TMI Blog1993 (2) TMI 143X X X X Extracts X X X X X X X X Extracts X X X X ..... facts, in brief are that, Indian Naval Benevolent Fund (hereinafter referred to as INBA), functioning from the Naval Headquarters, New Delhi, through its Joint Director Personnel Services, entered into an agreement with Shri S. S. Marwah (hereinafter referred to as SSM) on 28-9-1983, for organizing the Naval Welfare Bumper, called as 'Raffle', INBA, had decided on his selection, by considering his experience in running of lotteries, in the capital. This agreement empowered SSM, to act as the organizing agent of the Raffle, which was intended to be conducted, as permitted authorized by theDelhiadministration, vide their letter of20-9-1983. The agreement was to be valid for a year and the date of draw of the Raffle, was fixed as14-1-1984, which was to be held atNew Delhi. 3. The said agreement, provided the areas of activity of SSM and the areas of control by INBA, and the responsibilities, finances, printing, sale of tickets, appointment of agents and the like, INBA, allowed SSM to operate from his office at the capital and permitted him to open, offices in various States, where, the competent authority, had permitted the sale of tickets. Though, INBA, was generally, not require ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14-1-1984, was changed to18-2-1984, because, the Maharashtra Government, had delayed in giving permission to sell the tickets of the raffle, in its State. The permission to sell the tickets inMaharashtra, was granted almost near about the initial date of draw and INBA, accordingly, shifted the date of draw to18-2-1984. 6. The draw was held on18-2-1984, in public and the first prize winning ticket was NL-883341, for an amount of Rs. 2.20 crores. The draw, that was held was certified to be properly so held. The first prize was claimed by Shri Rattan Khatri his three family members jointly from INBA on26-3-1984. INBA, deducted therefrom, Income-tax of Rs. 56,19,375 and remitted the amount to the claimants in May 1984. 7. A ripple was caused in and aroundBombay, which found its place in Parliament and this led to the start of the investigation by the income-tax department. ADI,Bombayconducted search seizure operations on the stockists, agents the sellers of the raffle tickets and seized documents, unsold tickets and the like. 8. The perusal of the confidential folder provided by the income-tax department to us, revealed that, the search operations, were commenced because of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sfer memo no. 428 dated 8-2-1984 and the bill books for sale of the tickets to sellers and agents. ADI, had taken photocopy of the transfer memo and the bill no. 26506 dated10-2-1984. KPS and JCC, admitted to have been introduced by Sanjay Agency (hereinafter referred to as SA), whose office was situated in the same building as of SSM, inNew Delhi. ADI Bombay, had kept in touch with SSM and SSM also had sent information, as was called by ADI Bombay in October 1984. ADI Bombay, had passed on all these informations to ADI New Delhi, and this ended up with a search and seizure proceedings at the business residential premises of SSM, on2-5-1985. 10. The search at the premises of SSM, yielded cash of Rs. 1,01,570 Rs. 13,695 at the residence and the office respectively. Jewellery worth Rs. 1,07,570 Rs. 45,060 was found at the residence and locker no. 43 with Vijaya Bank, Connaught Place, New Delhi, of which, jeweller worth Rs. 93,170 was seized. The search also yielded some records of the raffle, but not all of it, because, it was claimed that, most of the records, which were kept in the office of the Chartered Accountant, in Marina Hotel building, were gutted in a fire, which wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 51 of the seizure. This photocopy (page 60) does not mention the invoice no. 26501-550. This means that, photocopy of the original transfer memo had been taken at the same time and the invoice by virtue of which the winning ticket was dispatched was never on8-2-1984. If the invoice had been sent then the photocopy of the original invoice would have incorporated the same. This proves the false claim that, the ticket was sent to Shri K. P. Shah before the date of draw. This is the evidence that shows that the ticket was not sent toBombayfor sale and circumstantial evidence therefore shows that the ticket in question was sold by M/s. Marwah Co. to Rattan Khatri and others after the date of draw at a price agreed upon. " 13. ADI goes on to make further observations in para 6(b), that, MMC used to sell the tickets after receipt of advances from various stockists, but, the sale to KPS was on credit basis, with whom, he had no prior dealings. This observation was so made by him, by referring to the bank statements, the deposits which were explained as advances received from the stockists. He then referred to a file containing 51 pages, seized from the office of MMC, speciflcally to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to settlement of accounts. In para 22 of the report, ADI had noted that, the cash found at the premises and at the office, stated to be of the business, was unverifiable because, the books had not written up after6-3-1985and that, the Assessing Officer, in his proceeding under section 132(5) of the Act, must cautiously proceed with the matter. On the jewellery, found at the residence and at the locker, of which jewellery worth Rs. 93,170 was seized, the