ITO AND ANOTHER Vs. K.N. PRAMOD

JUDGEMENT

(1.) This appeal by the revenue is filed being aggrieved by the order passed by the Assistant Commissioner, Bangalore Bench, Bangalore, in I.T.A. No. 1082/Bang/2005.

(2.) THE Assessee is a wholesale distributor of lottery tickets and was purchasing lottery tickets from Mysore Sales International Limited (MSIL). Lottery Division, Government of Karnataka organisation. The Assessee had made total sales of lottery tickets to the tune of Rs. 1,02,26,070 and no profit was declared by the Assessee from the said sales of Rs. 1,02,26,070. The assessing officer found that the Assessee had purchased lottery tickets from the Government organisation by making payments in cash exceeding Rs. 20,000 amounting to Rs. 45,93,810. The explanation of the Assessee was called for and the Assessee submitted that the payments were made to Mysore Sales International Ltd., a Government organisation and since the agents of MSIL were coming for collection of cash regarding the tickets purchased from MSIL, he was forced to pay the amount in cash. The assessing officer being not satisfied with the explanation offered by the Assessee in accordance with Section 40A(3) 20 per cent, of the total payment of Rs. 45,83,810 comprising payment each in respect of Rs. 20,000 was disallowed as excess and added to the total income of the Assessee by order dated 31 -3 -2004. Being aggrieved by the said order passed by the assessing officer, the Assessee preferred an appeal before the Commissioner (Appeals), Hubli, in I.T.A. No. 117/CLT(A)/HBL/ 2004 -05 and the appellate authority by order dated 30 -3 -2005, held that the lottery tickets were purchased by the Assessee from Mysore Sales International Ltd. (MSIL) which does not accept bearer cheque and wherefore, necessarily payment has to be made by way of cash or demand draft. Accordingly, the said payments come within the purview of Rule 6DD(b) of the Income -tax Rules, 1962 (hereinafter referred to as "the Rules"), and wherefore the said amount paid to the Government company could not be added by the assessing officer towards income and accordingly allowed the appeal by order dated 30 -3 -2005. Being aggrieved by the said order passed by the appellate authority, the revenue preferred an appeal before the Income Tax Appellate Tribunal and the Appellate Tribunal by order dated 3 -8 -2006, confirmed the order passed by the appellate authority holding that Mysore Sales International Ltd. (Lottery Division) is a Karnataka Government company. The sale of lottery tickets has been vouched by the vouchers given by the Assessee and the Assessee has to make payment immediately as it is only on receipt of payment, lottery tickets will be given to the distributors. It was also explained that payment that has to be made depends upon the number of lottery tickets purchased and MSIL does not accept bearer cheques and wherefore, applying the provisions of Rule 6DD(b) of the Rules, the Tribunal confirmed the order passed by the appellate authority and being aggrieved by the said order dated 3 -8 -2006, passed by the Tribunal, the revenue has preferred this appeal.

(3.) WE have heard learned Counsel appearing for the Appellants and the learned Counsel for the Respondent. Learned Counsel appearing for the Appellants submitted that the finding of the Tribunal confirming the order of the appellate authority that the payment made to MSIL a Government company would not be covered under Rule 6DD(b) of the Income -tax Rules, 1962, and wherefore, the concurrent finding is perverse, arbitrary and baseless and the matter may be remitted for fresh consideration of the said question of fact.