Income Tax Appellate Tribunal - Mumbai
Dcit Cce-8(2),Mumbai, Mumbai vs Mentor Capital Limited, Mumbai on 24 April, 2026
IN THE INCOME TAX APPELLATE TRIBUNAL
"B" BENCH, MUMBAI
BEFORE SHRI SANDEEP GOSAIN, (JUDICIAL MEMBER) &
SHRI JAGADISH, ACCOUNTANT MEMBER
I.T.A. No. 5307/Mum/2025
A.Y: 2013-14
With
I.T.A. No. 5311/Mum/2025
A.Y: 2014-15
DCIT CC 8 (2) Mumbai Vs Mentor Capital Limited
Room No. 658 Aayakar 713, Raheja Centre, Free
Bhavan M.K. Road, Press Journal, Road,
Nariman Point Nariman Point
Mumbai - 400020 Mumbai - 400021
PAN: AACCP7995G
(Appellant) (Respondent)
With
CO. No. 103/Mum/2026
A.Y: 2014-15
Mentor Capital Limited Vs DCIT CC 8 (2) Mumbai
713, Raheja Centre, Free Room No. 658 Aayakar
Press Journal, Road, Bhavan M.K. Road,
Nariman Point Mumbai - 400020
Mumbai - 400021
PAN: AACCP7995G
(Appellant) (Respondent)
Appellant by Shri N.R. Suresh, CA
Respondent by Shri Shri Mahendra Bishnoi, (CIT DR )
Date of Hearing 17.03.2026
Date of Pronouncement 24.04.2026
Mentor Capital Ltd. Mumbai
ORDER
PER SANDEEP GOSAIN:
The present appeals have been filed by the Revenue and cross objection by the assessee challenging the different impugned orders dt. 09.06.2025 and 10.06.2025 passed under section 250 of the Income Tax Act, 1961 ('the Act'), by the National Faceless Appeal Centre (NFAC) / CIT(A) for the assessment year 2013-14 and 2014-15.
2. Since all the issues involved in these appeals and cross objection are common and identical and belongs to one assessee therefore, they have been clubbed, heard together and consolidated order is being passed.
Firstly, we shall take ITA No. 5307/Mum/2025, A.Y 2013-14 as lead case and facts narrated therein.
The Revenue has raised the following grounds of appeal:
1. Whether the Ld. CIT(A) erred in law and on f acts in deleting the addition of Rs. 21,06,50,000/- made under Section 68 of the Income Tax Act, 1961, without properly appreciating that the assessee failed to establish the creditworthiness of M/s Startree Dealer Pvt.
Ltd., from whom the amount was received in A.Y. 2013 -14?
2. Whether the Ld. CIT(A) was justif ied in holding that the receipt was a deferred sale consideration for a transaction disclosed in an earlier assessment year, despite the f act that no supporting documentary evidence such as bank statements, f inancials, or conf irmations for A.Y. 2013-14 were produced to substantiate the claim?
3. Whether the Ld. CIT(A) erred in ignoring the investigation f indings in the case of M/s Sukalyan Complex Put. Ltd., which identif ied M/s Startree Dealer Put. Ltd. as an accommodation entry provider, thereby casting serious doubt on the genuineness and source of the receipt shown by the assessee?
2Mentor Capital Ltd. Mumbai
4. Whether the Ld. CIT(A) erred in law in deleting the addition merely on the basis of a prior transaction assessment without independently verifying the genu ineness and source of the actual receipt during the year under appeal?
5. The appellant craves leave to add, alter, amend or withdraw any of the above grounds at the time of hearing. "
3. All the grounds raised by the Revenue are interrelated and interconnected and relates to challenging the order of the Ld. CIT(A) in deleting the additions made by the AO under Section 68 of the Act. Therefore, we have decided to adjudicate these grounds through the present consolidated order.
