2019 (2) TMI 806 - AT - Income Tax

Addition u/s 68 - source of such deposits in the banks - receipt of advance from proposed sale of property - genuineness and credit worthiness of transactions - Held that - The assessee cannot produce the person for confirmation, because he is no more. The assessee was creditor to him. The assessee has been alleging that part of the money received back in cash. In these circumstances, unless there is other evidence with the AO to believe that the assessee has some other source of earning should not be disbelieved. If this was not the source for the assessee to deposit ₹ 16 lakhs, and there should be some other mode which can be expected that the assessee must have earned income from that mode. No such things could be brought on record. Generation of agriculture income could only be estimated by considering the land holding. The man has deposed that he was having sufficient resources and paid advances for purchase of a office space. It is difficult to ascertain the exact affairs of what vendee planned for future of his children for acquiring such office space and from where he has arranged the money. But surrounding circumstances is clear that he remained strict to his stand that a sum of ₹ 10.10 lakhs was given to the assessee. In such circumstances, if any unexplained money possessed by him, ought to be considered in his case and not in the hands of the assessee. It is to be appreciated that the assessee has explained the source and proved genuineness of the transaction. Owner of 15 bigas of agriculture land with one son running pan-shop and another son working in dyeing mill, it can be expected he must have the sources for arranging ₹ 10 lakhs for making investment in real estate. Therefore, we are of the view that the assessee is able to fulfill all the ingredient of section 68 and no addition deserves to be made in her hand. We allow this appeal, and delete both the additions. - Decided in favour of assessee.

Issues:
Appeal against CIT(A) order for Asstt.Year 2010-11 - Addition of unexplained credit under section 68 of IT Act - Cash deposits in bank accounts - Source of deposits - Credibility of creditors - Genuineness of transactions - Credit-worthiness of creditors - Appeal grounds - Newspaper reports as evidence - Legal precedents cited - Judgment analysis.

Detailed Analysis:

1. Grounds of Appeal:
The assessee appealed against the CIT(A) order for the assessment year 2010-11, specifically challenging the addition of unexplained credits under section 68 of the Income Tax Act. The grounds of appeal included issues related to cash deposits in bank accounts, the source of deposits, credibility of creditors, genuineness of transactions, and the credit-worthiness of the creditors.

2. Cash Deposits and Source of Funds:
The assessee had deposited significant amounts in two bank accounts, leading to scrutiny by the assessing officer (AO). The source of these deposits was questioned, with explanations provided by the assessee regarding funds received from Vibrant Equities and Shri Arvindbhai M. Gondaliya. The AO sought to verify the identity of creditors, genuineness of transactions, and their credit-worthiness.

3. Issues with Vibrant Equities:
Regarding the cash allegedly received from Vibrant Equities, the AO raised concerns despite the assessee's explanations and evidence of transactions. The demise of the proprietor of Vibrant Equities under mysterious circumstances complicated the verification process. The absence of the proprietor for confirmation and the unique circumstances surrounding the case were highlighted in the appeal.

4. Transaction with Arvindbhai M. Gondaliya:
The transaction involving the receipt of funds from Shri Arvindbhai M. Gondaliya was also scrutinized. The AO and CIT(A) doubted the credit-worthiness and genuineness of the transaction. However, the assessee presented evidence, including agreements and documents, to support the transaction. The lower economic status of the creditor and the nature of his activities were considered in the judgment.

5. Legal Precedents and Newspaper Reports:
The assessee's counsel cited legal precedents from the Hon'ble Gujarat High Court to support the case. Additionally, newspaper reports detailing the circumstances surrounding Vibrant Equities and Shri Malaviya's demise were presented as evidence to contextualize the transactions and the challenges faced by the assessee.

6. Judgment and Conclusion:
After considering the submissions, the ITAT analyzed the provisions of section 68 of the IT Act. The tribunal emphasized the need for a satisfactory explanation from the assessee regarding the credited sums. In the case of Vibrant Equities, the peculiar circumstances and lack of contradictory evidence led the tribunal to accept the assessee's explanation. Similarly, in the case of funds received from Arvindbhai M. Gondaliya, the tribunal found the assessee's evidence sufficient to prove the genuineness of the transaction and the creditor's credit-worthiness.

7. Final Decision:
Consequently, the ITAT allowed the appeal, ruling in favor of the assessee and deleting both additions made under section 68. The judgment highlighted the importance of considering the specific facts and circumstances of each case, especially when dealing with unexplained credits, creditor transactions, and the genuineness of financial dealings.

This comprehensive analysis of the judgment from the Appellate Tribunal ITAT Rajkot highlights the key issues, arguments, evidence presented, legal precedents cited, and the final decision rendered in favor of the assessee.

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