DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-4(1)(1), AHMEDABAD vs. TIRUPATI RETAIL (INDIA) PRIVATE LIMITED, AHMEDABAD

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, AHMEDABAD BEFORE DR. B.R.R. KUMAR, VICE-PRESIDENT SHRI T.R. SENTHIL KUMAR, JUDICIAL MEMBER I.T.A. No. 560/Ahd/2023 (Assessment Year: 2014-15) Vs. Deputy Commissioner of Tirupati Retail (India) Pvt. Ltd., Income-tax, 2nd Floor, Popular House, Circle 4(1)(1), Ashram Road, Ahmedabad Ahmedabad [PAN : AACCT 6411H]

I.T.A. No. 576/Ahd/2023 (Assessment Year: 2014-15) Vs. Tirupati Retail (India) Pvt. Deputy Commissioner of Ltd., Income-tax, 2nd Floor, Popular House, Circle 4(1)(1), Ashram Road, Ahmedabad Ahmedabad [PAN : AACCT 6411H] (Appellant) .. (Respondent) Assessee represented by : Shri Biren Shah, AR Revenue represented by: Shri Alpesh Parmar, CIT (DR) Date of Hearing 25.02.2026 Date of Pronouncement 30.04.2026 O R D E R PER DR. B.R.R. KUMAR, VICE-PRESIDENT :

These are the cross-appeals filed by the assessee and Revenue against the order of the Ld. Commissioner of Income-tax (Appeals)-11, Ahmedabad (hereinafter referred to as "CIT(A)" for short) dated 24.05.2023, passed under Section 250 of the Income-tax Act, 1961 [hereinafter referred to as "the Act" for short], for Assessment Year (AY) 2014-15.

ITA No. 560/Ahd/2023 Tirupati Retail (India) Pvt Ltd Vs. DCIT Asst. Year : 2014-15 - 2– 2. On the facts and in the circumstance of the case, the learned CIT(A) has grossly erred in upholding loss of Rs. 59,28,35,703/- and thereafter disallowing the same when the same has already been unclaimed by the Assessee. 3. On the facts and in the circumstance of the case, the learned CIT(A) has erred in making addition of Rs. 32,14,49,000/- by estimating unaccounted income at the rate 1 per cent of turnover recorded in books of accounts. The learned CIT(A) has erred in making addition on presumption basis without bringing any concreate evidence on records applicable to the Assessee. Learned CIT(A) has failed to appreciate the relation of such huge turnover against the paltry or so to say NIL capital employed for such turnover. 4. On the facts and in the circumstance of the case, the learned CIT(A) has grossly erred in arriving at a percentage of profit at the rate 1 per cent by referring inappropriate comparables.”

“1. The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 6,08,343/- made by the AO on account of unaccounted profit (being 25% of closing stock of Rs. 24,33,375/-). 2. The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 81,86,05.409/- made by the AO on account of unaccounted purchase. 3. The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 16,20,76,44,093/- made by the AO u/s 68 of the IT Act in respect of Non genuine trade payable reflected in its audited Books of account. 4. On the facts and circumstances of the case, Ld CIT(A) ought to have upheld the order of the Assessing Officer.”

ITA No. 560/Ahd/2023 Tirupati Retail (India) Pvt Ltd Vs. DCIT Asst. Year : 2014-15 - 3– assessment u/s 143(3) r.w.s. 142(2A) was completed on 06.06.2017 making various additions.

ITA No. 560/Ahd/2023 Tirupati Retail (India) Pvt Ltd Vs. DCIT Asst. Year : 2014-15 - 4– was under section 139(4). The Assessing Officer disallowed the loss, which was confirmed by the Ld. CIT(A).

