235, 226 & 227/Ind/2021 CO Nos.2 to 4/Ind/2022 30 ITA Nos.235, 226 & 227/Ind/2021 CO Nos.2 to 4/Ind/2022 31 ITA Nos.235, 226 & 227/Ind/2021 CO Nos.2 to 4/Ind/2022 32 ITA Nos.235, 226 & 227/Ind/2021 CO Nos.2 to 4/Ind/2022 33 ITA Nos.235, 226 & 227/Ind/2021 CO Nos.2 to 4/Ind/2022 34 28. In view of the above, we are unable to see any valid reason to interfere with the findings of the ld.CIT(A) because the onus was on the AO to establish that the assessee on such date such amount was received by such accommodation entry operators. Neither in the show cause notice nor in the assessment order, there is no mention of such dates and amounts and, therefore, we are compelled to hold that the AO made addition on the basis of insufficient, incomplete and incorrect information without complying with the requirement of provisions of section 68 of the Act and bringing on record any positive and adverse material on record to make sustainable addition in the hands of assessee. We are unable to see any valid reason or basis to interfere with the conclusion drawn by the ld.CIT(A) and, thus, we uphold the same ITA Nos.235, 226 & 227/Ind/2021 CO Nos.2 to 4/Ind/2022 35 as the addition was rightly deleted by the ld.CIT(A). Accordingly, ground No.4 of the Revenue for AY 2012-13 is also dismissed. Revenue’s Appeal (ITA No.227/Ind/2021 -AY 2015-16) 29. The grounds of appeal read as under:- “1. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was justified in deleting the upward adjustment of Rs.21,31,14,226/- made by the TPO in respect of benchmarking specified domestic transactions. 2. Whether in the facts of the case and in law, the Ld. CIT(A) erred in ignoring the fact that the assessee had failed to benchmark the transactions with its AE as per law thereby failing to discharge the primary onus cast upon it by the Act. 3. Whether on the facts and in the circumstances of the case and in law, the decision of the Ld. CIT(A) erred in holding that there is no question of tax evasion by ignoring the fact that the transfer pricing is concerned with the determination of Arm’s Length Price of the specified domestic transactions carried out by the assessee. 4. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the upward adjustment of Rs.2l,31,14,226/- made by the TPO in respect of benchmarking specified domestic transactions as every year is an independent assessment year and as per doctrine of res judicata, decision of A.Y. 2014-15 and A.Y. 2016-17 not binding for A.Y. 2015-16. 5. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in rejecting the TPO's approach of adopting the TNMM method as the MAM which is contrary to the provisions of Rule 10C of Income Tax Rules.” Ground Nos.1 to 5 of the Revenue for AY 2015-16 30. The ld. CIT-DR submitted that the ld.CIT(A) was not justified in deleting the upward adjustment made by the TPO in respect of benchmarking specified domestic transactions. He further submitted that the ld. First appellate authority erred in ignoring the fact that the assessee had failed to benchmark the transactions with its ITA Nos.235, 226 & 227/Ind/2021 CO Nos.2 to 4/Ind/2022 36 AE as per law thereby failing to discharge the primary onus cast upon it by the Act. The d. CIT-DR also contended that the Ld. CIT(A) has grossly erred in holding that there is no question of tax evasion by keeping aside, rather, ignoring the fact that the transfer pricing is concerned with the determination of Arm’s Length Price of the specified domestic transactions carried out by the assessee with its AE. The ld.CIT-DR drawing our attention to the order of the TPO, submitted that the ld. First appellate authority has erred in rejecting the TPO’s approach of adopting the Transactional Net Margin Method (TNMM) as the Most Appropriate Method (MAM) which is contrary to the provisions of Rule 10C of Income Tax Rules, 1962. The ld. CIT-DR finally submitted that the ld. First appellate authority had made a mistake in deleting the upward adjustment made by the TPO in respect of benchmarking specified domestic transactions as every year is an independent assessment year and the doctrine of res judicata does not apply to the tax proceedings. He finally submitted that the decision for A.Y. 2014-15 and A.Y. 2016-17 cannot be taken as basis and binding for A.Y. 2015-16 for allowing relief to the assessee for intervening AY 2015-16. Therefore, the impugned first appellate order may kindly be set aside and the order of the AO may be restored. 