Emdarapu Kumaraswamy Vs ITO (ITAT Hyderabad)
The Income Tax Appellate Tribunal (ITAT), Hyderabad, considered an appeal against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), for Assessment Year 2022-23. The dispute concerned the addition of Rs.3,54,44,447 as winnings from online games under Section 115BB of the Income Tax Act and the disallowance of Rs.5,71,288 claimed under Chapter VI-A and Section 24(b).
The assessee, an individual, filed a return declaring total income of Rs.15,62,200, comprising salary income and income from other sources. The case was selected for scrutiny through CASS. During assessment, the Assessing Officer (AO) relied on information obtained during a search conducted under Section 132 in the case of M/s. Gameskraft Technology Pvt. Ltd., which indicated that the assessee had won Rs.3,54,44,447 through online gaming. As this amount was not offered to tax, the AO sought an explanation. The assessee contended that he had played online rummy on the platform and had actually incurred a loss of Rs.32,40,810, while the company’s own records reflected a loss of Rs.30,43,537, making the allegation of winnings incorrect.
The AO, however, concluded that the assessee had earned gross winnings of Rs.3,54,44,447 and held that under Section 115BB, gross winnings from games were taxable without allowing any deduction for expenditure. Referring to Section 58(4), which disallows deduction of expenditure against income from games, the AO added the entire amount to the assessee’s income. The AO also disallowed deductions of Rs.5,71,288 claimed under Chapter VI-A and towards loss from house property because the assessee had not furnished supporting evidence during assessment.
