Income Tax Appellate Tribunal - Delhi
Income-Tax Officer vs D.C. Rastogi on 14 August, 1991
Equivalent citations: [1991]39ITD490(DELHI)
ORDER
D.N. Sharma, Judicial Member
1. As these cross appeals are directed against the order dated 8th February, 1988, passed by the CPT (Appeals) for the assessment year 1984-85, they were heard together and for the sake of convenience are being disposed of by a comfirm order.
2. The assessee is an individual. In February 1976 certain complaints were received against the assessee in respect of tax evasion and acquisition of large assets by him and his family from undisclosed source of income. Before enquiries into these allegations could be completed, the assessee in September 1986 submitted revised returns of income for the assessment years 1978-79 to 1986-87 under Amnesty Scheme, 1985, declaring additional accumulated income for these years at Rs. 58. 90 lakhs. Similarly, additional income of Rs. 40. 35 lakhs was declared under the aforesaid scheme by his wife Smt. Meena Rastogi for the aforesaid assessment years. For the assessment year 1984-85 additional income under the Amnesty Scheme had been declared by the assessee at Rs. 3,50,000. This additional income was disclosed by the assessee in the revised return of income filed on 30th September 1986.
3. In the original return, filed on 27-7-1984, as well as in the revised return filed on 30th September 1986, the assessee declared income from lottery receipts at Rs. 10,80,000 claiming deduction under Section 80TT. As per documents filed with the return, the assessee claimed to have won a prize of Rs. 12, 00,000 on ticket No. W-2665871 in Draw No. 20 of Kanchanjunga Weekly Lottery of Government of Sikkim, held on 19-9-1983. In view of the facts stated above, the Income-tax Officer proceeded to make comprehensive enquiries relating to the genuineness of the assessee's claim of having won the prize of Rs. 12, 00,000 on lottery ticket No. W-2665871. The documents filed by the assessee, along with the original return, showed that he had been paid Rs. 9,71,940 by the Director of State Lotteries, Government of Sikkim, Gangtok through demand draft No. TL/445817 dated 22-11 -1983, drawn in favour of the assessee on account of prize money of Rs. 12, 00,000, after making the following deductions: -
1. Rs. 1,20,000 on account of agency bonus.
2. Rs. 1, 07, 088 on account of payment of income-tax as per Sikkim Government Income-tax Rules.
3. Rs. 972 on account of demand draft charges.
4. The information received by the Income-tax Officer from the Director of Lotteries, Government of Sikkim, vide his letter dated 8-3-1985, showed that in respect of prize winning ticket the assessee had filed his claim on 18-11-1983. The Income-tax Officer also made enquiries from M/s. K & Co. New Delhi. Organising Agents of Kanchanjunga Weekly Lottery of the Government of Sikkim. According to the information furnished by them, the assessee had filed his claim on 29-10-1983 and that bonus prize of Rs. 85, 056 was paid to the agent M/s. Rajeev Agencies, Nasik and that an amount of Rs. 24,000 was paid as bonus to Shri Milkhi Ram of Krishna Nagar, Delhi, from whom the assessee was paid to have purchased the prize winning lottery ticket. From various enquiries made by the Income-tax Officer, following facts also came to his notice: -
(a) M/s. K & Co. as organising Agents of the Lottery had got printed 72 lakh tickets at New Delhi for 20th Draw of Kanchanjunga Lottery of Government of Sikkim. Their Nos. were 10, 00, 001 to 19, 00,000 & 20, 00, 001 to 29, 00,000 in four series WXYZ.
(b) Out of 72 lakh tickets as above 24,00,000 tickets with Nos. 23, 00, 001 to 29, 00,000, in four series WXYZ, which included the prize winning ticket No. W-2665871, were printed by M/s. Thomson Press, Faridabad & delivered to M/s. K & Co. New Delhi on 5-9-1983.
(c) On 9-9-1983, 40,000 tickets with Nos. 26, 60, 001 to 26,70,000 in four series W X Y Z, were despatched by M/s K & Co. New Delhi to M/s. Chawla Agencies, their stockists in Bombay. This included the prize winning ticket also. The despatch was by Air.
(d) On 15-9-1983, 8,000 tickets with the following Nos. in four series WXYZ, were sold by M/s. Chawla Agencies, Bombay vide invoice No. 11679, on the invoice book of M/s K & Co. to M/s Rajiv Agencies Nasik.
No. 26,65,001 to 26,66,000 2667001 to 2668000 These tickets included the prize winning ticket No. W-2665871
(e) The draw took place on 19-9-1983 & as per information supplied by Director of State Lottery Sikkim, Sh. D.C. Rastogi, filed its claim relating to prize winning ticket on 18-11-1983 (As per M/s K & Co. the said claim was filed by Sh. Rastogi on 29-10-1983).
