SUMATI DAYAL Vs. COMMISSIONER OF INCOME TAX BANGALORE

JUDGEMENT

(1.) These appeals filed by the assessee against the order dated February 24, 1977 passed by the Income-tax Settlement Commission (hereinafter referred to as 'the Settlement Commission'), related to assessment years 1971-72 and 1972-73. The appellant carries on business as a dealer in art pieces, antiques and curios at Bangalore. During the assessment year 1971-72 the appellant received a total amount of Rs. 3,11,831/- by way of race winnings in Jackpots and Treble events in races at Turf Clubs in Bangalore, Madras and Hyderabad. The said amount was shown by the appellant in the capital account in the books. The appellant filed a return on March 27, 1972 declaring an income of Rs. 27,829/-. The appellant also made a sworn statement on January 6, 1973 before the Income-tax Officer and on the basis of the said statement the Income-tax Officer made an assessment order dated March 27, 1974 wherein he held that the sum of Rs. 3,11,831/- is not winnings in races and he treated the said receipts as income from undisclosed sources and assessed the same as income from other sources. For the assessment year 1972-73 the appellant showed receipts of Rs. 93,500/- as race winnings in two Jackpots at Bangalore and Madras and the said amount was credited in the capital account in the books. The appellant filed a return declaring an income of Rs. 3,827/- on February 3, 1973. In his assessment order dated August 31, 1974 the Income-tax Officer included the amount of Rs. 93,500/- as income from other sources and assessed income of the appellant on that basis. The appeals filed by the appellant against the two assessment orders were disposed of by the Appellate Assistant Commissioner by order dated December 12, 1975 whereby the assessment of Rupees 3,11,831/- as income under the head other sources for the assessment year 1971-72 and Rs. 93,500/- for the assessment year 1972-73 was confirmed. The appeals filed against the said order before the Income-tax Appellate Tribunal were withdrawn by the appellant under Section 245M(2) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act'),and on August 6, 1976 she moved the application giving rise to this appeal, before the Settlement Commission wherein the appellant stated that she was agreeable to a reasonable addition on a reasonable basis should the Commission hold that the drawings of 1970-71 and 1971-72 were not adequate for purchase of Jackpot tickets, other expenses in connection with the races and losses, if any, estimated by the Settlement Commission to have been sustained by the appellant. On the said application the Commissioner of Income-tax submitted his report dated January 29, 1977 wherein he urged that the action of the Department in taxing the entire winnings as income from undisclosed sources should be upheld inasmuch the appellant lacked any knowledge of race techniques and the theory of probabilities precluded any systematic and continuous winnings at races on as many as 16 occasions during a period of less than two years. In his report, the Commissioner also submitted that the books of accounts did not indicate the expenditure on travel and other incidental expenses which had been incurred by the appellant for attending the races at Bangalore and Hyderabad. The Commissioner also asked for reopening of the assessment year 1970-71 where the appellant had won a sum of Rs. 74,681/- and which was not brought to tax by the Income-tax Officer.

(2.) The matter was heard by three members of the Settlement Commission. By order dated February 24, 1977 two members of the Commission (Shri R. S. Chadda and Shri K. Srinivasan) upheld the assessment for the assessment years 1971-72 and 1972-73 made by the Income-tax Officer and confirmed by the Appellate Assistant Commissioner of Income-tax; but did not find it possible under Section 245-E to accede to the request of the Commissioner of Income-tax that the assessment for 1970-71, which was made without bringing to tax the alleged race winnings of Rs. 74,681/-, may be reopened on the view that the assessment for 1970-71 was not so connected with the case pending before them as to make it necessary to reopen it for the proper disposal of the assessments for 1971-72 and 1972-73. The Chairman of the Settlement Commission, Shri C. C. Ganapathy, has, however, dissented from the said view.

(3.) Shri B. K. Mehta, the learned senior counsel appearing for the appellant, has submitted that the source of the receipt of the amounts has been established by the appellant by placing on record the certificates from the various race clubs which show that the said amounts were received by way of winnings from races and the burden lay on the Department to show that the said amounts were not winnings from races but was an income from other sources. The submission of Shri Mehta is that in the present case the Department has not adduced any evidence to discharge the said burden which lay on it and the majority view of the Settlement Commission is unsustainable insasmuch as it is based on no evidence and is founded on mere suspicion and surmises. According to Shri Mehta the Chairman of the Settlement Commission, in his dissenting opinion, has correctly applied the law. Shri Mehta has placed reliance on the decisions of this Court in Parimisetti Seetharamamma v. Commr. of Income- tax, A.P., (1965) 57 ITR 532 ; Sreelekha Banerjee v. Commr. of Income -tax, Bihar, (1963) 49 ITR 112 ; and Commr. of Income-tax Orissa v. Orissa Corporation P. Ltd., (1986) 159 ITR 78 . Shri. J. Ramamurthy, the learned senior counsel appearing for the Revenue, has supported the majority view and has submitted that having regard to the facts and circumstances of the case the receipts claimed to be winnings from races were income from other sources and that no case is made out for interference by this Court in an appeal under Article 136 of the Constitution.