Case Law Details
Kashyap Suresh Brahmbhatt Vs DCIT (ITAT Ahmedabad)
Held that AO correctly estimated the income of the assessee at 1% of the total transactions of cricket betting as found recorded in the laptops seized
Facts-
The assessee is an individual. The Vigilance Squad of State Police, Gandhinagar conducted a raid at his residential premises. During the course of the said raid, cash of Rs.43,88,500/- was found and seized besides some incriminating documents and articles such as laptops, mobiles, TV etc. On the basis of the information received relating to this raid conducted by the Vigilance Squad of State Police, Gandhinagar and the seizure of cash and incriminating documents and articles, an authorization u/s. 132A was issued. An application was also made before the Additional Chief Judicial Magistrate for requisition of assets, in response to which the police authority was directed by the Court to handover all seized assets which were ultimately requisitioned under Section 132A.
Although a different stand was taken by the assessee in respect of cash of Rs.43,88,500/- found during the course of raid, he finally claimed that he was engaged in the business of real estate agency and the said cash represented his commission income earned from the said business. Consequent to action u/s. 132A of the Act, proceedings u/s. 153A of the Act were initiated in the case of the assessee inter alia for both the years under consideration i.e. AY 2011- 12 and 2012-13 by issuing notices. During the course of assessment proceedings, copies of printouts taken from the seized laptops were provided to the assessee and he was asked to explain the transactions of Rs.33,09,01,900/- and Rs.111,48,49,350/- relating to AYs 2011-12 and 2012-13 respectively as found recorded in his laptop.
AO thus estimated the income of the assessee at Rs.33,09,019/- and Rs.1,11,18,493/- from the business of cricket betting for AYs 2011-12 and 2012-13 respectively being 1% of the total transactions as found recorded in the seized laptops and made addition to that extent to the total income of the assessee in the assessments completed u/s. 143(3) and 153A of the Act.
The CIT(A) did not find merit in the said submission made on behalf of the assessee and proceeded to confirm the additions of Rs.33,09,019/- and Rs.1,11,18,493/- made by the AO.
Conclusion-
The assessee also never offered any satisfactory explanation regarding the nature of the said transactions as well as the income earned by him from the said transactions despite sufficient and specific opportunity afforded by the Assessing Officer in this regard during the course of assessment proceedings. He also did not produce any books of account or other relevant details to show the exact amount of income earned by him from the said transactions. The Assessing Officer, therefore, was left with no option but to estimate the income of the assessee at 1% of the total transactions for both the years under consideration as found recorded in the laptops found from the possession of the assessee.
Held that we are of the view that the estimate made by the AO of the assessee’s income at 1% of the total transactions of cricket betting as found recorded in the laptops seized from the possession of the assessee is quite fair and reasonable and the learned CIT(A) was fully justified in confirming the same.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
These two appeals filed by the assessee against a common order of learned Commissioner of Income-tax (Appeals)-12, Ahmedabad (“CIT(A)” in short) dated 27.02.2018 for Assessment Years 2011-12 and 2012-13 involve a solitary common issue relating to the addition made by the Assessing Officer and confirmed by the learned CIT(A) on account of income earned by the assessee from cricket betting and the same, therefore, have been heard together and are being disposed of by a single consolidated order for the sake of convenience.
2. The assessee, in the present case, is an individual. The Vigilance Squad of State Police, Gandhinagar conducted a raid at his residential premises at 13, Vakharia Nagar-II, Kalol, Dist. Gandhinagar on 21.01.2012.