(f) The prize money of Rs. 9.71,940 was paid to Sh. Rastogi by Director of State Lotteries, Sikkim on 23-11-1983 but the bonus prize to Sh. Milkhi Ram, the alleged seller of the prize winning ticket, was paid by M/s K & Co. on 3-11 -1983 i.e. even before the said prize bonus was deducted from the prize money payable to Sh. Rastogi.
5. According to the Income-tax Officer, the above mentioned facts conclusively proved that the prize winning ticket was not available for sale in Delhi by 15-9-1983, the same being under despatch from Bombay to Nasik. The Income-tax Officer recorded the statements of the assessee, Milkhi Ram and Ravi Goel, a partner of M/s K & Co., New Delhi on various dates. Statement of Milkhi Ram was recorded on 20-5-1985, 27-7-1987 and 3-8-1987. Shri D.C. Rastogi was examined on 27-4-1985 and 10-7-1987 and the statement of Ravi Goel was recorded on 19-8-1985 and 15-7-1987. Materials gathered by the Income-tax Officer, on the. basis of enquiries made by him, were put to the assessee, who was given an opportunity of being heard in respect of those materials. This was done by the Income-tax Officer vide his letter dated 11-8-1987 and on the assessee's request, copies of statements and other documents, collected during the course of assessment proceedings, were supplied to the assessee. On the basis of the materials collected by the Income-tax Officer, the assessee was informed that his claim of having won the said prize money was not genuine and that it was proposed to assess the amount of Rs. 12, 00,000 as unexplained income. The assessee submitted his reply dated 1-9-1987 seeking certain clarifications and stating that certain discrepancies occurred in the evidence in possession of the Department. The assessee asked for further information. The Assessing Officer dealt with the points raised by the assessee in his letter dated 1-9-1987. The Income-lax Officer concluded, on the basis of the materials gathered by him, that the assessee had not purchased the prize winning ticket in Delhi by normal channels and that he purchased the prize winning ticket, commanding a prize of Rs. 12, 00,000 on premium from the holder of such ticket from unaccounted and undisclosed cash with him. The Income-tax Officer further held that the consideration paid for acquiring the prize winning ticket has to be Rs. 12, 00,000. For want of information about the exact premium paid, the same was estimated at Rs. 1, 00,000. So, the Income-tax Officer was of the view that an amount of Rs. 13, 00,000 has been paid for acquisition of the prize winning ticket. The said amount was held to have been paid from undisclosed source of income and was included in the total income of the assessee, as income from undisclosed source.
6. Against this addition the assessee preferred an appeal to the CIT (Appeals), before whom it was contended that the entire case of the assessee had been built up around the theory that on the date on which Milkhi Jlam claimed to have sold the prize winning ticket in Delhi, the same was under despatch from Bombay to M/s Rajiv Agencies, Nasik and in support of this theory the Income-tax Officer had relied on documents, which being no better than photo copies had very little evidentiary value. It was further submitted on behalf of the assessee that the documentary evidence in possession of the department, failed to establish conclusively that on the alleged date of sale, the ticket in question was on its way to Nasik. It was pointed out that the evidence on record indicated that M/s Rajiv Agencies, Nasik, was a non-existent party and that it was, therefore, clear that the tickets, including the prize winning ticket had not been sent to Nasik and that the prize winning ticket was sold in Delhi through Milkhi Ram. According to the submissions made on behalf of the assessee before the CIT (Appeals), M/s K & Co. being liable to tax in respect of the agents and stockists, commission to the tune of Rs. 96,000 created dummy parties like M/s Chawla Agencies and M/s Rajiv Agencies to divert income, taxable in its hands. It was submitted that the deposition of Milkhi Ram showed that it was he who had sold the prize winning ticket and that he was given the prize money of Rs. 24,000. It was further contended that addition was not based on any concrete evidence, but solely on surmises and conjectures.
7. The CIT (Appeals) on a consideration of the submissions made on behalf of the assessee and the materials available on the record, concluded that the assessee's claim that he had purchased the prize winning ticket in normal course, was not true. According to him the assessee as well as Milkhi Ram were putting up only a make-believe story. The CIT (Appeals) discussed the statements of the assessee and Milkhi Ram in detail and concluded that the claim that Milkhi Ram had sold the prize winning ticket to the assessee, did not stand corroborated by any documentary evidence. After considering various facts and circumstances and the materials gathered by the Income-tax Officer, the CIT (Appeals) finally concluded that the assessee had not purchased the prize winning ticket in the normal course. He, accordingly, confirmed the finding of the Income-tax Officer that the assessee had purchased the prize winning ticket not in the normal course, but only from the original bona fide purchaser against consideration. He, however, did not agree with the Income-tax Officer that the assessee must have paid Rs. 13, 00,000 for purchasing the ticket from the bona fide owner. According to the CIT (Appeals) the estimate made by the ITO was not supported by any material. The CIT (Appeals) restricted the addition to Rs. 10,80,000 being the amount disclosed by the assessee in his return and, according to him, this amount could be brought to tax under Section 68 of the Income-tax Act, 1961. The assessee thus got a relief of Rs. 2,20,000.