4. The Ld. DR, appearing on behalf of the Revenue, while relying upon the order of assessment, submitted that the Ld. CIT(A) erred in deleting the additions without properly appreciating that the assessee failed to establish the creditworthiness of M/s. Startree Dealers Pvt. Ltd., from whom the amount was received in the year under consideration. It was further submitted that the Ld. CIT(A) had also wrongly held that the receipts were deferred sale consideration for a transaction disclosed in an earlier assessment year, despite the fact that no supporting documentary evidence such as bank statements, financials, or confirmations for the year under consideration were produced to substantiate the same. The Ld. DR further submitted that the Ld. CIT(A) ignored the investigation findings in the case of M/s. Sukalyan Complex Pvt. Ltd., which identified M/s. Startree Dealers Pvt. Ltd. as an accommodation entry provider, thereby casting serious doubts on the genuineness and source of the receipts shown by the assessee.3
Mentor Capital Ltd. Mumbai
5. Whereas, on the contrary, the Ld. AR appearing on behalf of the assessee relied upon the order passed by the Ld. CIT(A) and also his written submissions filed before us, the same is reproduced herein below:
The grounds taken up by the Department is not sustainable as CIT (A) has examined the facts and has made clear findings supported by legal decisions.
1. Whether the Ld. CIT (A) erred in law and on facts in deleting the addition of Rs.21,06,50,000/- made under Section 68 of the Income Tax Act, 1961, without properly appreciating that the assessee failed to establish the creditworthiness of M/s. Startree Dealer Pvt. Ltd., from whom the amount was received in A.Y. 2013-14?
Submission The CIT(A) has dealt with this ground in Paragraph 5.4.6 of his Order, which is extracted below:-
5.4.6 Coming to the findings of the AO with respect to M/s Startree Dealer Pvt Ltd, 1 find that there is no direct finding in respect of the party and the AO has based her finding on the basis of enquiries done in the case of M/s Sukalyan Complex Pvt Ltd, the primary red flag being that high value RTGS are being transferred to another account almost immediately. M/s Startree Dealer Pvt Ltd appears to be one such account which has received high value transfer from M/s Sukalyan Complex Pvt Ltd. Mere routing of funds through a common chain or similarity in transactions does not establish Startree as a shell company unless specific evidence shows that Startree lacked genuine operations or was involved in a circular money trail. The AO has further highlighted that M/s Startree Dealer Pvt Ltd has a miniscule profit and hence the credit worthiness is not proved. It is my considered view that income alone cannot be a criterion for determining the credit worthiness of a party and it is the net worth that is essential as investments can be 4 Mentor Capital Ltd. Mumbai done out of reserves and capitals, borrowings etc also. The mere presence of low financial metrics does not legally or factually prove it is a shell or paper company. The AO in the case of the appellant itself has accepted loss of Rs.71,73,416/- after making detailed assessment in the instant order. Moreover, from the findings of the AO itself it is clear that there are no cash deposits in the various accounts and only RTGS transfers. There is nothing on record to suggest that there has been a round tripping of funds of the appellant and that the funds originated from the appellant, were routed through Startree, and came back as share sale consideration. Thus, regardless of whether M/s Startree Dealers Pvt Ltd is a shell entity or not, I find that the appellant has been able to furnish evidences to substantiate that its transactions with M/s.
Startrade Dealers Pvt Ltd are genuine and the receipts are merely deferred receipts of a transaction that has already been taxed in the earlier year.
2. Whether the Ld. CIT(A) was justified in holding that the receipt was a deferred sale consideration for a transaction disclosed in an earlier assessment year, despite the fact that no supporting documentary evidence such as bank statements, financials, or confirmations for A.Y. 2013-14 were produced to substantiate the claim?