7.1 Before us, the Ld. AR on this issue submitted that since the assessee has withdrawn the claim during assessment proceedings, no further disallowance was warranted. The Revenue shall accept the same. The returns for the subsequent years can be examined if the losses carried forward and set off against any profits. If claimed any set off, such set off shall not be allowed. Ld. CIT-DR appearing for the Revenue could not dispute the above submission of the assessee counsel. Therefore, we hereby direct the Jurisdictional Assessing Officer to verify the Returns of Income filed by the assessee for subsequent years whether the losses carried forward and set off against any profits and allow the same in accordance with the provisions of law.

7.2. In the result, Ground No.2 raised by the Assessee is allowed for statistical purpose.

Ground Nos. 3 & 4 – Estimation of Profit

ITA No. 560/Ahd/2023 Tirupati Retail (India) Pvt Ltd Vs. DCIT Asst. Year : 2014-15 - 5– itself held to be non-genuine, the provisions of Section 41(1) cannot be applied. 10.20 ln preceding paras it is observed that real intent of entering into such transactions on NSEL exchange which is nothing but to obtain non-genuine loss by helping other counter parties and even though entire loss claimed by appellant in such transactions are already disallowed by AO and confirmed in proceedings paras, it is reasonable to estimate certain percentage of profit on turnover reflected in books of account which appellant might have gained by entering into such transactions and are not reflected in the regular books of Account. It is observed that no prudent person would have entered into such transactions without gaining anything. The appellant has claimed to have entered into paper purchase and sale transactions without delivery and no prudent person would carry out such transactions for certain period of time and that too without settling such transactions which proves that appellant has gained certain percentage of income by entering into such modus operandi and same is not offered to tax. The books of account reflected by appellant does not show correct details which is established from the fact that trade receivable and trade payable as well as purchase and sale are paper transactions, such books of account of appellant are rejected u/s 145 of the Act and reasonable profit is estimated. The appellant has claimed losses from trading of unbranded oil and as per data available on public domain, following companies have shown net profit on sale of branded oil as under:

It can be seen from above referred data that various companies have shown net profit in the range of 0.05% to 1.04% over a period of three years. Since the profit from unaccounted transactions are always higher than the profit shown in the regular books of account, it is reasonable to estimate such higher income on such type of transactions. Thus, unaccounted profit for the year under consideration is estimated at Rs.32,14,49,000/- being @ 1% on turnover of Rs.3214.49 crores as reflected in Profit & loss account as against loss shown in return of income. The AO is directed to compute taxable income

ITA No. 560/Ahd/2023 Tirupati Retail (India) Pvt Ltd Vs. DCIT Asst. Year : 2014-15 - 6– in case of appellant considering net profit at Rs.32,14,49,000/-- as stated supra.” 8.1 The Ld. AR submitted that the CIT(A)’s estimation at 1% was excessive and he contended that the assessee-company is not a branded retail oil company like Adani Wilmar or Patanjali Foods, so profit margins are inherently lower. The Ld. AR submitted that the bulk of assessee’s business is trading in edible oil, not retail sales and the profit margins in trading are lower than in retail. The Ld. AR further contended that, given the large volume of transactions, 1% of turnover would result in an unreasonably high estimated income; therefore, if estimation is necessary, the profit margin may be restricted to 0.01% of turnover rather than 1%.

8.2 The Ld. DR, on the other hand, contended that the estimation by the CIT(A) was reasonable given the rejection of books and industry comparables, and that some profit must have accrued from these paper transactions.

8.3 We have heard the rival contentions and perused the material available on record. Taking into consideration the profit range, we determine on estimate basis the profit @ 0.3%. The appeal of the assessee on these grounds are thus partly allowed.

In the result, the assessee’s appeal is partly allowed.

Revenue’s Appeal: Ground No. 1 – Deletion of Addition of Rs. 6,08,343/- (Closing Stock) 9. The Assessing Officer disallowed 25% of closing stock treating it as profit on alleged unaccounted sale. The CIT(A) deleted the addition holding that once entire transactions were treated as paper transactions and loss disallowed, there was no basis to assume separate cash sale of closing stock.