8. Both the parties feeling aggrieved, by the order of the CIT (Appeals), have come up in appeal before the Tribunal.
9. Shri S.B. Gupta, learned counsel for the assessee, submitted before us that the prize winning lottery ticket No. W-2665871 was purchased by the assessee from Milkhi Ram in Delhi, a fact which was fully corroborated by the statement of Milkhi Ram, recorded by the Income-tax Officer. It was also contended that as per scheme of 20th (Bumper) Draw, a copy whereof is at page 12 of the paper book, filed by the assessee, the seller of the prize winning ticket was entitled to a commission of Rs. 24,000 and that this amount was paid by M/s K & Co., Organising Agent for the Kanchanjunga Weekly Lottery by means of a cheque dated 3-11-1983. In this connection our attention was invited to page 23 of the paper book, which is a copy of the letter dated 3-11-1983 sent by M/s K & Co. to Milkhi Ram, enclosing therewith cheque No. 140074 dated 3-11-1983 on New Bank of India, New Delhi for Rs. 24,000. It was stated in this letter that the said amount was against his winning counterfoil No. W-2665871 of 20th Draw of Kanchanjunga Lottery. It was pointed out that the Assessing Officer has not been able to collect any material to show that in case the assessee was not the real owner of the lottery ticket, then who else was the real owner. In support of the contention that the prize winning ticket was purchased by the assessee from Milkhi Ram it was further submitted that the counterfoil of the prize winning ticket was produced by Milkhi Ram for claiming the commission of Rs. 24,000, a fact which further corroborated the assessee's version that he had purchased the prize winning ticket from Milkhi Ram. It was then submitted that the letter of the Director of Sikkim State Lotteries dated 23-11-1983, a copy whereof is at page 14 of the paper book showed that the claim in respect of the prize winning ticket was filed by the assessee and he was paid a sum of Rs. 9,71,940 by demand draft No. TL/445817 dated 22-11-1983 and that pursuant to that claim he was paid the prize money of Rs. 9,71,940 after deduction of a sum of Rs. 1,20,000 on account of commission payable to stockist, agent and seller (counterfoil holder) and further deduction on account of income-tax payable on account of Sikkim State Income-tax. All these facts, according to Shri S.B. Gupta, fully established that the assessee was the genuine holder of the prize winning ticket. According to him, the evidence collected by the department did not prove the case that the transaction was not genuine. It was on the banks of mere suspicion and conjecture that the authorities below came to the conclusion that the prize winning ticket was not purchased by the assessee in the normal course.
10. Shri Gupta next contended that delivery challan of Thomson Press (India) Limited, which had printed 24 lakhs lottery tickets, which also included the prize winning ticket, showed that the delivery Challan was issued on 13-8-1983. However, below this date there appeared another date which indicated that the delivery challan was issued on 5-9-1983. According to Shri Gupta, from this paper it was not established that delivery of 24 lakhs tickets were taken by M/s K & Co. from the said Press on 5-9-1983. The ITO failed to make further enquiry into the matter. According to Shri Gupta the department has not been able to establish that out of 24 lakh tickets forty thousand tickets, including the prize. winning ticket, were despatched by M/s K & Co. to their stockists M/s Chawla Agencies, Bombay and that the letter from M/s K & Co. dated 9-9-1983 of which a copy is available at page 18 of the paper book, did not establish the fact that on 9-9-1983, forty thousand tickets were in fact despatched to M/s Chawla Agencies. It was further submitted that in reply to the ITO's letter dated 11-8-1987, the assessee filed detailed replies dated 1-9-1987 and 24-9-1987, copies whereof are included in paper book at pages 1 to 11. It was submitted that the assessee requested the Income-tax Officer to ascertain as to through which air-line tickets were sent to M/s Chawla Agencies, Bombay and that on which date M/s Chawla Agencies took delivery of the parcel from the air-line. The Income-tax Officer, however, failed to make any enquiry regarding these material facts. It was then pointed out that none from M/s Chawla Agencies and Rajiv Agencies, Nasik, to whom 8,000 tickets, including the prize winning ticket were alleged to have been sent by the stockists was examined by the ITO and that even according to the information collected by the Income-tax Officer, M/s. Rajiv Agencies, Nasik was not traceable at the address furnished to the Income-tax Officer. It was also contended that no evidence could be collected by the Income-tax Officer to show that out of forty thousand lottery tickets said to have been despatched to M/s Chawla Agencies eight thousand tickets, including the prize winning ticket, were sent to M/s Rajiv Agencies, Nasik, Thus, according to Shri