explanation that, about 55 to 60 tolas were received as dowry, at the time of marriage from parents and relatives, and that a diamond set was purchased about three months prior to the date of search, was noted, ADI, reported : " However, there is one discrepancy in his statement, whereas the diamond pieces of jewellery found at his residence were set in 14 ct. gold, the jewellery item mentioned at page 8 are of 22 ct. gold. Accordingly it can be said that item No. 4 and 8 of the valuation report dated2-5-1985are not the same as those bought by him. " He referred to the current account of the firm with Vijaya Bank, which was opened on6-10-1983. This bank account had deposits of Rs. 21 lakhs by25-10-1983. ADI observed : " It h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Raffle Bumper Draw and they had to perform the functions of arranging for the printing of the one crore tickets of the draw each of the value of Rs. 5 liable to pay a fixed royalty of Rs. 55 lakhs to the Indian Naval Benevolent Association, conducting the draw, to appoint sub-agents to maintain and keep proper account for the tickets received from the printing press, tickets sold, unsold, cancelled or condemned and to ensure that no duplicate tickets in the same series are printed or issued. The first prize of Rs. 2.22 crores was claimed by the following persons jointly : (a) Shri Rattan Khatri, 2/27, 9th Floor, Navjeevan Society, Lamington Road, Bombay ; (b) Smt. Janaki Khatri ; (c) Shri Rajkumar Khatri (d) Shri Ashok Khatri and cheques of Rs. 27,57,657.25 issued by the Naval authorities to each of the above persons on 2-5-1984. Before the search, statement of Shri Rattan Khatri on oath was recorded by ADI (Int.), Mah. Zone-B,Bombayand it was gathered that-- (i) The cheques of Rs. 27,57,656 each received by the Khatri's were deposited in their accounts with Vijaya Bank, Mahim Branch, Bombay Union Bank of India, Opera House Branch, on 4-5-1984 and 5-5-1984. (ii) Shri Ratt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epared after the draw is further supported by the fact that if the tickets (including the winning ticket) would have actually been sold, the Agent/Seller should have definitely claimed agents'/ Sellers' prize which was not done. The ticket prize was claimed nearly 3 months after the date of draw. 3. According to the agreement between Naval Authorities M/s. Marwah Co. referred above, the date of draw was to be14-1-1984, but the draw was delayed and finally held on18-2-1984. 4. Shri K. P. Shah has stated in his statement on7-5-1985that he received two lots of tickets of 10,000 each from M/s. Marwah Co. through Jayantilal Cheda Co. but only one copy of the bill for 10,000 tickets dated17-2-1984from M/s. Marwah Co. has been produced by him. When asked about the second bill, he replied that he has only one bill from M/s. Marwah Co. in respect of the 2nd lot of tickets. The seized bill book starts with the tickets of the series 883. He could not give any satisfactory reply as to in which lot the winning ticket was received and why he did not receive the bill for the first lot of tickets. The lot containing winning ticket has been shown to have been sold on10-2-1984, but n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... da Co. in this respect. Both Shri Jitendra Cheda Shri Fatehchand Cheda, partners of M/s. Jayantilal Cheda Co. could not give satisfactory explanation as to why the board was displayed and advertisements made in the news papers if they have not sold the ticket. 4. The lot containing the winning ticket was stated to have been received by Shri K. P. Shah through M/s. Jayantilal Cheda Co. 5. Shri K. P. Shah could not give satisfactory explanation as to what he did to the monies withdrawn from his bank account in Bank of Baroda, in Mulund Branch. He has given contradictory statements in this respect on1-2-1985and7-5-1985. This requires further follow-up action and necessary enquiries. Assessing Officer may please take necessary action in this respect. 6. The demand draft of Rs. 41,500 which was stated to have been sent to M/s. Marwah Co. on11-4-1984, in respect of the purchase of the tickets of Naval Bumper Raffle has been taken from the bank by Shri Fatehehand Cheda. 7. Although Shri K. P. Shah was a person of no means the tickets have been stated to have been sent to him on credit by M/s. Marwah Co., which is quite unbelievable. 8. The letter heads used for corre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hrough Bill No. 26506, Majestic Lottery Depot was not found at the location indicated by KPS. AO had observed that, since Majestic Lottery Depot was not found at the specified location, it was a fake name and that, the bill was prepared after the draw, for which he drew further support from the fact that, the agents' and the sellers' prize were not claimed by any one and to the claiming of the first prize after about three months of the draw. AO further drew support for his conclusion that, the entire affair was stage-managed by adopting the reasons of the ADI Bombay, in his report of 2-7-1985, concerning the examination of KPS, on the non-availability of the bill of the first lot received by him, no satisfactory reply to the question, as to in which of the lot, he had received the winning ticket. 