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TMI Blog2016 (8) TMI 223X X X X Extracts X X X X X X X X Extracts X X X X ..... stockists. The stockists were mainly concerned with their shares on sale of lottery tickets and they were not entitled to receive any commission on sale of lottery tickets from the assessee. They were free to sale the lottery tickets to any sub-stockists or retailers at the self determined prices as per their free will and the contract between the assessee and the stockists was that of purchase and sale of lottery tickets and not that of rendering services on commission. In the matter of lottery business as governed by the relevant agreements, the stockists were to act on their own and not for or on behalf of the assessee. The relationship between the assessee and the stockists thus was that of principal to principal and there being no principal – agent relationship between them as held by the Hon'ble High Court of Sikkim in the case of Future Gaming and Hotel Services Pvt. Limited (supra), we agree with the contention of the ld. counsel for the assessee that the amount in question was not in the nature of commission as defined in clause (i) of Explanation to Section 194H so as to attract the provision of section 40(a)(ia) read with section 194G. In our opinion, the amount in ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rein profit from the business of dealing in lottery tickets was shown by the assessee at ₹ 88,00,00,000/- before depreciation and interest and after claiming depreciation and interest, total income of ₹ 63,96,81,915/- was declared by the assessee. On the basis of the documents impounded during the course of survey, the evidences collected during the course of assessment proceedings and the statement recorded under section 131 of one Shri Shantilaln Vira, partner of the assessee-firm, the Assessing Officer arrived at a conclusion that the business of conducting of lotteries was virtually outsourced by the Royal Government of Bhutan to the Private Group to which the assessee-firm belonged on royalty basis. He held that the entire chain of income, from that accruing to the Directorate of Lotteries, Bhutan, the sole purchaser, the wholesaler and the main seller was so arranged on the basis of Bernoullis Theorem that the lottery business conducted by the Group would always give a net profit of 8 to 10% of the total size of lottery tickets. He held that the assessee-firm, however, created a web of transactions routed through bogus/paper/front entities to distance its actual p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... net profit of ₹ 270 crores so worked out was divided by the Assessing Officer between the assessee-firm and the other distributors in the ratio of their sales and accordingly, the net profit of the assessee from the business of dealing in lottery tickets was arrived at by the Assessing Officer at ₹ 197 crores being 73% of ₹ 270 crores (before depreciation and interest) as against the net profit of ₹ 88 crores shown by the assessee in the return of income. After allowing deduction on account of depreciation and interest, the total income of the assessee from the business of dealing in lottery tickets was determined by the Assessing Officer at ₹ 1,72,96,81,920/- for the year under consideration in the assessment completed under section 143(3)/144 vide an order dated 22.03.2013. 5. The records of the assessment made under section 143(3)/144 in the case of the assessee thereafter came to be examined by the ld. Pr. CIT and on such examination, he found that the assessee during the year under consideration had made an aggregate payment of ₹ 551.30 crores to the various stockists by way of prize winning money attributable to the unsold lottery ticke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect of the assessment year 2010-11, the said Assessment Order, according to you, was allegedly erroneous as well as prejudicial to the interest of the Revenue within the meaning of section 263 of the said Act. 3. At the very outset, we deny and dispute each and every allegation made by you in your said purported Notice dated 18th March, 2015; and we say and submit that the said impugned Assessment Order dated 22nd March, 2013 passed by the learned AO under section 143(3}/144 of the said Act, although erroneous in law in respect of various issues already raised by us in the Appeal filed by us and pending before the learned CIT(A)- XXXIII, Kolkata (now renumbered as CIT(A)-VII], is not prejudicial to the interest of the Revenue, as alleged or otherwise or at all. 4. We repeat and reiterate that the said impugned Assessment Order dated 22nd March, 2013 passed in our case is in fact prejudicial to the interest of the Assessee Firm herein, and not prejudicial to the interest of the Revenue. 