THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-3(1),, VISAKHAPATNAM vs. NARSIMHARAJU KANUMURI, VISAKHAPATNAM

आदेश /O R D E R Per Bench : This appeal is filed by the revenue against the order of the Commissioner of Income Tax (Appeals) [CIT(A)]-1, Visakhapatnam in ITA No.10404/2019-20/CIT(A)-1/VSP/2020-21 dated 18.09.2020 for the Assessment Year (A.Y.) 2017-18 and Cross Objections are filed by the assessee.

3 ITA No.63/Viz/2021 and CO No.40/Viz/2021, A.Y.2017-18 Kanumuri Narasimharaju, Visakhapatnam

subsequently after survey, the assessee filed the return of income admitting total income of Rs.4,31,56,197/- which includes the additional income declared in survey. By the time survey was conducted, the assessee has not filed the return of income for the A.Y.2017-18 and in the return filed subsequently, the assessee has admitted the sum of Rs.4,17,00,000/- towards gifts received from near and dear and offered the same to tax u/s 56(2)(vii)(a) of the Act. During the assessment proceedings, the AO requested the assessee to furnish the details of gifts received along with confirmation letters and the assessee filed the details and explained that on attaining the age of 60 years he celebrated the ‘Shashti Poorthy’ function in the month of April 2016 and received the gifts worth Rs.4.17 crores in monetary / non monetary terms and he converted the non cash gifts into cash and made the investment for purchase of land. The gifts received by the assessee were offered for tax u/s 56(2)(vii)(a) of the Act. Therefore, requested to accept the return and complete the assessment. Since, the assessee has not furnished the confirmation letters along with evidences to prove the identity of the persons and genuineness of the transactions, the AO taxed the entire sum of Rs.4,17,00,000/- u/s 69A of the Act. 3. Against the order of the AO the assessee went on appeal before the Ld.CIT(A) and the Ld.CIT(A) deleted the addition made by the AO, holding

4 ITA No.63/Viz/2021 and CO No.40/Viz/2021, A.Y.2017-18 Kanumuri Narasimharaju, Visakhapatnam

that there is no case for making the addition u/s 69A since the assessee has recorded the source in the books of accounts and admitted the income in the returns filed by him. For the sake of clarity, we extract relevant part of the order of the Ld.CIT(A) in para No.4.1.8 as under . “4.1.8. I have carefully considered the issue and facts of the case. There is no dispute of the fact that the appellant had owned up the payment of cash to the seller. It is also not in dispute that such amounts have come to him in the form of gifts which was duly disclosed in the books. This information was filed before DDIT(Inv) along with final account. Therefore, there is no dispute regarding the nature and source of gift. It is also a fact that the income was brought to tax u/s 56(2) of the Act and paid relevant taxes. The DDIT (Inv) has not drawn any adverse conclusion on the explanation. It is seen that the source of funds are neither loan nor advance , hence the rigors of section 69A of the Act will come into operation. Be that as it may, the appellant had furnished the names and addresses of the donors with whom the Assessing Officer has not caused any enquiry. In the absence of such enquiry, section 69A of the Act can’t be invoked. It is also a fact that the gifts are suffered tax at 30% in the hands of appellant. (i) The appellant offered the income u/s 56(2) in his return of income and not under section 69A, section 69B, section 69C and section 69D of the Act. (ii) No additional income has been determined by the Assessing Officer other than the income which is voluntarily declared by the appellant in his return of income filed u/s 139(4) of the Act. So, in this case there is no question of invoking section 115BBE of the Act. On overall consideration of facts and circumstances, the appellant had reasonably explained the sources of gifts. Accordingly, there is no scope for invoking section 69A of the Act.” 4. Against which the department is in appeal before this Tribunal. 5. We have heard both the parties and perused the material placed on record. In the instant case, the AO assessed the sum of Rs.4,17,00,000/- u/s 69A of the Act despite the fact that the assessee has admitted the same as income in the return of income u/s 56(2)(viia) of the Act. The AO extracted section 69A in page No.6 of the assessment order as per which, in any