ITA No. 560/Ahd/2023 Tirupati Retail (India) Pvt Ltd Vs. DCIT Asst. Year : 2014-15 - 7– 9.1 The findings of the Ld. CIT(A) in this regard are as under:- “8.2 The brief facts of the case are that appellant had shown closing stock in Audited Annual Accounts of Rs.24,33,775/-. The Ao had asked appellant to submit details of closing stock as no physical stock was maintained by Assessee Company and only paper transactions were made. During the course of assessment proceedings, appellant had claimed that purchase and sales are reflected on net basis in Profit & Loss Account and stock is arising out of such purchases recorded in Books of Account. However, this contention of appellant was not found to be correct on the ground that appellant had not furnished any proof of delivery of purchase and sale of goods. Thus, the AO had considered closing stock of Rs.24,33,375/- as non-verifiable and came to the conclusion that Company has sold such stock in open market without bill and incorrectly reflected as stock in audited annual accounts. The AO also observed that the reason for such cash sales might be to gain higher profit as both purchaser and seller would have saved by way of VAT, income tax and other levies. The AO estimated unaccounted profit @ 25% of cost and made addition of Rs.6,08 ,343/- 8.3 During the course of appellate proceedings the appellant has contended that castor seed purchases are higher than corresponding sales hence difference in quantity is shown as closing stock which is also mentioned in special audit report. Though purchase and sales through NSEL are without delivery of goods, net quantity of purchase and sales being 67,500 Kgs., of castor seed are shown as closing stock. It was also contended by appellant that there is no evidence that such stock is sold in market in cash and appellant has earned profit thereon hence addition made on estimate deserves to be deleted. 8.4 During the course of Appellate Proceedings, my predecessor ld. CIT (Appeals) vide his letter dated 26.10.2018 had called for Remand Report and AO in his Remand dated 11.07.2019 had stated that special auditor has not made any comments on the value of stock in actual possession of appellant hence addition need to be upheld. The appellant in his rejoinder dated 30.09.2019 filed on 22.10.2019 and 09.11 .2019 has reiterated its earlier stand and stated that such value is already considered while working out profit/loss from commodity transactions hence no addition can be made. 8.5 lt is observed that ld CIT (Appeals) - 8, Ahmedabad, had again called for Remand Report vide letter dated 4th February, 2020 and Ao in his Remand Report dated 03.03.2020 had submitted that appellant has not made any additional submission on this issue hence addition made in assessment order

ITA No. 560/Ahd/2023 Tirupati Retail (India) Pvt Ltd Vs. DCIT Asst. Year : 2014-15 - 8– need to be upheld. The appellant again in the rejoinder to the Remand Report has stated that closing stock is arising out of purchase made during the year and entire loss arising from such trading transaction is disallowed by AO considering it to be paper transaction and even such loss is withdrawn by appellant, hence addition cannot be made on presumption that appellant has sold such stock on profit and such profit is not recorded in Books of Account. 8.6 On perusal of relevant facts on record, it is observed that appellant has shown closing stock of castor seeds at Rs.24,33,3751- (67,500 Kgs) out of aggregate purchase of castor seeds for Rs.737,84,06,6414. The summary of purchase/sale as well as closing stock for all the commodities is as under:

The appellant has carried out all the transactions of purchase and sale at NSEL and all these transactions are without delivery and held to be paper transactions in preceding paras. Though appellant has claimed trading loss of Rs.59,51,97,263/- as business loss in return of income (difference between purchase and sale), such loss was purportedly withdrawn during assessment proceedings by filing the revised computation of income, but the same was rejected by the AO on the ground that such withdrawal was not allowed as law as the appellant had not filed original return u/s 139(4). However, after detailed discussions, disallowance of such loss is already upheld by the undersigned while dealing with ground No. 2 herein above. Once entire transactions have been held to be paper transactions, there is no scope for sale of such goods in cash as concluded by the AO. Once purchase and sale are held to be bogus, closing stock is arising out of such bogus purchase and net result of such paper transactions has already been disallowed while passing the assessment order, AO was not correct in holding that appellant has sold such stock in cash outside the market and therefore, estimation of profit on such non existing closing stock is not justified. Therefore, addition made by AO for Rs.6,08,543/- is deleted.”

