Dy. Commissioner of Income Tax , Circle-2(2), Hyderabad V. Hyderabad Race Club, Hyderabad

ITA 379/Hyd/2020

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 6364 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2021
• Appeal Filed By: Department
• Order Result: PartlyAllowed
• Bench Allotted: DB-A
• Assessment Year: 2017-2018
• Appeal Filed On: 05-07-2020
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Charitable institution; Condonation of delay; Revised return; TDS
• Section: 145; 148; 2; 11; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH “A”, HYDERABAD (Through Virtual Hearing) BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SRI CHANDRA MOHAN GARG, JUDICIAL MEMBER ITA NO.379/Hyd/2020 A.Y. 2017-18 DCIT, Circle-2(2), Hyderabad. Vs. Hyderabad Race Club, Hyderabad. PAN: AAACH 2773 C (Appellant) (Respondent) Assessee by Sri K.C. Devdas Revenue by Sri B. Bala Krishna, DR Date of hearing: 12/10/2021 Date of pronouncement: 15/12/2021 ORDER PER A. MOHAN ALANKAMONY, A.M: This appeal is filed by the Revenue against the order of the Ld. CIT(A)-2, Hyderabad in appeal No. 12960/2019-20/CIT(A)-2, order dated 06/01/2020 passed U/s. 143(3) r.w.s 250(6) of the Act for the A.Y. 2017-18. 2. At the outset, Ld. DR submitted before us that there is a delay of 90 days in filing the appeal before the Tribunal. In this regard, the Revenue had filed an affidavit seeking condonation of delay wherein the reasons for not filing the appeal within the prescribed time limit was 2 explained. For reference, the relevant portion from the aforesaid letter is extracted herein below: - “There is delay in filing second appeal in the case of M/s. Hyderabad Race Club, Hyderabad for the A.Y. 2017-18 delayed by 90 days. It is humbly submitted that the appellate order was received in office of the Pr. Commissioner of Income Tax-2, Hyderabad 7/2/2020. Due to lockdown imposed by central Government as preventive measures to contain the spread of COVID-19 from 23/03/2020, it took time for filing of second appeal. Hence, it is humbly requested that the delay of 90 days in filing the appeal may be condoned and appeal be admitted.” 3. On perusal of the affidavit filed by the Revenue, it appears that the delay of 90 days in filing the appeal was due to the Pandemic situation during the period. Therefore, considering the reasons adduced by the Revenue for filing the appeal with a delay of 90 days as well as the Pandemic situation prevailed during the relevant period, in the interest of justice, we hereby condone the delay of 90 days in filing the appeal before the Tribunal and proceed to adjudicate the appeal on merits. 4. The Revenue has raised lone ground in its appeal, and it is extracted herein below for reference: “Whether, on the facts and circumstances of the case, the CIT (A) is correct in following the decision of the Appellate Tribunal in deleting the disallowance of 15% of expenditure on ad-hoc basis without appreciating the fact that there is a lack of evidence supporting the payments allegedly made (upto a limit of Rs. 5,000)?” 5. The brief facts of the case are that the assessee is a limited company incorporated U/s. 25 of the Companies Act, 1956. The main activities of the assessee company are to carry on the business of a race 3 club, to hold and promote races, race meetings, equestrian activities, to establish clubs, hotels and other conveniences in connection with the company’s property, to carry on the activities of coding, designing, formulating, researching and development software and applications relating to equestrian activities and any other sports synchronised with the object of charity. The company filed its return of income for the AY 2017-18 on 31/10/2017 electronically and subsequently revised return was filed on 31/3/2018 declaring income of Rs. 71,57,27,030/-. Thereafter the return was selected for scrutiny under CASS and assessment was completed U/s. 143(3) of the Act on 24/10/2019 wherein the Ld. AO estimated the income of the assessee at 15% of Rs.1021,00,80,463/- the amount paid to winning punters (a person who wagers a bet on a horse or horses in a particular race or a combination of races) on which no tax was deducted at source as these payments were supposed to be made below the limit specified U/s. 194BB of the Act which works out to Rs. 153,15,12,070/-. 6. During the course of scrutiny assessment proceedings, the Ld AO observed that: (i) In respect of winnings paid to punters below the limit specified U/s. 194BB of the Act for not deducting tax at source, the assessee had not maintained proper records such as name and address etc of the recipient. 4 (ii) With respect to the recipients of winnings where tax is not deductible at source there was nothing on record to establish their identity. 7. Therefore, it was opined by the Ld. AO that the assessee is unable to prove the genuineness of the payment made to the individuals whose winnings are below the tax-deductible limit as the same could not be verified. 