5. We also say and submit that the issue raised by you in your said impugned Notice dated 18th March, 2015 had already been examined by the AO, in course of the assessment proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime on FOR basis, with an option to intimate to the Assessee Firm, full details of unsold tickets. In other words, here too the sale and supply of Lottery Tickets by the Assessee Firm to its Stockists has always been on Actual Sold Basis only; vii. It may be noted that PLE supplied all Lottery Tickets to the Assessee Firm on Credit; and the Assessee Firm also supplied Lottery Tickets to its own Stockists on credit only, save and except the fact that the Assessee Firm had arranged to receive substantial Trade Advances from each of its Stockists; viii. It may also be noted that the advances made by each of the Stockists to the erstwhile Main Seller , MAV Associates were transferred to the Assessee Firm on 1st June, 2009, when the Assessee Firm was appointed by PLE to be the Main Seller in place of the erstwhile MAV Associates; ix. The Bhutan Paper Lotteries, of different denominations with different types, were being conducted on weekly basis. The draws, in some name of them were being conducted by the Royal Government of Bhutan (RGB), on daily basis, at Bhutan; and the information about results of the draws was conveyed to all concerned from Bhutan through websit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ostly related to tampering of winning tickets and/or wrong claim of prizes, based on wrong reading of prize winning number printed on the tickets. At the time, when the Bills initially raised by the Assessee Firm upon the Stockists, were sought to be settled, it was not possible at all times to check all such tampering and/or wrong claims received by the Assessee Firm from the Stockists. In such cases, as and when such tampering and/or wrong claims made by the Stockists were detected by the Assessee Firm, which was required to be done within 15 days from the receipt of claims from the concerned Stockists, the Assessee Firm raised Debit Notes upon the Stockists for the relevant amounts attributable to such tampering/wrong claim, as the case may be. 9. During the financial year ending 31st March, 2010 corresponding to the assessment year 2010-11, the assessee firm purchased and sold Bhutan lottery Tickets organized and conducted by the Royal Government of Bhutan, as per Audit Certificate dated 15th March, 2013, a copy whereof, which is already on the assessment records, is annexed hereto for ready reference and marked with the letter 'A'. 10. The break-up details of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... persons. In such cases, the retailer himself may retain the 'super! gold/special ticket'. But such 'super/gold/special tickets' are not meant to be retained by the distributor/stockist/agent/sub-agent/retailer by way of their commission or remuneration, as the case may be; The Super/Gold/Special tickets are meant for the public, who buy in large quantity such as 100/1000 tickets. 15. The Assessee Firm states that it does not pay the prize monies directly to any person who possesses the prize winning lottery ticket. The agents/sub-agents/retailers concerned make payments of prize monies (always not exceeding ₹ 5,ooO/- per ticket), both by way of PWT and also PWT-1/PWT-2 (super/gold/special) tickets, on production of the prize winning ticket before either of them; and the Assessee Firm makes reimbursements on behalf of PLE/RGB by way of adjustments of the accounts, as and when submitted by the stockists to it. The Assessee Firm deals only with the stockists. The stockists, in their turn deal with the agents, the agents deal with sub-agents and the sub-agents deal with the retailers, all in the form of a chain. 16. The Assessee Firm states that it did n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessee Firm, in its books of accounts, as an expenditure. The prize monies paid on the winning tickets is the expenditure of RGB, and not of the distributors/stockists/agents/sub-agents/retailers etc. The said amount has been claimed by the stockists from the Assessee Firm, by way of adjustments, against the dues payable by them to the Assessee Firm, for purchase of lottery tickets in bulk. The same has been reimbursed by RGB through their chain of distributors by way of adjustment against invoices raised by RGB. 21. Since the amount of prizes paid on such 'super/gold/special ticket' are nothing but winnings from lottery within the meaning of section 1946 of the Income Tax Act, 1961, and the amount of prize is ₹ 5,000/- or less per ticket, no tax was at all required to be deducted at source at any relevant time whatsoever. The said limit of ₹ 5,000/- is now increased to ₹ 10,000/- by the Finance Act, 2010 w.e.f. 01.07.2010. 