TaxTMI 
TaxTMI 
2016 (7) TMI 202
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....in lottery tickets and filed its return of income on 29.10.2004 declaring a total loss of Rs. 2,08,32,311/- and on scrutiny notices under section 143(2)(ii) was issued and thereafter, notice under section 142(1) of the Act was issued with detailed questionnaire. 4. Ground No-1 relating to addition of Rs. 69,59,120/- made by the AO considering the income determined from unsold lottery wining (prize) money. 5. The assessee is a dealer of lottery tickets and won some prize money on the unsold stock of lottery ticket. The AO observed that the statutory Auditor or Tax Auditor of assessee 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 ....
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....icket, if not returned or not able to return to WBSL, there is a possibility to win prize money. 7. The CIT-A after considering the above submissions and gave relief to the assessee and has opined as under: So, from the fact of the case it is apparent that the prizes were won out of such unsold tickets. Definitely the assessee did not purchase any ticket over and above the purchase shown in the profit and loss account. The assessee also returned the unsold ticket to the extent of 10%, as stipulated in the sole selling agreement. The assessee, being 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....
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.... is eligible to return 10% of tickets of each draw of remained unsold. Ld.AR argues that the assessee has to bear the cost of 90% if the ticket sales were not achieved to that extent. The assessee only enjoys the fruits of lottery business, if any, in the form of prize money from the lottery by taking part in such lottery draws on unsold lottery tickets, it is only, but due to business obligation. He further pointed out that regarding three types of credit items viz. i) Sales ii) Closing Stock and iii) Prize Winning Ticket (Ex-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 prod....
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.... treating the cash deposits found in bank account as unexplained investment under section 69 of the Act. The facts relating to the issue, the AO found that the assessee deposited Rs. 21,00,000/- into its bank and assessee explained that the amount was received from debtors as security deposit and the AO did not accept the explanation and treated the same as unexplained investment under section 69 of the Act. 12. In first appeal, the CIT-A found that the finding of the AO that "The assessee was asked to explain 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 dou....
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....s ground." 13. On confrontation, the assessee filed its rejoinder to the remand report as under: "The matter was in respect of receipts of deposits from seven parties. In the original order the issue was summarily discussed and without verification of debtors, Rs. 21,00,000/- was added back . In the first remand report (before the current report dated 25.08 11) the ld. Assessing Officer did not do much and for this reason, the assessee presumes 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 ....
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....ing enough opportunity to the assessee. Thus, the addition made in respect of these persons arc confirmed. Accordingly, the A.O. is directed to suitably modify the extent of addition made u/s.69 of the Act keeping in view my above observation. Thus, this ground of appeal of the assessee is partly allowed." 15. The CIT-A did not accept the copies of returns and accounts details as per required by the AO 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 inco....