SMT. KAJALBEN N. GONDALIYA,,JUNAGADH vs. THE INCOME TAX OFFICER, WD-1(2),, JUNAGADH

Assessee has taken four grounds of appeal. Out of that ground no.1 and 4 are general grounds of appeal, which do not call for recording of any finding. In ground no.2 and 3, the assessee has pleaded that the ld.CIT(A) has erred in confirming addition of Rs.16.00 lakhs and Rs.10.10 lakhs being unexplained credit appearing against M/s.Vision Equities and Shri Arvindbhai M. Gondaliya. These additions have been made with aid of section 68 of the Income Tax Act, 1961.

Brief facts of the case are that the assessee has filed return of income on 28.6.2010 declaring total income at Rs.3,20,000/-. The case of the assessee was selected for scrutiny assessment and notice under section 143(2) was issued and served upon the assessee. A perusal of the record revealed to the AO that the assessee has deposited in cash a sum of Rs.12,02,500/- in the Cooperative Bank of Rajkot Ltd., Jungadh Branch in saving bank account no.04336. She further deposited a sum of Rs.15,23,000/- with IDBI, Rajkot Branch. Thus total cash of Rs.27,25,000/- was deposited by the assessee in two bank accounts. The ld.AO sought source of such deposits in the banks. With regard to cash deposited in Cooperative Bank, it was contended by the assessee that she had issued cheque to Vibrant Equities on different dates totaling to Rs.21 lakhs. These cheques were issued from Cooperative Bank, Rajkot on different dates. Out of that she has received Rs.16 lakhs in cash and the balance Rs.5.00 lakhs were shown as recoverable. This cash was used for depositing in cooperative bank. With regard to the deposits in IDBI Bank, it was contended that she has received Rs.10.10 lakhs from Shri Arvindbhai M. Gondaliya as advance for sale of 933 sq.feet office space at second floor of C-Dwarkadhish Market, Junagadh. The ld.AO directed the assessee to prove identify of creditors, genuineness of the transaction, and their credit-worthiness. With regard to Vibrant Equities, it was contended by the assessee that it was being run by Deven Malaviya. He has given confirmation, but of late, he has suffered lot of losses, and ran away from the city to Pune. Cuttings from the newspapers exhibiting all these ups and downs have been produced before the AO. The AO did not rely upon the version of the assessee on the ground that Vibrant Equities, a proprietary concern of Mrs.Disha D.

Before us, the ld.counsel for the assessee reiterated his contentions, as were raised before the ld.Revenue authorities. He placed on record copy of Form No.7/12 exhibiting land held by Shri Arvindbhai Manjibhai Gondaliya. He also placed on record copy of the agreement vide office space was sought to be sold in favour of Shri Arvindbhai Gondaliya. Thereafter, he drew our attention towards newspaper cuttings from Times of India. It showed that Shri Malaviya committed suicide and police was exploring other angle in share broker suicide. The alleged proprietor of Vibrant Equities was found lying in pool of blood at a star hotel at Senapati Bapat Road. The police started investigation, whether he committed suicide or was murdered. There were other newspaper reports showing fate of Deven Malviya and other activities he has done to various investors. In a way, he was absconding from the investors. The ld.counsel for the assessee drew our attention towards all these newspaper reports. Thereafter, ld.counsel for the assessee has relied upon the judgment of the Hon’ble Gujarat High Court in the cases of CIT Vs. Sun Builders, 41 taxman.com 484 (Guj), CIT

On the other hand, the ld.DR relied upon the orders of the Revenue authorities.

We have duly considered rival submissions and gone through the record carefully. Section 68 of the Income Tax Act contemplates that where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof, or the explanation offered by the assessee is not, in the opinion of the AO satisfactory, then the sum so credited in the accounts may be treated as income of the assessee of that previous year.

As far as cash alleged to have been received from Vibrant Equities is concerned, it is to be appreciated in the light of particular background of this issue. The AO has not disputed that the assessee has issued cheque in favour of the Vibrant Equities, and money was cleared from SB account to that concern. It is also not in dispute that, that concern was running into trouble and ultimately proprietor died in mysterious circumstances. The question is, if an assessee can make payment as investor to said concern, and allege that under some compelling circumstances or non materialization of the deal, it was received in cash, then that admission of the assessee ought to be looked into looking to the peculiar facts. 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

As far as second amount of Rs.10.10 lakhs is concerned, a copy of agreement dated 10.7.2009 and final document dated 7.8.2009 has been placed on record at pagenos.9 to 14 of the paper book, wherein the assessee has contended that she had sold her flat 13, Nandigram Apartment, Junagadh for Rs.4.77 lakhs to Smt.Shitalben Ganwantray Jivani. The AO has accepted this transaction as genuine and did not disturb. Thus, it should be construed that this amount was available with the assessee. Apart from that she had received Rs.10.10 lakhs from Arvindbhai Manjibhai gondaliya. The AO has doubted credit- worthiness of this man. The ld.CIT(A) has also doubted credit- worthiness as well as genuineness of the transaction and made reference to the decision of Hon’ble Supreme Court in the case of Sumati Dayal, 214 ITR 801 as well as Durga Prasad More, 82 ITR 540. We are of the view that the alleged vendee belongs to a lower strata of the society. One of his sons is running PAN shop and another one is working at dyeing mill. He is an agriculturist. He cannot maintain the accounts and monitor his activities in an organized manner. The ld.Revenue authorities expect that he should submit details of agriculture produce, bank accounts, cost of cultivation, proof of sales. These are highly alien to agriculture activities in India, what to talk of marginal farmers. Even big farmers having big chunk of lands are not maintaining these kinds of

In the result, appeal of the assessee is allowed.