Deepak Dewan vs Income Tax Officer.
1995 Latest Caselaw 322 Del

ORDER

MANZOOR AHMED BAKHSHI, J. M. :

The appeal of the assessee is directed against the order dt. 24th Dec., 1993 and the dispute is relating to the addition of Rs. 10 lakhs on account of alleged investment in the purchase of a lottery ticket. Assessee is an individual. Assessee claimed to have won the first prize of Rs. 10 lakhs of Manipur State Lottery Super Bumper Draw of the Government of Manipur during the previous year relevant to asst. yr. 1984-85. A return of income had been filed on 30th Sept., 1985 declaring income of Rs. 2,95,570 which was later on revised on 27th March, 1986 declaring income of Rs. 4,47,750. Assessing Officer (AO) had completed the assessment under s. 143(3) vide order dt. 24th March, 1987 on an income of Rs. 14,47,749. The addition of Rs. 10 lakh had been made by the AO on the ground that assessee was not the actual winner of the lottery and that the prize winning ticket had been purchased by the assessee from the actual winner of the lottery. The purchase price of the winning ticket was presumed to be Rs. 10 lakhs and assessee was deemed to have invested the said amount out of undisclosed income. Assessee appealed to the CIT(A)-III, New Delhi. The CIT(A) did not approve of the addition made by the AO vide order dt. 3rd Jan., 1989. He accordingly remitted the matter to the file of the AO for making further necessary investigation, after giving the appellant due opportunity of being heard in the matter. In para 4 of the appellate order the CIT(A) observed as under :

"In the result, appeal is partly allowed."

Application was moved before the CIT(A) by the AO requesting to modify para 4 of his order which was accepted and para 4 was substituted as under :

"Subject to the above discussion, the assessment order is set aside."

The AO accordingly made fresh assessment vide order dt. 19th March, 1991. The AO not having been able to enforce the attendance of Shri Sachdeva held that assessee did not prove the genuineness of the winning ticket when he had been specifically asked to do so. He accordingly drew the inference that the assessee had utilised the unaccounted money of Rs. 10 lakhs towards the purchase of lottery ticket. The addition of Rs. 10 lakhs was thus accordingly made.

2. The CIT(A) has confirmed the addition vide impugned order against which assessee is in appeal before us.

3. Rival contentions have been heard and records perused. Various issues have been hotly contested before us on both sides. One of the issues argued before us is the that the CIT(A) having remitted the matter to the file of the AO with certain directions, the AO was duty bound to act on those directions and make the fresh assessment in accordance with the decision of the appellate authority. The learned Departmental Representative contended that as per the order under s. 154 of the CIT(A) the assessment has been set aside and therefore, it was open to the ITO to make a fresh assessment in accordance with law and that the findings of the appellate authority were not binding upon the AO.

4. In our considered view, assessee deserves to succeed on this technical ground. The AO, as already pointed out, had made the addition of Rs. 10 lakhs on the background of the winning ticket having been sold by the organizers to a stockiest in Madurai. The assessee had claimed to have purchased the ticket in Delhi from one Shri S. D. Sachdeva, B-III, Lajpat Nagar-I, New Delhi-24. On making enquiries from the stockist, it transpired that the ticket had not been sold by the stockist to any dealer in Delhi. Assessee having claimed that the ticket was purchased in Delhi, he had been asked to establish that the said ticket had travelled to Delhi. The assessee, according to the AO, failed to establish that the ticket had travelled from Madurai to Delhi through proper channel so that he could have purchased the same in the normal course. On these facts, the AO had made the addition presuming that the winning ticket had been purchased by the assessee from the actual winner by paying the amount of Rs. 10 lakhs out of undisclosed sources. When the matter came up before the CIT(A) in the first round, the following finding was recorded by him :

"The whole case rests on the assumption that Shri Sachdeva could not have been in possession of the relevant ticket which was ultimately sold to the appellant. Onus cannot be on the appellant to obtain knowledge about the present whereabouts of the said dealer in tickets. It also cannot be said in view of the evidence that the dealer did not exist in the first instance. The assessing authority has not shown in any convincing manner the improbability or the impossibility of the said ticket having been sold at a place other than Madurai. On the basis of the available facts, it is not possible to hold that the appellant was not the actual purchaser of the ticket or that he had unexplained investment of Rs. 10 lakhs with him at the relevant time. It is also not clear from the order if the assessment has been made keeping in mind any specific party or person as the actual owner. Unless there is some evidence about the existence of such a party it cannot be asserted through a bland statement that the appellant was not the actual owner and the income was being assessed in his hands on a protective basis. No clear basis is seen of reaching such a conclusion in the present order of the assessing authority. Accordingly, on this limited point this matter is restored to the file of assessing authority for making further necessary investigation after giving the appellant due opportunity of being heard in the matter."

A perusal of the above order clearly establishes the fact that the CIT(A) had recorded two important findings as under :

(i) Onus cannot be upon the appellant to obtain knowledge about the present whereabouts of the said dealer in tickets; and

(ii) On the basis of the available facts, it is not possible to hold that the appellant was not the actual purchaser of the ticket or that he had unexplained investment of Rs. 10 lakhs with him at the relevant time;

(iii) That it is not clear from the order of the assessment as to whether any specific party or person was kept in mind to be the actual owner of the ticket.

5. After recording these findings the CIT(A) restored the matter to the file of the AO on the limited point for making necessary investigation after giving the assessee due opportunity of being heard in the matter.

6. Whereas the CIT(A) did ask the AO to make further enquiry and investigation and record a finding, certain aspects of the matter as have been highlighted above had been decided by him. Revenue did not challenge the order of the CIT(A). Therefore, these findings have become final. When we see the order of the AO and that of the appellate authority in the second round, we do not find any fresh material having been collected by the AO for taking a different view. The only enquiry made by the AO after the matter was set aside was regarding Shri Sachdeva. As is clear from the records, the AO has not been able to enforce the attendance of Shri Sachdeva. No other material against the assessee has been collected in the second round of the proceedings. As such the addition of Rs. 10 lakhs made by the AO is unwarranted.

7. We do not know what would have been the fate of the findings of the CIT(A) in his appellate order dt. 3rd Jan., 1989 if these were challenged before the Tribunal. However once these findings have not been challenged, the AO while making the fresh assessment cannot ignore those findings as these have become final. We are, therefore, making ourselves very clear that we are not subscribing to the view of the CIT(A) in his appellate order dt. 3rd Jan., 1989 but since the present appeal arises out of order of the AO passed as a result of the first appellate order, we are bound to hold that the AO was legally bound to act upon the findings of the first appellate authority. The Revenue not having established the case as perceived by the CIT(A) vide order dt. 3rd Jan., 1989, the addition of Rs. 10 lakhs, in our view, could not be repeated. The addition is accordingly deleted.

8. The learned counsel argued that the provisions of s. 144B not having been complied with in this case, therefore, the assessment made is bad in law. This contention of the assessee is not well founded. The AO has framed the assessment in accordance with directions of the appellate authority. At the time of making the fresh assessment, s. 144B was not on the statute book, the same having been omitted by the Direct Tax Laws (Amendment) Act, 1987 f. 1st April, 1989. The said section being procedural in nature not having been on the statute book when the fresh assessment was made, it was not necessary for the AO to follow the procedure as provided under s. 144B. This contention of the assessee is accordingly dismissed.

9. In view of the addition of Rs. 10 lakhs having been deleted as above, it is not necessary for us to deal with the other contentions raised before us relating to the addition.

10. In the result, appeal is partly allowed.