8. In this connection the assessee had made the following submissions: “1.4 In this connection we humbly submit the following for your kind consideration. • Hyderabad Race Club (HRC) is a company, engaged in the business of maintaining and operation of horse racecourses. As part of such activity, HRC collects monies from punters who bet on horse racing. HRC collects such betting monies and distributes the same amount the persons who won such betting. However, for conducting such betting activity, HRC collects commission from such betting proceeds. • Persons can engage themselves in such betting activity from a small amount of Rs.5. Therefore, there will be huge number of persons engaging themselves in the activity of betting. A ticket is issued by HRC to person while collecting betting money. Immediately upon conclusion of the race, if such person wins the bet he/she would come to the counter and collects his betting proceeds as per the rules prescribed for such race. It would not be practical and almost impossible for HRC to collect the names, addresses and other details either while issuing such tickets or while making the payments to winner of the bet. Such impossibility is due to time constraint coupled with huge number of persons of whom majority persons would be not so educated to supply their identities such PAN cards. Also, there will not be enough time to collect such details as the time gap between opening of counter and start of race would be very less and the winner will not wait after closure of race. Due to this impossibility of collecting information, HRC was unable to produce details of persons to whom betting monies amounting to Rs.5,000 or less have been paid ( Rs. 10,000/- W.e.f 1 st June 2016). 5 • This kind of activity is the same for each and every other horse racing club in the country. HRC is not the only entity which could not furnish these details since the practice and procedure of betting is same across the country. • During the assessment for earlier AY.2010-2011, the assessee submitted a detailed letter dated 18/03/2013 explaining the procedure of betting, maintenance of records, sample records, etc., Such letter is consequent to physical inspection by the Department to examine the procedure and maintenance of records for the betting activity. The Department after examining the whole process did not find any discrepancy or malafide recording of transactions. • The assessee explained that, while betting the punter is issued a small ticket generated by computer system which contains a unique number, amount received and other details of race. If such punter wins the bet, another small ticket is generated to indicate the amount won containing cross reference of original ticket. If the amount payable is more than Rs. 10,000 (earlier the same was Rs. 5,000), HRC would collect a declaration from the punter indicating his / her name, address, PAN signed by the punter. Thereafter, TDS would be deducted U/s. 194BB by HRC. However, for amounts less than Rs. 10,000 (earlier the same was Rs. 5,000) no such declaration was taken by the assessee as the TDS obligation was not there on such payments. • Due to peculiar nature of business, it was not possible for the appellant to maintain records of names, addresses, PANs of each ticket holder within the short time available between purchase of ticket and disbursement of ticket proceeds. • The assessee prays your good self to kindly consider that, in the first instance, the betting monies collected and paid were neither income of assessee nor expenditure of the assessee. The assessee acts as mediator in the betting transaction, collects the monies and out of such amounts recovers its commission, government taxes, tax deduction at source u/s 194BB and passes on the entire balance to the Winning punters. Effectively, the losers' money is passed on to the Winners, after reducing its own commission, government taxes, tax deductions at source. • It may kindly be considered that all the betting money collected is passed to Winning punters after reducing commission, government taxes and tax deducted at source. The assessee is not entitled to keep any other amount out of betting money collected. The assessee acts in trust for the monies collected on behalf of winning punters. • Therefore, it is humbly prayed that the betting monies paid cannot be treated as expenditure, which practice is in accordance with the accepted accounting principles followed by the assessee. Therefore, such amount 6 was never claimed by the assessee as expenditure in the. books of account. Hence, disallowance of expenditure that was never claimed may kindly be deleted on this count. • Alternatively, even if such an amount is considered to be expenditure as per Income Tax Act, 1961, the same is not liable for disallowance relying upon the following judgments of the Tribunal in assessee’s own case in earlier years. ITA No. 313/HYd/2011 for the AY 2004-05 ITA No. 312/Hyd/2011 for the AY 2005-06 ITA No.1059/Hyd/2011 for the AY 2006-07 ITA No. 1425/Hyd/2011 for the AY 2007-08 ITA No.120/Hyd/2012 for the A.Y.2008-2009 dated 16/07/2012 ITA No.1 08/Hyd/2013 for the A.Y.2009-2010 dated 30/04/2013 ITA No.295-98/Hyd/2016 for A.Y 2010-11 and 2011-12 dated 30/12/2016 ITA no 1661/Hyd/2016 and 732/Hyd/17 for A.Y 2012-13 and 2013-14 dated 14.02.2018 ITA no. 977/Hyd/2018 for A.Y 2014-15 dated 05/04/2019 • Combined order of the Hon'ble Tribunal for the A.Y.2004-2005, A.Y.2005- 2006, A.Y.2006-2007 and A.Y.2007-2008 reads as under. 