During the course of the said raid, cash of Rs.43,88,500/- was found and seized besides some incriminating documents and articles such as laptops, mobiles, TV etc. On the basis of the information received relating to this raid conducted by the Vigilance Squad of State Police, Gandhinagar and the seizure of cash and incriminating documents and articles, an authorization under Section 132A of the Income-tax Act, 1961 (“the Act” in short) was issued on 30.01.2012. An application was also made before the Additional Chief Judicial Magistrate, Kalol for requisition of assets, in response to which the police authority was directed by the Court vide order dated 15.05.2012 to handover all seized assets which were ultimately requisitioned under Section 132A of the Act on 05.09.2012. Although a different stand was taken by the assessee in respect of cash of Rs.43,88,500/- found during the course of raid, he finally claimed that he was engaged in the business of real estate agency and the said cash represented his commission income earned from the said business. Consequent to action under Section 132A of the Act, proceedings under Section 153A of the Act were initiated in the case of the assessee inter alia for both the years under consideration i.e. AY 201112 and 2012-13 by issuing notices on 24.06.2013. During the course of assessment proceedings, copies of printouts taken from the seized laptops were provided to the assessee and he was asked to explain the transactions of Rs.33,09,01,900/- and Rs.111,48,49,350/- relating to AYs 2011-12 and 2012-13 respectively as found recorded in his laptop. He was also called upon to produce 11 persons whose names appeared in the entries made in his laptops for verification and examination regarding the relevant transactions. In his letter dated 30.12.2014 filed before the Assessing Officer, it was stated by the assessee that all these names were fake as no persons involved in betting used to give their true names and identity. The assessee again was asked by the Assessing Officer to explain the nature of entries as found recorded in his laptops and show-cause as to why income from the said entries relating to cricket betting should not be added on estimated basis. In reply, the following explanation was offered by the assessee before the Assessing Officer in writing:-
“I am not having an established and regular business and as per opportunities coming to me I am inclined to earn my livelyhood. I have petty brokerage business and for 2 yrs I have done cricket betting brokerage also. However I have declared all my income from all the source in return of income filed by me. I am as small person and no books of accounts or any records are maintained by me. The income earned is also in cash hence the details of parties is not available with me. In fact I have filed my return of income for A.Y. 2012-13 based on assets i.e. cash in hand and not on the basis of income. I do not have any other assets except one house which belongs to my wife regarding value of transactions in A.Y. 2011-12 & 201213 I beg to submit that no profit or loss is linked to value of transactions. To explain more I submit as under:-
1) Contents of Seized material
The copies of booklets provided by you out of our seized material contains only entries of saudas entered into. During the course of matches, as per telephonic conversation the entries in computer was made for his settlement of dues. No profit or loss can be arrived at with these entries.
2) Modes operandi of our activity
As and when any match is played, the customer over phone gives us their saudas which is entered into computers. The match may be for 1 day or 3 days or 7 days etc. As per our match is finished same day people either pays us or receive from us. As per our experience 100% people take their profits but 75 to 90% people pays their losses. This is settled in cash immediately for which no records were maintained.
3) Estimation of our income
Please refer my letter dated 31-12-2014 filed on 01-01-2015 where in I have clearly mentioned that I have truly disclosed all my assets (Capital) as income. This was done to buy peace and not confrontation with I.T. Department. I am 40 yrs old and this is my total Wealth/Assets/Capital other than a House which belongs to my wife no other document evidencing any other assets was found during search. I myself do not know how much I have earned or lost out of these activities. Still I filed my return to pay taxes to makes my life normal for a respectable future. I have nothing to say any more and your goodself is requested to assess me as per my returns filed. I hereby clarify again that I have not filed my return of income on the basis of income but on the basis of assets.”
3. The above explanation offered by the assessee was not found acceptable by the Assessing Officer for the following reasons given in paragraph No.7 of his order:-
7. The submissions made by the assessee have been carefully gone through. However, the same is not found acceptable. It is admitted by the assessee and also established that the assessee is engaged in the business of cricket betting. During the course of raid by the police authorities on 21-01-2012 the cash amounting to Rs. 43,88,500/- was seized. Further the laptop LED and 22 Mobile phones were found and seized by the police authority. It was categorically admitted by the assessee before police authority that the laptop and other electronics instruments are kept for cricket betting. Shri Hardik Khamar is computer engineer and operating laptop. Shri Mittal Nair is writing details of transaction and Shri Rakesh Soni is coming for giving transactions in respect of cricket betting. It was also admitted that the cash amounting to Rs. 43,88,500/- found and seized is pertains to the income from cricket betting.
In the reply dated 08-01-2015 to the show cause notice, it is clearly admitted that the seized material contains entries of saudas of cricket betting. Further in respect of modes operandi of activity he was stated that “as and when any match is played, the customer over phone gives us their saudas which is entered into computers. The match may be for 1 day or 3 days or 7 days etc. As per our match is finished same day, the customers either pay us or receive payment from us. As per our experience 100% people take their profits but 75 to 90% people pays their losses. This is settled in cash immediately for which no records were maintained”.