31. Replying to the above, the ld. AR submitted that the assessee had submitted detailed grounds before the authorities below and the ld.CIT(A) has also reproduced the same in the first appellate order which clearly support the view taken by the ld.CIT(A). The ld. AR vehemently submitted that the cognizance taken by the AO u/s 92BA(i) of the Act and reference made to the TPO u/s 92CA was not in accordance with the law, therefore, the order passed by the TPO was bad in law and, consequently, the addition made by the AO on the strength of such order of the TPO ITA Nos.235, 226 & 227/Ind/2021 CO Nos.2 to 4/Ind/2022 37 was also not sustainable in the eyes of law. Therefore, he also pointed out that the ld.CIT(A) while dealing with ground No.4 of the assessee, rightly taken note of the very relevant fact that the TPO, in the preceding AY 2014-15 and subsequent AY 2016-17 has accepted and adopted Comparable Uncontrolled Price (CUP) method as the most appropriate method in respect of identical transactions, therefore, as per rule of consistency, the AO was bound to accept the CUP method as the most appropriate method for benchmarking the domestic transactions of the assessee with its AE and, thus, the ld.CIT(A) rightly held that the addition made was wrong and unwarranted. 32. On careful consideration of rival submissions, first of all, we note that the ld.CIT(A) in the first appellate order, declined to accept the legal objections of the assessee contained in grounds No.1 to 3, 5 and 7. However, the ld.CIT(A) granted relief to the assessee by allowing ground No.4 on merits. We may also point out that the assessee filed detailed submissions on the issue before the ld. First appellate authority. For the sake of completeness, the same are being reproduced below:- “4. GROUND NO. 4: As regards addition of Rs. 21,31,14,226/- apropos variation in Arms Length Price(ALP) of the transactions proposed by the Learned TPO. 4.1. This ground of appeal is raised against an upward adjustment of Rs. 21,31,14,226/- made by the Learned AO on account of adjustment in the arm’s length price as determined by the Learned Transfer Pricing officer, Ahmedabad (TPO) in the order passed u/s 92CA(3). 4.2. The appellant company has entered into transaction of sale and purchase of goods from its sister concern mainly from M/s. Manish Agrotech Limited Ltd. and it has purchased goods worth Rs. 41,67,84,935 - and sold goods worth Rs. 22,20,74,867/- to M/s Manish Agrotech Ltd. 4.3. It is reiterated that the auditors of the appellant company had. without dwelling upon the share holding pattern of the appellant company and its sister concern, under the common misconceived understanding, ITA Nos.235, 226 & 227/Ind/2021 CO Nos.2 to 4/Ind/2022 38 treated the said ‘sister concern’ as ‘related party’ and transactions with the sister concern as specified domestic transaction and reported the same in Form 3CEB and has adopted Comparable Uncontrolled Price “CUP” as the most appropriate method (MAM) for recognizing its transactions with its sister concern. 4.4. The jurisdictional AO at Indore referred the matter to the TPO Ahmedabad. It is submitted and clarified that the TPO proceedings were attended by a local counsel at Ahmedabad and it is the case of the Learned TPO that the case was not attended properly and proper and complete details were not filed by the appellant. It is submitted that the counsel at Ahmedabad did attended the proceedings and also filed the written submission, which it seems were not upto the expectation of the TPO. 4.5. At this juncture, Your Honour’s attention is also drawn towards the fact that from the Assessment year 2018-19, with the introduction / amendment in section 27 IF i.e. mandatory levy of penalty for delay in filing of returns, there was a situation of panic amongst the clients as well as amongst the counsels during mid of the year 2018. The work which w as segregated and divided to be completed till March became all due in the Month of July as all the non audit returns, w hick could have been filed upto 31'' March 2019 were required to be filed by 31 July 2018. Then with the extension of due dates u s 139(1) for non audit cases till 31 Aug 2018. the pressure got extended till August 2018. Consequentially, the audit work pressure also increased Eventually, looking to the return filing scenario and the difficulties faced by the counsels/ clients and the technological issues with the 1TD Portal, the due dates for audit cases which was 30.09.2018 was extended to 15.10.2018 pnd then to 31.10.2018. The extension of due date by the CBDT substantiates the situation of pressure and chaos prevailing at that time. The above situation was equally applicable to the Chartered Accountants all over India as well as to the assessee. This could be possible reason for delayed / improper compliances by the counsel at Ahmedabad. 4.6. It is submitted that the appellant company was also facing a severe liquidity> crunch and some of the bankers have freezed the banking facilities made available to the appellant. This had also serious repercussions on the overall management of the appellant and the. accounts department was fully diverted and focused on bringing the bank facilities to normalcy during this period. Hence, timely compliances could not be made in the matter. 