22. In any event, there is no liability to deduct tax at source when the person making the payment seeks reimbursement from the Principal (PLE/RGB, in the instant case); and the prize monies having been reimbursed, the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), payable by us to PLE for purchase of Bhutan paper lottery tickets in terms of the Agreement executed on 1st June, 2009 between the Assessee Firm and PLE, a copy whereof is already on our assessment records. 26. As already stated earlier, since our Profit and loss A/c for the financial year ending 31st March, 2010 corresponding to the assessment year 2010-11 is debited only with the purchase value of Lottery Tickets in the said sum of ₹ 1393,22,38,446/-, and not with any commission and/or any prize payable on the lottery tickets, we say and submit that there was no requirement of any deduction of tax at source either under section 194G and/or section 194G of the said Act; and therefore there was no question of applying section 40(a)(ia) of the said Act, in our case, in respect of the assessment year 2010-11. 27. We therefore say and submit that in the facts and circumstances of the instant case, the Assessment .order dated 22nd March, 2013, cannot by any stretch of imagination, can be said to be erroneous in law and/or prejudicial to the interest of the revenue, in respect of the matters raised by you in your said impugned Show Cause Notice dated 18th March, 2015. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts payable/receivable in respect of paper lottery tickets purchased/sold during the financial year ending 31st March, 2010, as also of prizes paid on PWT PWT-1 lottery tickets during the said period. vi. Photocopy of two pages of the lottery scheme by way of sample . 8. The written submissions filed by the assessee as well as the documents filed in support were considered by the ld. CIT in the light of material already available on record and after discussing the same in detail, he held that there was no merit in the case of the assessee. Accordingly, he rejected the stand of the assessee after recording his findings/observations in paragraph no. 3 of his impugned order, which is reproduced hereunder:- 3. The arguments put forward by the Id A.R.s have carefully been examined in the light of the documents furnished by them and the evidences collected by the A.O. in the course of the enquiry during the ongoing remand proceeding before the Ld. CIT(A)-7, Kolkata (erstwhile CIT(A)-XXXIII, Kolkata). It is seen that Shri Santiago Martin acquired the right to market the Bhutan lottery tickets through his company M/s Martin Lottery Agencies Ltd. which was subsequently rename ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en Enterprise (Proprietor Ms. Pema Lhaden was appointed the assessee group with the prior concurrence of the Royal Govt of Bhutan (RGB) as the sole purchaser (again in the nature of an intermediary) with the primary objective of avoidance of the payment of service tax introduced by the Finance Bill, 2008. The same has been admitted by Shri S. Martin in his statement recorded by the A.O. It has come to the notice that Ms. Pema Lhaden claimed to have paid huge amount of commission to her stockists based in India and paid TDS @ 3% thereon as shown in her returns filed with the Bhutan income-tax department. It was later on discovered that none of such India-based stockists declared any such commission income in their LT. returns filed in India. It, therefore, transpired that Ms. Pema Lhaden claimed bogus commission expenditure to reduce her taxable income arising out of the illegal transfer of money generated by the lottery business 'conducted by the Martin Group. That Shri Martin operated as a lottery scamster has been established by the chargesheet filed by the CBI, Cochin Branch against Shri Martin. The press reports also highlighted at the relevant point of time the details of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subsequently changed by the RGB to the actual sold basis through introduction of an addendum in the original agreement which was stated to have been effected without any re-tendering process. It is pertinent to mention that the original agreement which operated on All Sold Basis did not have any clause requiring the sole purchaser to intimate the details the unsold lottery tickets to the RGB before the actual draw. Had the addendum in the agreement been genuine, then the changing of the terms from All Sold Basis to Actual Sold Basis could not take place without such a precondition of reporting the unsold tickets before the happening of the actual draw. The absence of such a clause in the revised agreement confirms that the addendum was merely a facade to' hoodwink the Service-tax department, while in reality the transactions were carried out on All Sold Basis as stipulated in the original agreement. The fact that both the agreement and the addendum did not have any clause as to how the unsold tickets would be returned to the RGB for destruction also