7. Aggrieved the Assessee is on appeal before us. We find that the issue is covered in favour of the Assessee by the order of the ITA Tin Assessee's own case for the AYs 2004-05 and 2005-06 in ITA No.212, 710/Hyd/08 and 972, 973/ Hyd/08 dated 26.09.08. The ITAT has deleted a similar disallowance observing as under. Ad-hoc disallowance out of winnings payments of less than Rs. 2, 500 each: ............... There is no material on record brought out by the revenue to show that the cash transactions, like number of tickets sold, quantity sold and the rates at which the tickets were sold, are not genuine/correctly recorded. The only thing that is not done by the club is that the details of the payees are not entered for tickets sales. The failure to maintain the same, cannot be regarded as a circumstances giving rise to a suspicion with regard to the genuineness of the transactions. Therefore, it cannot be said that by not maintain the names of the payee, etc., the assessee has violated the provisions of IT, since it was practically impossible on this part to do so. 7 Since, in the case under consideration, the entire payment was through computerised system, duly audited by Independent CA at the end of each racing day, and the payments were effected only on the basis of winning ticket numbers, etc., through the system of accounting followed, the assessee had proved all the four conditioner noted above in support of its payments . ............ In the circumstances, we delete the entire ad hoc disallowance of Rs.18,04,50,000 made by the AO. 8. We find that the earlier order of the ITA T have elaborately dealt with the issue In the circumstances, respectfully following the decision of the coordinate bench in the Assessee's own case we delete the ad hoc disallowance 1.5. In view of the above, we humbly request you not to make any disallowance for the betting monies paid to punters for whom no tax has been deducted by the assessee. " 9. However, the Ld. AO rejected the submission of the assessee and made addition by observing as under: “5. The assessee company made payments of above Rs. 5000/- and below Rs. 5000/- to wining betting holders. In respect of cash payments of above Rs. 5000/-, the assessee has maintained proper record of recipients i.e., name and address etc. In respect of payments less then Rs. 5000/- Rs. 10,000/- from 01/06/2016), no proper record to identify the payee is available / produced. During FY 2016-17 relevant to AY 2017-18, the assessee company made cash payments of less than Rs. 5000/- (less than Rs. 10,000/- from 01/06/2016) to the extent of Rs. 1021,00,80,463/-. The assessee is unable to produce names and addresses of the payees, without which the genuineness of payment could not be verified. The assessee further relied upon the ITAT’s judgment in its own case pertaining to 2004-05, 2005-06, 2006-07, 2007- 08, 2008-09 & 2009-10. 6. The submissions made by the assessee company are not tenable. The assessee instead of producing the required information stated that the facts are the same as in earlier years and that everything was computerized and that the Hon’ble ITAT on similar facts of circumstances has deleted the disallowance. It is true that the Hon’ble ITAT has deleted the ad-hoc disallowance. However, the Department has not accepted the decision of the Tribunal and the matter is pending before the Hon’ble Jurisdictional High Court. 7. In the light of the above and in view of assessee’s inability to produce the name and address of the payees, 15% of Rs. 1021,00,80,463/- where the assessee has not deducted TDS on such payment amounting top Rs. 153,15,12,070/- is disallowed. In this regard, the reasons recorded in earlier assessment orders which may be treated as part and parcel of this order, reliance is placed on Hon’ble 8 Allahabad High Court decision in the case of Motilal Padampat Udyog Ltd vs. CIT 187 ITR 515 (All) wherein it was held that “where the assessee failed to adduce proof with regard to the genuineness of purchase transactions, although it has been given ample opportunity to do so, the addition on that count was held justified. In view of the above, Rs. 153,15,12,070/- being 15% of Rs. 1021,00,80,463/- is disallowed and added back to the income of the assessee.” 