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10. The basic fact with regard to the nature of business of the assessee and its export receivables / payables are not disputed. The assessee is in the business of import of rough diamonds and export of polished diamonds. During the financial year relevant to AY 2007-08, the assessee has achieved more than 1018 crores export turnover. The assessee also has outstanding bills receivables from its exports and outstanding payables for import of diamonds. The assessee claims that at any point of time its export receivables / payables ITA 8612/um/2011 & 6991/Mum/2012 (exposure to foreign currency) is more than total value of its forward contracts; however, accepts that one to one co-relation between forward contracts and outstanding bills receivables / payables is not feasible. We find that the assessee has entered into more than 2200 forward contracts in the year. However, the total value of such forward contracts are not readily available. Even both the lower authorities orders are silent about value of total forward contracts. The AO is only on the point that forward contracts entered into by the assessee are settled otherwise than by actual delivery and the assessee is not able to have one to one co-relation between export bills receivables / payables. The AO never disputed the fact that the assessee's exposure in foreign currency in the form of bills receivables / payables is not more than its value of forward contracts. Therefore, one has to see the nature of forward contracts entered into by the assessee are fit into the definition of hedging transactions entered into to mitigate the possible loss in fluctuation in currency movement of / or speculative transaction as defined in section 43(5). The assessee claims that loss incurred on maturity / closure of forward contracts has been treated as crystallized liability and debited to the P & L Account. Loss incurred in respect of contracts outstanding at the year end has been marked to market based on the prevailing exchange rate in accordance with the method of accounting regularly followed in its business as per AS-11 ITA 8612/um/2011 & 6991/Mum/2012 issued by ICAI. The assessee further contended that it is following this method of accounting consistently for the past several years. The assessee further contended that it is not the case of the AO that only loss incurred on forward contracts has been treated as business los,s but even gain on forward contracts has been treated as business profits. The AO conveniently ignored the gain on forward contracts and has disallowed loss incurred on forward contracts on the ground that these are in the nature of speculative transactions as defined in section 43(5).