2003 (9) TMI 10

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....n Rs. 22,500 under section 115BB of the Income-tax Act, 1961, is valid and in accordance with law and making adjustment under section 143(1)(a) is highly debatable?" The facts of the case are that the only source of income for the assessee during the assessment year 1993-94 was winning an amount of Rs. 25,000 from Kerala State Lottery. He had filed a return of income showing the total income as Rs. 22,500 after deducting the agent's commission and seller's bonus, at the rate of 5 per cent. each. The Assessing Officer, at the first instance, accepted the returned income and made a total demand of Rs. 10,472, together with interest under sections 234B and 234C of the Act. He also gave credit for TDS of Rs. 7,000, and thereafter, fixed the amo....

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....and the appellate authority were correct, and the Tribunal was wrong in allowing the appeal, and directing the Assessing Officer to accept the tax return. It is also contended that Circular para. No. 31.1 of the Central Board of Direct Taxes Circulars is inapplicable. As stated above, a deduction under section 10(3) of the Act had been granted by the Assessing Officer through his rectification order under section 154 of the Act, thereby, deducting an amount of Rs. 5,000. After rectification, the Assessing Officer fixed the total income at Rs. 17,500 and under section 115BB, 40 per cent, of the tax together with surcharge at the rate of 12 per cent, was also deducted. After reducing the tax deducted at source, Rs. 7,000, the demand was refix....

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....d the Tribunal was as to whether in view of the provisions of section 115BB of the Act the basic exemption available under section 2 and the First Schedule to the Finance Act applicable to the assessment year in question is attracted or not? To put it differently for the assessment year 1993-94 under the Schedule to the concerned Finance Act, no tax was exigible in a case where the total income did not exceed Rs. 28,000. In the present case by way of winnings in the lottery was only Rs. 22,500 even without applying the exemption of Rs. 5,000 provided under section 10(3) of the Act. So the question was as to whether in view of the basic exemption from the levy of tax under the Act provided in the Schedule to the Finance Act concerned, the as....

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....ed that no adjustment could have been made by the Assessing Officer. However, it was observed that, in view of this, the assessee has to succeed and the assessee's appeal was allowed. We are afraid, the Tribunal has seriously erred in its conclusion that the assessee has to succeed, for, if the rectification order is found to be illegal the result is that the original intimation stands. As already noted, in the original intimation the Assessing Officer had applied the provisions of section 115BB of the Act and applied a flat rate of 40 per cent, on the entire lottery income. The effect of the finding of the Tribunal that the legal issue is a debatable one and the assessment cannot be rectified is that the original intimation which is aga....