RICHA FINANCE & INVESTMENT PRIVATE LIMITED ,MUMBAI V. INCOME TAX OFFICE WARD 15(3)(1), MUMBAI

ITA 4252/MUM/2023

AI Insights

The case involves Richa Finance & Investment Private Limited, which appealed against the order of the Commissioner of Income Tax (Appeals) confirming an addition of Rs. 81,00,000 as unexplained cash credit under section 68 of the Income Tax Act, 1961. The addition was initially made by the Income Tax Officer based on information from the Directorate General of Income Tax (Investigation) that the company had received accommodation entries. The ITAT examined whether the company had discharged its burden of proof regarding the genuineness and creditworthiness of the investors and the transactions involved. The ITAT noted that similar cases involving the same investors had been decided in favor of the assessee in previous orders, and the only basis for the addition was the retracted statement of a third party, which was not considered sufficient evidence.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 791379 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2007-2008
• Appeal Filed On: 24-11-2023
• Other Referred Cases: H R Mehta Vs. ACIT, Mumbai, PCIT Vs. Bairagra Builders P. Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANNAVARAN KOSURI
• Assessee Lawyers: DHARAN GANDHI
• Keywords: Unexplained cash credit; Retraction; Principle of natural justice; Accommodation entries; Bogus Share capital; Bogus
• Section: 143(3); 68; 131

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL, ‘D’ BENCH MUMBAI BEFORE: SMT. BEENA PILLAI, JUDICIAL MEMBER & SHRI ARUN KHODPIA, ACCOUNTANT MEMBER ITA No. 4252/MUM/2023(AY: 2007–08) (Physical hearing) Richa Finance & Investment Private Limited 1601, Bhumiraj Costarica, Plot no. 1&2, Sector 18, Sanpada Navi Mumbai, 400703. PAN: AABCR6594G Vs. Income Tax Officer Ward 15(3)(1), Aayakar Bhawan, Mumbai-400020. (Appellant) .. (Respondent) Assessee by Shri. Dharan Gandhi, Adv. Revenue by Shri. Annavaran Kosuri, Sr. DR Date of Hearing 04/09/2025 Date of Pronouncement 26/11/2025 PER ARUN KHODPIA, AM: The captioned appeal filed by the assessee is directed against the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Center (NFAC), Delhi (in short ‘Ld. CIT(A)’) u/s 250 of the Income Tax Act, 1961 (in short ‘the Act’), dated 17.10.2023 for the A.Y. 2007-08, which in turn arises from the assessment order u/s. 143(3) r.w.s 147 of the Act dated 24.03.2015 passed by Income Tax Officer 15(3)(1), Mumbai (in short ‘Ld. AO’). The assessee has raised the following grounds of appeal: “1. The hon'ble CIT(A) erred in confirming the validity of the order passed u/s 143 (3) r.w.s. 147, despite being illegal, bad in law, or otherwise void ab-initio on the ground that it appears to be purely based on information received from DGIT (Inv) Mumbai, which being in general nature & not specific and hence liable to be quashed. Printed from counselvise.com ITA no. 4252/MUM/2023 Richa Finance & Investment Private Limited 2 2. The hon'ble CIT(A) erred in law by confirming addition w/s 68 of Rs. 81,00,000 received on account of share capital, on the ground that assessee company has not been able to prove beyond reasonable doubt, the credit worthiness of the allotees and the genuineness of the transaction. 3. The hon'ble CIT(A) erred in law by indirectly confirming the action of the AO of violation of natural justice by the A.O. by not conducting independent inquiry, ignoring the evidences and proofs and explanations offered during the course of hearing and making addition on the basis of surmises and conjectures. 4. Your appellant craves to add to ammend, alter, delete and/or modify the above grounds of appeal on or before the final date of hearing.” 