10. However, when the matter cropped up before the ld. CIT (A), he granted relief to the assessee by following the earlier orders of the Tribunal. Aggrieved by the order of the Ld. CIT (A), the assessee is now on appeal before us. 11. Before us, the Ld. DR stoutly argued stating that the assessee is bound to maintain receipts for every cash payment made by it comprising of the particulars of the recipient so that the genuineness of the payments could be verified. The Ld.DR further argued stating that maintain such vouchers is a statutory obligation cast upon the assessee which is mandatory. It was further submitted that when the assessee does not maintain such details, the genuineness of the payments cannot be established and therefore, estimation of income is justifiable. The Ld. DR further submitted that the fact and circumstance of the case differs from year to year and therefore, the earlier orders of the Tribunal may not be treated as a binding precedent. 12. The Ld. AR on the other hand vehemently argued stating that the earlier orders of the Tribunal set a binding precedent as the facts are identical for the relevant assessment year also. It was further submitted 9 that for the sake of consistency the ratio laid down in the earlier orders of the Tribunal may be followed for the relevant assessment year. Reliance was placed in the decision of the case decided by the Hon’ble Apex Court PCIT vs. Maruti Suziki India Limited reported in 416 ITR 613 wherein “Rule of Consistency” is advocated. The Ld. AR further submitted in his written submission that in all the events conducted by the assessee where financial implications are involved the transactions are completely computerised and recorded. Thus, collections from various races, payments of winning tickets are all computerized leaving no place for human errors and intervention. On each racing day, Chartered Accountants are engaged to certify the collections to different pool accounts like Jockpot, Treble, Tanala, Quinella, Forecast, Win and Place etc., and also with respect to the amount paid to the winners. Thus, the whole system is full proof and therefore the question of any defects arising therefrom does not arise. The entire computerized betting system is a unit of authentic document to the Club. When the punter presents a ticket for payment, the Betting Terminal Operator inputs the ticket number into the Terminal, which will be verified by the Betting Server and in case it is a winning ticket, a pay-out voucher with details will be printed by the Betting Terminal. Thus, the entire racing accounting system in the club is computerized efficiently leaving no scope for any error. This accounting system is as per the Companies Act, and the AO has no pointed out any mistake in the maintenance of 10 the racing accounts. The computer system, itself records winning payments, and if any payment is not made, the system itself takes it as income and therefore it cannot be said that the information submitted is beyond the scope of verification of real receipt. It was further submitted that the possibility of acquiring details such as Aadhar Card or PAN is difficult due to the inherent nature of the business. HRC receives amounts from innumerable customers who are public at large and in denominations ranging from Rs. 5/- onwards and in respect for every racing event. On completion of each event/race it is immediately required to make winning payments. The gap between two races/event is just 15 minutes within which the winning punters have to be paid back the amount. HRC is required to settle the winning bets immediately because the punters would always like to utilize the winning amounts to bet in the subsequent race. Records for all winning payments exceeding the TDS limit are maintained. The customer base is too huge, and no mode of verification would be apt for huge customer base which is also changing with every race and every event. There is no constant set of customers. More so over with given the base value beginning from Rs. 5 onwards and the necessity to settle the amount within a time gap of 15 minutes. It was further submitted that the mode of operation or payment to a labourer is very different and cannot be compared. On any given race/event there would be atleast 20000 to 30000 punters betting on various terminals or windows. Hyderabad Race Club on an average 11 conducts betting on 6-8 races on any given day. The punters bet on various pools for a single race which could be multiple tickets or could be in same ticket. The punters are not constant, and they keep changing with every race/every event and every day. Their mode of operation is also not constant and keep changing with every event. The varying factors could be the person, the amount he decided to place the bet for, the pool in which he would like to place the bet, the event he chooses to place the bet, the combination of pools the punter would like to place the bet or choose multiple receipt for a single event or multiple receipts for combination of events. 