4.7. It is submitted that the appellant is based at Indore whereas the jurisdiction of transfer pricing lies with the Transfer Pricing Office at Ahmedabad. The appellant, in order to save time and money appointed a local counsel at Ahmedabad for attending the transfer pricing ITA Nos.235, 226 & 227/Ind/2021 CO Nos.2 to 4/Ind/2022 39 proceedings. Whenever a notice was received from the TPO, it was forwarded to the counsel at Ahmedabad. 4.8. It is submitted that the report in Form 3CEB was filed online and was also filed before the Learned TPO and once the said report, which is certified by a Chartered Accountant, is filed, it is a reasonable assurance that the assessee has maintained the required records and details. There is no reason to withhold such information which action will always be detrimental to the interest of the appellant. 4.9. At this juncture, it shall be apt to mention that the appellant company has entered into transactions with its sister concern Manish Agrotech Limited in subsequent years as well as in earlier years. There is no change in the nature of transactions entered into by the appellant company with its sister concern during the FY 2013-14, FY 2014-15, FY 2014-15 and FY 2015-16 and the method of recognizing the transactions is also the same i.e. in all the years, CUP method was adopted as the most appropriate method for recognizing the transactions with its sister concern. 4.10. It shall be pertinent to mention that transfer pricing proceedings for proceedings years i.e. FY 2012-13 and FY 2013-14 were completed by the TPO at Nil addition i.e. the methodology adopted by the appellant was very well accepted by the TPO. It is further submitted that Transfer pricing proceedings of subsequent year i.e. AY 2016-17 has also been since completed by the TP0-2, Ahemdabad, where-in the CUP method adopted by the appellant company has been accepted as the most appropriate method. Copy of the order passed by the TPO for AY’s 2013- 14, 2014-15 and 2016-17 is enclosed at page No. 127 to 140 of case law paper book. 4.11. Be that as it may the TPO has rejected the Comparable Uncontrolled Price Method (CUP) and has applied Transaction Net Margin Method (TNMM) and ended up by proposing an upward addition of Rs. 21,31,14,2267- in his order passed u/s 92CA on account of the purchase transactions of the appellant with its sister concerns M/s Manish Agrotech Ltd. of Rs. 41,67,84,935/-. No tax arbitrage in the transactions with the sister concern 4.12. The Learned TPO also lost sight of the fact that both the appellant and its sister concerns fall in the same tax bracket and there was no reason for not ad-hearing to the overall Arms Length mechanism while transacting with a sister concern. The variations proposed by the TPO are bad for this reason as well. 4.13. It was further submitted that appellant’s sister concern M/s. Manish Agrotech Limited is regularly assessed to income tax vide PAN ITA Nos.235, 226 & 227/Ind/2021 CO Nos.2 to 4/Ind/2022 40 AACCM7584Q. The said company is profit making company and has paid tax at Maximum Rate i.e. 30% during the year and the appellant company is also paying tax @ 30%. Copy of Income tax Return filed by M/s. Manish Agrotech Limited for AY 2015-16 is enclosed at page No. 91. A perusal of the same will show that the appellant and the said sister concern, both have paid the income tax at the same rate of 30%. 4.14. The Learned TPO also lost sight of the very important facts such as (i) both the appellant and its sister concern i.e. M/s Manish Agrotech Ltd. had positive income and (ii) Both the companies have not claimed any losses (iii) Both the companies have not claimed any deduction u/s 80(ia) or exemption u/s 1OAA etc (iv) Both the companies fall in the same tax bracket Therefore, evidently there was no tax arbitrage and no violation of the basic spirits and intentions behind incorporating the provisions of specified domestic transactions in the statue. There was even otherwise no reason for not ad-hearing to the overall Arms Length mechanism while transacting with - the sister concern. The variations proposed by the TPO and the additions made by the A O are bad for this reason as well. Absurd conclusions of the TPO proceedings 4.15. The appellant and M/s Manish Agrotech Ltd. both have purchased goods from each other and similar TP proceedings were carried out in both the cases. The case of the sister concern M/s Manish Agrotech Ltd. was also assessed by the TPO for this very year wherein an addition of Rs. 6,83,23,913/- has been proposed in respect of purchases made by M/s Manish Agrolech Ltd. from the appellant. A copy of the order passed ids 92CA(3) dated 