2. The brief facts of the case are that the assessee company was engaged in the business of renting one commercial premise at Vashi to the Citi Bank, had filed its return of income on 05.11.2007, declaring total income of Rs. 1,83,985/-. The return of income was processed u/s. 143(1) of the Act. Subsequently, an information about the assessee was forwarded by the DGIT (Inv.) on 07.03.2014 to the ld. AO, that the assessee is one of the beneficiaries of accommodation entries provided by Pravin Jain & its group. The investigation wing had taken action against the number of hawala dealers, who provide accommodation entries of the various nature like unsecured loan/advances, bogus share application and bogus sale/purchases. During the course of search action in the case of Shri Pravin Jain, the statement of Shri Chandrashekhar Goyal, one of the brokers were recorded and he admitted that he introduced the parties who were in the need of bogus/non-genuine transactions for expenditure/commission brokerage and accommodation entries for bogus bills. It is also admitted that the commission of 0.25% to 0.50% on the total amount of transaction involved was charged. Further, it is observed that the assessee company had received substantial sums of cash credit in the books of assessee in the nature of Share Premium from following companies: Printed from counselvise.com ITA no. 4252/MUM/2023 Richa Finance & Investment Private Limited 3 S. No. Name of the Hawala Parties Amount (Rs.) 1. Olive Overseas Pvt. Ltd. (Realgold Trading Co. Pvt. Ltd.) 6,00,000/- 2. Olive Overseas Pvt. Ltd. (Realgold Trading Co. Pvt. Ltd.) 25,00,000/- 3. Lexus Infotech Ltd. 25,00,000/- 4. Yash-V Jewellers Ltd. 25,00,000/- Total 81,00,000/- 3. After discussion an addition of Rs. 81,00,000/- was made in the hands of assessee on account of unexplained cash credit u/s. 68 of the Act and added to the income of assessee, on account of subscription of share capital amount received during the relevant year. 4. Being aggrieved, assessee preferred an appeal before the first appellate authority, wherein ld. CIT(A) had dismissed the appeal of the assessee in absence of any credible details in respect of share capital to be furnished by the assessee. Ld. CIT(A) observed that the onus was on the appellant to prove nature and genuineness of the transaction and creditworthiness of the shareholders to the satisfaction of the fact-finding authority, something which it has miserably failed in, something which the material on record did not justify. Ld. CIT(A) also observed that the material available on record does not reasonably evidence nature and genuiness of the transaction and creditworthiness of the shareholders. In view of such discussion the appeal of the assessee has been dismissed. Printed from counselvise.com ITA no. 4252/MUM/2023 Richa Finance & Investment Private Limited 4 5. Being dissatisfied with the aforesaid decision by the ld. CIT(A), assessee preferred further appeal before the ITAT which is under consideration before us in the present matter. 6. At the outset, apropos, ground no. 1 of the present appeal, the ld. Counsel of the assessee prayed not to press, accordingly the same has been treated as dismissed being withdrawn. 7. Besides the legal ground no. 1 which is not pressed by the assessee, the only grievances which is raised pertains to the addition u/s. 68 for Rs. 81,00,000/- on account of receipt of share capital which has been treated as unexplained cash credit by the ld. AO and subsequently confirmed by the ld. CIT(A). 8. On the aforesaid issue ld. AR reiterated the facts from the order of ld. AO. He submitted that the companies / investors which are treated as ingenuine / bogus by the Ld. AO, are held to be genuine and transactions with them are considered to be explained, thereby the additions made by Ld. AO are vacated by the ITAT under various orders, Ld. AR placed reliance on such cases and submitted a list of the same before us for our perusal, which is culled out here under for the sake of reference: “Olive Overseas Pvt. Ltd (former Name: Realgold Trading Co P Ltd) 1. ITO v Richtime Trading Pvt Ltd ITA No. 4139/Mum/17 [Date of Order - 28.08.2019] 2. DCIT v Adhunik Transport Organisation Ltd ITA No. 3725/Mum/2017 [Date of Order 22.08.2019] 3. ACIT, Central Circle-13, New Delhi v. Adamine Construction (P.) Ltd. Date of Order: 18.08.2017 Printed from counselvise.com ITA no. 4252/MUM/2023 Richa Finance & Investment Private Limited 5 4. ΙΤΟ 13(3)(3)vs V Vimla Properties Pvt Ltd ITA