ITA No. 560/Ahd/2023 Tirupati Retail (India) Pvt Ltd Vs. DCIT Asst. Year : 2014-15 - 9– 9.2 We have heard the rival contentions and perused the material available on record. In view of the decision at ground no.2 of the assessee’s appeal, the appeal of the Revenue on this ground stands intrapolated. Ground No. 2 – Addition of Rs. 81,86,05,409/- (Difference in NSEL Records)

ITA No. 560/Ahd/2023 Tirupati Retail (India) Pvt Ltd Vs. DCIT Asst. Year : 2014-15 - 10– higher purchase than purchases as per NSEL and simultaneously, shown higher sales in books of account. It is found that both unsubstantiated purchase and sale value as worked out by AO after comparing data recorded on NSEL are part and parcel of purchase, sales recorded in Books of Account. The appellant has claimed loss from trading transactions for Rs 59.92 crore which is arrived at after reducing purchase value from sales value and closing stock and part of net loss of Rs 59.92 crore and such purchases as well as sales includes higher amount of purchase and sales as worked out herein above. It is found that such loss of Rs 59.92 crore was separately disallowed by AO in assessment order and same is upheld in preceding paras, hence there is no reason for making separate addition of Rs.2,91,39,509/- by comparing purchase/sale value as per NSEL and data recorded in books of account. On entire gamut of transactions carried out by appellant is that it has incurred net non -genuine loss of Rs. 59,51,97,263 and same is already disallowed by AO hence there is no reasons for making artificial disallowance by making comparison with purchase/sale transactions recorded in books of account and transactions as reflected on NSEL.

9.19 Considering these facts, addition made by AO for Rs 81,86,05,409/- is deleted.”

10.1 We have heard the rival contentions and perused the material available on record. In view of the decision at ground no.2 of the assessee’s appeal, the appeal of the Revenue on this ground stands intrapolated.

Ground No. 3 – Deletion of Addition of Rs. 1620,76,44,093/- u/s 68

11.1 The detailed findings of the Ld. CIT(A) in this regard are as under:- “…. (i) The aggregate value of purchase is Rs.3274.01 crores and aggregate sale is Rs.3214.49 crores and difference between both purchase and sale is

ITA No. 560/Ahd/2023 Tirupati Retail (India) Pvt Ltd Vs. DCIT Asst. Year : 2014-15 - 11– Rs.59.51 crores which is debited as loss in Audited Annual Accounts and same is subject to disallowance in Assessment Order. Thus, net loss arising from such transaction is disallowed by AO treating it as non-genuine and paper loss.

(ii) The purchase inclusive of VAT is credited in party account and sales inclusive of VAT is debited to party account. When aggregate purchase made from the party in entire assessment year is higher than sales, if any, made to such party, net amount is reflected as trade payable whereas when sales are higher than purchase, net amount is reflected as trade receivable.

(iii) The aggregate amount of trade receivable and trade payable as appearing in above referred tabular chart tallies with Audited Annual Accounts and there is no financial movement in any account. The appellant has drawn attention to last column of such tabular chart which represents trade payable of Rs. 1621.26 crores and such figure tallies with balances of sundry creditors appearing on page No. 19 of assessment order. While passing the assessment order, the AO has treated amount payable to Madhur Industries for Rs.49,40,000/- as genuine, which is also reflected at Sr. No. 26 in above tabular chart. The AO has thus made net addition of Rs.16.21 crores.

(iv) The above tabular chart was explained with illustration i.e. in case of Arian Commodities Pvt. Limited (refer Sr. No. 2), appellant has made both purchase as well as sale transactions. The aggregate value of purchase from such party is Rs.9.77 crores whereas sale is Rs.1.81 crores and net difference between purchase and sale amounting to Rs.7.97 crores is reflected as trade payable by appellant. The closing balance of trade payable for 1621.26 crores is inclusive of above referred amount of Rs.7.97 crores.