Submission The CIT(A) has dealt with this ground in Paragraphs 5.4.3, 5.4.4 and 5.4.7 of his Order, which are extracted below:-
5.4.3 I have perused the submissions filed by the appellant before the AO that has also been filed before me. I have also perused the assessment order of AY 2012-13, the return of income and the computation filed by the appellant for AY 2012-13. It is an undisputed fact that the appellant has sold shares of Southern Wind Farm Ltd and Global Wind Power Ltd to M/s Startree Dealers Pvt Ltd on 31.03.2012 and capital gain amounting to Rs. 19,10,20,589/- has been returned in the income tax return of AY 2012-13. Based on the facts and submissions on record, it is evident that the amount of 5 Mentor Capital Ltd. Mumbai Rs.21,06,50,000/- received by the appellant during the Assessment Year 2013-14 represents part payment towards the sale consideration of shares sold in the FY 2011-12, relevant to AY 2012-13. The transaction of sale of shares and the resultant capital gains were duly disclosed, examined, and accepted by the AO in that year. The appellant has merely received a portion of the already disclosed and assessed sale consideration in the year under appeal. In such circumstances, the amount received cannot be treated as an unexplained cash credit under Section 68 of the Act, as the nature and source of the receipt have already been established and accepted. The amount of Rs.21,06,50,000/- received in the year under consideration, therefore, did not represent a new credit entry, but merely a brought forward balance against a duly accounted for and accepted transaction.
5.4.4 It is a well settled law that addition u/s. 68 can be made only during the year in which such credit has been received and if the credit balance appearing in the account of the appellant is not pertaining to the year under consideration, the AO cannot make addition u/s. 68 of the Act in the subsequent assessment year. This view is supported by the decision of the Hon'ble Gujarat High Court in the case of CIT vs. Jagatkumar Satishkumar Patel (2014) 45 taxman.com 441 (Gujarat).
Similar view was also taken by the Gujarat High Court in the case of Dy. CIT vs. Amod Petro-Chem (P) Ltd. 2008 ITO vs. Shri Samir J. Shah 217 CTR (Guj) 401. The Delhi High Court in the case of CIT vs. Usha Stud Agricultural Farms Ltd. 301 ITR 384 (Del) also held that when the credit balance appearing in the account of the assessee did not pertain to the year under consideration, the Assessing Officer was not justified in making the impugned addition u/s. 68 of the Act. Again, the Delhi ITAT in the case of Mahaveer Prasad vs. ITO 40 taxman 35 (Del Trib) (Tax Magazine) held that amounts found in the books of accounts of the assessee were in existence much prior to the beginning of the accounting period and therefore the same cannot be treated as income of the assessee during the relevant previous year. Again, the Delhi ITAT in the case of Nuchem Ltd. vs. DCIT 87 TTJ (Delhi Trib) 166 held that since Revenue has failed to prove that the amounts were credited to the 6 Mentor Capital Ltd. Mumbai books of the assessee during the year and these amounts were brought forward from earlier years, therefore, it is a settled law that addition u/s. 68 could be made only if the amount was credited in the accounts of the assessee in the relevant financial year. Accordingly, the Delhi ITAT directed the addition to be deleted. Further, in the case of Shri Vardhman Overseas Ltd. vs. ACIT 24 SOT 393 (Delhi Trib.) held that since no new amount has been credited by the assessee in its account during the year under consideration, applicability of section 68 of the Act is ruled out. Therefore, in view of the above judgments, it is a settled law that opening balance of credit entries coming from previous financial years cannot be added u/s. 68 of the Act to the income of the appellant.
5.4.7 Therefore for reasons as detailed above, it is held that the AO is not correct in invoking Section 68 in respect of a deferred receipt for sale of shares that has happened in the earlier year and the capital gains on account of which has already been brought to tax earlier. The addition of Rs.21,06,50,000/ done by the AO is therefore deleted and these grounds of appeal are allowed.
3. Whether the Ld. CIT(A) erred in ignoring the investigation findings in the case of M/s. Sukalyan Complex Pvt. Ltd., which identified M/s. Startree Dealer Pvt. Ltd. as an accommodation entry provider, thereby casting serious doubt on the genuineness and source of the receipt shown by the Assessee?
