2013 (6) TMI 308 - HC - Income Tax

Addition u/s 69 - unexplained investment in lottery tickets - addition on account of incentive income - Held that - Tribunal had relied upon the findings in the report of auditors which was found to be in accordance with the provisions of the Act. It was further observed that during the course of search, no material was found indicating any payment in cash outside the books of account regarding the purchase of lottery tickets. - no addition - decided in favor of assessee. Regarding incentive income - Held that - There is no material on record to establish that assessee was either the organizer or stockiest of any lottery. Further, there is nothing on record to indicate that assessee had any dealing with I.C. Khurana. In the absence of such material, it is not understandable as to how the AO could infer that assessee earned incentives @ 1% of total turnover. AO has also not brought any material to suggest that assessee ever received any incentive from the persons with whom assessee had any dealings. - Decided in favor of assessee.

Summary

Issues involved:
1. Whether the addition of Rs.1,37,49,079/- as unexplained investment in lottery tickets under Section 69 of the Income Tax Act, 1961 was justified?
2. Whether the deletion of the incentive income of Rs.52,38,859/- received by other stockiest of lottery tickets was justified?

Analysis:

Issue 1: Unexplained investment in lottery tickets
The appellant filed an appeal against the order of the Income Tax Appellate Tribunal regarding undisclosed income from the block assessment period. The Tribunal, based on auditors' findings, concluded that no material was found indicating cash payments outside the books of account for the purchase of lottery tickets. The auditors confirmed that prize-winning tickets were returned in lieu of payment, and account settlements were recorded. The Tribunal found no evidence to support the Assessing Officer's claim of unaccounted investments in lottery tickets. Consequently, the addition of Rs.1,37,49,079/- was deleted. The High Court upheld the Tribunal's decision, noting the absence of any material to challenge the findings.

Issue 2: Deletion of incentive income
Regarding the incentive income of Rs.52,38,859/-, the Tribunal observed that there was no incriminating material found during the search to indicate undisclosed income in the form of incentives received by the assessee. The Tribunal emphasized that assessments of undisclosed income must be based on incriminating material found during the search. As no material indicated undisclosed income from incentives, the addition made by the Assessing Officer was deemed to be based on assumptions and suspicions. Consequently, the Tribunal deleted the addition. The High Court concurred with the Tribunal's decision, emphasizing that additions cannot be made on presumptions or assumptions without concrete evidence. The Court upheld the deletion of the incentive income, as there was no basis for the Assessing Officer's inference.

In conclusion, the High Court dismissed the appeals, ruling in favor of the assessee and against the revenue. The judgments of the Tribunal were upheld, emphasizing the importance of concrete evidence and incriminating material in determining undisclosed income for taxation purposes.