In the case of Devashish Commodities Limited (refer Sr. No. 13), the sale value is Rs. 12.89 crores whereas purchase value is Rs.9.87 lacs hence difference of purchase and sale is reflected as receivable of Rs.12.79 crores and such amount is part of net receivable reflected in Audited Annual Accounts at Rs. 1558.76 crores.

10.13 On perusal of relevant facts on record, it is observed that appellant has made purchase and sale transactions in commodities on NSEL platform. During the course of assessment proceedings, AO found that appellant has shown balance of trade payable in Audited Annual Accounts at Rs. 1621.25 crores, but has failed to submit third party confirmation. When AO has issued notice under Section 133(6) to few parties in assessment proceedings as well

ITA No. 560/Ahd/2023 Tirupati Retail (India) Pvt Ltd Vs. DCIT Asst. Year : 2014-15 - 12– as in remand proceedings, he found that amount payable shown in the account of respective party by appellant is not matching with amount shown as receivable by such third party. Thus, AO found that balance of trade payable as reflected in Audited Annual Accounts are not genuine. AO contended that merely furnishing copies of invoices or VAT number in such bills does not prove the identity, creditworthiness and genuineness of trade payable. During the course of assessment proceedings. he found that balance of Madhur Industries shown by appellant tallies with amount reflected as receivable from appellant by such party hence to that extent AO treated trade payable as genuine and remaining amount of Rs. 1620.76 crores is added under Section 68 of the Act. During the course of Appellate Proceedings, appellant has submitted additional evidences under Rule 46A which are admitted for the detailed reason given while dealing with Ground No. 5 relating to addition of Rs.81.86 crores being unexplained purchase on the basis of details received from NSEL. 10.14 On perusal of Remand Report, submission filed by appellant and documentary evidences on record, it is relevant to consider modus operandi of transactions of purchase and sale at NSEL as discussed on page 53 and 54 of special audit report, which is reproduced hereunder: Gist of Modus Operandi: "In reality, "Trade contract” with National Spot Exchange Ltd. was meant for availing finance by executing paper trade on the electronic platform of NSEL. The modus operandi adopted was such that client of M/s. N.K. Proteins Ltd., say for e.g. M/s. N.K. Corporation (henceforth NKC) executes a T + 36 contract in the electronic platform of NSEL, whereby NKC purchases 100 Kg. of castor seeds from another prospective investor/client of another broker of NSEL for Rs.100/-. The another prospective investor client of NSEL, in turn executes a T + 3 trade contract on the electronic platform of NSEL whereby it purchases castor seeds from another client of M/s. N.Κ. Proteins Ltd. such as M/s. Tirupati Retail (India) Pvt. Limited (henceforth) TR(I)PL associated concern) for Rs.100/-. Thereafter the associated concern i.e. M/s. NKC carry out intra-group sale back to M/s. TR(I)PL to square off the sale/purchase transaction and to maintain the stock position. All the above three transactions are executed simultaneously. Thus, after the above set off of circular transactions, M/s. TR(I)PL has to receive the amount on the 3rd day from prospective investor (T + 3) and the associate concern say M/s. NKC has to pay to the prospective investor after 36 days (T + 3B) To keep the process going, a fresh T +

