Commissioner of Income Tax vs Accord Metal (I) Pvt. Ltd.

The revenue is aggrieved by the impugned order of the Income Tax Appellate Tribunal (ITAT) in ITA No. 4424/Del/2010. It urges that the impugned order was made in error of law in as much as it directed deletion of ''84 lakhs brought to tax by the Assessing Officer (AO) under Section 68 of the Income Tax Act,1961.

The assessee in this case trades in metal, iron and steel. For A.Y. 2007-08, in its return, it reported an addition of ''84 lakhs on account of share application money received from two companies and share capital received from four companies. In support of its contention that this was a genuine transaction, the assessee relied upon inter alia a copy of Certificate of Incorporation of the applicants, relative Board Resolutions of the investor companies; details of share applicant companies available with the Registrar of Companies; Returns of such investors in Form No. 2 filed with the Registrar of Companies; written confirmation of accounts; independent confirmation from the parties; the affidavit of the Director; copies of Income Tax Returns (ITRs) along with copies of Permanent Account Number (PAN) , relative assessment for the A.Y. 2007-08 and 2009-10; balance sheets of the parties; the bank account statement vis-a-vis cheque payments, and certain letters written directly by the assessee applicants. The AO based upon his appreciation of materials and the circumstance held that upon issuance of notice under Section 131, most of the summons were returned unserved and that even field survey by the Inspector indicated that investor companies were not found at the addresses mentioned. The CIT (Appeals) reversed this. In doing so, it primarily based his conclusions upon the material produced by the assessee during remand proceedings, including the bank account statements etc. The discussion by the CIT (Appeals) in this regard is as follows:

"14. While adjudicating on merits, I have also had the opportunity to vet the assessment record. It is evident that the assessee has filed the Income Tax Returns of the investing companies as it stood then and also contained the PAN. It is further observed that the ROC certificate has been filed. Further bank statements evidencing the receipt of money through channels had also been filed before the Ld. AO. I have not taken into the cognizance the bank statement filed in 3 other companies. It need not be over emphasized that the acknowledgement of I.T. returns filed before the AO has the Permanent Account Numbers of the investing companies. Therefore, in such circumstances when the income tax return alongwith the PAN Nos. of the assessee company is filed, apart from the ROC certificate, the identity of the investing companies stands established. I have noted that many of the investing companies did not respond to the notices of the Ld. AO. Some were not even found at the addresses given. These facts, though persuasive, cannot dilute the identity of the investing companies once other crucial details have been filed by them. There is one more important aspect. Directors of the respective companies have also filed affidavits before the Ld. AO. Now the PAN, ITR, ROC certificates, affidavits and bank certificates cannot be ignored."

The revenue''s appeal was dismissed by the ITAT in its impugned order.

This Court has heard learned counsel for the parties and considered the submissions. In this case, facially, the assessee appears to have submitted all the requisite documents such as written confirmation by the assessee applicants/investors. Yet, two important features stand out: (a) that none of the investor/applicants could be found despite two-pronged enquiry at the addresses. In fact, the CIT (Appeals) indicated that even the changed address was not found to be accurate since the investors/applicants were not found there; (b) A second important aspect ? which appears to have been completely overlooked by the CIT (Appeals) is that the bank statement or at least the evidence of the share application money received by cheque were a part of the record. The CIT (Appeals) ought not to have stopped at the mere receipt of the bank statement but ought to have required ? in the remand - a complete record of the investor applicants? bank accounts for the concerned year, for detailed enquiry. This would have facilitated proper appreciation of creditworthiness of the share applicants.

We are fortified by the decision in Commissioner of Income Tax Vs. Lovely Exports (P) Ltd., which states that the onus of proof which lies upon the assessee is not only vis-a-vis the identity but also with respect to the genuineness of the transaction and the creditworthiness of the share applicants. In these circumstances, we hereby remit the matter for consideration by the CIT (Appeals) who shall proceed to make enquiries as to the creditworthiness of the transaction and the genuineness and identity of the shareholders given the parameters indicated in Lovely Exports (supra) . If necessary, the CIT (Appeals) shall take requisite steps, including seeking a remand report from the AO to work out the consequence of the present remit.

All rights and contention of the parties are expressly reserved; it is clarified that nothing in this order shall be an expression on the merits of such contentions. The appeal is partly allowed in the above terms.