No. 7053/Mum/2016 5. Komal Agrotech Pvt. Ltd vs ITO, Ward-2(1), Hyderabad 6. Sweta Syntheitcs P.Ltd, Mumbai vs Ito 4(3)(4), Mumbai on 12 July, 2019 7. Deputy Commissioner Of Income Tax vs Perfect Filaments Ltd, on 12 October, 2020 8. Kundali Jewel (India) Private Ltd vs Ito 12(3)(1), Mumbai on 23 February, 2021 9. Ito 8(3)(3), Mumbai vs Vhm Apparels P. Ltd, Mumbai on 9 September, 2019 Yash V Jewels Ltd 1. Arceli Realty Limited V NO.6492/Mum/2016 (Mumbai) ITO ITA Date of order: 21.04.2017 2. ITO v M/s. Khshboo Exports Pvt. Ltd. I.T.A. No. 3647/Mum/2017 Date of order: 21.09.2017 3. ITO v Suchitra Fabtex Pvt Ltd (ITA No. 2979/Mum/2017) Date of order: 31.08.2017 4. ITO vs Pyramid Realty Pvt Ltd (ITA No. 3579/Mum/2017) 5. ITO v Suchitra Fabtex Pvt Ltd (ITA No. 2979/Mum/2017) Date of order: 31.08.2017 6. Choice Buildestate Pvt Ltd v ITO (ITA No. 431/JP/2016) Jaipur ITAT 7. ACIT vs Elegant Security Services Pvt Ltd ITA.No.6173/Del./2013 8. Income Tax Officer Ward-1(1), vs M/S. Centaurus Equities Private Ltd on 5 April, 2021 9. Ito 8(3)(3), Mumbai vs Vhm Apparels P. Ltd, Mumbai on 9 September, 2019 Lexus Infotech Limited (former Name: Triangular Infocom Limited) 1. ITO v M/s. Khshboo Exports Pvt. Ltd. I.T.A. No. 3647/Mum/2017 2. Bairagra Builders Pvt. Ltd ITA No.4691 & 4692/Mum/2015 (unsecured loan) 3. ITO 13(3)(3)vs V Vimla Properties Pvt Ltd ITA No. 7053/Mum/2016 4. ITO v Shreedham Construction Pvt Ltd ITA No.3754/Mum/2017 5. ITO v Suchitra Fabtex Pvt Ltd (ITA No. 2979/Mum/2017) Date of order: 31.08.2017 6. Choice Buildestate Pvt Ltd v ITO (ITA No. 431/JP/2016) Jaipur ITAT 7. Sweta Syntheitcs P.Ltd, Mumbai vs Ito 4(3)(4), Mumbai on 12 July, 2019 8. Income Tax Officer Ward-1(1), vs M/S. Centaurus Equities Private Ltd on 5 April, 2021 9. Ito 8(3)(3), Mumbai vs Vhm Apparels P. Ltd, Mumbai on 9 September, 2019 10. M/S. Jds Ventures India Ltd, ... vs ITO Mumbai on 17 October, 2022 (ITA No. 1597/MUM/2021) 11. Acit Circle-3(1)(2), Mumbai VS M/S Chemicon Engineering ... on 17 June, 2022 (Ι.Τ.Α. Νο.7907/Mum/2019)” 9. It is further submitted that all the documents necessary to satisfy the needs of section 68 are submitted by the assessee during the course of assessment to prove the identity, credit worthiness of the investor companies and genuineness of transactions. List of such transactions submitted before us are as under: “27. Documents related to Share Investment by Real Gold Trading Co. Pvt. Ltd. :- (i) Share application form (ii) Power of attorney (iii) Board resolution (iv) List of shareholdings Printed from counselvise.com ITA no. 4252/MUM/2023 Richa Finance & Investment Private Limited 6 (v) Signature verification of director (vi) 2nd Annual Report which includes Notice, Director's Report, Auditor's Report, Balance sheet, Profit & Loss A/c with schedules and ITR for AY 2005-06 (vii) PAN, Incorporation certificate, MOA and AOA 28. Documents related to Share Investment by Yash-V-Jewels Ltd. :- (i) Share application form (ii) Power of attorney (iii) Board resolution (iv) List of shareholdings (v) Signature verification of director (vi) 6th Annual Report which includes Notice, Director's Report, Auditor's Report, Balance sheet, Profit & Loss A/c with schedules and ITR for AY 2005-06 (vii) PAN, Incorporation certificate, MOA and AOA 29. Documents related to Share Investment by Lexus InfoTech Ltd.:- (i) Share application form (ii) Power of attorney (iii) Board resolution (iv) List of shareholdings” 10. Regarding cash credit transaction with M/s Lexus Infotech Ltd., it is submitted by the Ld AR that in the case of PCIT Vs. Bairagra Builders P. Ltd., Income Tax Appeal No. 1427 / 2018, Hon’ble Bombay High Court had approved the observations of CIT(A) and ITAT that respondent had discharged the onus explaining the transactions. 