Gupta, the prize winning ticket had not moved out of Delhi, a circumstance, which further lent corporation to the assessee's version that the prize winning ticket was in fact sold in Delhi and not in Nasik or any where else. According to Shri Gupta, the Income-tax Officer ought to have made enquiry as to how the remaining lottery tickets out of 24 lakh tickets, printed by Thomson Press (India) Limited, were disposed of by the Organising Agent. The Income-tax Officer failed to do so even though he was requested by the assessee to make necessary enquiries in this regard. In support of the contention that the prize winning ticket was not despatched to Bombay or to Nasik, our attention was invited to pages 19, 20 and 21 of the paper book. Pages 19 and 20 of the paper book, purported to be Photostat copies of invoice No. 11678 dated 15-9-1983, through which 8,000 lottery tickets including the prize winning ticket were sent by M/s Chawla Agencies to M/s Rajiv Agencies, Nasik. Shri Gupta pointed out various discrepancies in the Photostat copies at pages 19 and 20 in order to show that these documents were fabricated at the behest of M/s K & Co. and that they could not be copies of the same invoice. Page 21 is a Photostat copy of a letter from Chawla Agencies dated 6-10-1983, sent to M/s K & Co. giving account in respect of a sum of Rs. 1,20,000, which was the amount payable as commission/bonus to stockists, agents and seller of the prize winning ticket out of Bumper Prize of Rs. 12 lakhs, as per scheme of the weekly lottery. Shri Gupta submitted mat production of originals of copies at pages 19, 20 and 21 was insisted upon by the assessee, but despite his request, the Income-tax Officer did not summon the originals of these copies. According to Shri Gupta, these copies in the absence of original documents were inadmissible in evidence and in support of this contention reliance has been placed on the decision of the Supreme Court in Moose S. Madhya and Aiam S. Madha v. CIT [1973] 89 ITR 65. Our attention was also invited by Shri Gupta to the entries made on the back of page 19 of the paper book to show that there was discrepancy in the amounts of commission which was payable to M/s Rajiv Agencies. It was also pointed out that as per scheme of the weekly lottery, the stockists were entitled to get a commission of Rs. 12,000, but as per their letter dated 6-10-1983 they claimed the commission only of Rs. 3,600. It was further pointed out that in this letter they also claimed a sum of Rs. 24,000 on account of agent's commission. Shri Gupta submitted that it was not known to whom this amount of Rs. 24,000 was paid by M/s Chawla Agencies in respect of the prize winning ticket. It was next contended that there was no evidence available on the record to show that a sum of Rs. 1,20,000 being 10% of the prize money of Rs. 12 lakhs was paid to M/s Chawla Agencies. This circumstance, according to Shri Gupta, further established the fact that the lot of forty thousand lottery tickets, including the prize winning ticket, was not despatched from Delhi to Bombay.
11. According to Shri Gupta the department was prejudiced against the assessee because of disclosure of about Rs. one crore by him and his wife under the Amnesty Scheme, 1985, and that it was for this reason that the income-tax officer made enquiry in this case with a prejudiced mind. Shri Gupta emphasised that no evidence was available on record to show that any person other than the assessee had purchased the prize winning ticket. It was also submitted by Shri Gupta that M/s K & Co. was interested in fabricating evidence in order to avoid payment of tax on a sum of Rs. 96,000, comprised of two sums of Rs. 84,000 and Rs. 12,000 payable as commission/bonus to the agents and stockists respectively in respect of the prize winning ticket. Shri Gupta next referred to the bank statement of the assessee, a copy whereof is at pages 58 and 59 of the paper book in support of the contention that this statement did not show that during the material period the assessee was continuously staying in Delhi. It was submitted that the assessee had to go to Bareilly where his mother-in-law was ill and that for this reason the claim in respect of the prize winning ticket could not be filed promptly by the assessee and that it was filed with M/s K & Co. on 29-10-1983. According to Shri Gupta the assessee would not have paid Rs. 13 lakhs for purchasing the prize winning ticket. Shri Gupta then submitted that the onus to prove that the apparent was not the real was on the party who claimed it to be so. In support of this contention reliance has been placed on the decisions of the Supreme Court in Parimisetti Seeth aramamma v. CIT [1965] 57 ITR 532 and CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349. Reliance has also been placed on the decision of the Supreme Court in Lalchand Bhagat Ambica Ram v. CIT [1959] 37 ITR 288. According to Shri Gupta the department has not been able to discharge the onus to prove that the apparent was not the real.