ITA No. 560/Ahd/2023 Tirupati Retail (India) Pvt Ltd Vs. DCIT Asst. Year : 2014-15 - 13– 3 contract is executed by with NSEL 2 to 3 days prior to the due date of making payment as per T + 36 contract. The funds receivable from such T + 3 contract neutralized the fund outflow needed to settle the initial T + 36 contract. In this way, the T + 36 contracts are rolled over from one settlement cycle to the next cycle. As mentioned above, it is clear that entire gamut of transactions shown as purchase & sales were not real transactions and institutionalized shape of the entire transactions was given to obtain funds from the investors on short term basis which was also transformed in form of long term funds by making rollover of contracts." It is apparent from special audit report that transactions of purchase and sales as shown by Appellant are not real transactions. This modus operandi is also discussed by AO at page No. 5 to 7 of Assessment Order. During the course of survey proceedings, in NK Group, statement of Mr. Nilesh Patel was recorded wherein he has stated that physical delivery with respect to purchase and sale of commodities as shown in Books of Account of Assessee Company group have never taken place. In the light of above observation made by special auditor as well as admission made by Mr. Nilesh Patel it is apparent that appellant company has made only paper transactions on NSEL platform which is settled without any delivery and there is no fund movement. The appellant has submitted date-wise transactions in various commodities and from such details it is apparent that appellant has made purchase and sale transactions of same commodity for same quantity simultaneously except in one or two occasions wherein there was stock available with appellant for 67,500 Kgs which is very meager in comparison with aggregate transactions. 10.15 On perusal of daily purchase and sale data, invoices raised by third party as well as ledger account of debtors/creditors, it is apparent that there is no movement of goods from one party to another party. The appellant has not given any cheques against purchases made throughout the year and not received any amount against sales made throughout the year. Both purchase and sales transactions of similar quantity are made simultaneously and same is explained by citing example of transactions carried out in Washed Cotton Seed Oil on 10th April, 2013. The appellant has also submitted evidences in support of such circular transaction. It is observed that appellant has made sale of 47,60,000 Kgs of Washed Cottonseed Oil to NK Corporation on 8th April, 2013 and raised the sales bill inclusive of VAT. Similarly, NK Corporation has raised sale invoice in name of different parties for similar quantity. Similarly, the third parties have raised the aggregate bill of

ITA No. 560/Ahd/2023 Tirupati Retail (India) Pvt Ltd Vs. DCIT Asst. Year : 2014-15 - 14– 47,60,000 Kgs in name of appellant. In this transaction the purchase value was Rs.29.83 crores and sale value were Rs.29.25 crores and appellant has incurred net loss Rs.58,00,000/-. Similar pattern of the transactions has been carried out throughout the year. The nature of this transaction clearly proves that appellant has made circular paper transaction. Once the transactions of purchase and sale are paper transactions, corresponding amount shown as payable or receivable cannot be genuine. However, when appellant has carried out transactions of commodities in same pattern throughout the year and when credit balances arising from net purchase transactions are not genuine, amount shown as trade receivable arising out of net sales transaction are equally needs to held as non-genuine. The balances of trade payable and trade receivable are emanating from bogus purchase and sale transactions hence AO cannot hold aggregate balance appearing in trade payable account as non-genuine without giving set off of non-genuine balance of trade receivable as they are part and parcel of aggregate paper transactions carried out by appellant. 10.16 On perusal of tabular chart (containing party-wise aggregate purchase, aggregate sale, closing balance of such party) as reproduced in preceding paras, it is observed that during the year under consideration appellant has made aggregate purchase of Rs. 3274.01 crores and aggregate sale of Rs.3214.49 crores. The difference between purchase and sale is Rs.59.52 crores (3274.01-3214.49) and such loss is reflected as speculative loss in Audited Annual Accounts. Once appellant is purchasing the goods on NSEL, aggregate purchase value inclusive of VAT is credited to party account whereas in the case of sale aggregate sale value is debited in party account. Thus, ledger account of any party reflects net balance of aggregate purchase and sales made by appellant with them. When appellant has made purchase only or when aggregate purchase made with particular party is higher than sales made to such party, net credit balance is reflected as trade payable in Audited Annual Accounts. The aggregate net credit balance in year under consideration is Rs.1621.26 crores. However, when appellant has made only sales with particular party or aggregate sales made by appellant is higher than purchases, net balance is reflected as trade receivable in Audited Annual Accounts. The aggregate balance of such trade receivable is Rs.1558.76 crores. The net difference between trade payable and trade receivable is 62.5 crores (1621.26 - 1558.76). On perusal of Audited Annual Accounts, it is apparent that appellant has reflected amount receivable from VAT at Rs.2.98 crores as loans & advances. As ledger account of parties with whom appellant has made purchase and sales transactions are containing purchase/sale value inclusive of VAT and net balance of trade payables