15.10.2018 by the TPO 1 Ahmedabad in the case of M/'s Manish Agrotech Ltd. is enclosed at page no. 115 to 126. The appeal filed by M/s. Manish Agrotech Limited is also pending before Your Honour. The crux and essence of both the orders of the TPO i.e. in the case of the appellant and in the case of M/s Manish Agrotech Ltd. is that the appellant has made purchases from M/s Manish Agrotech Ltd. by making excessive payment to the tune of Rs. 21,31.14.226/-(addition made in the case of the appellant) and on the other hand the appellant has also received excessive amount of Rs. 6.83.23,913/- from M's Manish Agrotech Ltd. against sales made by the appellant to its sister concern (addition made in the case of M/s Manish Agrotech Ltd.). Learned TPO of the appellant is alleging that the appellant has diverted its profit by making excessive payments to its sister concern and on the other hand the TPO of the same sister concern is alleging that the said sister concern has diverted its profit to the appellant by making excessive ITA Nos.235, 226 & 227/Ind/2021 CO Nos.2 to 4/Ind/2022 41 payment. Thus the stand of the department and the TPO is self contradictory as evident from the orders passed by the TPO in both the cases. 4.16. With due respect it is submitted that the fact that heavy upward adjustment has been proposed in both the cases in respect of purchases made by one company from the other company in itself reflect the approach of the respective TPO that without making any attempt to understand the basic object and intention of incorporating the provisions of section 40A(2)b) and / or 92BA which was primarily that the profits of profit making entity are not shifted to loss making related party or the profits of non eligible entities are not shifted to eligible related party, huge upward adjustment were proposed and made in case of both the companies in respect of mutual transactions between both the companies, which is patently wrong and uncalled for. Anomalies in the methodology and approach adopted by the TPO 4.17. In view of the above submissions, the very reference made to the TPO was unwarranted and bad in law and the order passed by the TPO ought to be quashed out rightly. However, even on merits it is submitted that there are various anomalies in the overall methodology adopted by the TPO for working out the ALP variation and proposing a huge upward adjustment of Rs. 21,31,14,226/- to the total income of the appellant in respect of the purchase transactions of Rs. 41,67,84,935/- as reported in 3CEB. Such fallacies in the approach and methodology of the TPO are as under:- (i) The learned TPO erred in rejecting the Comparable Uncontrolled Price (CUP) method and also erred in applying Transactional net Margin Method (TNMM) for the following reasons: a. At the outset it is submitted that the Learned TPO has rejected the CUP method and applied the TNMM method in this year which action of the TPO is unwarranted. It is worth pointing out here that the CUP method has been accepted by the TPO in the immediately succeeding assessment year Le. AY2016-17. b. It is further submitted that the transactions of the appellant and its sister concern were that of purchase/ sale of soyabean seed, DOC and solvent oil and similar transactions have been carried out with outside third party and therefore, their FAR, the availability, coverage and reliability of data necessary for the application of method, the degree of comparability between the specified domestic transactions and the uncontrolled transactions and other such parameters also support using internal CUP and therefore, CUP was the most appropriate method (MAM). c. very high degree comparability of products and junctions such as quality, contractual terms, geographical market, embedded intangibles etc ITA Nos.235, 226 & 227/Ind/2021 CO Nos.2 to 4/Ind/2022 42 was available of the controlled transactions with the comparable uncontrolled transactions in comparable circumstances. d. Further analysis of each transaction was possible separately and therefore, there bench marking of interlinked transactions on the combined or aggregate basis was neither required nor called for. e. TNMM has its own limitation and the selection of comparable entities in itself is a challenge since TNMM compares the net profit of the entity with the net profit earned by the comparable entities with ought to be comparable on so many other factors such as appropriate base like assets, product range, turnover etc which data is not readily and easily available. Further differences in the function performed between enterprises are reflected in variations in operating expenses which lead to a wide range of gross profit margin and also net operating profit margins. f. Moreover, the assets employed by the appellant are much lower than