12. Shri S.K. Bansal, learned D. R., on the other hand, fully supported the impugned order of the CIT (Appeals). It was submitted that vital links were missing in the story spun by the assessee. It was pointed out that the ticket was purchased by the assessee under unusual and abnormal circumstances. As per scheme of the weekly lottery claimed in respect of first prize winning ticket should have been lodged within thirty days from the date of the draw. The assessee, however, filed his claim with M/s K & Co. only on 29-10-1983 i.e. one month and ten days after the draw held on 19-9-1983. It was contended that in explaining the delay in lodging the claim, the assessee gave contradictory and inconsistent version on two different occasions and that his statement on the point was thoroughly unbelievable. According to learned D.R. the contention of the assessee was not at-all commensurate with his claim that he had purchased the prize winning ticket from Milkhi Ram. It was further submitted that the statement of Milkhi Ram and the assessee were full of infirmities. From the statement of Milkhi Ram it was borne out that he was not at all carrying on business of selling lottery tickets. It was then pointed out that Milkhi Ram opened his bank account with the amount of Rs. 24,000 paid to him by M/s K & Co. as commission on the counterfoil for the prize winning ticket and soon thereafter he withdrew Rs. 20,000. It was further submitted that in this case there was no violation of principle of natural justice, as has been contended by the assessee in ground No. 5. It was pointed out that the entire materials collected by the Assessing Officer were put to the assessee and he was given opportunity to meet the evidence relied upon by the Income-tax Officer. According to learned D.R. the onus placed on the department stood fully discharged in this case. In this connection reliance was placed on the decision of the Supreme Court in CIT v. Durga Prasad More [1971] 82 ITR 540. According to Shri Bansal, the assessee had purchased the prize winning ticket after the result of the draw had been declared. The ticket was purchased by him on premium and, therefore, the ITO was justified in adding the sum of Rs. 13 lakhs as income of the assessee from undisclosed source. It was further submitted that the CIT (Appeals) was not justified in restricting the amount of addition to Rs. 10,80,000.
13. We have considered the rival submissions as also the facts on record. We have also perused the paper book filed by the assessee and have also considered the case laws cited at the bar. M/s K & Co. as Organising Agents of Kanchanjunga Weekly Lottery got 72 lakhs tickets printed for 20th draw. Out of 72 lakhs lottery tickets, 24 lakhs tickets with Nos. 2300001 to 2900000 in four series of W X Y Z including the prize winning ticket No. W-2665871 were got printed by M/s Thomson Press (India) Ltd., Faridabad. There cannot be a serious challenge to the fact that these 24 lakhs tickets were delivered by M/s Thomson Press (India) Ltd., Faridabad to M/s K & Co. New Delhi and according to the delivery challan, a copy of which is at page 17 of the paper book, 24 lakhs tickets were delivered on 5-9-1983. It was not at all necessary for the Assessing Officer to make further enquiries as to the date on which 24 lakhs tickets were delivered to M/s K & Co. The evidence collected by the ITO showed that out of the aforesaid 24 lakhs tickets, 40 thousand tickets, which included the prize winning ticket were despatched to their stockists M/s Chawla Agencies, Bombay on 9-9-1983. At page 18 of the paper book, there is a copy of the letter dated 9-9-1983 sent by M/s K & Co. to M/s Chawla Agencies Bombay, despatching 40 thousand tickets. One of the grievances raised on behalf of the assessee was that the ITO failed to ascertain if these 40,000 tickets were in fact despatched from Delhi to Bombay. It was also not ascertained whether these tickets were sent to Bombay by air and if so, through which Air-line. However, we find that on this point Ravi Goel, one of the partners from M/s K & Co. was examined. In course of his statement recorded on 15-7-1987, he has categorically stated that the said tickets were sent to the stockists namely M/s Chawla Agencies on 9-9-1983 by air vide CN No. 2508975. So, the statement of Ravi Goel coupled with the letter of M/s K & Co. on 9-9-1983 fully established the fact that 40,000 lottery tickets including the prize winning ticket were sent by M/s K & Co. to their stockists in Bombay by air.
14. According to the Income-tax Officer, out of 40,000 tickets despatched to M/s Chawla Agencies by air, they sent 8,000 tickets, including the prize winning ticket, to M/s Rajiv Agencies, Nasik and in support of this version the ITO relied upon the invoice No. 11678 dated 15-9-1983, of which paper Nos. 19 & 20 of the paper book, purported to by the copies. We agree with the learned counsel for the assessee that there are certain discrepancies in these two papers and, therefore, it was imperative for the Assessing Officer to have made efforts to obtain the original invoice No. 11678. This, however, was not done even though a request in this behalf was made by the assessee. We agree with the learned counsel for the assessee that in the absence of the original, no reliance should be placed on paper Nos. 19 and 20. The Assessing Officer could not examine any body from M/s Chawla Agencies and M/s Rajiv Agencies. Therefore, in the absence of any other reliable evidence, it is not possible to come to a conclusion that 8,000 lottery tickets, including the prize winning ticket, were despatched from Bombay to Nasik. There are discrepancies in paper No. 21 also which is the letter of Chawla Agencies dated 6-10-1983. In respect of this paper also the assessee insisted upon production of the original, which was, however, not done. We, therefore, exclude this paper from consideration. However, the fact remains that it is conclusively established from the materials and evidence gathered by the Income-tax Officer, during the course of assessment proceedings, that 40,000 lottery tickets, including the prize winning ticket, were in fact sent to Bombay by air on 9-9-1983. This fact is a relevant circumstance which goes to support the case of the department that the prize winning ticket was not purchased by the assessee in Delhi in normal course. We, however, agree with the view canvassed on behalf of the assessee, on the strength of the decisions of the Supreme Court on the point that the onus was on the department to show that the apparent was not the real and that the assessee was not the genuine holder of the prize winning ticket. The taxing authorities while deciding the point whether the transaction is genuine and the apparent is not the real can take, into consideration the circumstances surrounding the transaction. In this connection it would be useful to refer to the decision of the Supreme Court in Durga Prasad More' s case (supra), wherein Their Lordships of the Supreme Court have held that an apparent must be considered real until it was shown that there were some reasons to believe that the apparent was not the real. Their Lordships observed that a little probing was sufficient to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the document produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in the documents. In the instant case, one of the surrounding circumstance is that 40,000 lottery tickets, including the prize winning ticket, were despatched from Delhi to Bombay on 9-9-1983, a fact which militates against the assessee's contention that the ticket had been purchased by him in Delhi.
