2008 (12) TMI 22 - HC - Income Tax

Remand overturned; original tax authority's factual findings on shareholders' identity, creditworthiness and genuineness upheld, disclosures confirmed

The HC allowed the taxpayer's appeal, holding the ITAT erred in remanding the matter because the CIT(A) had properly examined and found the identity, ... Addition u/s 68 - identity, credit worthiness and genuineness of each of the share holders - Whether the ITAT was justified in law in remanding the case to AO when the matter has been examined on merits by CIT(A) - HELD THAT:- On going through the order of the Commissioner, we find that he has examined the question of identity, credit worthiness and genuineness of each of the share holders and came to a conclusion of fact that the identity and credit worthiness of the share holders and the genuineness of the transactions stood established. Therefore, the finding returned by the Tribunal to the contrary cannot be accepted as it is contrary to the record. Since the Commissioner of Income Tax (A) has not only found that the identity of each of the share holders stood established, but has also examined the fact that each of them were income tax assessees and had disclosed the share application money in their accounts which were duly reflected in their income tax return as well as in their balance sheets. Thus, we see merit in what the learned counsel for the appellant has submitted and we feel that the Tribunal was unjustified in coming to the conclusion that the CIT(A) had not considered the matter in the right perspective. Appeal stands allowed. The High Court of Delhi, with Hon'ble Mr. Justice Badar Durrez Ahmed and Hon'ble Mr. Justice Rajiv Shakdher presiding, considered a substantial question of law regarding whether the Income Tax Appellate Tribunal was justified in remanding a case back to the Assessing Officer after examination by the Commissioner of Income Tax (Appeals). The Tribunal had set aside the order of the Commissioner of Income Tax (A) and directed the Assessing Officer to re-examine the case, citing the need for more rigorous proof in cases involving cash or demand drafts. However, the High Court found that the Commissioner of Income Tax (A) had thoroughly examined the identity, creditworthiness, and genuineness of the shareholders, as evidenced in the appeal papers. The High Court also referenced a Supreme Court case, CIT vs. Lovely Exports Pvt Ltd, which supported the Commissioner's findings. Ultimately, the High Court ruled in favor of the assessee, concluding that the Tribunal's decision was unjustified and setting aside their order. The appeal was allowed with no order as to costs.