13. We have heard the rival submissions and carefully perused the materials on record. No doubt that on the earlier instances the Hyderabad Branches of the Tribunal had followed the initial orders passed by it for the AY 2004-05 considering the facts as identical without venturing to further examine the issue. At this juncture it is pertinent to mention that from the AY 2004-05 to the relevant AY 2017- 18, Technology has considerably advanced. Many records that was cumbersome to be manually maintained are now possible to be maintain digitally. Presently Government of India has incorporated digital technology in dealing with day-to-day affairs. Therefore, it is now possible to record the identity of every individual by virtue of Aadhar Card, PAN, voter ID, Mobile Phone Nos etc., which more or less every adult Citizen possess in the country or at least by those individuals who 12 participate in such kind of betting. Therefore, the overall scenario has considerably changed from the AY 2004-05 to the relevant assessment year 2017-18. In this context, we proceed to examine the issue in the appeal with a birds view as it pertains to the business of conducting wagering activities which is generally not acclaimed as a healthy activity in the society and the aggregate quantum of such prize winnings on a day’s Horse Race is as high as Rs. 1021,00,80,463/- toward which tax is not deducted at source. Further it is to be kept in mind that when such large amount is involved it may attract siphoning of funds or pilferages unless there is a full proof system in existence. It should be kept in mind that computer is only GIGO viz., Garbage In Garbage Out. 14. From the information obtained from the Ld. AR as well as the Ld. DR it is apparent that there are different forms of betting in the Horse Race conducted by Hyderabad Race Club such as prize winnings on the horse that finishes first, Quinella (in order to win Qunella one must choose which horse will finish first and which horse will finish second in a race), Jockpot (in order to win Jockpot one has to predict the first six winning horse in a horse race), Super-Jockpot, Second Horse Pool, betting–totalizer, other vertical winnings such as Forecast (Nominates the winner and the second place horse), Tanala (Nominates the first, second and third placed horses), Double (Nominates the horses placed fir in two different races), Trible (Nominates the horses placed first in the three different races), Win and Place etc. Further, as stated by the 13 Ld. AR there is a possibility of a single punter having multiple tickets nominating the same winning horse. Therefore, it is possible for an individual to get winnings from any one or more of the above types of betting in one horse race. It is also possible to get winnings from the multiple tickets nominating the same winning horse. Hence, it is possible for an individual to get cumulative winnings from more than one form of betting conducted in a single horse race which could result more than the limit prescribed U/s. 194BB of the Act for non-deduction of tax at source. 15. Before proceeding further, it is pertinent to note the relevant important provisions of various relevant Acts in the case of the assessee. 16. Section 289 of the Income Tax Act, 1961 specifies that “a receipt shall be given for any money paid or recovered under this Act”. Therefore, it is evident that as per the provisions of the Income Tax Act, 1961, when payments are made maintenance of receipt is mandatory. Obviously, the identity of the person to whom payment is made, the amount of payment, date of payment, purpose of payment etc., has to be recorded in the receipt. This is external evidence which can be relied on and the bonafide of the recipient can be verified. Law does not permit any assessee for not to maintaining authentic records for payment made which are treated as expenditure towards which deduction is granted on the pretext of impossibility. 14 17. Section 145 and 145A of the Income Tax Act, 1961 also prescribes the method of accounting to be followed by every assessee. Obviously, accounting is meaningless unless relevant supporting vouchers for every payment are maintained. 18. Section 194BB of the Income Tax Act, 1961 specifies that where a person is responsible for paying to any person any income by way of winnings from any horse race in an amount exceeding the specified limit, shall at the time of payment thereof deduct tax at source at the rates in force. This provision is very relevant in the case of the assessee because there is every possible for an individual to participate on several events in a singly horse race and the aggregate winnings if any may exceed the limit prescribed U/s.194BB of the Act. Hence maintaining records for payment to recipients of winnings is essential. The Ld. AR has also admitted that the ticket for betting is also as low as Rs. 5 for betting in one event. However, it is a fact that predominantly an individual may buy several tickets for participating in one event of betting. Hence the aggregate winnings in an event may exceed the limit prescribed under 194BB of the Act. Hence if the identity of the recipient of winnings is not maintained the provisions of Section 194BB of the cannot be complied. The Revenue also will not be able to identify the instances where the assessee has not deducted tax at source from such recipients of winnings. Therefore, the claim of the assessee with respect to the 15 winnings aggregating to the amount of Rs. 1021,00,80,463/- the provisions U/s. 194BB of the Act will not at all applicable is factually incorrect. Hence maintaining the identity of the recipients of winnings is mandatory by virtue of the relevant statutes. 