MANDA MARKANDEYULU,,KAKINADA vs. THE ITO, WARD - 2,, KANCHILI

आदेश / O R D E R

PER V. DURGA RAO, Judicial Member:

This appeal filed by the assessee is directed against order of the

CIT(A), Visakhapatnam vide ITA No.0501/2011-12/ITO W-2/KKd/2013-

14 dated 14.3.2014 for the assessment year 2009-10.

ITA No.240 /Vizag/2014 Manda Markandeyulu, Kakinada 2. Ground Nos.1 & 2 are general in nature, which are not pressed.

Therefore, the same are dismissed as not pressed.

in electrical goods had filed his return of income declaring total income

of ` 4,94,720/-. The case of the assessee was selected for scrutiny and

after due process, the assessment was completed u/s 143(3) of the

Income Tax Act, 1961 (hereinafter called as 'the Act'). During the

course of assessment proceedings, the A.O. noted that from the balance

sheet as on 31.3.2009, it is seen that the assessee’s capital account is

credited with an amount of ` 24,30,000/- towards gold and jewellery &

gifts from friends and relatives. The A.O., to examine the genuineness

of the gifts, issued summons to the assessee and the sworn statement

was recorded on 15.10.2010, wherein the assessee was asked to furnish

names and addresses of the friends and relatives from whom he has

received gold and jewellery and also the details of weight of the articles

received. It was submitted by the assessee before the A.O. that the

gifts were received from his mother Smt. M.S. Sarojini (`24,00,000) and

his friend T. Prabhakar Reddy of G.Mamidada (`30,000) but stated that

he cannot exactly say the quantum of the gold/gold jewellery received

from his mother and his friend. When the A.O. asked the assessee to

produce his mother, it was submitted by the assessee that his parents 2

ITA No.240 /Vizag/2014 Manda Markandeyulu, Kakinada are very old and cannot come to the office to give a statement and

other particulars and his friend T. Prabhakar Reddy is carrying on

business at G. Mamidada and assessee does not like to disturb his

business for having made some gifts to him out of love and affection

and accordingly, he has offered an amount of ` 24,30,000/- to tax.

Thereafter, the A.O. has deputed the Inspector to verify the

genuineness of the gifts received from his friend Sh. T. Prabhakar

Reddy, G. Mamidada. When the inspector examined Sh. T. Prabhakar

Reddy and asked whether any gift is given to the assessee, he denied

having made any gift to the assessee. The A.O. after considering the

explanation of the assessee and also after examining Sh. T. Prabhakar

Reddy, he has noted that the claim of the assessee regarding receipt of

the gift in the shape of gold and jewellery from his mother and friend

are not correct. The receipt of gifts is a ploy undertaken by the

assessee to bring into books his unaccounted money whether to

suppress or not to disclose to the department. Further, the provisions of

section 56 clause (1)(vii) are brought into statute w.e.f. 1.10.2009,

which was meant for tax in gifts other than cash. The assessee wanted

to take advantage of this provision and hurriedly introduced his

unaccounted money into books in the shape of gold and jewellery. This

was the very reason why he was unable to furnish any details of items, 3

ITA No.240 /Vizag/2014 Manda Markandeyulu, Kakinada weight, etc. If it were really gold ornaments received from his mother,

they need not be brought into books. The assessee definitely taken

advantage of the value of goods by depositing them and converting

them into cash in the subsequent years. Accordingly, the amount of `

24,30,000/- offered by the assessee for taxation was treated by the A.O.

as bogus and brought to tax.

additional evidence in the form of affidavit of Smt. M.S. Sarojini,

wherein, she has stated that she has gifted 1609 gms. of gold jewellery

to his son (assessee) out of love and affection on 15.4.2008, which

represents her Shridhana property. The Ld. CIT(A) has admitted the

same and referred to the assessing officer for his comments. The A.O.

has submitted the report to the Ld. CIT(A) after considering the

reference made by the Ld. CIT(A) that the assessee himself offered the

amount of ` 24,30,000/- for taxation and the additional evidence filed

during the appellate proceedings were only self serving affidavit. No

evidence was furnished as to the availability of jewellery and source of

jewellery, purchase bills, etc. and submitted that addition has to be

confirmed. The Ld. CIT(A) after considering the entire facts and

circumstances of the case, he has observed that the assessee himself

admitted the gifts received for taxation as he was unable to prove 4

ITA No.240 /Vizag/2014 Manda Markandeyulu, Kakinada genuineness of the gifts and even in remand proceedings also, no

evidence is produced for gold and jewellery and held that the claim of

the gifts of jewellery is not proved and confirmed the order of the A.O.