that of the other comparables found and hence, the scale of operations and transactions of the appellant are not comparable under TNMM. g. Further, adjustment of other income and various items of expenses of entities cannot be made as the operational cost and revenue can ’l be traced separately with utmost accuracy. Hence CUP is more appropriate method appears to be most appropriate method for transactions entered into by the appellant company. (ii) The Learned TPO also erred in the selection of comparable cases which are not comparable either due to. their turnover or due to their products. (iii) The. Learned TPO while working out the profit level indicator (PL1) has not given the workings thereof and has apparently not considered the working capital adjustment which ought to have been taken into account for calculating the PLI. (iv) The Learned TPO also erred in the selection of comparable cases in as much as out of 12 companies shortlisted by the TPO, at I east 8 companies dealt in entirely different product. The Learned TPO, it seems applied an altogether wrong category of industry. Even the other four companies taken as comparable by the TPO are not comparable either due to their turnover or due to their products. (v) The Learned TPO while working out the profit level indicator (PLI) has not given the workings thereof and the PLI calculated does not match with the actual PLI of these comparables except in one case i.e. JVL Agro Industry Ltd. where the PLI working of the TPO is correct and the said PLI corresponds favourably with the PLI of the appellant i.e. the PLI of JVL Agro is less than the PLI of the appellant. ITA Nos.235, 226 & 227/Ind/2021 CO Nos.2 to 4/Ind/2022 43 (vi) There are various other fallacies in the working of profit margin of the appellant and the figures considered by the TPO are not reconciling with the actual figures of the appellant. The Learned TPO has not clarified as to how the figures have been calculated or worked out. In view of the above it is submitted that the AO ought not to have rejected the CUP method and also ought not to have applied TNMM. Further considering the above anomalies in the overall approach and methodology adopted by the AO the huge upward adjustment is apparently wrong and unwarranted. 4.17 Thus the payment made to the said sister concern though not covered us 40A(2)(b) was at arms length price i.e. market value only and as such there was no planning for reduction of tax incidence of the appellant by having transaction with the said sister concern by which income tax department have lost the tax and the transactions were tea neutral. 4.18 For all the reasons stated above and in view of the submission mJr it is submitted that the Ld. TPO erred in proposing an upward adjustment nr arm's length price by Rs. 21.31,14,226/- and Ld. AO erred in making the addition thereof Neither the impugned transactions are hit by the provisions of section 40(A)(2)(b) nor provisions of section 92BA are applicable, the said provision also stand omitted, both the companies fall in the same tax bracket and the transactions are also at Anns Length Price, therefore, the addition made by the Ld. AO is wrong and uncalled for and ought to be deleted. In view of the above submissions it is most humbly prayed that the additions made be kindly deleted and the appeal may very kindly be allowed. 5. GROUND NO. 6 (Additional Ground): This ground is against the reference made to the TPO even after the omission of section 92BA(i). 5.1. The appellant company has entered into transactions with its sister concerns during the year under consideration but the auditors of the company, without dwelling upon the shareholding pattern of the companies, treated the ‘sister concern‘ as related party’ and reported the said transactions as transactions covered u/s 40A(2)(b) and in Form 3CEB i.e. as transactions covered u/s 92BA(i). 5.2. The Finance Act, 2017 omitted section 92BA(i). The effect of such omission was that the transactions with persons referred to in section 40A(2)(b) do not fall within the ambit of domestic transfer pricing regulations w.e.f. 01.04.2017. After omission of Section 92BA(i), such ITA Nos.235, 226 & 227/Ind/2021 CO Nos.2 to 4/Ind/2022 44 transactions will not fall under the definition of Specified Domestic Transaction and therefore, the provisions of transfer pricing will not be applicable on such transactions. 5.3. It is submitted that clause (i) of section 92BA was omitted from the statute by the Finance Act 2017, with effect from 01.04.2017, without any saving clause, thus it has a retrospective effect because when a provision ' omitted from the statute, it result into a situation where it is deemed that the said provision did not exist in the statute book in absence of any saving provision. Thus. when 92BA(i) was omitted, it shall be deemed to be not existent in the Income Tax Act at any point of time. Effect of omission is different from repeal. 