1983 (7) TMI 108 - AT - Income Tax

Summary

Issues Involved:
1. Addition of Rs. 30,000 as unproved investment by two lady partners.
2. Addition of Rs. 10,000 as income from undisclosed sources.
3. Addition of Rs. 9,000 as unproved cash credit.
4. Addition of Rs. 16,500 in cloth account.

Detailed Analysis:

1. Addition of Rs. 30,000 as unproved investment by two lady partners:
The assessee contested the addition of Rs. 30,000, which was made by the ITO and confirmed by the AAC. The ITO disbelieved the statements of the two lady partners, Smt. Shardabai and Smt. Kaushalyabai, regarding their investment of Rs. 15,000 each as share capital by selling their ornaments. The ITO's disbelief was based on several grounds, including the financial status of their families and discrepancies in the sale memos. However, the Tribunal found that the ITO's conclusions were based on surmises and not on concrete evidence. The assessee provided sufficient proof, including sale memos, affidavits, and statements from witnesses, to substantiate the claim that the ladies possessed and sold gold ornaments to invest in the firm. The Tribunal was convinced by the evidence and concluded that the investment of Rs. 30,000 was genuine and not concealed income. Therefore, the addition of Rs. 30,000 was deleted.

2. Addition of Rs. 10,000 as income from undisclosed sources:
The ITO added Rs. 10,000 to the income of the assessee, claiming it was from undisclosed sources. This amount was allegedly a gift from Smt. Sunderbai, the maternal grandmother of Ashok Kumar. The ITO disbelieved the gift, citing Sunderbai's financial status. However, the Tribunal noted that the ITO did not examine Sunderbai, who had filed an affidavit affirming the gift. Citing the Supreme Court's decision in Mehta Parikh & Co. vs. CIT, the Tribunal held that the affidavit should be accepted as true in the absence of cross-examination. The Tribunal found the gift to be genuine and deleted the addition of Rs. 10,000.

3. Addition of Rs. 9,000 as unproved cash credit:
The ITO added Rs. 9,000 to the income of the assessee, treating it as unproved cash credit in the names of Nandram and Bhika. The ITO doubted the genuineness of these deposits, questioning the financial capacity of the depositors. However, the assessee provided evidence, including statements, confirmation letters, and details of agricultural land owned by the depositors. The Tribunal found that the assessee had sufficiently proved the genuineness of the deposits and the financial capacity of Nandram and Bhika. Consequently, the addition of Rs. 9,000 was deleted.

4. Addition of Rs. 16,500 in cloth account:
The ITO added Rs. 16,500 to the trading account of the assessee, estimating the sales and applying a higher gross profit (G.P.) rate. The assessee argued that their business dealt mainly in coarse cloth with a low profit margin and that the G.P. rate disclosed was reasonable. The Tribunal compared the G.P. rates of the assessee with those accepted in the case of Ashok Vastra Bhandar for previous years and found the disclosed G.P. rate of 10.2% to be reasonable. Therefore, the addition of Rs. 16,500 was deemed unreasonable and was deleted.

Conclusion:
The Tribunal found that the additions made by the ITO and confirmed by the AAC were not justified. The assessee provided sufficient evidence to prove the genuineness of the investments, gifts, and deposits. Consequently, all the contested additions were deleted, and the appeal of the assessee was allowed.