corroborates that the Govt. and the assessee group had sold lottery tickets only on All Sold Basis . The findings point ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t exceeding ₹ 5000/- declared on the paper lottery tickets are required to be disbursed to the general public directly by the stockists/sub-stockists/retailers/agents appointed by assessee and the stockists and that the prize money exceeding ₹ 5000/- was to be paid by the RGB only. It has been contended that stockists used to seek only reimbursement of disbursal of the prize money from the assessee through comission of their respective weekly bills raised on the assessee. The Id. A.Rs averred that the expression PWT has been used in the assessee's books to describe the paper lottery tickets on which prizes were declared in the usual course as per the scheme framed by the RGB and that the expression PWT-1/PWT-2 has been used to describe the super, gold and special lottery tickets which are separately printed and which carried different prize amounts as compared to the ordinary PWT lottery tickets. In the written submission the assessee has sought to explain the composition of the super, gold and special lottery tickets in the bundles of 100/ 1000 ordinary tickets which participate in the draw. The super, gold and special lottery tickets along with the other t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een debited by passing entries prize money received by way of journal entries. In fact, the said company never received any prize money from the RGB, the same being only a book entry. In the said account there was no mention of PWT and PWT-l. The agreement dated 15-05-2008 does not state that the RGB will be declaring two different types of prizes, i.e. one for the winning ticket holder and the other for the seller of the ticket. The assessee firm in reply to the AO.'s show cause notice has submitted that for the sake of easy accounting the assessee had termed the super ticket prize and special ticket) prize as PWT-1 and that the same was nothing but the general prize winning tickets as mentioned in the scheme of the lotteries. However, perusal of the schemes indicated that nowhere it stipulated that super tickets and special tickets are PWT-l and they are payable to the sellers of the tickets. Subsequent to the completion of the assessment proceeding Shri S. Martin in his deposition dated 23-11-2013 categorically stated that PWT-1 are separate tickets in separate bundles given to the stockists and were thus not transferrable like the winners of PWT. In that deposition Shri Mar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es with the Director of Lotteries, West Bengal. As per his reply dated 21-05-2014, it has been gathered that though the nomenclature super and special tickets is given to PWT-1, the same are basically in the nature of incentives for the sellers and not payable to the winners of the lottery tickets. It is, therefore, established beyond doubt that the PWT-1 payments were basically made by the assessee to its stockists, which, in turn, were not supposed to part with any part of the said money by way of the other payments to any lottery playing public. It has been found (on the basis of the entries recorded in computerised ledger a/cs of the prize winning tickets as extracted from the impounded hard disk FDA-1 and also on the basis of the details subsequently furnished by the assessee) that during the relevant accounting year the total payments made by the assessee against PWT-1 stood at ₹ 551,30,41,569/-. The said amount was also found to be a part of the total purchase amount of ₹ 1393,22,38,446/- debited to the profit loss a/c. Since the entire sum of ₹ 551,30,41,569/- represented the incentive payment/prize money given to the stockists by the assessee, the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him after conducting necessary enquiries in that regard. Aggrieved by the order of the ld. Pr. CIT passed under section 263, the assessee has preferred this appeal before the Tribunal. 10. The ld. counsel for the assessee, at the outset, explained the entire modus operandi of the business through which the lottery tickets issued by the Royal Government of Bhutan were distributed. He submitted that the Royal Government of Bhutan had appointed M/s. Martin Lottery Agencies Limited (earlier known as Future Gaming Solutions India Pvt. Limited and now as Future Gaming and Hotel Services Pvt. Limited) as its sole purchaser to sell all types of conventional paper lotteries all over Bhutan and India. The said sole purchaser appointed two wholesalers namely M/s. Megha Distributor for the State of Kerala and M/s. Pema Lhaden Enterprise for Bhutan and West Bengal. M/s. Pema Lhaden Enterprise, a proprietary concern of Ms. Pema Lhaden of Phuentsholing, appointed the assessee-firm as the main seller of Bhutan Paper Lotteries in the State of