From the above facts, it is established beyond doubt that the assessee engaged in the business of cricket betting. In the return of income filed for the A.Y. 2011-12 the assessee has shown the gross commission income of Rs.3,45,150/- and after deducting expenses the net income has been shown at Rs.2,82,500/-. Therefore, it is quiet apparent that the assessee has earned income from cricket betting over and above the commission income shown in the return of income. From the data available from laptop seized during the year the transaction pertains to A.Y.2011-12 amounting to Rs.33,09,01,900/-. In the show cause notice the assessee was specifically asked to explain why the income should not be estimated on the basis of evidence found during the search. In this connection submitted in the reply dated 08-01-2015 to the show cause notice that he has disclosed all assets as income to buy peace and non confrontation with Income Tax Department. The above contention of the assessee is not tenable. The assessee himself has declared income from commission in return of income which is also confirmatory with the statement given before ITO (Inv), Unit-II, Ahmedabad. Therefore the income earned from cricket betting is over and above the income from commission shown in the return of income. The hardcopy of laptop data were already provided to the assessee. The transaction found for the year under consideration is of Rs. 33,09,01,900/-. In this regard the assessee has stated in his reply dated 08-01-2015 as “the copies of book lets provided by you out of our seized material contains only entries of saudas entered into. During the course of matches, as per telephonic conversation the entries in computer was made for his settlement of dues. No profit or loss can be arrived at with these entries”.
The contention of the assessee is totally baseless and without any documentary evidences. The reasons for the same are that the assessee have been given proper opportunity to offer his explanation regarding entries made in the laptop. The hard copy of the same have also been provided to the assessee. Further the assessee was requested to produce the various persons whose name appeared in the entries made in the laptop and nature of transactions made with them. However, the assessee failed to produce the various persons as well as could not furnish the address of the said persons and explanation regarding entries made in the laptop. Ample opportunities were provided to the assessee for furnishing explanation in respect of entries made in the laptop. However, the assessee failed to comply with the same Therefore, there is no other alternative left except to estimate the income of the assessee from cricket betting, on the basis of above datas. Considering the facts that the transactions involve profit as well as loss and also considering the fact that some of the clients do not turn off for payment of their losses, the income is estimated @ 1% of the transactions which works out to Rs.33,09,019/- for the AY 2011-12 [Rs.1,11,18,493/- for the AY 2012-13], in respect of business of cricket betting. The same is added to the total income of the assessee.”
4. The Assessing Officer thus estimated the income of the assessee at Rs.33,09,019/- and Rs.1,11,18,493/- from the business of cricket betting for AYs 2011-12 and 2012-13 respectively being 1% of the total transactions as found recorded in the seized laptops and made addition to that extent to the total income of the assessee in the assessments completed under Section 143(3) r.w.s. 153A of the Act vide orders dated 19.01.2015.
5. Against the orders passed by the Assessing Officer under Section 143(3) r.w.s. 153A of the Act for both the years under consideration i.e. AYs 2011-12 and 2012-13, appeals were preferred by the assessee before the learned CIT(A) and the submissions made before the Assessing Officer were mainly reiterated on behalf of the assessee before the learned CIT(A) while challenging the additions of Rs.33,09,019/- and Rs.1,11,18,493/- made by the Assessing Officer for AYs 2011-12 and 2012-13 respectively on account of income from cricket betting as estimated by applying a net profit rate of 1% on the total transactions as found recorded in the laptops. The learned CIT(A) did not find merit in the said submission made on behalf of the assessee and proceeded to confirm the additions of Rs.33,09,019/- and Rs.1,11,18,493/- made by the Assessing Officer for the following reasons given in paragraph No.6 of his impugned order:-
“6. I have gone through the assessment order and considered the submission filed by the Ld AR. I find that the appellant has not explained the amount of Rs.33,09,01,900/- for A.Y. 2011-12 and Rs.1,11,18,49,350/- for A.Y. 201213 and has not given details of income from running the racket of cricket betting. I also do not find the explanation that the winners take all money and losers default in payment as acceptable because betting rackets are run by powerful syndicates managed by the strong people from underworld who are capable enough of realizing their dues and enforcing that there is no default. Betting is a matter of habit and immense trust. Neither the betting running syndicate nor the betters are known to quit. Both parties have their ways and means to enforce discipline and payments. If winner is assured of his winning amount, the loser also cannot risk his life and his family by defaulting in payments. Otherwise also it appears against the prudence that anybody will get into and continue to be in an illegal occupation of betting if he is not earning handsomely. I also find that no material has been submitted before me to interfere with assessment made by the AO. However, it may appear that it may have been proper if the cash seized of Rs.43,88,500/-should have been treated as part of income earned from illegal business of betting in cricket and thus total income for the AY 2012-13 but the same is not possible as it is admitted by the appellant before the ITO (Investigation) that the cash found of Rs. 43,88,500/- pertained to income from commission of land.”