11. Ld. AR also raised the issue that cross objection of Shri Chandrashekhar Goyal during the search in the case of Shri Pravin Jain was not provided to the assessee, which was the sole basis of addition in the present case, it is clear violation of the ratio of law laid by Hon’ble Mumbai high Court in the case of H R Mehta Vs. ACIT, Mumbai, (2016) 387 ITR 561 (Bombay), that assessing Printed from counselvise.com ITA no. 4252/MUM/2023 Richa Finance & Investment Private Limited 7 officer should have provided assessee the material used against him apart from providing opportunity to cross examine the deponents, whose statements were relied upon. In this respect the assessee submitted a copy of retraction from statements given during the search by Shri Praveen Kumar Jain in the form of an affidavit dated 15.05.2025 which was furnished before Ld. CIT(A) on 06.03.2017 (copy at page 127-132) of the PB) and requested to quash the assessment wherein the addition made was totally based on such statements. 12. In backdrop of aforesaid submission, it was the prayer by Ld. AR that the assessee during the course of assessment, had furnished all the relevant documents and discharged the primary onus cast upon it. The statement which are the sole basis of addition were also retracted by the concerned person Mr. Pravin Jain, therefore the addition u/s 68 on the ground that assessee company failed to prove beyond reasonable doubt, the credit worthiness of the allotees and genuineness of transaction was an erroneous finding by the Ld. CIT(A). Since the ITAT in its orders (listed supra) had accepted the Identity, Credit worthiness of aforesaid parties / investors and genuineness of transactions with them, in present case the same may not be decided otherwise. 13. Per contra, Ld. Sr. DR submitted that the assessee company was involved in receipt of accommodation entries in the form of bogus share capital / premium through the companies operated by Shri Praveen Jain, which is categorically admitted by him on oath as per his statements recorded during the search u/s 132(4) of the Act. Ld. AO also issued summons to the investors, u/s 131 through Printed from counselvise.com ITA no. 4252/MUM/2023 Richa Finance & Investment Private Limited 8 inspector but the parties were found missing on their address on record. Ld. SR DR further submitted that the information furnished by assessee before the Ld. AO are manipulated and after thought as the signature on confirmation copies which are available on paper book of the assessee are found to be identical i.e., signed by same person with no name mentioned below the signature. Ld. Sr DR further referred to page No. 10-11 of the assessment order and submitted that the summons u/s 131 were again issued on 06.02.2025 and 16.02.2015 to all three investors parties on their new address, through the Ld. AR of the assessee company but have returned unserved by postal authorities with remark “Left”. Ld. Sr. DR argued that the assessee company have not made any submissions before the Ld. AO till 24.03.2015 towards the show cause notice issued about no response by the investors companies and also the assessee failed to produce the said three parties inspite of several opportunities granted to them. Therefore, it is proved beyond reasonable doubts that the creditworthiness and the genuineness of allottees and transactions remain undischarged. Ld. Sr. DR further referred to page 2 of the assessee paper book stating that the assessee has admitted that the reasons recorded are received by it and have intended to furnish their objection to it. Therefore, the allegation is baseless that the relevant documents are not provided to the assessee. With aforesaid submission it is requested by Ld. Sr. DR that the addition made by Ld. AO was rightly confirmed by the Ld. CIT(A), the same therefore, deserves to be sustained. 