ITA No. 560/Ahd/2023 Tirupati Retail (India) Pvt Ltd Vs. DCIT Asst. Year : 2014-15 - 15– computed after reducing balance of trade receivable from gross trade payable at Rs.62.5 crores herein above and from such balance if effect of VAT receivable of Rs.2.98 crore is given, difference is worked out at Rs.59.51 crores which is nothing but speculative net loss computed by appellant from aggregate purchase/sales. The profit/loss arising from commodity transaction is without considering VAT effect. These facts clearly prove that in sum and substance of all the transactions carried out by appellant on NSEL is that appellant has incurred net loss of Rs.59.51 crores and such loss is already disallowed by AO treating it as non-genuine and paper loss. This addition made in assessment order is already upheld by undersigned while dealing with ground No. 2 herein above. When amount of trade payable as reflected in Audited Annual Accounts which is subject matter of present dispute is arising out of aggregate non-genuine paper purchase and net result of this transaction is loss of Rs.59.51 crores, AO was not justified in holding that gross amount appearing in trade payable is required to be added as income of appellant under Section 68 of the Act. The AO has failed to appreciate that even aggregate sales made during the year out of such purchases are also paper transactions and receivable balance as arising from such net sale transaction are also non-genuine, hence AO cannot tax only credit balance appearing in party account as non-genuine as debit balance appearing in party's account from similar transactions are also non- genuine. On holistic consideration of entire Audited Annual Accounts, it is apparent that appellant has entered into non-genuine transactions and one cannot tax only credit side appearing in Balance Sheet by treating it as non- genuine when debit side of Audited Annual Accounts also contain non- genuine balance. On overall basis by adopting this modus operandi, appellant has incurred net loss and as per real income theory only such loss can be held to be non-genuine which is already held so in preceding para. The AO cannot tax part of this transaction as non-genuine without giving set off of other side of transactions which are also of similar nature. 10.17 On perusal of assessment order along with statement of Mr. Nilesh Patel recorded during the course of survey, it is apparent that appellant has carried out fictitious/paper transactions in commodities which are settled without delivery. The net loss of Rs. 59.52 crores arising from such transactions are already held to be bogus/fictitious loss by AO. Once AO is of the view that entire transactions of purchase and sale of commodities are bogus, corresponding amount of creditor/debtor cannot be genuine but, in such case, only net amount can be held to be non-genuine. When the nature of the transaction itself is bogus, AO was not justified in treating such closing balance of creditors as non-genuine under Section 68 of the Act on the