Submission The CIT(A) has dealt with this ground in Paragraph 5.4.6 of his Order, which is extracted below:-
5.4.6 Coming to the findings of the AO with respect to M/s Startree Dealer Pvt Ltd, I find that there is no direct finding in respect of the party and the AO has based her finding on the basis of enquiries done in the case of M/s Sukalyan Complex Pvt Ltd, the primary red flag being that high value RTGS are being transferred to another account almost immediately. M/s Startree Dealer Pvt Ltd appears to be one such account which has received high value transfer from M/s Sukalyan 7 Mentor Capital Ltd. Mumbai Complex Pvt Ltd. Mere routing of funds through a common chain or similarity in transactions does not establish Startree as a shell company unless specific evidence shows that Startree lacked genuine operations or was involved in a circular money trail. The AO has further highlighted that M/s Startree Dealer Pvt Ltd has a miniscule profit and hence the credit worthiness is not proved. It is my considered view that income alone cannot be a criterion for determining the credit worthiness of a party and it is the net worth that is essential as investments can be done out of reserves and capitals, borrowings etc also. The mere presence of low financial metrics does not legally or factually prove it is a shell or paper company. The AO in the case of the appellant itself has accepted loss of Rs.71,73,416/- after making detailed assessment in the instant order. Moreover, from the findings of the AO itself it is clear that there are no cash deposits in the various accounts and only RTGS transfers. There is nothing on record to suggest that there has been a round tripping of funds of the appellant and that the funds originated from the appellant, were routed through Startree, and came back as share sale consideration. Thus, regardless of whether M/s Startree Dealers Pvt Ltd is a shell entity or not, I find that the appellant has been able to furnish evidences to substantiate that its transactions with M/s.
Startrade Dealers Pvt Ltd are genuine and the receipts are merely deferred receipts of a transaction that has already been taxed in the earlier year.
4. Whether the Ld. CIT(A) erred in deleting the addition merely on the basis of a prior transaction assessment without independently verifying the genuineness and source of the actual receipt during the year under appeal?
Submission The CIT(A) has dealt with this ground in Paragraphs 5.4.3, 5.4.5 and 5.4.7 of his Order, which are extracted below:-
5.4.3 I have perused the submissions filed by the appellant before the AO that has also been filed before me. I have also perused the assessment order of AY 2012-13, the return of income and the 8 Mentor Capital Ltd. Mumbai computation filed by the appellant for AY 2012-13. It is an undisputed fact that the appellant has sold shares of Southern Wind Farm Ltd and Global Wind Power Ltd to M/s Startree Dealers Pvt Ltd on 31.03.2012 and capital gain amounting to Rs. 19,10,20,589/- has been returned in the income tax return of AY 2012-13. Based on the facts and submissions on record, it is evident that the amount of Rs.21,06,50,000/- received by the appellant during the Assessment Year 2013-14 represents part payment towards the sale consideration of shares sold in the FY 2011-12, relevant to AY 2012-13. The transaction of sale of shares and the resultant capital gains were duly disclosed, examined, and accepted by the AO in that year. The appellant has merely received a portion of the already disclosed and assessed sale consideration in the year under appeal. In such circumstances, the amount received cannot be treated as an unexplained cash credit under Section 68 of the Act, as the nature and source of the receipt have already been established and accepted. The amount of Rs.21,06,50,000/- received in the year under consideration, therefore, did not represent a new credit entry, but merely a brought forward balance against a duly accounted for and accepted transaction.
5.4.5 It is a settled position of law that Section 68 is applicable only where there is a credit entry of a nature that is unexplained and the identity, creditworthiness, or genuineness of the transaction is not established. In the present case, the amount received is neither share capital nor loan and thus does not fall within the purview of unexplained cash credit under Section 68. Moreover, the credit is not unexplained, it is a receipt arising from a transaction whose genuineness has already been accepted in the earlier year. It is well- settled that once the source and nature of a transaction have been accepted in an earlier year, mere realization of outstanding consideration cannot be taxed again as unexplained in a subsequent year. The sale of shares was neither doubted nor disputed by the AO in the earlier year. In such circumstances, applying Section 68 to a mere realization of dues is both factually and legally untenable.
9Mentor Capital Ltd. Mumbai 5.4.7 Therefore for reasons as detailed above, it is held that the AO is not correct in invoking Section 68 in respect of a deferred receipt for sale of shares that has happened in the earlier year and the capital gains on account of which has already been brought to tax earlier. The addition of Rs.21,06,50,000/- done by the AO is therefore deleted and these grounds of appeal are allowed.
