Sale of CWO proved and recorded as Income in Books of Account: ITAT deletes Addition on alleged Non genuine Purchase [Read Order]

The Income Tax Appellate Tribunal ( ITAT ), Ahmedabad Bench deleted addition on the ground of alleged non-genuine purchase as the sale of Cotton Wash Oil (CWO) was proved and recorded as income in books of account.

The appeal is relating to the addition of Rs.59.70 crores made by the Assessing Officer and confirmed by the CIT(A) on account of non-genuine purchases, the relevant facts of the case are that the assessee had undertaken transactions of CWO on NSEL platform through its Member M/s. N.K. Proteins Ltd (NKPL). The appellant in the present appeal is N.K. Industries Ltd.

A certificate was filed by the assessee confirming that the CWO had actually been delivered by the assessee to the concerned parties. The assessee also submitted soft copy of purchase and sales register in excel format to prove the transactions of purchase and sales.

The AO observed that the transactions made by the assessee through NSEL were only paper transactions as per assessee’s own submission without any actual movement of goods and accordingly held that purchases of Rs.59.70 crores were claimed by the assessee in excess of sales actually made and by treating the same as non-genuine.

The sale was duly recorded and recognized in the books of NKPL as verified by the Assessing Officer and the corresponding sale of 10,180 MT of CWO made by the assessee-company from the purchases made from NKPL was duly supported by the party-wise details furnished by the assessee-company.

A Coram consisting of Pratap M Jagtap, Vice President and Suchita Kamble, Judicial Member observed that “The said sale recorded and recognized by the assessee-company in its books of account was accepted by the authorities below and we find merit in the contention raised by the learned Counsel for the assessee that the corresponding purchases cannot be disallowed when the sale was accepted.”

“It is thus clear that the purchase of CWO for Rs.59.70 crores on delivery basis was actually established by the assessee on the basis of supporting evidence and since the corresponding sale of the same was not only proved but the same was also recorded and recognized as income in the books of account of the assessee-company, we are of the view that the purchase of CWO for Rs.59.70 crores cannot be said to be excessive as alleged by the authorities below” the Tribunal noted.

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