AO fails to Conduct Independent Enquiry after Onus Shift: ITAT Upholds Deletion of ₹15 Cr Share Application Money u/s 68 [Read Order]

The Income Tax Appellate Tribunal (ITAT), Delhi bench, has dismissed the appeal filed by the revenue against the order of the Commissioner of Income Tax (Appeals) [CIT(A)] deleting an addition of ₹15 crore made underSection 68 of the Income Tax Act, 1961 holding that the AO had failed to conduct independent enquiry after the onus was shifted onto him.

Al‑Arsh Exports Pvt. Ltd., the assessee, was engaged in the export of meat. The assessee filed its return of income for AY 2014‑15, declaring ₹32.32 lakh. During a survey in April 2015, tax authorities impounded a hard disk containing a trial balance as of 31 March 2014. And it reflected a share application money of ₹15 crore.

Based on this, the Assessing Officer (AO) reopened the assessment under Section 147 and added the amount as unexplained credits under Section 68, alleging that the company failed to establish the identity, creditworthiness, and genuineness of 23 investor companies.

The AO argued that the investor companies had nominal profits and engaged in large debit and credit transactions, raising doubts about their capacity. Notices under Section 133(6) were issued. Replies were received with ITR acknowledgements and bank statements. But the AO concluded that the assessee had not satisfactorily proved the genuineness of the transactions. The addition of ₹15 crore was made in December 2018.

On appeal, the Revenue contended before ITAT that CIT(A) erred in deleting the addition without appreciating the AO’s findings. It stressed that the assessee failed to prove the creditworthiness of the 23 companies and relied on precedents such as Sumati Dayal to argue that the transactions were not genuine.

The assessee maintained that it had furnished complete evidence regarding the identity, creditworthiness, and genuineness of the investors, including confirmations, ITRs, and bank statements.

It was further argued that once such evidence was filed, the burden shifted to the AO to rebut it with an independent enquiry, which was not done. The assessee also raised a cross‑objection challenging the legality of the reassessment proceedings, alleging vague reasons and a lack of jurisdiction.

The two-member bench comprising Amitabh Shukla ( Accountant Member) and AnubhavSharma (Judicial Member) observed that from para-4.1 on page-21 of the order of the CIT(A) had solicited a remand report from the AO, and examining the same, it was found that the AO merely reiterated the arguments taken in the assessment order. It was further observed that there was nothing on record to suggest that any enquiries were conducted by the AO during the remand proceedings.

Also, the CIT(A) had requisitioned certain information from the 23 investor companies. The AO submitted that no statements of the Directors or the employees of 23 entities were recorded. It was also observed that the CIT(A) rightly concluded that the onus was upon the AO to have conducted his enquiries before drawing any negative conclusions. Thus, the tribunal confirmed the appellate order and dismissed all the grounds of appeal raised by the appellant Revenue.

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