14. We have considered the rival submission perused the material available and record judicial pronouncement relied upon by Ld.AR. Admittedly in present case Printed from counselvise.com ITA no. 4252/MUM/2023 Richa Finance & Investment Private Limited 9 the assessee has received a sum of Rs. 81,000,00/- from three companies referred to (Supra) and as per list of companies admitted by Mr. Jain during the search action upon him that are involved in bogus transactions, these companies were also part of such list. Being a company which was considered as shell companies involved in bogus accommodation entries transaction, Ld. AO initiated action against the assessee and issued notices to substantiate the identity and creditworthiness of the investors, as well as genuineness of the transaction. During the course of assessment proceedings, the assessee furnished relevant documents of the aforesaid investors such as share application form, power of attorney, board resolution, list of share holders, signature verification of directors, annual audited financial, PAN, incorporation certificate, MOA and AOA etc. Ld. AO also initiated independent enquires by issue of summons u/s 131, which could not be served upon the investors as the inspector of department had reported that such companies are not available on their stated addresses. Subsequently, Ld.AO tried to serve the summons through Ld. AR of the assessee company. However, the summons was again return unserved with the remark “Left”. Accordingly, the addition of Rs. 81,00,000/- was made u/s 68 of the Act, treating the amount received as subscription of share capital being unexplained cash credit for the relevant year. Ld. CIT(A) upheld the finding of Ld. AO being dissatisfied with the submission made by assessee before him stating that the onus cast upon the assessee could not be discharged to the satisfaction of appellate authority or Ld. AO in terms of sec 68 of the Act. Before u/s. Ld.AR submitted that the transaction with the aforesaid so-called bogus investors from whom the assessee has received the money in the form of subscription of share Printed from counselvise.com ITA no. 4252/MUM/2023 Richa Finance & Investment Private Limited 10 capital are examined by the jurisdictional ITAT in various appeals enlisted supra. Therefore, the identify, creditworthiness of investors and genuineness of the transactions with such parties by the assessee in present case, cannot be doubted. We find substance in the submission of Ld. AR that the investors companies i.e. 1. Olive Overseas Pvt. Ltd (former Name: Realgold Trading Co P Ltd), 2. Yash V Jewels Ltd and 3. Lexus Infotech Limited (former Name: Triangular Infocom Limited) are held to be identified and creditworthy assessee also the transactions with them are treated as genuine transaction by the Jurisdictional ITAT in various cases referred to (supra). Therefore, dehors any new material qua allegation about the creditworthiness of the parties on the basis of documents furnished before the Ld. AO, the sole basis of disallowance was statements of Shri. Pravin Jain, which were also retracted later by him, copy of affidavit furnished before the Ld. CIT(A) but it was not considered by him in his order. In absence of any specific finding by the revenue authorities regarding identity and creditworthiness of the investors and also the genuineness of the transaction. We are unable to persuade as to how the addition u/s 68 can sustain solely on the basis of statement of third party without any corroborative evidence to support such statement. In terms of aforesaid observation as nothing could be brought on record by the revenue to dislodge the decisions of various benches of jurisdictional ITAT, while dealing with the aforesaid alleged investors, we are unable to concur with the decision of Ld. CIT(A) to confirm that addition u/s 68 made by Ld. AO. Accordingly, ground No. 2 of the assessee’s appeal stands allowed and the addition u/s 68 for Rs. 81,00,000/- made on the sole basis of statement of third party, has been directed to deleted. Printed from counselvise.com ITA no. 4252/MUM/2023 Richa Finance & Investment Private Limited 11 15. Since we have directed to delete the substantive quantum addition in the present case and legal contention are withdrawn by the Ld. AR of the assessee. The appeal of the assessee stands allowed in terms of all aforesaid observation. Order pronounced in open court on 26.11.2025. Sd/- (BEENA PILLAI) Sd/- (ARUN KHODPIA) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated 26/11/2025 Anandi Nambi, Steno Copy of the Order forwarded to: BY ORDER, (Asstt. Registrar) ITAT, Mumbai 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. Printed from counselvise.com "