5 ITA No.63/Viz/2021 and CO No.40/Viz/2021, A.Y.2017-18 Kanumuri Narasimharaju, Visakhapatnam

financial year, the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any maintained by him and the assessee offers no explanation about the nature and source of the acquisition, the same may be deemed to be the income of the assessee for such financial year. In the instant case, the assessee has purchased a piece of land for which the source was explained as gifts, partly and partly the amount was paid through cheques. Thus, the gifts were recorded in the books of accounts and also offered to tax u/s 56(2)(vii)(a) of the Act. The assessee also furnished the details to the DDIT/ AO, with names and addresses of the persons from whom the gifts were received vide letter dated 30.03.2018. The assessee furnished the details before the AO also vide letter dated 11.12.2019. Neither the DDIT nor the AO found any deficiency in the information submitted by the assessee and has not caused any enquiries. Since, the assessee has already explained the source as gifts and offered the same to tax u/s 56(2)(vii)(a), which was not being disproved by the AO, the credits made in the books of accounts stands explained and there is no case for invocation of section 69A of the Act. Hence, we do not find any reason to interfere with the order

6 ITA No.63/Viz/2021 and CO No.40/Viz/2021, A.Y.2017-18 Kanumuri Narasimharaju, Visakhapatnam

of the Ld.CIT(A) and the same is upheld. The appeal of the revenue is dismissed. 6. The assessee filed cross objections. Ground No.1 is supporting the order of the Ld.CIT(A). Since, we have upheld the order of the Ld.CIT(A) and dismissed the appeal of the revenue, the ground raised by the assessee becomes infructuous, hence, dismissed. 7. Ground No.2 is related to the validity of conversion of case selected for scrutiny under CASS as complete scrutiny in violation of CBDT guidelines. The assessee is challenging the validity of issue of notice u/s 143(2) and converting the case into complete scrutiny against the guidelines issued by the CBDT. According to the assessee, the AO ought not to have selected the case for scrutiny at all since, the survey u/s 133A was conducted in the case of M/s Kasyap Home Needs but not in assessee’s the case. 8. We have heard the rival contentions and we are of the view that this ground does not need adjudication since, we have dismissed the appeal of the revenue on merits. The assessee is free to take up this ground, in case, the department succeeds on merits in the Hon’ble High Court. The cross objection raised by the assessee stands dismissed.

7 ITA No.63/Viz/2021 and CO No.40/Viz/2021, A.Y.2017-18 Kanumuri Narasimharaju, Visakhapatnam

Sd/- Sd/- (एन के चौिरी) (धड.एस .सुन्दर धसंह) (N.K.CHOUDHRY) (D.S.SUNDER SINGH) न्याधयक सदस्य/ JUDICIAL MEMBER लेखा सदस्य/ACCOUNTANT MEMBER Dated : 08 .09.2021 L.Rama, SPS आदेश की प्रतितिति अग्रेतषि/Copy of the order forwarded to:- 1. राजस्व/The Revenue - Dy.Commissioner of Income Tax, Circle-3(1), Visakhapatnam 2. तिर्ााररिी/ The Assessee – Shri Kanumuri Narasimharaju, 50-1-23/46, Flat No.202, KSR Complex, C-Block, Opp.Rytu Bazaar, Seethammadhara, Visakhapatnam 3. The Pr.Commissioner of Income Tax-1, Visakhapatnam 4. The Commissioner of Income Tax (Appeals)-1, Visakhapatnam 5. तवभागीय प्रतितितर्, आयकर अिीिीय अतर्करण, तवशाखािटणम/DR, ITAT, Visakhapatnam 6.गार्ाफ़ाईि / Guard file आदेशािुसार / BY ORDER // True Copy //

Sr. Private Secretary ITAT, Visakhapatnam