19. Section 128 of the Companies Act, 2013: Section 128. Books of account, etc., to be kept by company. — (1) Every company shall prepare and keep at its registered office books of account and other relevant books and papers and financial statement for every financial year which give a true and fair view of the state of the affairs of the company, including that of its branch office or offices, if any, and explain the transactions effected both at the registered office and its branches and such books shall be kept on accrual basis and according to the double entry system of accounting: Provided that all or any of the books of account aforesaid and other relevant papers may be kept at such other place in India as the Board of Directors may decide and where such a decision is taken, the company shall, within seven days thereof, file with the Registrar a notice in writing giving the full address of that other place: Provided further that the company may keep such books of account or other relevant papers in electronic mode in such manner as may be prescribed. (2) .......... (3) The books of account and other books and papers maintained by the company within India shall be open for inspection at the registered office of the company or at such other place in India by any director during business hours, and in the case of financial information, if any, maintained outside the country, copies of such financial information shall be maintained and produced for inspection by any director subject to such conditions as may be prescribed: Provided that the inspection in respect of any subsidiary of the company shall be done only by the person authorised in this behalf by a resolution of the Board of Directors. (4) Where an inspection is made under sub-section (3), the officers and other employees of the company shall give to the person making such inspection all assistance in connection with the inspection which the company may reasonably be expected to give. 16 (5) The books of account of every company relating to a period of not less than eight financial years immediately preceding a financial year, or where the company had been in existence for a period less than eight years, in respect of all the preceding years together with the vouchers relevant to any entry in such books of account shall be kept in good order: Provided that where an investigation has been ordered in respect of the company under Chapter XIV, the Central Government may direct that the books of account may be kept for such longer period as it may deem fit. (6) .......... 20. Section 2 of the Companies Act, 2013. Section 2. Definitions. (12) “book and paper” and “book or paper” include books of account, deeds, vouchers, writings, documents, minutes and registers maintained on paper or in electronic form; (13) “books of account” includes records maintained in respect of— (i) all sums of money received and expended by a company and matters in relation to which the receipts and expenditure take place; (ii) all sales and purchases of goods and services by the company; (iii) the assets and liabilities of the company; and (iv) the items of cost as may be prescribed under section 148 in the case of a company which belongs to any class of companies specified under that section; 21. Rule 3 of The Companies (Accounts) Rules, 2014 and the Companies (Accounts) Amendment Rules 2016. Rule-3. Manner of books of account to be kept in electronic mode.- (1) The books of account and other relevant books and papers maintained in electronic mode shall remain accessible in India so as to be usable for subsequent reference. (2) The books of account and other relevant books and papers referred to in sub-rule (1) shall be retained completely in the format in which they were originally generated, sent or received, or in a format which shall present accurately the information generated, sent or received and the information contained in the electronic records shall remain complete and unaltered. 