META TILES P.LTD,MUMBAI vs. DCIT-3(2)(1), MUMBAI

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ITA 1487/MUM/2019Status: DisposedITAT Mumbai16 May 2019AY 2015-1629 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the Assessing Officer had not appreciated the correct facts of the case. The Tax Audit Report, which was available to the AO, contained details of loans taken and repaid, specifically mentioning the three parties in question. These parties were corporate entities registered with the Registrar of Companies, with their addresses and Permanent Account Numbers detailed in the Tax Audit Report, thereby proving their identity. The Tribunal noted that the assessee had provided confirmations from these parties, along with their PANs, income tax returns, and balance sheets, as per the ruling in Apex Therm Packaging (P) Ltd. Furthermore, the assessee had partly repaid the loans through banking channels, and the transactions were reflected in bank accounts, establishing genuineness and creditworthiness, as supported by the rulings in Rahul Vineet Traders and Varinder Rawlley. The Tribunal emphasized that suspicion, however strong, cannot replace evidence, and the AO had not brought on record any evidence to disprove the transactions. Therefore, the Tribunal concluded that the assessee had discharged its onus of proving the identity, creditworthiness, and genuineness of the transactions. The AO was directed to delete the addition made under Section 68 of the Act.

What were the facts?

The assessee, Meta Tiles Pvt. Ltd., engaged in the business of tiles and chemicals, filed its return of income for Assessment Year 2015-16. The Assessing Officer (AO) selected the case for scrutiny and passed an assessment order under Section 143(3) of the Income Tax Act, 1961. The AO made an addition as unexplained cash credit on account of share premium/share application money/share capital. The assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], who dismissed the appeal. The assessee then filed an appeal before the Income Tax Appellate Tribunal (ITAT) challenging the CIT(A)'s order.

What were the issues?

1. Whether the addition made by the Assessing Officer as unexplained cash credit under Section 68 of the Income Tax Act, 1961, on account of share premium/share application money/share capital, is justified? Assessee's Contention: The assessee argued that it had provided a complete set of its return of income, audited accounts for FY 2014-15, Tax Audit Report, confirmations of accounts of loans and advances from three related companies (M/s Metaoxide Private Ltd., M/s Anandeya Investments Private Ltd., and M/s Sankeya Chemicals Private Ltd.), and audited accounts of Metaoxide Private Ltd. It was submitted that these three companies are corporate entities with their addresses and PANs detailed in the Tax Audit Report, thus establishing their identity. The transactions were through account payee cheques, establishing genuineness, and the running accounts showed receipts and repayments, demonstrating creditworthiness. The assessee relied on judgments such as Gagandeep Infrastructure Pvt. Ltd., Rahul Vineet Traders, Varinder Rawlley, Apex Therm Packaging (P) Ltd., Vijay Kumar Jain, Jai Kumar Bakliwal, and Iraisaa Hotels Pvt. Ltd. Revenue's Contention: The Learned Departmental Representative relied on the orders passed by the revenue authorities.

Which sections of the Income-tax Act were involved?

Section 68,Section 143(3),Section 115JB

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “D”

Before: HON’BLE SH. SANDEEP GOSAIN, JM & HON’BLE SH. G. MANJUNATHA, AM

For Appellant: Shri N. R. Rao, AR, Shri D. G. Pansari, DR
Pronounced: 16.05.2019

DCIT- 3(2)(1), Meta Tiles Pvt. Ltd. 6th floor, Aayakar 25, Nariman Bhavan Premises बिधम/ Bhavan, CHS Ltd. 227, Backbay Vs. Mumbai-400 020 Reclamation, Nariman Point, Mumbai 400 021 स्थायीलेखासं./जीआइआरसं./ PAN No. AAACT3954F (अपीलाथी/Appellant) (प्रत्यथी / Respondent) : अपीलाथीकीओरसे/ Appellant by : Shri N. R. Rao, AR प्रत्यथीकीओरसे/Respondentby : Shri D. G. Pansari, DR सुनवाईकीतारीख/ : 30.04.2019 Date of Hearing घोषणाकीतारीख / : 16.05.2019 Date of Pronouncement आदेश / O R D E R

Per Sandeep Gosain, Judicial Member:

1.

The present Appeal filed by the assessee is challenging against the order of Ld. CIT (Appeal) – 8, Mumbai dated 25.02.19 for AY 2015-16. Meta Tiles Pvt. Ltd.

2.

The brief facts of the case are that the assessee company is engaged in the business of tiles and chemicals. The return of income for the year under consideration was filed declaring total income at Rs.51,10,240/- as per normal provisions of I.T. Act and Rs. 50,26,301/- as book profit u/s 115JB of I.T. Act. Subsequently, the case was selected for scrutiny and after serving statutory notices and seeking reply of the assessee, assessment order was passed by AO u/s 143(3) of the Act, thereby making addition as Unexplained Cash Credit on account of share premium/share application money/share capital.

Aggrieved by the order of AO, assessee preferred appeal before Ld. CIT(A) and Ld. CIT(A) after considering the case of both the parties, dismissed the appeal of the assessee.

Now before us, the assessee has preferred the present appeal by raising the above grounds.

3.

The solitary ground raised by the assessee relates to challenging the order of Ld. CIT(A) in upholding addition made by AO as cash credit and as assessable u/s 68 of the I.T. Act.

Meta Tiles Pvt. Ltd.

4.

Ld AR appearing on behalf of the assessee reiterated the same arguments as were raised by him before Ld. CIT(A). It was submitted that assessee had filed written submissions before Ld. CIT(A) which may also be read as arguments on behalf of assessee before us and the same are contained in para no. 3.1.2 of the order of Ld. CIT(A). It was further submitted that assessee is in the business of trading tiles, chemicals etc. The Return of Income was filed at Rs. 51,10,240 and during the course of assessment, assessee had filed (i) a complete set of Return of Income e-filed earlier along with a copy of Computation of total income, (ii) Audited accounts for the Financial year 2014- 15, (iii).Tax Audit report; (iv) Confirmation of accounts of loans and advances from the three related companies in the group M/s Metaoxide Private Ltd., M/s Anandeya Investments Private Ltd. and M/s Sankeya Chemicals Private Ltd. and (v) Audited accounts of Metaoxide Private Ltd. In this respect, all the documents have been enclosed in the paper book.

4.1 The assessee had also filed details of running account of three related parties, the details of which are as under:

Meta Tiles Pvt. Ltd. Sr. No. Name of the party Opening balance Closing balance i Metaoxide Private Nil Rs. 1,42,78,442 Limited 2 Shree Anendeya Rs. 4,50,000 Nil Investment Private Ltd. 3 Sankeya Chemicals Rs. 15,18,265 Nil Private Limited 4.2 It was submitted that all the three accounts are running accounts and during the year under consideration, there are several transactions of receipt of amount as well as repayments. In this respect, copies of account of three parties have already been enclosed.

4.3 It was submitted that all the three parties from whom loans were taken are corporate entities and therefore are registered with the

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