Tribunal. The Ld. Counsel for the assessee has submitted that the

assessee has only received gold and jewellery and no amount is

received, therefore, addition cannot be made u/s 68 of the Act. He

further submitted that the assessee’s mother has already confirmed the

gifts and therefore, the same may be accepted and addition may be

deleted.

made by the authorities below.

on record and gone through the orders of the authorities below. In the

second ground, the case of the assessee is that he has received gifts

worth ` 24,30,000/- from his friend and relatives. When the A.O. has

asked the assessee to produce the friend and relatives from whom he

received the gifts for verification, he submitted that his parents are old,

therefore, they are unable to come to give a statement and so far his

friend is concerned, he does not want to disturb him and accordingly, he

ITA No.240 /Vizag/2014 Manda Markandeyulu, Kakinada offered the entire amount of receipt of gift for taxation. The A.O.

deputed the inspector to make enquiry about the genuineness of the

gifts. The inspector has directed the A.O. to examine Sh. T. Prabhakar

Reddy from whom he has received the gift who has denied having made

any gift to the assessee. The assessee also failed to submit a detailed

report before the A.O. that what is the jewellery items received or what

is the gold received. Therefore, the A.O. has held that the assessee has

not received any gold/jewellery, the entire transaction is a bogus

transaction and the amount shown of ` 24,30,000/- is his own amount

and shown as a gift received from friends and relatives and treated as

bogus and accordingly, the same is brought to tax. We find that even

before Ld. CIT(A) or even before us, the assessee is not able to

establish that what is the jewellery items received or what is the gold

except affidavit filed by the assessee’s mother by stating that he has

received gift from her mother having 1609 gms. of gold jewellery, if it is

really true, why the assessee has not submitted before the A.O., the

quantity received. We find that the additional evidence filed by the

assessee in the form of affidavit from his mother is only after thought

and it cannot be accepted. Not only that, the assessee himself has

accepted the entire gift amount for taxation for the reason that he was

not able to establish that he has received a gift from his mother and 6

ITA No.240 /Vizag/2014 Manda Markandeyulu, Kakinada

friend. In enquiry, it is also proved that he has not received gift from

his friend Sh. T. Prabhakar Reddy, therefore, keeping in view of the

facts and circumstances of the case, we are of the opinion that the Ld.

CIT(A) has rightly confirmed the order of the A.O. and we find no

infirmity in the order passed by the Ld. CIT(A). This ground of appeal

raised by the assessee is dismissed.

payment. During the assessment proceedings, the A.O. noted that the

assessee has made a huge commission payment to the tune of `

10,01,330/- to various persons as follows:

% of S.No. Name of the party Commission Turnover Turnover 1. Sri B. Sajjana Rao 80,000 16,34,282 4.90 2. Sri T. Prabhakara Reddy 1,02,500 7,36,214 13.92 3. Sri K. Veera Naga Satya 1,06,500 65,83,562 1.62 Rao 4. Smt. M. Venkata 7,12,330 1,75,89,235 4.05 Subhadra

The A.O. also noted that major payment of ` 7,12,330/- was made

to assessee’s wife and the same payment was unreasonable in terms of

section 40A(2)(b) of the Act. Keeping in view of the facts and

circumstances, the A.O. restricted the expenses to 1.62%, accordingly,

he has disallowed an amount of ` 5,71,482/-. Before the CIT(A), it was 7

ITA No.240 /Vizag/2014 Manda Markandeyulu, Kakinada submitted that the amount paid as commission to his wife is reasonable

and was made depending upon the profit earned by the assessee. No

evidence is filed before the CIT(A). The Ld. CIT(A) by considering the

explanation given by the assessee, he has observed that the addition

made by the A.O. is correct and reasonable and confirmed the order.

Even before us, the assessee is not able to establish that the addition

made by the A.O. is not correct to show that the assessee’s wife is

eligible for more than what is granted by the A.O., except stating that

disallowance made by the A.O. is unreasonable, we find that gross profit

of assessee itself is 2.59% paying to the agent, particularly his wife @

4.5% is highly excessive in terms of section 40A(2)(b) of the Act. Under

these facts and circumstances of the case, we find that the A.O. has

disallowed the excess payment made by the assessee and the same is

confirmed by the Ld. CIT(A). We find no infirmity in the order passed

by the Ld. CIT(A), therefore, this ground of appeal raised by the

assessee is also dismissed.

submitted that the assessee may be granted telescoping adjustment of

the addition with that of the different creditors. We find no merit in the

argument of the Ld. Counsel and he has not brought any

ITA No.240 /Vizag/2014 Manda Markandeyulu, Kakinada material/evidence that he is entitled for telescoping adjustment. This

ground of appeal raised by the assessee is dismissed.

The above order was pronounced in the open court on 6th Apr’18.

Sd/- Sd/- ( ड.एस. . . . सु�दर "संह) (वी. दुगा�राव) (D.S. SUNDER SINGH) (V. DURGA RAO) लेखा सद�य/ACCOUNTANT MEMBER �या�यक सद�य/JUDICIAL MEMBER #वशाखापटणम /Visakhapatnam: 'दनांक /Dated : 06.04.2018 VG/SPS

आदेश क� ��त)ल#प अ*े#षत/Copy of the order forwarded to:-