20. AO also drew his support from the report of ADI Bombay, from the statement of Rattan Khatri, who had stated that, he or his family was buying lottery tickets, only if the prize involved was a large one and that, he had bought the tickets from different places, while having a walk. AO then referred to the report of ADI New Delhi dated19-8-1985, wherein, he had observed about GK recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e been incorporated in the order, is briefly brought out, for the sake of facility. 24. Conclusions of the AO - (a) mode of despatch of 10,000 ticket nos. 883001 to 884000, covered by transfer memo no. 428 dated 8-2-1984, not established ; (b) how the lots exchanged hands from JCC to KPS in two days ; (c) unknown to lottery trade, KPS selling 10,000 tickets in three days of 10-2-1984 to 14-2-1984 for Rs. 42,820 and sending Rs. 41,500 on 15-2-1984 to MMC ; (d) undated correspondence between KPS MMC, prove connivance ; (e) undated receipt for cash of Rs. 2,09,000 given by KPS, disallowed under section 40A(3) ; (f) unsold tickets not returned by KPS to MMC ; (g) payment of Rs. 41,500 for the second lot sent by Bill No. 489 dated 17-2-1984, made on 11-4-1984, while the payment for the first lot was sent in about five days ; (h) agent and seller not claiming their bonus ; (i) KPS not being able to provide the complete address of Majestic Lottery Depot ; (j) first prize being claimed jointly by four persons, the assessment made on Rattan Khatri for his share of one-fourth of the winning ticket, in his hands, is of no consequence ; (k) SSM's stay in Bombay for fifteen days, indicated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der : (a) clause 14 to the agreement between INBA SSM, permitted lottery prize on all sold and unsold tickets ; (b) sale of tickets to KPS is suspicious, because his name figures as the last item in the list of sales, that too in a different ink, the UPC register and the sale of ticket register, were not admitted because they were not produced before AO ; (c) contradictions as to the manner of introduction of KPS to SSM, SSM claiming that KPS was introduced by SA of Delhi, while KPS claimed to have been introduced by JCC, Bombay ; (d) mode of sale of ticket to KPS not established ; (e) JCC displaying the board for the sale of winning ticket by them and also publishing of in the newspapers ; (f) KPS being an agriculturist ; (h) to a question put to KPS as to when he had received the tickets from MMC and how, the reply was " the bill was received by post from MMC directly after about 5 to 6 days, I took possession of tickets from JCC, i.e., 20 to 25 days before the day of draw. It may be even one month before " ; (i) KPS had initially stated to have sold the ticket as retailer but subsequently modified as sale to various dealers ; (j) the contradiction in the statement of KPS regar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of KPS in Bombay, had yielded the bill books and the list of the bills so issued by him to other parties are not doubted, excepting the one, that was made in favour of Majestic Lottery Depot, which was one of few bills raised by KPS. It was contended that KPS also had claimed the stockist's prize and was paid also by Naval Authorities. It was contended that, SA,Delhiwas the firm of the father of the partners of JCC and KPS happend to be the father-in-law of the partners of JCC and this was how the contact developed. The tickets were sent under cover of transfer memo no. 428 dated8-2-1984, along with the bill books. The normal practice with all organisers of lottery tickets is to print uniform bill books, indicating the draw and supply them to the stockists along with the bunch of tickets for sale by them to the agent or the sellers. Following this practice, the assessee also had printed the bill books, which were sent to KPS along with 10,000 tickets 883001 to 884000 of all the ten series NA to NL. Reference was made to the copy of bill no. 26506 dated 10-2-1984 raised in favour of Majestic Lottery Depot, and it was submitted that, at the top, the Naval Bumper Raffle is printed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being the father-in-law of one of the partner and for the sake of publicity, they had perhaps placed the board indicating that, the winning ticket was sold by them and also in the advertisement so issued in the papers. Shri Batra pleaded that, this also clearly goes to establish that, the winning ticket was sold on a regular basis and that too prior to the date of draw. 29. He pleaded that, KPS was able to sell 10,000 tickets In a short period and also could remit the amount to the assessee, which perhaps was the reason that, the appellant could further allow him credit of another 10,000 tickets. He pleaded that, family ties of KPS with the partner of JCC is known and the SA,Delhibelonged to the father of the partners of JCC. which is how, the assessee, had come to know KPS. The credit was allowed perhaps on the reason of SA,Delhiand the assessee-firm was located in the same building and were carrying on the same lottery business and there was nothing strange about it. The submission was that, SA,Delhi, JCC or KPS are not related to the assessee and similarly Rattan Khatri was no relative of the assessee. It was pleaded that, the revenue has no answer to the question as to why th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im dated26-3-1984, from Rattan Khatri others and this has been treated by the department as of no consequence and that, the claim as made after three months. He pleaded that, this is an indication of the attitude of the department to refuse to appreciate the fact as it exists. He submitted that, Rattan Khatri had stated that, he only bought lottery tickets, if the prize was huge, as was in the instant case, is an indication that he did buy lottery tickets. He pleaded that, Rattan Khatri could be a Matka King, but, this does not debar him from buying the lottery ticket. He submitted that, there is no such law that, a person, who is well off should not buy lottery tickets. He contended that, the buyer of the winning ticket claims to have bought the ticket, and the concerned accepting his claim, had paid him the prize amount after deducting the tax amount thereon and he had been so assessed along with his other family members, does not leave any thing further to be done and the action of the revenue is to make it appear as non-genuine, based only on supposition, assumption and suspicion. He pleaded that, there is no basis for the department to say that the bills were prepared after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... winning ticket landing in the lap of Rattan Khatri could not be brushed aside, especially when they have admitted to have played their part as stockists. He contended that SA of Delhi and the assessee are in the same lottery business and no two businessmen would collude to the extent suggested by the revenue, so as to benefit one of them alone. He pleaded that, the raid at the premises of JCC KPS also did not result in seizure of huge unaccounted investment, which indicates that, the department only has refused to see the true light, but are imagining some event, which never happened. He further pleaded that the department had made observation that, the appellant had sold tickets normally after receipt of advance, while the sale to KPS was on credit. He submitted that, this claim by the department was not correct, because, the assessee, had sold to several others also on credit, and for recovery of the dues only that SSM had stayed back inBombay. He further contended that, the department had been mentioning about the first prize all along, but, suddenly jumped to the conclusion that, the second and third prize winning tickets too were sold after the date of draw, without bringing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eaded that, the additions as have been made as undisclosed income of SSM in his individual capacity has been established as on surmise only, the firm being genuine, the registration should be granted to it. 31. Shri Rajinder Singh, the learned departmental representative, submitted that, the inquiry into the raffle episode, was as a consequence of a complaint, which even figured in the Parliament of India. He submitted that, the ADI New Delhi, AO and CIT(A), had gone in depth on the entire matter and had found with which fact, the assessee has no dispute that, he had absolute control over the distribution and sale of the tickets. SSM, had the right to appoint any person as his agent, stockist for sale of the raffle ticket and also reserved the right about the quantity of the tickets to be provided to them. He submitted that, it is not the case of the assessee, that, all of the tickets that were got printed, were sold, indicating that, assessee, did have certain number of tickets which remained unsold. He contended that, assessee has no positive evidence in his possession to prove that, the ticket nos. 883001 to 884000 of series NA to NL, together with the bill books nos. 14401 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that, the fact of that party not being found even in the locality, is a factor, which goes to anchor the conclusion that, it is all a made up affair. He pleaded that, KPS, JCC, SA and Rattan Khatri are mere pawns in the game plan of the assessee. He submitted that, Rattan Khatri, is a man with finance and it was very convenient for him to agree to buy the unsold lottery, by parting with the unaccounted money, which he would be making in his Matka business. He therefore, contended that, AO and CIT(A), had rightly held that, the winning ticket was an unsold ticket on the date of draw, which was encashed by the assessee along with the premium. He accordingly pleaded that, the orders of the authorities in including all the three prizes amount and the premium thereon as undisclosed income is proper. On the point of who is the owner, he contended that, the firm was only a window, because, the agreement with INBA was by SSM. He concluded by stating that, the income has been rightly assessed in the hands of SSM in his individual capacity and therefore, the firm was only a front, hence, refusal to registration claim was proper. 32. The rival contentions together with the various documents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uestion or doubt or complaint raised on the draw as such. Therefore, the claim of premeditated scheme, in our view would be an imagination, because, it would be too much to claim even that, the assessee, would have expected of some enquiry at some point of time. The agent or the seller, if they fail to claim their bonus, because of they omitting to affix their stamp, on the back of the tickets, is a loss to them, but, to claim that, this is an indication for the assessee having retained the winning ticket, could at best be termed as suspicion. This could be nothing more than suspicion is evident from the fact that, Rattan Khatri produced 57 tickets, which did not contain any stamping on its back and even the winning ticket did not contain any stamping on its back. Rattan Khatri had claimed that, he had bought the tickets from the roadside inBombayand never claimed to have received it from SSM. SSM had claimed that, his stay inBombaywas in connection with press conference and for recovery of the dues. This has not been found to be wrong. KPS not returning the unsold tickets, like some others, who had returned the unsold tickets, is an action, for which the assessee-firm or SSM could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mo. With the inscription of the bill nos. 14401-450 and 26501-26550 ; (c) list of sales to various stockists, with entry of KPS appearing as the last item, stated to be in a different ink; (d) cash receipt for Rs. 2,09,000 from KPS ; and (e) receipt of draft for the sale of first lot of tickets on 15-2-1984 from KPS. The seizure from KPS JCC included (a) the bill book nos. 26501 26550 ; (b) newspaper advertisement of the winning ticket being sold by JCC ; (c) display board about the winning ticket being sold by them ; and also the bank account belonging to KPS, which showed almost all of the deposits being withdrawn in cash by Fatehchand and so admitted by him. Rattan Khatri was found to be assessed and he had returned his one-fourth share of the raffle and the confirmation as was obtained from Naval Authorities, indicated that, Rattan Khatri had jointly with three others, had claimed the first prize on 26-3-1984, which, after deduction of tax was paid on 2-5-1984, deposited in the respective bank account of the Khatris on 4-5-1984 5-5-1984. It is not disputed by the assessee that, neither the agent nor the seller had come forward to claim their bonus on the winning ticket, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffair is a stage-managed one, in our view would be far-fetched proposition, without any legs to stand on. The bill book as was produced by KPS to ADI Bombay, on 2-5-1985, indicated sale to others, in addition to Majestic Lottery Depot and it has not been brought on record that, the other parties too are non-existent or those found have disclaimed to have bought the tickets from him. The statement of KPS, is stated to have been recorded on1-2-1985,7-5-1985 18-5-1985but, ADI Bombay had sent to ADI New Delhi, the statement recorded on7-5-1985 18-5-1985. In this statement, KPS had, stated to have sold the tickets to various persons and had stated that, the tickets were received at JCC, for him. He further had stated that, the invoice for the first lot is not available, but the invoice for the second lot only is available. He had also stated to have received the bill after about five days of requesting for the ticket, though, he had received the ticket about 20-25 days or even a month before the date of draw. This particular statement, is quite contradictory, because, he had received the first lot of tickets only on 10-2-1984 and the second lot on 17-2-1984, which dates are eight and on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contention of SSM that, he knew KPS only through SA and JCC and the appearance of KPS on the scene, by virtue of his relationship, may be an accommodation by JCC. The burden to prove that, the affair was a stage-managed one, is squarely on the revenue, because, it has alleged so. The various circumstances, as stated above, treated by the revenue as circumstantial evidence, are of the nature of suspicion or doubt, and inference drawn from doubts or suspicion. The various factors, as had been brought out by the revenue, in our view are preparatory ground for further enquiry, but could not be treated as a finality for drawing of the conclusion, which was arrived at by them. The burden of proof lies on the party who substantially asserts the affimiative of the issue and not upon the party who denies it. It has been observed by courts that, this principle or doctrine or rule of convenience has been adopted in practice, not because it is impossible to prove negative, but because the negative does not admit of the direct and simple proof of which the affirmative is capable. The courts have further held that, the party on whom the onus of proof lies must, in order to succeed, establish a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er factor, which we would like to observe, at this point is that, the department jumped to the conclusion that, even the second and the third prize tickets were unsold tickets, without indicating the manner thereof and the suspicious circumstances. We have therefore, come to the conclusion that, the treatment given to the three prize amounts and the premium at 25 per cent in the hands of the assessee, as undisclosed income, is on supposition, surmise and is baseless. It therefore has left us no alternative, but to delete it, which we do. 33. On the aspect of the raffle whether was organised by the firm or by SSM, reference to the order as was made under section 185(1)(b) of the Act is felt necessary. Assessing Officer had found that, the bank account as was opened on6-10-1983was in the name of Marwah Co., with SSM as its sole proprietor. The deed of partnership was signed on20-12-1983, stating to be effective from28-9-1983. The bank account of the Firm was opened only on16-2-1984, i.e., two days prior to the date of draw and the only authorized signatory was SSM. The Assessing Officer had observed that, if the intention was that the raffle was to be organised by the firm, and i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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