5.4. It is a well settled law that once a particular provision is omitted from the statute, it shall be deemed to be omitted from its inception unless and until there is some saving clause or provision to make it clear that action taken or proceeding initiated under that provision or section would continue and would not be left on account of omission. 5.5. In the present case, the Id. AO made a reference under section 92CA(1) to Id. TPO on 26.10.2017 and consequential order was passed by the Id. TPO on 15.10.2018. It is submitted that clause (i) to section 92BA itself stood omitted at the time when the reference under section 92CA(1) was made by the Id. AO. Therefore, the very reference made to the TPO and the order passed by the Id. TPO after omission of the provision is itself not sustainable and bad in law and ought to be quashed. 5.6. The appellant company places heavy reliance on the decision of Honourable Jurisdictional Indore Tribunal in the case of Swastik Coal Corporation Pvt. Ltd. Vs. Pr. CIT in ITA No.486/1nd/2018 dated 26.07.2019 (Copy enclosed at page no. 48 to 56 of the case law paper book). In this case, the assessment order of AY 2014-15 was revised under section 263 by Id. Pr. CIT for the reason that the assessing officer has not referred the case to the TPO to determine the arm’s length price in respect of the specified domestic transactions of the assessee with its AEs. The Honourable IT AT held that since the provision 92BA(i) itself stood omitted at the time when the order was passed by the Ld. Pr. CIT, in the light of the judgment of the Hon’ble Supreme Court rendered in the case of General Finance Company (2002) 124 Taxman 432 as well as the order of the coordinate bench rendered in the case of Texport Overseas Pvt. Ltd. ITA (TP) No.l722/Bang/2017, the impugned order cannot be sustained and was quashed by the Honourable ITAT. It is worth pointing out that the case before the Honourable jurisdictional ITAT was that of assessment year 2014-15 and the present case before ITA Nos.235, 226 & 227/Ind/2021 CO Nos.2 to 4/Ind/2022 45 Your Honour is of AY 2015-16. Therefore, the order passed by the Id. TPO in the present case is not sustainable. 5.7. It is further submitted that there are many other decisions categorically holding the above view. The appellant further places reliance on the following judicial pronouncements which also support the contention of the appellant as under: a. Decision of the Honourable Supreme Court in the case of General Finance Co. & Anr. Vs. Commissioner of Income Tax (2002) 257ITR 0338 where after placing reliance on the decision of the Apex court in the case of Rayala Corporation (P) Ltd. & M.R. Pratap vs. Director of Enforcement 1969 (2) SCC 412, and Kolhapur Canesugar Works Ltd & Anr. V/s Union of India & Ors. 2000 (2) SCC 536, it was held that an ‘omission’ of a provision is different from a ‘repeal’ and section 6 of the General Clauses Act applies to a repealed law and not to omission. This view has held the field for over three decades and reiterated even as late as two years ago. In the IT Act, section 276DD stood omitted from the Act but not repealed and hence, a prosecution"' could not have been launched or continued by invoking section 6 of the General Clauses Act after its omission. b. Decision of the Honourable Supreme Court in the case of Kolhapur Canesugar Works Ltd. Vs. Union of India in CA 2132 of 1994 dated 01.02.2000 where it was held as under: "The position is well known that at common law, the normal effect of repealing a statute or deleting a provision is to obliterate it from the statute book as completely as if ii had never been passed, and the statute must be considered as a law that never existed. To this rule an exception is engrafted by the provisions Section 6(1). If a provision of a statute is unconditionally omitted without a saving clause in favour of pending proceedings, all actions mast stop where the omission finds them, and if final relief has not been granted before the omission goes into effect, it cannot be granted afterwards Savings of the nature contained in Section 6 or in special Acts may modify the position. Thus the operation of repeal or deletion as to the future and the past largely depends on the savings applicable. In a case, where a particular provision in a statute is omitted and in its place another provision dealing with the same contingency is introduced without a saving clause in favour of pending proceedings then it can be reasonably inferred that the intention of the legislature is that the pending proceeding shall not continue but afresh proceeding for the same purpose may be initiated under the new provision.’’ c. Decision of the Honourable Karnataka High Court in the case of CIT & ACIT Vs. M/s. GE Thermometries India Pvt. Ltd. in ITA No. 876 & 877 of 2008 dated 25.11.2014 where it was held that in absence of a saving clause or any new provision introduced by way of amendment while omitting sub-section (9) of Section 10B, the aforesaid section once ITA Nos.235, 226 & 227/Ind/2021 CO Nos.2 to 4/Ind/2022 46 omitted from the statute will be considered as it had never been passed and that it never exists. Thus, the assessing officer was held to be not justified in passing an assessment order by taking note of a provision which was not in statute book and denying benefit to the assessee. In view of the above judicial pronouncements, it is submitted the once a particular provision of section is omitted from the statute, it shall be deemed to be omitted from its inception unless and until there is some saving clause. Therefore, the omission of clause (i) of section 92BA shall be deemed to be not existent in the Income Tax Act at any point of time. In this legal position, the cognizance taken by the Id. AO under section 92BA(i) and reference made to TPO under section 92CA is not in accordance with law, therefore the order passed by the TPO is bad in law and the consequential addition made by the AO on the strength of such order of the TPO is also not sustainable in the eyes of law. 33. Further, we observe that the ld. CIT(A) has granted relief to the assessee with the following observations and findings:- “Ground No. 4:- This ground of appeal has been raised against the addition of Rs. 21,31,14,226/- made by the AO on account of upward variation in the ALP proposed by the TPO. The AO has referred to the order passed u/s 92CA(3) of the Act by the TPO and made this addition. From the order of the TPO, it is seen that the appellant had applied Comparable Uncontrolled Price (CUP) for bench marking its domestic transactions with its sister concern, which method was rejected by the TPO, who applied Transactional Net Margin Method (TNNM) as the Most Appropriate Method (MAM) and after comparing the margins of the comparable companies found the margin of the appellant very less and made the above upward adjustment. 4.2.1 The appellant per contra has contended that its major transactions with its sister concern was mainly with M/s Manish Agrotech Ltd. from whom the appellant has purchased goods and also sold goods to the said sister concern. The appellant has further contended that the CUP method adopted by it in respect of identical transactions was accepted by the TPO in preceding year i.e. AY 2014-15 and also in subsequent year i.e. AY 2016-17. Further considering the nature of transactions the TNNM method is not at all applicable. The appellant strongly contended that there was no tax arbitrage in the transactions with the sister concern as the said sister concern is so a profit making company and has paid income tax at the maximum rate of 30% and has not claimed any deduction u/s 80IA of the Act or exemption u/s 10AA of the Act. Copy of income tax return filed by Manish Agrotech Ltd. for AY 2015-16 is also filed by the appellant. It is the case of the appellant that the appellant and M/s Manish Agrotech Ltd. both have purchased goods from each other and similar TP proceedings ITA Nos.235, 226 & 227/Ind/2021 CO Nos.2 to 4/Ind/2022 47 were carried out in both the cases, wherein heavy additions have been made in both the cases in respect of mutual transactions of purchase and sale. The appellant has also pointed out various anomalies in the approach of the TPO in adopting the TNNM method and ascertaining the ALP of the transactions with its sister concern and challenged the addition made by the AO. 4.2.2 I find that similar upward adjustment has been made in the case of M/s Manish Agrotech Ltd. for this very year in respect of its transactions with the appellant and the appeal filed by M/s Manish Agrotech Ltd. is also pending with this office. It is seen that M/s Manish Agrotech Ltd. has filed its return of positive taxable income and has not claimed any deduction u/s 80IA of the Act or u/s 10AA of the Act. Further, the TPO has proposed and the AO has made an addition of Rs. 6,83,23,913/- in the case of M/s Manish Agrotech Ltd. in respect of purchases made by it from the appellant. Therefore, the TPO of the appellant is of the view that the appellant has shifted its profits to M/s Manish Agrotech Ltd. and the TPO of M/s Manish Agrotech Ltd. is of the opinion that the said company has shifted its profits to the appellant, which apparently is a contradictory stand. In my considered view only to avoid this type of situations where addition are proposed in both the sister concerns in respect of mutual domestic transactions between them, where there is no tax