6. We have heard the counsels for both the parties, perused the material placed on record, the judgments cited before us, and the orders passed by the Revenue Authorities. From the records, we found that the sole issue involved in the present appeal is the deletion of additions of Rs. 21,06,50,000/- made by the AO and deleted by the Ld. CIT(A), the said amount was received by the assessee from M/s. Startree Dealers Pvt. Ltd. In this regard, we noticed that the AO had primarily made the addition on the basis of an investigation report in the case of M/s. Sukalyan Complex Pvt. Ltd., which highlighted the lack of creditworthiness of M/s. Sukalyan Complex Pvt. Ltd. and various other intermediaries, including Startree Dealers Pvt. Ltd., from whom the assessee had received the amount.
7. The AO was of the view that since the assessee could not prove the creditworthiness of M/s. Startree Dealers Pvt. Ltd. for the purpose of transferring such a huge amount, the same should be treated as unexplained income under Section 68 of the Act.
8. On the contrary, the assessee had taken a specific stand that the amount received was part consideration on account of the sale of shares to M/s. Startree Dealers Pvt. Ltd. It was submitted that the transaction was carried out in the financial 10 Mentor Capital Ltd. Mumbai year 2011-12 relevant to AY 2012-13, and the same was duly disclosed in the return of income and examined by the AO during the course of assessment proceedings. However, on the basis of information received from the Investigation Wing, the AO made the addition without any independent basis or foundation. From the records, we noticed that the assessee had substantiated its version by placing on record documentary evidence demonstrating that the sale of shares had taken place and that part consideration was received during the year under consideration. The remaining balance amount of Rs. 8,93,50,000/- was also received in the subsequent assessment year, i.e., AY 2014-15. Thus, it was the case of the assessee that these receipts were nothing but realization of an already accounted for and accepted transaction.
9. We are of the view that once it is the specific stand of the assessee that the amount received is neither share capital nor a loan, it does not fall within the purview of unexplained income under Section 68 of the Act. The assessee has proved the source and nature of the transaction, which was already accepted in earlier years. Therefore, mere realization of outstanding consideration cannot be taxed as unexplained income in a subsequent year.
10. From the records, we also find that the AO has not placed on record any documentary evidence to establish any connection of the assessee with M/s. Sukalyan Complex Pvt. Ltd. Further, the AO could not establish, through proper evidence, that the assessee's funds were routed through that concern. Thus, in our 11 Mentor Capital Ltd. Mumbai view, the assessee cannot be burdened with the responsibility of verifying the internal affairs or financial arrangements of M/s. Startree Dealers Pvt. Ltd., especially when the assessee had no control over or connection with the alleged intermediary entities. Even otherwise, once the sale transaction has been accepted in earlier years and capital gains have been taxed, the subsequent receipts cannot be independently brought to tax under Section 68 of the Act.
11. After evaluating the entire documentary evidence, we find that the additions made by the AO were based on mere assumptions and general allegations arising out of third-party inquiries and were not based on any material or findings specific to the assessee's transaction. In this regard, reliance is placed on the decision of the jurisdictional Bombay High Court in the case of Jay Ganga Exim India Private Limited and Well Trans Logistics India (P) Ltd. vs. ACIT, wherein it has been categorically held that once the sale of shares has been accepted and taxed in an earlier year, the amount subsequently received towards the same cannot be taxed under Section 68 of the Act.
12. After having carefully gone through the submissions of the parties and the documentary evidence placed on record, we find from the assessment order of the AO for AY 2012-13, the return of income, and the computation thereof filed by the assessee, that it is an undisputed fact that the assessee had sold shares of Southern Wind Farm Ltd. and Global Wind Power Ltd. to M/s. Startree Dealers Pvt. Ltd. on 31.03.2012, and capital gains 12 Mentor Capital Ltd. Mumbai amounting to Rs. 19,10,20,589/- had been declared in the income tax return for AY 2012-13.
