DCIT, CENTRAL CIRCLE 7(1), MUMBAI vs. KOPRAN LIMITED, MUMBAI

आयकरअपीलीयअिधकरण�ायपीठमुंबईम�। IN THE INCOME TAX APPELLATE TRIBUNAL “E” BENCH, MUMBAI BEFORE SHRI AMIT SHUKLA, JM & SHRI ARUN KHODPIA, AM I.T.A. No.3994/Mum/2025 (Assessment Year:2017-18) DCIT, Central Circle 7(1) Kopran Limited Room No.653, 6th floor, Aayakar 1st Floor Parijat House, 1076, Dr. E Vs. Bhawan, MK Road, Churchgate, Mosses Road, Worli, Mumbai-400018 Mumbai-400020 PAN: AAACK3202D Revenue- अपीलाथ� / Appellant Assessee-��थ�/ Respondent :

Assesseeby : Shri Bhupendra Karkhanis a/w Shri Jay Dharod : Shri Hemanshu Joshi, Sr. DR Revenueby : 17.02.2026 Date of Hearing : 15.05.2026 Date of Pronouncement

O R D E R Per Arun Khodpia, AM: This appeal is preferred by the Revenue, directed against the order of the Commissioner of Income Tax Appeals – 49, Mumbai [in short, “the Ld. CIT(A)”], dated 13.03.2025 for the assessment year 2017-18,resulted from the assessment order under section 143(3) of the Income Tax Act, 1961 [in short, “the Act”] dated 26.12.2019, passed by Assistant Commissioner of Income Tax Central Circle 7 (1), Mumbai [in short, “the Ld.AO”].The grounds of appeal raised by the Revenue, are as under:

ITA No. 3994/Mum/2025 Kopran Limited “1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of ₹1,00,00,000/- made by the Assessing Officer under section 68 of the Income-tax Act, 1961, without appreciating that the assessee failed to satisfactorily establish the creditworthiness of the lenders and genuineness of the loan transactions. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in relying merely on confirmations, ITR acknowledgements, and the fact that loans were received and repaid through banking channels, without critically examining the financial strength and real capability of the lender companies to advance such large loans. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ignored the settled legal position laid down by the Hon'ble Supreme Court in the case of Navodaya Castle (P) Ltd. v. CIT (2015) 230 Taxman 268 (SC), wherein it was held that identity, PAN and bank transaction alone are notsufficient, and the onus lies on the assessee to prove the genuine nature of the transaction and the real creditworthiness of the lender. 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in disregarding the ratio lald down in other binding decisions such as Precision Finance Pvt. Ltd. (208 ITR 465), CIT v. Durga Prasad More (82 ITR 540), and SumatiDayal v. CIT (214 ITR 801), which collectively emphasize the importance of examining the surrounding circumstances, economic rationale, and actual financial capacity of lenders in determining the genuineness of credit entries. 5. On the facts and in the circumstances of the case and in law, the order of the Ld.CIT(A) erred in restricting the disallowance made u/s.14A of the Income-tax Act, 1961 to the extent of exempt income of Rs.7,337/-, as against the disallowance of Rs.1,56,00,720/- made by the Assessing Officer as per Rule 8D of the Income Tax Rules. 6. On the facts and in the circumstances of the case and in law, the order of the Ld. CIT(A) failed to appreciate that as per the binding judgment of the Hon'ble Supreme Court in the case of Maxopp Investment Ltd. v. CIT [2018] 91 taxmann.com 154 (SC), the disallowance u/s.14A read with Rule 8D is to be made irrespective of whether exempt income is actually earned during the year or not and irrespective of the quantum of exempt income. 7. On the facts and in the circumstances of the case and in law, the order of the Ld. CIT(A) erred in accepting the assessee's contention that the investments were made out of own funds, ignoring the fact that the Reserves and Surplus as on 01.04.2016 was Rs.144.81 crores, which was less than the investments of Rs.156.07 crores, thereby rendering the claim factually incorrect.” 2. Briefly stated, the assessee company had e-filed its Return of Income on 29/10/2017, for the assessment year 2017-18, declaring total income at ‘NIL’. The case of Assessee was selected for scrutiny under CASS. After deliberations 2

ITA No. 3994/Mum/2025 Kopran Limited the assessment u/s 143(3) was completed by the Ld. AO on 26/12/2019.The income of the assessee was re-computed with the following additions / disallowances: Sr. Nature of additions Amount (Rs.) No. 1 Late payment of Employees’ 16,72,047/- contribution to PF, disallowed u/s. 36(1)(va) 2 Interest on late payment of 8,354/- TDS 3 Disallowance u/s. 14A 1,56,00,720/- 4 Addition u/s. 68 1,00,00,000/- Total 2,62,81,121/-

ITA No. 3994/Mum/2025 Kopran Limited transactions. During the course of assessment proceedings, assessee submitted copies of the Ledger Account, Confirmations, Bank Statement, and Acknowledgement of Income Tax Returns of the aforesaid Parties. The AO was not impressed with the aforesaid submissions by the assessee, had observed that the assessee couldn't prove the creditworthiness of the parties, as the nature and Source of the amounts credited in its Books of Accounts remains unexplained. Ld. AO, thereafter, relying upon various decisions by Hon’ble Courts, had made the addition of Rs. 1,00,00,000/- in the hands of assessee treating the same, as unexplained cash credit under Section 68 of the Act. 6. Assessee preferred an appeal before the ld. CIT appeals, wherein had explained the nature and source of the transaction along with evidences, which are on record before the ld. AO to substantiate the identity and creditworthiness of the lenders as well as the genuineness of the transactions. Submitted that the loans were taken during the year and also repaid in the same year, much less within 2 months. Therefore, the provisions of Section 68 have no application in the present case. It is also clarified that ld. AO had called for information u/s 133(6) of the Act from the aforesaid parties, both the lender companies had responded and furnished their audited balance sheet, ITR, relevant pages of Bank Statement, ledger account of the assessee company in their books before the ld. AO. Ld. CIT(A) after deliberations decide the issue in favour of assessee, with following observations: 6.2 DECISION: In the assessment order, the AO has referred to the assessment for AY 2015-16 wherein identical addition of loans was made u/s 68 of the Act. The 4