West Bengal in terms of agreement dated 01.06.2009. The assessee-firm appointed more than 100 stockists in the area of South Bengal for the sale of paper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ket', while each bundle of such 1000 tickets contained 'special ticket'. He explained that any buyer of either of the said two bundles got these 'super/gold/special tickets' and these 'super/gold/special tickets' also participated in the draw through the independent numbers. He submitted that when a retailer bought the bundles, he could sell the entire bundle to any one person, or alternatively he could sell one or more tickets in loose form to one or more persons. Where tickets were sold loose, the retailer himself was entitled to retain the 'super/gold/special tickets'. He contended that the prize money under this scheme, i.e. PWT-1 also was disbursed in the same manner as the prize money was distributed on ordinary/normal paper lottery tickets (PWT), inasmuch as, the prize monies above ₹ 5,000/-were paid by Royal Government of Bhutan directly while the prize monies upto ₹ 5,000/- were paid by the retailer directly to the prize winner, which was subsequently reimbursed by the Royal Government of Bhutan through its chain of intermediaries. 13. After explaining the modus operandi of the lottery business and unfolding the scheme of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowance under section 40(a)(ia). In support of this contention, he relied on the decision of the Hon'ble Sikkim High Court in the case of Future Gaming and Hotel Services Pvt. Limited vs.- Union of India (WP(C) No. 39 of 2015 dated 14.10.2015), wherein it was held that activities of the lottery distributors did not constitute the service as the activity comprising of promotion, organizing, reselling or in any other manner assisting or arranging the lottery tickets of the State, did not establish the relationship of principal and agent but it was rather that of a buyer and a seller on principal to principal basis. 14. The ld. counsel for the assessee also contended that the provisions of section 194G are applicable only in cases, where the impugned payments constitute income by way of commission, remuneration or prize of the payee. He contended that where such payments do not constitute income of the said nature in the hands of the payee, the payer is not required to deduct tax at source on such payment under section 194G of the Act. He reiterated that the amount in question on account of prize money was paid by the assessee to the stockists as reimbursement on behalf of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stion of liability to deduct tax under section 194G or consequential disallowance under section 40(a)(ia) would not arise. 16. The ld. counsel for the assessee further contended that the amount in question was not in the nature of any commission or remuneration paid to the stockists by the assessee, but the same represented reimbursement of prizes from the winning lottery tickets, which were paid by the retailers to the general public. He submitted that such prizes exceeding ₹ 5,000/- were directly paid by the Royal Government of Bhutan while the prize money upto ₹ 5,000/- was paid by the retailers/sellers of the lottery tickets to the general public, which was subsequently got reimbursed from Royal Government of Bhutan through the various agencies acting in distribution chain. He contended that even if his argument relating to no requirement of TDS on reimbursement is found to be not acceptable, the deduction of tax at source, if any, was required to be done as per the provisions of section 194B applicable to payment of income by way of winning from any lottery, etc. and not under section 194G as held by the ld. CIT. He invited our attention to the provisions of sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee was determined on estimated basis after rejecting the books of account, the Assessing Officer could not rely on the same books of account of the assessee for making a disallowance separately of any expenditure claimed therein by invoking the provisions of section 40(a)(ia). In support of this contention, he relied on the decision of the Coordinate Bench of this Tribunal in the case of Shri Arjun Bhowmick v. DCIT rendered vide its order dated 30.03.2014 in ITA No. 767/KOL/2013, wherein it was held that when the profit was estimated by the Assessing Officer, he could not make any disallowance on the basis of same books of account by invoking the provision of section 40(a)(ia). It was held by the Tribunal that the estimation made by the Assessing Officer of net profit will take care of every addition related to the business income or business receipts and no further disallowance can be made. The ld. counsel for the assessee submitted that the decision rendered by the Tribunal in the case of Arjun Bhowmick (supra) has already been upheld by the Hon'ble Calcutta High Court vide its order dated 29.08.2014 in G.A. No. 2683 of 2014. 19. Keeping in view all the submissions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e lottery business and thereby indulged in concealment of income on the basis of adverse findings of survey, enquiries made independently, statements of the concerned persons recorded under section 131 etc. and the assessee has made a detailed submission at the time of assessment proceedings before the Assessing Officer as well as during the course of proceedings under section 263 before the ld. CIT and has also filed a written submission before us in order to dislodge the said allegations, it is observed that the issue that requires our consideration and decision in order to dispose of the present appeal lies in a narrow compass. The limited issue that is required to be considered and decided by us as involved in the present appeal is whether the assessee was liable to deduct tax at source from the amount in question disbursed as prize monies on lottery tickets under section 194G and if the answer to this question is affirmative, whether the order passed by the Assessing Officer under section 143(3) without making disallowance under section 40(a)(ia) on account of assessee's failure to deduct tax at source under section 194G could be said to be erroneous as well as prejudicial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an amount exceeding one thousand rupees shall, at the time of credit of such income to the account of the payee or at the time of payment of such income in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of ten per cent. (2) 5 [***] (3) 5 [***] Explanation.-For the purposes of this section, where any income is credited to any account, whether called Suspense Account or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly. ] 22. A combined reading of the provisions of section 40(a)(ia) and 194G (emphasis supplied in bold letters) makes it abundantly clear that disallowance under section 40(a)(ia) is liable to be made on account of commission payable by any person to any other person, who is or has been stocking, distributing, purchasing or selling lottery tickets and the said disallowance thus is restricted to income of the payee of the nature of commission on the sale of lottery tickets. As provided in Clause ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2015 in W.P.(C) No. 39 of 2015. In the said case, the petitioner was engaged in the business of sale of paper lottery tickets and had procured, during the course of said business, the lottery tickets in bulk from the Government and resold the same to the public at large through various agents, stockists, re-sellers, etc. The issue that arose for the consideration of Hon'ble High Court of Sikkim was whether the petitioner was liable to pay service tax. In this context, Hon'ble High Court of Sikkim examined the relationship between the concerned parties in the light of the agreement entered into between them and after referring to the relevant terms and conditions of the said agreement, the sums and substance of which is similar to the agreement entered into by the assessee in the present case with its stockists (sample copy available at page 129 to 137 of the paper book), it was held by Their Lordships that the activity of the petitioner comprising of promotion, organising, reselling or in any other manner assisting or arranging the lottery tickets of the State, did not establish the relationship of principal and agent but it was rather that of a buyer and a seller on princi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en if it is assumed for the sake of argument, that the assessee was liable to deduct tax at source from the amount in question disbursed as prize monies on lottery tickets under section 194G, no disallowance under section 40(a)(ia) could be made for the failure of the assessee to do so in the assessment completed by the Assessing Officer under section 143(3)/144 since the books of account of the assessee were rejected by him by invoking the provision of section 145(3) and the income of the assessee from lottery business was determined on estimated basis. In support of this contention, he has relied on the decision of the Coordinate Bench of this Tribunal in the case of Shri Arun Bhowmik v. DCIT (ITA No. 767/KOL/2013 dated 13.03.2014), which has been subsequently affirmed by the Hon'ble Calcutta High Court. In the said case, the book results declared by the assessee were rejected by the Assessing Officer and the income of the assessee was estimated by applying net profit rate. The income so estimated was further enhanced by the Assessing Officer by way of disallowance made under section 40(a)(ia) for the failure of the assessee to deduct tax at source from the payment of hire ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Tribunal