13. Thus, based on the facts and submissions on record, it is evident that the amount of Rs. 21,06,50,000/- received by the assessee during AY 2013-14 represents part payment towards the sale consideration of shares sold in FY 2011-12, relevant to AY 2012-13. Therefore, the transaction of sale of shares and the resultant capital gains were duly disclosed, examined, and accepted by the AO in that year. Merely receiving a portion of the already disclosed and assessed sale consideration in the year under appeal cannot be treated as an unexplained cash credit under Section 68 of the Act, as the nature and source of the receipt have already been established and accepted. It does not represent a new credit entry, but merely a brought-forward balance against a duly accounted for and accepted transaction.
14. We also noticed that the Ld. CIT(A) has already dealt with this issue in its order, the operative portion of which is contained in paragraphs 5.4 to 5.4.7 and the same is reproduced herein below:
5.4 Decision 5.4.1 The facts of the case, findings of the AO and the submissions of the appellant have been considered. The sole issue involved in the appeal is the AO holding that the receipt of Rs.21,06,50,000/- received from M/s Startree Dealer Pvt Ltd is in the nature of unexplained cash credit. The AO has primarily based her addition on the basis of investigation report in the case of M/s Sukalyan Complex Pvt Ltd which highlighted the lack of credit worthiness of M/s Sukalyan 13 Mentor Capital Ltd. Mumbai Complex Pvt Ltd and various other intermediaries including M/s Startree Dealer Pvt Ltd from which the appellant has received this money. The AO highlights that high value RTGS credits were appearing in the bank account of these companies that were immediately being transferred to other entity. The AO did not accept the contention of the appellant that the money receipt of Rs.21,06,50,000/- is the partial sale proceed of shares that were sold to M/s Startree Dealer Pvt Ltd in the last year and held that the appellant has not been able to prove the credit worthiness of M/s Startree Dealer Pvt Ltd to transfer this huge amount and hence held the same to be in the nature of unexplained income U/s 68.
5.4.2 The appellant on the other hand contended that the said amount represented part consideration received for the sale of shares to M/s. Startree Dealers Pvt. Ltd., a transaction that was carried out in the Financial Year 2011- 12 relevant to AY 2012-13. The appellant had duly disclosed the transaction in AY 2012-13, and the AO had examined the same during the course of assessment proceedings and accepted it by assessing the capital gains arising therefrom. Thus, the nature and source of the transaction have already been scrutinized and accepted by the Department in the year of sale.In the year under appeal, i.e. AY 2013-14, the appellant merely received a portion of the sale consideration, being Rs.21,06,50,000/- which was pending from M/s. Startree Dealers Pvt. Ltd and the balance amount of Rs.8,93,50,000/- was received subsequently in AY 2014-15. The receipts in these years are nothing but realization of an already accounted-for and accepted transaction. The amount received is neither share capital nor loan, and thus does not fall within the purview of unexplained cash credit under Section 68. It is well settled that once the source and nature of a transaction have been accepted in an earlier year, mere realization of outstanding consideration cannot be taxed again as unexplained in a subsequent year. The appellant also brought on record, during reassessment proceedings, all relevant documentary evidence including the submission made before the Assessing Officer in AY 2012-13, demonstrating the sale of shares and the corresponding entries. Despite this, the AO proceeded 14 Mentor Capital Ltd. Mumbai to treat the amount as unexplained solely on the basis of an investigation report concerning M/s. Sukalyan Complex Pvt. Ltd., alleging that M/s. Startree Dealers Pvt. Ltd. was a conduit for accommodation entries. However, the appellant has no connection with M/s. Sukalyan Complex Pvt. Ltd., and the AO has neither established any nexus nor shown any evidence that the appellant's funds were routed through that concern. The appellant further submitted that it cannot be burdened with the responsibility of verifying the internal affairs or financial arrangements of M/s. Startree Dealers Pvt. Ltd., especially when the appellant has no control or connection with the alleged intermediary entities. Once the sale transaction has been accepted in an earlier year, and the capital gains taxed, the subsequent receipts cannot be independently recharacterized under Section 68. The addition is based on mere assumptions and general allegations arising out of third-party enquiries, and not based on any material or finding specific to the appellant's transaction. In support of the above contention, the appellant relies on the decisions of the Hon'ble Bombay High Court in Jay Ganga Exim India Pvt. Ltd. (TS-474-ITAT-2025) and Well Trans Logistics India (P) Ltd. v.
