2008 (6) TMI 182 - HC - Income Tax

Reassessment notice to individual on ground that he and other fourteen others functioned as an AOP notice was issued to petitioner stating that there was failure on the part of AOP to file a return of income offering the prize money for taxation it is clear that claim of prize winning ticket was made by 15 individual persons - held that, since there was no failure on part of petitioner to file a return, notice issued after 4 years is time barred, so it is quashed

Summary

Issues:
Challenge to notice under section 148 of the Income-tax Act, 1961 for assessment year 1986-1987.

Analysis:
1. The petition challenged the respondent's action in issuing a notice under section 148 of the Income-tax Act for the assessment year 1986-1987. The petitioners, a group of 15 individuals, jointly purchased lottery tickets, with each having an equal share. Upon winning, the income from the lottery was shown in the return filed by one individual, claiming a 1/15th share. The Assessing Officer sought evidence to support this claim.

2. The individual provided evidence, including the purchase agreement, discharge of the prize ticket by all co-sharers, and the receipt acknowledging the prize amount distribution among the co-sharers. The individual also cited a Supreme Court decision to argue that jointly purchasing lottery tickets does not form an Association of Persons (AOP).

3. The Assessing Officer assessed the 1/15th share of the prize money in the individual's hands based on the evidence provided. Subsequently, a notice under section 148 was issued in 1996, challenging the initial assessment. The petitioner contended that the notice was issued beyond the statutory period of four years without any failure on their part to disclose material facts.

4. The respondent argued that the AOP should have filed a return of income, as the prize money was collectively won. The reasons recorded for issuing the notice highlighted the alleged failure of the AOP to file a return. However, the court analyzed the evidence and found no obligation for the AOP to file a return, as the 15 individuals acted in their individual capacity without forming an AOP.

5. Referring to the Supreme Court decision, the court emphasized that the act of jointly purchasing a lottery ticket and sharing the prize did not constitute an AOP, as there was no management involved. As there was no legal obligation for the group to file a return as an AOP, the court quashed the notice under section 148 issued beyond the prescribed period.

6. The court allowed the petition, ruling in favor of the petitioners and quashing the notice under section 148. The judgment clarified that in the absence of a legal obligation for the group to file as an AOP, the notice issued after the statutory period was unjustified.