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

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.

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 Counsel of the assessee prayed not to press, accordingly the same has been treated as dismissed being withdrawn.

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).

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:

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:

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.

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 Richa Finance & Investment Private Limited 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.

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.

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 7 Richa Finance & Investment Private Limited 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.

We have considered the rival submission perused the material available and record judicial pronouncement relied upon by Ld.AR. Admittedly in present case 8 Richa Finance & Investment Private Limited 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 9 Richa Finance & Investment Private Limited 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.

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. 10

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.