ACIT, wherein it has been held that once the sale of shares has been accepted and taxed in an earlier year, the amount subsequently received towards the same cannot be taxed again under Section 68.
5.4.3 I have perused the submissions filed by the appellant before the AO that has also been filed before me. I have also perused the assessment order of AY 2012-13, the return of income and the computation filed by the appellant for AY 2012-13. It is an undisputed fact that the appellant has sold shares of Southern Wind Farm Ltd and Global Wind Power Ltd to M/s Startree Dealers Pvt Ltd on 31.03.2012 and capital gain amounting to Rs.19,10,20,589/- has been returned in the income tax return of AY 2012-13. Based on the facts and submissions on record, it is evident that the amount of Rs.21,06,50,000/- received by the appellant during the Assessment Year 2013-14 represents part payment towards the sale consideration of shares sold in the FY 2011-12, relevant to AY 2012-13. The transaction of sale of shares and the resultant capital gains were duly disclosed, examined, and accepted by the AO in that year. The appellant 15 Mentor Capital Ltd. Mumbai has merely received a portion of the already disclosed and assessed sale consideration in the year under appeal. In such circumstances, the amount received cannot be treated as an unexplained cash credit under Section 68 of the Act, as the nature and source of the receipt have already been established and accepted. The amount of Rs.21,06,50,000/- received in the year under consideration, therefore, did not represent a new credit entry, but merely a brought forward balance against a duly accounted for and accepted transaction.
5.4.4 It is a well settled law that addition u/s. 68 can be made only during the year in which such credit has been received and if the credit balance appearing in the account of the appellant is not pertaining to the year under consideration, the AO cannot make addition u/s. 68 of the Act in the subsequent assessment year. This view is supported by the decision of the Hon'ble Gujarat High Court in the case of CIT vs. Jagatkumar Satishkumar Patel (2014) 45 taxman.com 441 (Gujarat). Similar view was also taken by the Gujarat High Court in the case of Dy. CIT vs. Amod PetroChem (P) Ltd. 2008 ITO vs. Shri Samir J. Shah 217 CTR (Guj) 401. The Delhi High Court in the case of CIT vs. Usha Stud Agricultural Farms Ltd. 301 ITR 384 (Del) also held that when the credit balance appearing in the account of the assessee did not pertain to the year under consideration, the Assessing Officer was not justified in making the impugned addition u/s. 68 of the Act. Again, the Delhi ITAT in the case of Mahaveer Prasad vs. ITO 40 taxman 35 (Del Trib) (Tax Magazine) held that amounts found in the books of accounts of the assessee were in existence much prior to the beginning of the accounting period and therefore the same cannot be treated as income of the assessee during the relevant previous year. Again, the Delhi ITAT in the case of Nuchem Ltd. vs. DCIT 87 TTJ (Delhi Trib) 166 held that since Revenue has failed to prove that the amounts were credited to the books of the assessee during the year and these amounts were brought forward from earlier years, therefore, it is a settled law that addition u/s. 68 could be made only if the amount was credited in the accounts of the assessee in the relevant financial year. Accordingly, the Delhi ITAT directed the addition to be deleted. Further, in the case of Shri 16 Mentor Capital Ltd. Mumbai Vardhman Overseas Ltd. vs. ACIT 24 SOT 393 (Delhi Trib.) held that since no new amount has been credited by the assessee in its account during the year under consideration, applicability of section 68 of the Act is ruled out. Therefore, in view of the above judgments, it is a settled law that opening balance of credit entries coming from previous financial years cannot be added u/s. 68 of the Act to the income of the appellant.
5.4.5 It is a settled position of law that Section 68 is applicable only where there is a credit entry of a nature that is unexplained and the identity, creditworthiness, or genuineness of the transaction is not established. In the present case, the amount received is neither share capital nor loan and thus does not fall within the purview of unexplained cash credit under Section 68. Moreover, the credit is not unexplained, it is a receipt arising from a transaction whose genuineness has already been accepted in the earlier year. It is well- settled that once the source and nature of a transaction have been accepted in an earlier year, mere realization of outstanding consideration cannot be taxed again as unexplained in a subsequent year. The sale of shares was neither doubted nor disputed by the AO in the earlier year. In such circumstances, applying Section 68 to a mere realization of dues is both factually and legally untenable.