15. Statement of the assessee was recorded by the income-tax Officer on 27-4-1985 and again on 10-7-1987. Copies of his statement are on pages 36 to 40 of the paper book, filed by the assessee. In course of his deposition recorded on 27-4-1985; the assessee stated that he purchased the lottery ticket from a vendor in Cannaught Place in Inner circle. The vendor was on cycle. In his statement, recorded on 10-7-1987, the assessee stated that he did not know the name of the vendor. The vendor was on cycle. However, according to the statement of Milkhi Ram, who had been examined thrice by the Income-tax Officer, he kept on moving to different places and travelled by bus. The fact that for the purpose of selling lottery tickets he travelled by bus, was reiterated by him twice on 20th May 1985 and 27-7-1987. A close scrutiny of the testimony of Milkhi Ram leaves no manner of doubt that he was never engaged in lottery business. In course of his statement, recorded on 20th May 1985, he stated that he was selling lottery tickets of all States and was engaged in this profession for the last six or seven years. According to him, he used to purchase lottery tickets from the persons selling tickets at Palika Bazar, New Delhi. He, however, failed to give out the name of a single person from whom he purchased lottery tickets. A person, who claimed to have been carrying on business of selling lottery tickets for six or seven years, was expected to tell at least the name of one person from who he had purchased lottery tickets. Further, Milkhi Ram does not maintain any account what-so-ever in respect of lottery business. Not only that, he was not able to produce a single counterfoil of any lottery ticket or even unsold lottery ticket. From the facts, stated by him in course of his statement, recorded by the ITO on three different dates, we are satisfied that he was not at all carrying on the business of selling lottery tickets. There is no other evidence available on the record except the statement of Milkhi Ram to show that this man was engaged in the business of selling lottery tickets. On the other hand, the facts stated by him in course of his statement, negatived his contention that he used to sell lottery tickets and so we are inclined to agree with the inference drawn by the ITO and first appellate authority that Milkhi Ram was not carrying on the business of selling of lottery tickets, as claimed by him.
16. Yet another circumstance which creates a serious doubt about the truthfulness of the version given by Milkhi Ram is that even though he does not remember the name of a single person from whom he purchased the lottery tickets, he was able to say that lottery ticket No. 2665871 might have been purchased by him on 13-9-1983 or 15-9 1983. This statement was made by him on 27-7-1987. It clearly goes to show as has been rightly pointed out by the CIT (Appeals), that he is tutorial witness. The date on which he claimed to have purchased the lottery tickets, including the prize winning ticket, has been put into his mouth and that is why he was able to give two dates on which he claimed to have purchased the ticket, even though his memory fails when asked about the names of persons from whom he used to purchase the lottery tickets.
17. On behalf of the assessee much emphasis has been laid on the fact that seller's (counter-foil holder) commission of Rs. 24,000 was paid to Milkhi Ram by M/s K & Co. in respect of the prize winning ticket No. W-2665871. This, according to the submissions made before us on behalf of the assessee, established beyond doubt that the prize winning ticket was in fact sold by Milkhi Ram in Delhi to the assessee. There are more than one reason to disbelieve the assessee's case on the point. Milkhi Ram, in course of his statement, deposed that he got commission of Rs. 24,000 by cheque, which was credited in his bank account No. 5671 with Punjab & Sind Bank Ltd., Krishna Nagar Branch, Delhi on 8-11-1983. He opened his bank account only on receiving the commission of Rs. 24,000. However, soon after receiving Rs. 24,000 from M/s K & Co., he withdrew Rs. 20,000 on 10-11-1983 and on 2-12-1983 and 4-12-1983 he withdrew Rs. 2,000 each. According to him, he invested the money in purchasing lottery tickets. He, however, did not get any prize and lost the entire money in the bargain. In course of his statement, recorded on 3-8-1987, he stated that he purchased tickets for sale, but he could sell only a few tickets. The remaining tickets were kept by him in the hope that he would get some prize on tickets which remained with him. However, he did not get any prize and lost the entire amount. It is to be borne in mind that Milkhi Ram is a poor man, as according to him his monthly income was about Rs. 350. It is unbelievable that such a poor man, who was having monthly income of only Rs. 350 would invest a sizeable amount of Rs. 24,000 for purchasing lottery tickets for sale, especially when, according to his own showing, he generally purchased 25 to 50 tickets of any lottery at a time for sale. The circumstances brought on record thus clearly go to show that the story given out by Milkhi Ram about having sold the prize winning ticket and about having received a commission of Rs. 24,000 was a make-believe story.
