2019 (2) TMI 806 - AT - Income Tax

ITAT ruling favors assessee by deleting income tax additions under section 68 for AY 2010-11

Smt. Kajalben N. Gondaliya Versus ITO, Ward-1 (2), Junagadh

Smt. Kajalben N. Gondaliya Versus ITO, Ward-1 (2), Junagadh - TMI 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.