ITA No. 560/Ahd/2023 Tirupati Retail (India) Pvt Ltd Vs. DCIT Asst. Year : 2014-15 - 16– ground that appellant has not submitted confirmation of such parties or third parties have reflected different amount in their Books of Account in comparison to amount payable as reflected by appellant in its Books of Account because simultaneous amount reflected as credit receivable are also non-genuine. Once the transactions itself are bogus, closing balance appearing in party account cannot become genuine when third party provides confirmation or confirms the amounts receivable from appellant and on similar analogy, merely non-submission of confirmation of third party cannot allow AO to treat entire credit balance appearing as trade payable as non-genuine and making addition under Section 68 of the Act, which is over and above disallowance made by AO for treating net loss arising from such transactions as non-genuine. The AO has never doubted the fact that trade payable appearing in Audited Annual Accounts which is subject matter of present dispute is not arising out of business transactions as discussed herein above. In the context of facts of present case, non-submission of details by third parties in response to notice under Section 133(6) or non-submission of confirmation of third parties or mismatch in the figure does not make any difference as what has been gained by appellant from these transactions is net business loss of Rs.59.52 crores which is already disallowed by AO. 10.18 In view of above discussion, AO at one end has treated commodity transactions as paper transactions and disallowed business loss arising from such activity and on the other hand has made addition under Section 68 of the Act after considering trade payable as non-genuine and same cannot be accepted for the reasons that trade receivable from similar transactions are also non-genuine. The AO has failed to appreciate the entire modus operandi and crux of the transactions and real intent of entering into such transactions which is nothing but to obtain non-genuine loss by helping other counter parties. Once AO has concluded that appellant is indulging in paper transactions, he cannot make addition of entire credit balance arising out of such transactions without considering debit balance arising from such transactions which is reflected as trade receivable in Audited Annual Accounts. This is not the case where appellant has entered into genuine purchase transaction but failed to provide confirmation of creditors or transactions of purchase are non-genuine but transactions of sale are genuine or this is not the case of substituted purchases but present is the case of carrying out paper transactions on NSEL and from these transactions ultimate result is incurring of paper loss of Rs.59.52 crores which is disallowed by AO in assessment order hence AO was not justified in holding that entire trade payable appearing in Audited Annual Accounts are non- genuine. Once the transactions itself are non-genuine, the resultant figures

ITA No. 560/Ahd/2023 Tirupati Retail (India) Pvt Ltd Vs. DCIT Asst. Year : 2014-15 - 17– will also be non-genuine. Considering these facts, entire addition of Rs.1620,76,44,093/- made by AO (subject to observation made herein above) without appreciating the correct nature of the transactions is directed to be deleted.”

11.2 We have heard the rival contentions and perused the material available on record. The Assessing Officer disallowed the Trade Payables as the assessee could not submit the confirmations of the creditors. When notices were issued to seven creditors u/s 133(6) of the Act, two replies were not received and five creditors did not confirm the amount payable by the Company. The assessee in its submissions to the Assessing Officer and the CIT(A) has explained in detail the Modus Operandi of the transactions at NSEL and the reasons as to why giving such confirmations is not possible. It was also submitted by the assessee a chart containing the name of party, commodity, purchase amount, sales amount, VAT on Sales, VAT on Purchases, Total Purchase amount and Total Sales Amount. The assessee explained that it is a trading entity and it used to purchase and sale goods from multiple parties during the assessment years. When the total purchases during the year exceeded the total sales made to that party, the assessee showed the net amount as Trade Payable in the Financial Statements and when the total sales to a party exceeded the total purchases, the assessee showed the net amount as Trade Receivables in its Financial Statements. It could be verified from the chart submitted that both the Trade Payables and the Trade Receivable as appearing in the Books of Accounts.

Particulars Amt (In Crores) Total Trade payable 1621.26 (-) Total Trade Receivables 1558.76 Net Trade Payables 62.5 (-) Amount Receivable from VAT Authorities 2.98 Net Loss 59.52

ITA No. 560/Ahd/2023 Tirupati Retail (India) Pvt Ltd Vs. DCIT Asst. Year : 2014-15 - 18–

11.3 Considering this, the Trade Payables cannot be considered in isolation, they need to be adjusted with Trade Receivables to calculate the Disallowance., and such amount had already been disallowed by the AO by declaring it as a speculative loss. Taking into consideration all these aspects, we decline to interfere with the order of the Ld. CIT(A) deleting the addition made by the Assessing Officer in respect of Trade Payables.

This ground of appeal of the Revenue is hereby dismissed.

In the result, the appeal of the Revenue is dismissed.

The order is pronounced in the open Court on 30.04.2026

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(T.R. SENTHIL KUMAR) (DR. B.R.R. KUMAR) JUDICIAL MEMBER VICE-PRESIDENT Ahmedabad; Dated 30/04/2026 **btk आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : अपीलाथ� / The Appellant 1. ��थ� / The Respondent. 2. संबंिधत आयकर आयु� / Concerned CIT 3. आयकर आयु�(अपील) / The CIT(A)- 4. 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER,