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TMI Blog2016 (7) TMI 202X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,331.00 as claimed by the assessee for the assessment year under consideration as against the business loss sustained by the assessee of ₹ 2,08,32,311.00 vide profit and loss account and such loss can be attributed was mainly due to unsold tickets. In view of the above discussion, that the prize money on unsold tickets is a business income and not the income from other sources as held by the AO. Therefore, the order of CIT-A is justified in deleting the addition made by the AO - Decided in favour of assessee Cash deposits found in bank account as unexplained investment under section 69 - Held that:- The assessee discharged its duty in giving details regarding the identity of all the parties before the authorities, now onus shifts to revenue authorities to bring evidence contrary to submissions of the assessee. We also conscious of the fact that the concerned financial year is 2003-04 and the summons were sent in the year 2012 and all the three parties either closed the business or changed to other business and we also find force in the arguments of the Ld.AR that the parties in the lottery ticket business are illiterate and doing their business in villages in unorganized ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not furnished the required information in respect of stock as per the Income Tax Act. The Tax Audit report of assessee shows the closing stock of unsold tickets NIL, but as per the balance sheet submitted with the return of income the closing stock of lottery tickets has been shown. Further, the AO observed that the Auditors of assessee did not examine the trading activity of the assessee and its stock position thoroughly while conducting the Audit required as per companies Act and u/s. 44AB of the Income Tax Act, 1961. As the assessee failed to establish that the prize-winning money on which tax was to be deducted at source and as no tax was deducted by the State Lotteries on prize-winning as shown on Prize Winning Ticket and on Bulk tickets of about ₹ 26 Crores and @30% being ₹ 69,59,120/- of lottery prize money u/s. 56(2) and The A.O. treated this income separately and assessed the income as income from other sources and assessed tax accordingly after detailed discussion in the assessment order as under: As per the Income Tax Act, 1961, winnings from Lottery is income from Other Sources and is liable to tax @ 30% u/s. 56(2) (ib) of the Act. However, income a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing a business unit of lottery ticket quite understands that purchase cost or lottery ticket would be must more than the prize money, if any. Lottery winning is a contingent factor and no business merit would invest their money to such chance factor. The Assessing Officer did not point out any other eventuality for such winning ticket. Therefore, the winning tickets arc definitely out of unsold stock which is an incidental activity of the business. The Assessing Officer mentioned in his order that From the facts on record, it is noticed that the assessee company has entered into an agreement with Director of West Bengal State Lottery. As per the agreement, the minimum guaranteed marketing of lottery tickets by the assessee company shall be 90% of total ticket printed by the State Lottery. As per the agreement the remaining unsold tickets have to be submitted to the Directorate. From the above, it is clear that unsold tickets, more than 10% of the bought tickets have to be consumed by the company. It is also clear that the company doing the business of lottery ticket by virtue of' an agreement with Director of Slate lottery, Govt. of West Bengal. From the audited pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Stock) where it is clearly evident from the audited final accounts form Profit loss account. It is also clear from agreement with the Director of State lotteries that the assessee does not have any interest in other business except lottery business as sole selling agent of Director of State Lottery, Govt. of West Bengal. We find from the record that the assessee company has entered into an agreement with Directorate of West Bengal of State Lotteries. As per the agreement the assessee shall sell 90% of total tickets as minimum guarantee and the remaining unsold tickets have to be returned to the Directorate and draw is held on sold tickets. The assessee produced a statement of such tickets purchased from WB State Lotteries to show that such tickets could not be marketed within such time i.e on the date of draw as specified by the Director of State Lotteries which was examined by the CIT-A. It is clear from the agreement that the assessee has to ensure minimum guarantee purchase of printed tickets from State Lotteries, amounting to 90% with a condition that the prize money payment is to be subject to the Income Tax if the prize money involves payments above ₹ 5,000/- and are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain the source of cash deposited into bank account but no explanation has been offered by the assessee. For which the assessee submitted that during the course of appellate proceedings that all the confirmations were filed before the, but, AO did not verify the same. Basing on such submissions, CIT-A sought remand report from the AO and as the AO did not give clear finding in the first remand report and CIT-A sought second remand report from the AO. The A.O. after making the enquiries on the issue submitted as under: In the instant case, one Remand Report dated 17.02.2010 was made by the A.O. where the identity. genuineness and creditworthiness of the cash depositors were doubted. Subsequently, your honour has called for another Remand Report vide your letter dated 01.08.2011 after verification of the 7 cash depositors. Pursuant to your directions, summons u/s 131 were issued to the following 7 parties requiring their personal attendance on 23.08.2011 along with (i) copy of the return for A. Y. 2004-05 and (ii) Income Expenditure A/c or P L A/c and Balance Sheet as on 31.03.2004 : (i) Shri Jahar Saha (Prop. Shree Guru lottery Centre): (ii) Shri Mahadeb Majumder ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sumes that a second remand report, was asked for. In the second remand report it is understood that the Assessing Officer took the trouble to send summons u/s 131 to all the seven parties but four parties were appeared before the Assessing Officer. Kindly note that the matter was in respect of F.Y. 2003-04 when lottery ticket business was in boom and the summons were sent in 2012 when lottery ticket business is at the lowest possible stream due to ban imposed by many states on lottery ticket. Most of the lottery ticket business firm either close the business or change to other business. Moreover, most of the parties in the lottery ticket business is illiterate and doing their business in villages in unorganized manner. Under this facts and circumstances, the ld. Assessing Officer was able to collect partial fact of the case as out of seven persons, four persons were appeared and confirmed the balance. If the Ld. Assessing Officer could send the summons at the time of hearing then all the transactions could be verified without much trouble and the assessee could avoid the botheration. Since the transactions arc confirmed now and no party denied th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in remand proceedings of both Shri Jahar Saha and Shri Dhiren as they have been shown as Proprietor of one concern namely Shree Guru lottery centre though they have responded to the summons issued by the AO. In this regard we may refer to the provision of Section 69 of the Act and it is reproduced hereunder: Unexplained investments 69. Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the 59 [Assessing] Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year. 16. A reading of the above provision explains that the value of investments would be treated as unexplained investments when the assessee fails to record such investments in the books of account and offers no explanation about the nature and source of such investments. In the present case, assessee submitted all the details were filed before the AO rega ..... X X X X Extracts X X X X X X X X Extracts X X X X
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