18. According to the statement of Milkhi Ram, he did not know the name of the person who won the first prize of Rs. 12 lakhs. It was further stated by him that the winner of the prize had not made any entry in the counter-foil of the ticket. The statement of Milkhi Ram that he did not know the name of the person who won the first prize of Rs. 12 lakhs eliminates the possibility of his having put down the name and address of the assessee on the counter-foil as the person who had purchased the ticket and had won the first prize of 12 lakhs. The assessee, in course of his statement recorded on 10-7-1987 stated that he did not remember whether he had noted his name etc. at the time of purchase of the ticket either on the counter-foil or on the ticket. The statement of Milkhi Ram clearly goes to show that name of the person who had purchased the prize winning ticket was not noted in the counter-foil otherwise he would have known the name of that person as his case was that the counter-foil was with him. From the evidence gathered by the ITO it was found that the counter-foil, filed with M/s K & Co. along with the claim for retainer's prize in the name of Milkhi Ram contained the name of the assessee with his address. It shows that when the counter-foil was filed along with the claim with M/s K & Co., it contained the name and address of the assessee. According to the statement of Milkhi Ram, he did not know the assessee and also did not know his name. This shows that the prize winning ticket was in fact not sold by Milkhi Ram to the assessee and that it was subsequently that the assessee obtained the prize winning ticket and got his name and address entered in the counterfoil of the prize winning ticket. This is a strong circumstance which further militates against the assessee's version and goes a long way in discharging the onus placed on the department to show that the apparent was not the real and that the assessee was not the genuine holder of the prize winning ticket and further it was not purchased by him in a routine or normal course.
19. According to the assessee he had lodged the claim in respect of the prize winning ticket with M/s K & Co. on 29-10-1983 though according to the Directorate of Lotteries, Government of Sikkim, the claim was filed on 18-11 -1983. The claim was lodged by the assessee clearly beyond the period stipulated in the scheme of weekly lottery. When called upon to explain the delay in lodging the claim, the assessee in course of his statement recorded by the ITO on 27-4-1985 stated that when the result of the draw was declared on 20th September 1983, he was out of Delhi on leave and had gone to his in-laws who were living at Bareilly. On his return from Bareilly he came to know about the result of the lottery and then he applied to M/s K & Co. He further stated that he had to stay for a long time at Bareilly as his mother-in-law was bed ridden due to heart enlargement and dying of brain cells. She died in January 1984. So, according to the explanation given by the assessee in course of his statement recorded on 27-4-1985, when the result of the draw was declared he was away from Delhi and was staying at Bareilly with his in-laws as for a long time his mother-in-law remained bed ridden because of her illness. When again examined on 10-7-1987, the assessee changed his version. He then stated that he was mentally very much disturbed and was making frequent hectic trips to Bareilly for treatment of his mother-in-law and, therefore, he could not get time to look into personal matters. He admitted that he was not at Bareilly throughout that period. When asked by the ITO when he first came to know about the winning of prize, the assessee stated that he came to know about winning of the prize one or two days before he filed the claim on 29-10-1983. He further stated that since he did not know that he could win the lottery, the ticket had been lying casually in various papers in the drawer. When he put papers in order, he came across the ticket and tallied the numbers with the results declared. It was then that he knew that he had won the lottery. He then lodged his claim. This version is at variance with the version given by him on 27-4-1985. According to his second version, the lottery ticket got mixed with other papers and it was retrieved by him while he was putting his papers in order. This, according to him, was this reason for the delay in lodging the claim in respect of the prize winning ticket. His earlier version also stood disproved by his bank statement, a copy whereof is at pages 58 and 59 of the paper book, which clearly goes to show that during the months of September and October he made several transactions and was, therefore, present in Delhi. The bank statement disentitled his earlier version that for a long time he was out of Delhi and was staying with his in-laws in Bareilly in connection with the illness of his mother-in-law. Contradictory statements given by the assessee on two different occasions, explaining the reason for the delay in lodging the claim, further goes to show that there is no truth in the version that the assessee had purchased the prize winning ticket in normal course and that for certain reasons the claim was lodged by him with delay. Had he been a genuine ticket holder and had he purchased the prize winning ticket in normal course as claimed by him, he would have lost no time in lodging his claim with M/s K & Co.
