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TMI Blog1983 (7) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... on. The wives of the other two brothers, namely, Smt. Shardabai and Smt. Kaushalyabai started the new business in cloth in the name of M/s Ashok Cloth Stores, now the assessee before us. The partnership deed was drawn and the two ladies invested their shore capital of Rs. 15,000 each by selling their ornaments at Jalgaon through a third person Shri Jugmanderlal. Shri Ashok Kumar invested Rs. 10,000 after receiving the same as gift from Smt. Sunderbai who is his maternal grand-mother. The ITO further found a cash credit amounting to Rs. 9,000 in the names of Nandram and Bhika. In trading account, the ITO issued notice u/s 142(1) dt. 15th Nov., 1980 and notice u/s 143(2) dt. 1st January, 1981 to the assessee to prove the capital in the name of the two ladies and the deposits as sated above. It was ladies submitted in writing by the counsel for the assessee that the two ladies invested their capital after selling their ornaments through one Dalal. Shri Ashok Kumar invested Rs. 10,000 after receiving the same as gift from Sunderbai of Raipur. With regard to the cash credits, the ld. Counsel stated that the credits existed in the old firm M/s Champalal Fakirchand and Ashok Vastra Bhand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e income of the assessee as income from undisclosed sources. With regard to the deposits appearing in the names of Nandram and Bhika, the ITO observed that the land owned by the aforesaid persons is the inferior land. Further Nandram and Bhika never advanced any money to any other businessman expect to the assessee. He, therefore, treated the aforesaid cash deposits as not genuine and included the same in the income of the assessee. With regard to the addition of Rs. 16,500 made by the ITO in cloth account, the facts are as under: The sales disclosed by the assessee are at Rs. 5,32,567 on which the G.P. of Rs. 56,294 has been shown which gives a rate of 10%. The ITO observed that as the sales stocks are not subject to verification, the application of proviso to s. 145(1) is imperative. He, therefore, estimated the sales at Rs. 5,60,000 and applying G.P. rate 13% added an income of Rs. 16,500 to the income of the assessee. 3. On appeal before the AAC it was contended by the ld. counsel for the assessee with regard to the investment of Rs. 30,000 made by the two ladies that the amount was deposited by Smt. Shardabai and Smt. Kaushalyabai as capital contribution out of sale procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were not benamidars of anybody. He further pointed out that the ITO u/s 185, in the case of the same assessee firm has mentioned that these ladies are benamidars, but he failed to mention as to whose benamidars these ladies are. He further filed before us copies of computation of total wealth of the HUF Nandlal & Maujilal where one of the husbands of the ladies was a coparcener. He drew our attention to the entries made in the aforesaid copy to substantiate his plea that the HUF owned 300 tolas of gold. According to him, the order of the to rejecting the statements of the ladies is based on purely surmises and presumptions. He drew our attention to the statement of Jugmandarlal recorded by the ITO and contended before us that from his statement it is quite clear that Jugmandarlal undertook to sell the ornaments in view of his family relations with the aforesaid two ladies. The observation of the ITO in his order that any number of cash memos can be available for any amount of gold and silver sold on payment of commissions is baseless as according to him no person dealing in the purchase and sale of gold and silver articles is prepared to give sale memos merely on payment of commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the copy of account of Shri Nandram in the Ashok Vastra Bhandar to substantiate his plea that they had deposits in the aforesaid firm and they withdrew and deposited the same in the assesssee firm on the same date. He, therefore, contended that the deposits stood in the name of Nandram and Bhikaji have been fully proved and the ITO is not justified in treating the aforesaid amounts as the income of the assessee from undisclosed sources. With regard to the addition of Rs. 16,500 in the trading account, the ld. counsel submitted that the assessee's business is only on semi-wholesale and retail basis and the firm deals mainly in coarse cloth on which the margin of profit is very low. He further contended that in the case of M/s Ashok Vastra Bhandar for the asst. yrs. 1977-78 and 1978-79 the gross profit rate applied by the department varied from 10% to 11%. He filed before us a comparative chart on the basis of which he contended that the sales of the assessee firm during the year under consideration is more than a lakh rupees from the sales shown by Ashok Vastra Bhandar for the asst. yr. 1978-79 wherein the department has accepted the G.P. shown by Ashok Vastra Bhandar at 11%. He, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.10,000 to Ashok Kumar belonged to the middle class family and that she has no capacity to make a gift. The aforesaid finding of the ITO is not based on any evidence and it is further found that the ITO has not been even cared to examine Sunderbai who has made solemn affirmation in the affidavit that she has gifted Rs. 10,000 to Ashok Kumar. The ITO in the absence of not cross-examining her cannot now dispute the contents in the affidavit in view of the ratio laid down by the Supreme Court in the case of Mehta Parikh and Co. vs. CIT 30 ITR 181. We, therefore, hold that the gift of Rs. 10,000 made by Sunderbai to Ashok Kumar is genuine gift and it should be believed. Therefore, the addition of Rs. 10,000 made by the ITO as income of the assessee from undisclosed sources and sustained by the AAC is hereby deleted. With regard to the deposits of Rs. 4,000 and Rs. 5,000 in the name of Nandram and Bhikaji respectively the assessee has produced sufficient material before the ITO to prove the genuineness of the deposits. By filing the copies of account of the aforesaid two persons in the books of Ashok Vastra Bhandar, the date of withdrawal of the same from the aforesaid firm and the d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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