ITA No. 3994/Mum/2025 Kopran Limited AO has observed that the said two concerns do not have sufficient reserves & income to prove their creditworthiness. On analyzing the financial statements of the two concerns, he has concluded that the companies were paper/shell companies engaged in providing accommodation entries. The credits in the bank accounts of appellant were treated as unexplained and accordingly provisions of section 68 of the Act were invoked resulting in addition of Rs 100,00,000/- to the income of the appellant. Before me, the appellant has produced the confirmation letters from the lenders, acknowledgment copies of ITR filed by lenders along with audited financial statements. It is seen that the loan amounts were received through banking channels. More importantly, the loans have been repaid in the same financial year through banking channels. Considering the facts that the loans have been repaid in the same year along with interest, I do not think that provisions of section 68 are applicable in this case. Accordingly, I direct the AO to delete the additions made by him u/s 68. Ground of Appeal no 1 is allowed.

ITA No. 3994/Mum/2025 Kopran Limited v. Hon'ble Kolkata ITAT in the case of Satyam Smertax Private Limited vs. DCIT [(2020) 117 taxmann.com 93] vi. Hon'ble Bombay High Court in the case of CCIT (OSD) vs. Bhupendra Champaklal Delal [(2024) 160 taxmann.com 560] vii. Hon'ble Gujarat High Court in the case of CIT vs. Ayachi Chandrashekhar Narsangji [(2014) 42 taxmann.com 251] viii. Hon'ble Mumbai ITAT in the case of DCIT vs. Supreme Holdings and Hospitality (India) Limited [(2025) 171 taxmann.com 309] ix. Hon'ble Delhi ITAT in the case of Delight Propcon Private Limited vs. ACIT [(2025) 180 taxmann.com 865] x. Hon'ble Ahmedabad ITAT in the case of Nikulbhai Chaturbhai Patel HUF vs. NFAC [(2025) 178 taxmann.com 697] xi. Hon'ble Surat ITAT in the case of Rajhans Construction Private Limited vs. ACIT [(2022) 140 taxmann.com 370] xii. Hon'ble Agra ITAT in the case of ITO vs. Shri Agrasen Logistics [(2025) 179 taxmann.com 86]

ITA No. 3994/Mum/2025 Kopran Limited with settled principles of law. We, thus, concur with the findings of ld. CIT(A). Consequently, ground of appeal nos. 1 to 4 of revenue are dismissed. 11. Adverting to the issue of disallowance u/s 14A r.w.r. 8D, we find substance in the observations of Ld. CIT(A) in restricting the disallowance to extent of exempt income only, based on principles settled by Hon’ble Courts in his order. The observations of Ld. CIT(A) in this respect are culled out as under: “6.7. Decision- The appellant has brought on record that the investments made by the appellant were out of its own funds. The appellant has furnished year wise comparison of its borrowing, investments and owned funds from FY 2012-13 to FY 2016-17 and has furnished detailed information for each year regarding nexus of own funds, investments and borrowings. Further, the appellant has made claim that if disallowance u/s. 14A were to be made the same to be restricted to exempt income earned. The appellant has relied upon the following decisions, wherein the disallowance u/s. 14A was restricted to exempt income earned: 1. PCIT, Patiala v. State Bank of Patiala [2018] 99 taxmann.com 286 (SC) 2. PCIT-2 v. Caraf Builders & Constructions (P.) Ltd. [2019] 112 taxmann.com 322 (SC) 3. Daga Global Chemicals Pvt. Ltd. (ITA No. 5592/Mum/2012)(Mumbai ITAT) 4. Future Corporate Resources Ltd. Vs. DCIT (ITA No. 4658/Mum/2015)(Mumbai ITAT) The rationale behind these judgments is that the amount of disallowance cannot exceed exempt income. In this case, on perusal of the facts, I find that the appellant has earned exempt income of Rs. 7,337, whereas the AO disallowed an amount of Rs. 1,56,00,720. Therefore, considering the facts and circumstances of the case and also as per above judicial decisions, I am of the view that disallowance under section 14A cannot exceed the exempt income. Hence, I direct the AO to restrict disallowance under section 14A to the extent of exempt income earned by the appellant. Hence, this Ground of Appeal is allowed.”

ITA No. 3994/Mum/2025 Kopran Limited 12. We find that the Ld. CIT(A) had rendered the decision qua the disallowance u/s 14A, following the rational of law as per settled principles under jurisprudence (referred to supra), so we do not see any reason to interfere with same. Ground No. 5 to 7 of the revenues appeal stands dismissed. 13. Ground No 8 is general in nature. 14. In result the appeal of revenue stands dismissed in above terms.

Order pronounced in the open court on 15-05-2026.

Sd/- Sd/- (ARUN KHODPIA) (AMIT SHUKLA) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated : 15-05-2026. Ankit K., Sr. PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. DR, ITAT, Mumbai 4. Guard File 5. CIT BY ORDER, (Dy./Asstt. Registrar) ITAT, Mumbai