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TMI Blog2022 (4) TMI 393X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer was in the context of the fact that the assessee was carrying out coal trading transactions which were non-delivery based i.e. no physical delivery of the commodity was therein involved. AO on the basis of his aforesaid observations that the assessee was engaged in the business of coal trading transactions which were non-delivery based i.e. trading on spot delivery basis, had thus, for the said reason concluded that the assessee s claim for deduction of expenses were to be restricted only to those which were related to non-delivery transactions or paper transactions. Pr. CIT had construed the paper transactions of the assessee as if no actual business was being carried out by it. In our considered view, not only the basis adopted by the Pr. CIT is found to be fallacious, but also, the same is not consistent with the past history of the assessee. As brought to our notice by the Ld. AR, the AO while framing assessment in the assessee s own case for the immediately preceding year i.e, assessment year 2010-11, had observed, that the assessee s claim for deduction of the expenses was to be restricted to only those expenses which were related to non-delivery based transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls (Nagpur) Ltd. in ITA No. 308/Nag/2016, wherein the impugned order has been assailed on the following grounds of appeal before us: (1) That the notice and the order of the Learned Pr. Commissioner of Income Tax (Central), Nagpur passed u/s. 263 is bad in law and wrong on facts. On the facts and circumstances of the case, the assessment order passed by the AO u/s. 143(3) was neither erroneous nor prejudicial to the interest of the revenue and the notice u/s. 263 and the proceedings thereafter are illegal and liable to be quashed. (2) That the learned Pr. CIT erred in law and on facts in holding that the interest on unsecured loans ₹ 44,26,767/-, Brokerage charges on unsecured loans ₹ 75,656/- and processing charges of ₹ 5,44,412/- are not allowable. On the facts and circumstances of the case, the expenditure is incurred for the purpose of the business and the learned Pr. CIT erred in directing the AO to disallow such expenditure. (3) That the learned Pr. CIT erred in law and on facts in holding that the assessee has not done any real business and hence the AO should have rejected the claim of trading loss. On the facts and circumstances of the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenses which were genuinely incurred to carry out its non-delivery transactions or paper transactions. Observing, that the assessee had in its Profit loss account debited various expenses which were not be required to be incurred in the case of business involving paper transactions, the Assessing Officer decided to allow only those expenses which were genuinely incurred to carry out such non-delivery transactions or paper transactions. On the basis of his aforesaid deliberations the Assessing Officer called upon the assesee to substantiate the genuineness of the expenses and put forth an explanation as to why the allowability of its claim for deduction be not restricted to the expenses which were genuinely incurred to carry out paper transactions. After considering the reply of the assessee the Assessing Officer disallowed the following expenses: Particulars Amount (Rs.) Remarks Manufacturing expenses 1,92,713 Since there is no manufacturing required is paper transaction Consultancy charges 3,09,887 Si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns ₹ 44,26,767/- (ii) Brokerage charges on unsecured loans ₹ 75,656/- (iii) Processing charges ₹ 5,44,412/- Total ₹ 50,46, 835/- , the Pr. CIT was of the view that the failure on the part of the A.O to disallow the aforesaid balance expenses had rendered his order erroneous in so far as it was prejudicial to the interest of the revenue under Section 263 of the Act. It was also observed by the Pr. CIT that now when the assessee had itself accepted the fact that no physical delivery of purchases and sales had taken place, therefore, there could have been no trading loss as claimed by the assessee. Backed by his aforesaid observations the Pr. CIT called upon the assessee to explain that as to why the order passed by the Assessing Officer under Sec. 143(3), dated 03.03.2014 may not be revised u/s 263 of the Act. As the reply filed by the assessee did not find favor with the Pr. CIT, therefore, he vide his order passed u/s. 263 of the Act, dated 09 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed expenses to the tune of ₹ 1,51,21,505/-. 7. In our considered view, the Pr. CIT had proceeded with absolutely on the basis of misconceived facts. The very basis for the Pr. CIT to infer that the assessee company was not carrying out any actual business and was only involved in paper transactions and accommodation entries is absolutely incorrect and fallacious. In fact, we may herein observe, that the reference to paper transactions of the assessee by the Assessing Officer was in the context of the fact that the assessee was carrying out coal trading transactions which were non-delivery based i.e. no physical delivery of the commodity was therein involved. As noticed by us hereinabove, the Assessing Officer on the basis of his aforesaid observations that the assessee was engaged in the business of coal trading transactions which were non-delivery based i.e. trading on spot delivery basis, had thus, for the said reason concluded that the assessee s claim for deduction of expenses were to be restricted only to those which were related to non-delivery transactions or paper transactions. 8. On the other hand, we find that the Pr. CIT had construed the paper transactio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld by the Income Tax Appellate Tribunal, Nagpur vide its order in ITA No.201/NAG/2014 CO No.24/NAG/2017, dated 29.03.2019, and the appeal filed by the Revenue was dismissed. 09. On the basis of the aforesaid facts, it was submitted by the Ld. AR that as there have been no shift in the business of the assessee company during the year under consideration as against that of the immediately preceding year i.e, A.Y 2010-11, therefore, no infirmity did emerge from the allowing by the Assessing Officer vide his order passed u/s.143(3) of the Act, dated 03.03.2014 of the assessee s claim for deduction of expenses i.e, to the extent the same were incurred to carry out non-delivery based trading transactions 10. We have given a thoughtful consideration to the issue before us, and find that the Assessing Officer had after deliberating at length arrived at a plausible view i.e., allowing of the assessee s claim for deduction of expenses to the extent the same were genuinely incurred in the course of its coal trading transactions on a non-delivery basis. In sum and substance, the Assessing Officer had after due application of mind restricted the assessee s claim for deduction to onl ..... 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