in the case of Shri Arun Bhowmik (supra), an appeal under section 260A of the Act was filed by the Revenue before the Hon'ble Calcutta High Court and one of the questions raised before the Hon'ble High Court was whether on the facts and circumstances of the case, the Tribunal was justified in law to direct that once profit rate is estimated, further disallowance on the same books of account cannot be made in the light of the provisions of section 40(a)(ia) of the Act . The Hon'ble Calcutta High Court after extracting paragraph no. 5 of the Tribunal's order in their judgment held that there were valid reasons given by the Tribunal in support of its decision to delete the disallowance made by the Assessing Officer under section 40(a)(ia) and dismissed the appeal of the Revenue filed in the case of Shri Arun Bhowmik (supra) holding that the order of the Tribunal did not give rise to any substantial question of law. The decision rendered by the Coordinate Bench of this Tribunal in the case of Shri Arun Bhowmik holding that no disallowance under section 40(a)(ia) can be made separately when the income of the assessee is determined on estimated basis after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... des for certain disallowances in certain cases notwithstanding that those amounts are allowed generally under other sections. It was observed by the Hon'ble Andhra Pradesh High Court that the computation under section 29 is to be made under section 145 on the basis of the books regularly maintained by the assessee and if those books are not correct or complete, the Income Tax Officer may reject those books and estimate the income to the best of his judgment. It was held that when such an estimate is made, it is in substitution of the income that is computed under section 29 and all the deductions, which are referred to under section 30 to 43D, are deemed to have been taken into account including the embargo placed in section 40 while making such an estimate. It was held that in a case where the books of account have been rejected by the Assessing Officer and the income of the assessee is estimated by him to the best of his judgment, the Assessing Officer cannot make any disallowance under section 40 separately as the same is deemed to have been taken into account by him while making such estimate. In our opinion, the ratio of this decision rendered by the Hon'ble Andhra Pra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same represented reimbursement of prizes from the winning lottery tickets upto ₹ 5,000/-, which were paid by the retailers to the general public. Keeping in view this nature of the said amount, the deduction of tax at source, if any, was required to be made as per the provisions of section 194B applicable to payment of income by way of winning from any lottery, etc. and not under section 194G and since the provisions of section 194B were applicable only when such income exceeded ₹ 5,000/-, even the said provisions were not applicable in the case of the assessee. 29. At the time of hearing, the ld. counsel for the assessee has vehemently argued the case of the assessee by raising the above contentions and has also explained the assessee's stand thereon by filing detailed written submission. However, keeping in view that we have already accepted the case of the assessee as made out by him on the basis of two main propositions, which are duly supported by the relevant judicial pronouncements already discussed in the foregoing portion of this order including the decision of the Hon'ble Jurisdictional High Court in the case of Shri Arun Bhowmik (supra), we do not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld have estimated the income at a higher figure than the one determined by the Income Tax Officer. However, that would not vest the Commissioner with power to re-examine the accounts and determine the income at a higher figure because the Income Tax officer has exercised the quasi-judicial power vested in him in accordance with law and arrived at a conclusion, which cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. 30. Having regard to all the facts of the case and keeping in view the legal position emanating from the various judicial pronouncements as discussed above, we are of the view that the order of the Assessing Officer cannot be said to be erroneous or prejudicial to the interest of the Revenue warranting any interference by the ld. CIT under section 263. The impugned order passed under section 263 thus is not sustainable either in law or in the facts of the case and setting aside the same, we restore the order passed by the Assessing Officer under section 143(3)/144 of the Act. 31. In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on July 29, 2016 - - TaxTMI - T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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