2004 (5) TMI 32 - HC - Income Tax

Income from Lottery Additions u/s 69 made in the hands of assessee in the wealth-tax assessment - authenticity of the purchase of lottery ticket - The case of the Department is that they have purchased the ticket after draw of lottery and converted black money into white. - As in the income-tax appeals we have taken the view that Rs. 88.80 lakhs is a result of lottery draw in the name of three brothers and now the three brothers have offered one third of that amount in their income-tax returns and that should be taxed as offered by all three brothers therefore the Assessing Officer has wrongly included Rs. 88.80 lakhs in the wealth of the assessee Suresh Kumar in the assessment year 1988-89. - There is no justification to make such addition in the wealth-tax assessment of Suresh Kumar. He has already shown one-third of Rs. 88.80 lakhs as his wealth in the wealth-tax returns in the year 1989-90 that be accepted. Revenue s appeal dismissed

Issues Involved:
1. Taxation of lottery amount in the hands of three brothers.
2. Justification of deleting additions made under section 69 by the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal.
3. Proper conduct of enquiry by the Assessing Officer as per directions.
4. Wealth-tax assessment based on income-tax proceedings.

Issue-Wise Detailed Analysis:

1. Taxation of Lottery Amount in the Hands of Three Brothers:
The primary issue was whether the lottery amount should be taxed in the hands of all three brothers or solely in the hands of one brother, Suresh Kumar. The court noted that the lottery ticket was claimed to be purchased jointly by Suresh Kumar, Bal Kishan, and Satish Kumar, and the lottery draw was in their names. The brothers disclosed one-third of the Rs. 88.80 lakhs each in their returns for the assessment year 1989-90. The Assessing Officer initially taxed the entire amount in the hands of Suresh Kumar for the year 1988-89 and two-thirds on a protective basis in the hands of the other two brothers. The court upheld the view that the amount should be taxed equally among the three brothers as disclosed in their returns.

2. Justification of Deleting Additions Made Under Section 69:
The Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal deleted the additions made under section 69, which were based on the assumption that the lottery ticket was purchased after the draw to convert black money into white. The court found that the Assessing Officer failed to establish that the ticket was purchased post-draw. The Tribunal affirmed that the enquiry did not substantiate the claim that the ticket was bought after the draw, and thus, the addition of Rs. 88.80 lakhs in Suresh Kumar's hands could not be sustained.

3. Proper Conduct of Enquiry by the Assessing Officer:
The Commissioner of Income-tax (Appeals) had remanded the matter back to the Assessing Officer for a detailed enquiry. However, the court found that the Assessing Officer did not conduct the enquiry as directed. The enquiries made were insufficient and did not address the directions given by the Commissioner of Income-tax (Appeals). The Tribunal noted that the Assessing Officer did not effectively investigate the purchase of the lottery ticket or the persons involved in the transaction, leading to the conclusion that the enquiry was not properly conducted.

4. Wealth-Tax Assessment Based on Income-Tax Proceedings:
The wealth-tax appeal was consequential to the income-tax proceedings. Since the court held that the lottery amount should be taxed equally among the three brothers, it followed that the entire amount of Rs. 88.80 lakhs should not be included in Suresh Kumar's wealth for the assessment year 1988-89. The court concluded that Suresh Kumar should only show one-third of the amount in his wealth-tax return for the year 1989-90, as disclosed.

Conclusion:
The court upheld the decisions of the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal, confirming that the lottery amount should be taxed equally among the three brothers in the assessment year 1989-90. The additions made under section 69 were rightly deleted due to the failure of the Assessing Officer to substantiate the claim that the ticket was purchased post-draw. Consequently, the wealth-tax assessment was also adjusted to reflect the correct distribution of the lottery amount. All seven appeals were dismissed.

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