arbitrage, the legislation in its own wisdom omitted section 92BA(i) of the Act from the statute without providing any saving clause. There is sufficient merit in the contention of the appellant that the CUP method has been accepted by the TPO in AY 2016-17, which appeal is also pending with this office. Considering the above discussions and also the fact that there is no tax arbitrage and also the fact that addition has been made in the case of the appellant in respect of purchases made by it from M/s Manish Agrotech Ltd. and addition has also been made in the case of M/s Manish Agrotech Ltd. as well in respect of purchases made by it from the appellant, both the additions having counter effect in the other case and apparently are contradictory and unwarranted, it is held that the addition made is wrong and unwarranted and therefore, addition made by the AO amounting to Rs. 21,31,14,226/- is Deleted. Therefore, the appeal on this ground is allowed.” 34. On careful consideration of the rival submissions, written submissions filed by the assessee before the ld. CIT(A) and the findings arrived at by the ld.CIT(A), first of all, we observe that the AO made the impugned addition on account of upward variation in the ALP proposed by the TPO. For this, the AO, have referred to the order passed by the TPO u/s 92CA(3) of the Act. From the order of the TPO, it is ITA Nos.235, 226 & 227/Ind/2021 CO Nos.2 to 4/Ind/2022 48 consistently seen that the assessee had applied CUP method for benchmarking its domestic transactions with its AE/sister concern, which was rejected by the TPO and applied Transactional Net Margin Method (TNMM) as the most appropriate method (MAM) and, after perusing the margins of comparable companies, found the margin of the assessee company very less and made the impugned upward adjustment and the consequent addition. 34.1 From the first appellate order, we observe that the CUP method adopted by the assessee in respect of identical transactions was accepted by the TPO in the immediately preceding assessment year 2014-15 and also in the immediately succeeding AY 2016-17. We may also point out that the principle of res judicata does not apply to the tax proceedings. However, it is the duty of the tax authorities to follow the rule of consistency under identical facts and circumstances. Neither the AO nor the ld. CIT-DR brought home any facts or circumstances to show that the facts and circumstances of identical transaction are different from the immediately preceding assessment year 2014-15 and immediately subsequent AY 2016-17 from the AY under consideration, i.e., AY 2015-16. Therefore, we safely presume that the TPO himself has adopted and accepted CUP method without making any upward adjustment in the hands of the assessee for similar transactions with its AE in AY 2014-15 & AY 2016-17 in assessee’s cases. Therefore, the AO cannot be allowed to make any upward adjustment by keeping aside CUP method and adopting TNMM for making impugned upward adjustment and consequent addition in the hands of the assessee. In view of the foregoing, we are unable to see any valid reason to interfere with the findings made by the ld. CIT(A) and, thus, we uphold the same. Accordingly, the grounds No.1 to 5 of the Revenue for AY 2015-16 are dismissed. ITA Nos.235, 226 & 227/Ind/2021 CO Nos.2 to 4/Ind/2022 49 CO Nos.2, 3 & 4/Ind/2022 (ITA Nos.235, 226 & 227/Ind/2021 -Assessment Years: 2011-12, 2012-13 & 2015-16) 35. The ld. Assessee’s representative submitted that the Cross Objections of the assessee are merely supportive of the first appellate order. Therefore, the assessee does not want to press the same. Accordingly, the Cross Objections of the assessee for all the three assessment years are dismissed. 36. In the result, the above captioned appeals filed by the Revenue as well as the Cross Objections filed by the assessee are dismissed. Order pronounced u/r 34(4) of the Income-tax (Appellate Tribunal) Rules, 1963 on 30.01.2023. Sd/- Sd/- (BHAGIRATH MAL BIYANI) (C.M. GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER Indore: Dated, 30/01/2023 dk आदेशकी ितिलिपअ ेिषत / Copy of Order Forwarded to:- 1. राज / Revenue 2. आवेदक / Assessee 3. संबंिधतआयकरआयु / Concerned CIT 4.आयकरआयु - अपील / CIT (A) 5. िवभागीय ितिनिध,आयकरअपीलीयअिधकरण, अहमदाबाद/ DR, ITAT, Ahmedabad 6. गाड फाइल / Guard file. By order UE COPY Assistant Registrar Income Tax Appellate Tribunal Indore Bench, Indore ITA Nos.235, 226 & 227/Ind/2021 CO Nos.2 to 4/Ind/2022 50 Date 1. Draft dictated on 16.01.2023 2. Draft placed before the author 20.01.2023 3. Draft placed before the other Member 4. Approved Draft comes to the Sr.PS/PS 5. Order uploaded on 6. File sent to the Bench Clerk 7. Date on which file goes to the Head Clerk. 8. Date on which file goes to the AR 9. Date of dispatch of Order.