6. Aggrieved by the order of the learned CIT(A), the assessee has preferred these appeals before the Tribunal.
7. At the time of hearing fixed in this case on 27.06.2022, none has appeared on behalf of the assessee. There was a similar non-compliance on the part of the assessee when these appeals were fixed for hearing before the Tribunal on 28.05.2021, 11.08.2021, 11.11.2021, 02.03.2022 and 02.05.2022. A letter dated 23.02.2022 filed by the Authorized Representative of the assessee, however, is available on record wherein a request has been made to decide these appeals based on the paper-book filed by the assessee containing certain documents as well as written submission. These appeals are accordingly being disposed of ex-parte qua the appellant-assessee after hearing the arguments of the learned DR and perusing the relevant material available on record including the written submission and paper-book filed by the assessee. It is observed that the first main contention raised by the assessee in the written submission is that the cash of Rs.43,88,500/- found and seized in the raid conducted by the Vigilance Squad of State Police, Gandhinagar was stated by the assessee to be relating to his cricket betting business in the first statement and the Assessing Officer was not justified in treating the same as dalali (brokerage) income of the assessee from the real estate agency business on the basis of the statement recorded subsequently. It is submitted that even in the said statement it was stated to be dalali income of the assessee without any reference to the real estate agency business. We are unable to accept this stand of the assessee. As already noted, different explanation was offered by the assessee in respect of cash found and seized during the raid conducted by the Vigilance Squad of State Police, Gandhinagar, and although it was initially stated to be the income of the assessee relating to his cricket betting business, this stand was subsequently changed by the assessee by stating that the same was belonging to his brother-in-law Mr. Himanshu and even the affidavit of Mr. Himanshu was also filed owning the said cash. Thereafter, in the statement recorded on 19.10.2012, the assessee again changed this stand by stating that the cash found and seized was his income from dalali. Even though there was no mention of any real estate agency business in the said statement, there was a specific mention by the Assessing Officer on page No.7 of his order that a letter dated 09.09.2014 was filed by the assessee during the course of assessment proceedings stating that he was doing dalali business of sale and purchase of land, flat & bungalows in the last two years. Keeping in view the same as well as all other facts of the case, we do not find any infirmity in the orders of the authorities below to treat the cash of Rs.43,88,500/- found and seized during the raid conducted by the Vigilance Squad of State Police, Gandhinagar at the residential premises of the assessee as his commission/dalali income from real estate agency business.
8. The second contention raised by the assessee in the written submission filed before the Tribunal is that the addition of 1% of total transactions relating to cricket betting, as made by the Assessing Officer on estimated basis, has been done purely out of whims and fancies without any basis and the learned CIT(A) is not justified in confirming the same. In this regard, it is pertinent to note that the transactions as found recorded in the laptops found from the residence of the assessee were related to the cricket betting as found by the Assessing Officer on the basis of relevant material and there was nothing brought on record by the assessee to dispute or doubt the same. The assessee also never offered any satisfactory explanation regarding the nature of the said transactions as well as the income earned by him from the said transactions despite sufficient and specific opportunity afforded by the Assessing Officer in this regard during the course of assessment proceedings. He also did not produce any books of account or other relevant details to show the exact amount of income earned by him from the said transactions. The Assessing Officer, therefore, was left with no option but to estimate the income of the assessee at 1% of the total transactions for both the years under consideration as found recorded in the laptops found from the possession of the assessee. The question now is whether the estimate so made by the Assessing Officer and confirmed by the learned CIT(A) is fair and reasonable in the facts and circumstances of the case? In this regard, it is observed that no details whatsoever were furnished by the assessee to show or even suggest the income actually earned by the assessee from the relevant transactions of cricket betting. The only submission made by him in this regard was that he had to pay 100% of the amounts due to bet-winners, whereas the recovery from the bet-losers was only 60-70%. This claim of the assessee, however, was not accepted by the Assessing Officer as well as by the leaned CIT(A) for the cogent and convincing reasons given in their respective orders – the relevant portions of which are already extracted by us in the foregoing portion of this order. It is also noted that neither before the authorities below nor even before the Tribunal, the assessee has brought anything on record to show that the profit actually earned by him from the transactions of cricket betting was lower than 1% as estimated by the Assessing Officer and confirmed by the learned CIT(A). Keeping in view all these facts and circumstances of the case, we are of the view that the estimate made by the Assessing Officer of the assessee’s income at 1% of the total transactions of cricket betting as found recorded in the laptops seized from the possession of the assessee is quite fair and reasonable and the learned CIT(A) was fully justified in confirming the same. In that view of the matter, we find no justifiable reason to interfere with the impugned order of the learned CIT(A) on this issue and upholding the same, we dismiss both the appeals filed by the assessee.
9. In the result, both the appeals filed by the assessee are dismissed.
Order pronounced in the Court on 29th June, 2022 at Ahmedabad.
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