20. Thus, on a consideration of the entire facts, materials and surrounding circumstances, we are convinced that the assessee had not purchased the prize winning ticket in the normal course and that the ticket was purchased by him after the result of the draw, held on 19-9 -1983, had been declared. In this view of the matter it must further be held that the assessee invested his income from undisclosed source in purchasing the prize winning ticket. The CIT (Appeals) was, however, not correct in holding that the addition should be made under Section 68. Addition on account of unexplained investment is to be made under Section 69 of the Income-tax Act, 1961. It was submitted before us by Shri Gupta that the assessee was not afforded an opportunity by the ITO to cross-examine the witnesses, whose statements were recorded by him. We do not find any substance in this contention. Copies of the statements of witnesses, recorded by the ITO as also copies of the documents relied upon by the Income-tax Officer were duly furnished to the assessee. The assessee was confronted with the entire materials collected by the ITO during the course of enquiry made by him vide his letter dated 11 -8-1987. The assessee sent reply to this letter on 1 -9-1987, a copy whereof is at pages 1 to 3 of the paper book. Second letter of the assessee addressed to the ITO is dated 24-9-1987. In his detailed replies the assessee has raised various objections and sought clarifications of certain points. But in his reply the assessee did not ask for an opportunity to cross-examine the witnesses, whose statements had been recorded by the Income-tax Officer. The assessee also filed written submissions before the CIT (Appeals), a copy whereof is at pages 56 and 57 of the paper book. Before the CIT (Appeals) also the ITO did not make any grievance to the effect that he was not given an opportunity by the ITO to cross-examine the witnesses. The fact is that the assessee never wanted to cross-examine the witnesses. Had he wanted to cross-examine the witnesses, he would have made a request to the ITO to that effect and in that event the ITO would have given him an opportunity to cross-examine the witnesses. Not only that before us the assessee raised as many as five grounds assailing the addition made on account of unexplained investment and restricted to Rs. 10,80,000 by the CIT (Appeals). In ground No. 5 it was pleaded that natural justice has been violated as relevant information asked for by the assessee had not been supplied by the ITO. Even in the grounds of appeal, filed before the Tribunal, the assessee did not plead that he was not given any opportunity to cross-examine the witnesses. The contention raised before us in a half-hearted manner that the assessee was not given an opportunity to cross-examine the witnesses by the ITO must be rejected. We are also of the view that in the instant case principle of natural justice has not been violated. Entire materials collected by the ITO during the course of enquiry were put to the assessee vide his letter dated 11-8^-1987 and the assessee had full opportunity to have his say in respect of those materials and to adduce evidence before the ITO in support of his case.
21. As has already been pointed out above, the ITO made an addition of Rs. 13 lakhs on account of unexplained investment in purchase of the prize winning lottery ticket, carrying the prize of 12 lakhs. According to the Assessing Officer, the assessee purchased the ticket on premium and it is for this reason that he made the addition of Rs. 13 lakhs, He estimated the amount of premium at Rs. one lakh. The CIT (Appeals) reduced the addition to Rs. 10,80,000, which was the amount disclosed by the assessee as winning from lottery. The evidence available on the record shows that the assessee received the net amount of Rs. 9,71,940 from the Director of Sikkim State Lotteries in respect of the prize winning ticket. Out of the amount of Rs. 12 lakhs a deduction of Rs. 1,20,000 was made on account of agency bonus. A further sum of Rs. 1, 07, 088 was deducted on account of income-tax as per Sikkim Government Income-tax Rules and a further deduction of Rs. 972 was made on account of demand draft charges. So, on the prize winning ticket the assessee got a net amount of Rs. 9,71,940. The ITO has not been able to bring any evidence on record to show that the prize winning ticket was purchased by the assessee on premium. Further, we are not prepared to believe that the assessee would have paid more for the prize winning ticket than what he would have expected to receive from the Director of Sikkim State Lotteries in respect of the prize winning ticket. So, on the basis that he received only Rs. 9,71,940 on account of Bumper prize of Rs. 12 lakhs, we are inclined to hold that she amount of Rs. 9,71,940 represented the amount invested by him in purchase of the prize winning lottery ticket from undisclosed source. So, this amount is liable to be added as his income from undisclosed source. So the addition is restricted to Rs. 9,71,940. As has already been shown above, this addition is to be made under Section 69. This disposes of ground Nos. 1 to 5.
22. In ground No. 6, in the assessee's appeal, it is stated that the assessee had received the lottery prize money in the normal course and that the provisions of Section 56(2) read with Section 80TT are applicable in computing the income addition to the extent of Rs. 9,71,940 has already been upheld above and it has been further held that the addition is to be made under Section 69. Since the amount of Rs. 9,71,940 has been added as income from undisclosed source, the question of giving relief to the assessee under Section 80TT does not arise.
23. In ground No. 7 the assessee claims credit of tax of Rs. 1, 07, 088 deducted by Sikkim State out of lottery payment and in the alternative he claimed deduction for that amount. In view of the finding, already recorded above, the assessee is not entitled to the credit of tax of Rs. 1, 07, 088 or deduction in respect of the said amount.
24. In the result, the departmental appeal is dismissed. The appeal filed by the assessee is allowed partly, to the extent indicated above.