5.4.6 Coming to the findings of the AO with respect to M/s Startree Dealer Pvt Ltd, I find that there is no direct finding in respect of the party and the AO has based her finding on the basis of enquiries done in the case of M/s Sukalyan Complex Pvt Ltd, the primary red flag being that high value RTGS are being transferred to another account almost immediately. M/s Startree Dealer Pvt Ltd appears to be one such account which has received high value transfer from M/s Sukalyan Complex Pvt Ltd. Mere routing of funds through a common chain or similarity in transactions does not establish Startree as a shell company unless specific evidence shows that Startree lacked genuine operations or was involved in a circular money trail. The AO has further highlighted that M/s Startree Dealer Pvt Ltd has a miniscule profit and hence the credit worthiness is 17 Mentor Capital Ltd. Mumbai not proved. It is my considered view that income alone cannot be a criterion for determining the credit worthiness of a party and it is the net worth that is essential as investments can be done out of reserves and capitals, borrowings etc also. The mere presence of low financial metrics does not legally or factually prove it is a shell or paper company. The AO in the case of the appellant itself has accepted loss of Rs.71,73,416/- after making detailed assessment in the instant order. Moreover, from the findings of the AO itself it is clear that there are no cash deposits in the various accounts and only RTGS transfers. There is nothing on record to suggest that there has been a round tripping of funds of the appellant and that the funds originated from the appellant, were routed through Startree, and came back as share sale consideration. Thus, regardless of whether M/s Startree Dealers Pvt Ltd is a shell entity or not, I find that the appellant has been able to furnish evidences to substantiate that its transactions with M/s Startrade Dealers Pvt Ltd are genuine and the receipts are merely deferred receipts of a transaction that has already been taxed in the earlier year.
5.4.7 Therefore for reasons as detailed above, it is held that the AO is not correct in invoking Section 68 in respect of a deferred receipt for sale of shares that has happened in the earlier year and the capital gains on account of which has already been brought to tax earlier. The addition of Rs.21,06,50,000/- done by the AO is therefore deleted and these grounds of appeal are allowed.
15. After meticulously going through the facts of the present case and the material placed on record, and also considering the decisions relied upon by the Ld. CIT(A), we are of the view that the portion of the amount received during the assessment year under consideration was sale consideration pending from M/s. Startree Dealers Pvt. Ltd., and the same cannot be termed as unexplained.
18Mentor Capital Ltd. Mumbai
16. Moreover, no new facts, circumstances, or documents have been placed on record by the Ld. DR to controvert or rebut the findings recorded by the Ld. CIT(A). Therefore, we see no reason to interfere with or deviate from those findings. Accordingly, we dismiss the grounds raised by the Revenue and uphold the order of the Ld. CIT(A) deleting the additions.
I.T.A. No. 5311/Mum/2025 (A.Y: 2014-15)
17. As the facts and circumstances in this appeal is identical to ITA No 5307/Mum/2025 for the A.Y 2013-14 (except variance in days of delay, if any) therefore, the decision rendered in above paragraphs would apply mutatis mutandis for this appeal also.
CO. No. 103/Mum/2026 (A.Y: 2014-15)
18. Since we have already dismissed the grounds raised by the Revenue and rejected the appeal in ITA No. 5311/Mum/2025 (AY: 2014-15), in the result, the CO filed by the assessee becomes infructuous and therefore does not require any adjudication.
Order pronounced in the open court on 24/04/2026
Sd//- Sd/-
(JAGADISH) (SANDEEP GOSAIN)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai:
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Mentor Capital Ltd. Mumbai
Dated: 24/04/2026
RY, Sr. PS
Copy of the order forwarded to:
(1)The Assessee
(2) The Respondent
(3) The CIT
(4) The CIT (Appeals)
(5) The DR, I.T.A.T.
True Copy
By order
(Asstt. Registrar)
ITAT, Mumbai
20