TaxTMI 
TaxTMI 
2003 (7) TMI 258
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....tive party account but it was separately credited to the parties security account. 3. Because the Courts below erred in wrongly and illegally confirming the deposit of Rs. 1,55,000." 4. The AO detected that the assessee has shown deposit of Rs. 1,55,000 in the name of undernoted dealers in cash: Name Amount Rs. 1. Shubham Enterprises 40,000 2. Trimurti Enterprises 50,000 3. Sabera Lottery House 20,000 4. Krishna Lottery Agency 20,000 5. B.I.A. Lottery Agency 10,000 6. Maa Vaishnou Lottery Agency 15,000 1,55,000 The AO observed that the assessee has failed to establish the identity of these depositors and transactions whatever and their creditworthiness to prove the source of these deposits in the books of account of the assessee. The AO also observed that these deposits are in violation of provisions of s. 269SS. The aforesaid amount was, thus, treated as unexplained and was added towards the income of the assessee. The matter was carried to the CIT(A). It was submitted that all these six parties are agents of the assessee making the purchases of the lottery tickets from the assessee being stockist. The assessee is sta....
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....e, the finding of the CIT(A) are final whereby the books of account have been accepted. The learned counsel for the assessee further argued that all the deposits are of the dealers of the lottery who have taken delivery of lottery tickets in the subsequent year and as such the advance money was accounted for against their sales. The learned counsel for the assessee further argued that the AO has referred for initiation of the proceedings under s. 269SS in which penalty is also imposed under s. 271D of the IT Act vide order dt. 17th April, 1995, on the same matter by the Dy. CIT(A), Varanasi. Therefore, the AO was not justified in making the addition under s. 68 of the IT Act. The learned Departmental Representative on the other hand, argued that the parties were not produced before the AO for verification, therefore, the AO was justified in making the addition in the hands of the assessee. The learned Departmental Representative further argued that the proceedings under s. 269SS not be seen in the context of s. 68 of the IT Act. The learned Departmental Representative relied upon the findings of the authorities below. The learned counsel for the assessee in rejoinder argued that bo....
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.... order under s. 271D of the IT Act that the penalty was imposed in a sum of Rs. 1,55,000 in respect of the amount deposited by the above six agents with the assessee in cash. Sec. 68 provides: "Addition for cash credits—It provides that where any sum is found credited in the books of the assessee and the assessee offers no explanation about the nature and source, or the explanation offered by him is not in the opinion of the AO, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year." Therefore, under s. 68 the unexplained amount could be treated as income of the assessee. However, s. 269SS provides: "That no person shall take or accept from any other person any loan or deposit otherwise than by an account payee cheque or account payee draft if it was ten thousand rupees or more." Therefore, penalty would be imposed under s. 271D accordingly if a person takes or accepts any loan or deposit in contravention of provisions of s. 269SS. The Dy. CIT(A), Varanasi, imposed the penalty against the assessee under s. 271D of the IT Act in respect of the same amount of deposit/loan vide order dt. 17th April, 1995, and t....
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....a material and evidence can be oral as well as documentary." 8. There is no dispute about this legal proposition as use of the word "material" in s. 143(3) shows that the AO not being a Court and was relying upon the material which may not strictly be an evidence admissible under the Indian Evidence Act for the purpose of making an order of assessment. The detailed documents were filed before the authorities below to show that the amount in question was advance deposited by the lottery agents of the assessee against which the tickets were sold subsequently. We may also mention that the argument of the learned counsel are probable that the dealers have closed their business as the lottery was banned throughout the country. Since the accounts of the agents were settled by selling the tickets to them in the next year, which is evident from the documents filed in the paper book, therefore, those parties were not within the control of the assessee. The AO has not taken any step to verify the documents at the initial stage of assessment, therefore, no fault could be found against the assessee. Even at the appellate stage, the summons returned unserved but no efforts were taken to just....
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.... a business loss. The assessee is in appeal on the grounds mentioned above. 11. We have heard the learned counsel for the assessee and the learned Departmental Representative. The learned counsel for the assessee argued that prize/commission assessed as income, therefore, out of the same transaction if losses suffered in unsold tickets then it should be treated as business loss. He has further argued that on account of negligence, no disallowance could be made. The learned Departmental Representative, on the other hand, argued that the assessee was doing business of lottery on commission basis and it is not clear as to why the tickets were kept subsequently. In rejoinder, the learned counsel for the assessee argued that the U.P. State Lottery Rules provides that: "The ticket books once sold shall not be returnable." The learned counsel for the assessee has taken us to reply filed before the authorities below, in which it was stated that the U.P. Government does not take the unsold ticket and as such the assessee had to suffer loss of unsold tickets. The learned counsel for the assessee further argued that the assessee maintained register of unsold tickets, which was produc....
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....could not have been returned. We find that even if some loss is suffered by the assessee on account of negligence, the same would have been the legitimate deduction out of the profit as the profit of the assessee's business includes losses also. Nobody can imagine that in every business, there would always be profit, when the element of loss is also attached to every business. There is no denial by the authorities below that the assessee had in fact suffered losses. There is no finding of fact against the losses suffered by the assessee but how it is suffered is not the question to be decided by the Revenue Department. We further find in the circumstances that lottery tickets which remained unsold cannot earn any profit, therefore, it has to be deducted from the closing stock naturally by doing so, the profit would be reduced. The assessee has claimed in the same way and as such the contention of the assessee cannot be rejected. Keeping in view the above facts and circumstances and more particularly that the fact of loss has not been disputed by the authorities below, we find that the authorities below were not justified in disallowing the loss in the case of the assessee. As a res....