17 (3) The information received from branch offices shall not be altered and shall be kept in a manner where it shall depict what was originally received from the branches. (4) The information in the electronic record of the document shall be capable of being displayed in a legible form. (5) There shall be a proper system for storage, retrieval, display or printout of the electronic records as the Audit Committee, if any, or the Board may deem appropriate and such records shall not be disposed of or rendered unusable, unless permitted by law: Provided that the back-up of the books of account and other books and papers of the company maintained in electronic mode, including at a place outside India, if any, shall be kept in servers physically located in India on a periodic basis. (6) The company shall intimate to the Registrar on an annual basis at the time of filing of financial statement- (a) the name of the service provider; (b) the internet protocol address of service provider; (c) the location of the service provider (wherever applicable); (d) where the books of account and other books and papers are maintained on cloud, such address as provided by the service provider. Explanation.- For the purposes of this rule, the expression “electronic mode” includes “electronic form” as defined in clause (r) of sub-section (1) of section 2 of Information Technology Act, 2000 (21 of 2000) and also includes an electronic record as defined in clause (t) of sub-section (1) of section 2 of the Information Technology Act, 2000 (21 of 2000) and “books of account ” shall have the meaning assigned to it under the Act. 22. Rule 4 of The Companies (Accounts) Rules, 2014 and the Companies (Accounts) Amendment Rules 2016. 4A. The financial statements shall be in the form specified in Schedule III to the Act and comply with Accounting Standards or Indian Accounting Standards as applicable: Provided that items contained in the financial statements shall be prepared in accordance with the definitions and other requirements specified in the Accounting Standards or the Accounting Standards or the Indian Accounting Standards, as the case may be. KEEPING OF BOOKS OF ACCOUNT AND RELEVANT BOOKS, PAPERS AND DOCUMENTS AT THE REGISTERED OFFICE OF THE COMPANY. Every company shall prepare, maintain and keep at its registered office, all books of accounts and relevant books, papers and documents along with financial statements for every financial year, 18 which give a true and fair view of the state of affairs of the company. These books shall include books and paper, document etc., of the branch offices of the company. These accounts shall be prepared on accrual basis and according to the double entry system of accounting. The company can keep its books of accounts or other relevant papers and documents in electronic mode and the company is required to mention the place of electronic record in e-Form MGT-7.” 23. The relevant provisions of the Indian Stamp Act, 1899 are extracted herein below for reference: Section 2(23) of the Indian Stamp Act, 1899 stipulates that “receipts” includes any note, memorandum or writing whereby any money, or any bill of exchange, cheque or promissory note is acknowledged to have been received. Further, schedule-1, Item No.53 of the Indian Stamp Act, 2004 stipulates RECEIPT [(as defined by section 2(23)] for any money or other property the amount or value of which exceeds five thousand rupees. 24. From the above provisions of the Income Tax Act, Indian Stamps Act and the Companies Act, 2013 it is apparent that maintenance of payment voucher with particulars is mandatory. Therefore, the assessee cannot take a plea that it is impossible to maintain the payment vouchers. In the present scenario identity of every individual who receives winning from wagering transaction can be maintained with ease unlike the past. It is also pertinent to mention that the assessee company is incorporated U/s. 25 of the Companies Act, 1956 i.e., formation of companies with charitable objects and therefore, it is all the more important for the assessee to maintain proper records as these are public funds to be utilised for charitable purpose for the benefit of the society and further if the assessee is granted registration U/s. 12A/AA of the Act the income of the assessee may be exempt from tax 19 on fulfilment of the condition specified U/s 11 of the Income Tax Act, 1961. Further, it is pertinent to mention that private licensed book- makers also operate who accept the bets placed by the punters and distribute winnings to the punters. The private licensed book-makers are supposed to keep accounts for all sums paid or agreed to be paid to them by backers in respect of bets in the prescribed manner as stated in the provisions of “THE TELANGANA (TELANGANA AREA) HORSE RACING AND BETTING TAX REGULATION 1358 F. (REGULATION NO. XLIX OF 1358F.).” It is obvious that the accounts maintained by them are kept separately and only the consolidated entries are incorporated in the books of the assessee. Therefore, unless the identity of the recipient of the winnings is obtained from the assessee as well as from the licensed book-makers it will not be possible to deduct tax from the individuals who get cumulative winnings of more than the limit, prescribed U/s. 194BB of the Act wherein tax has to be deducted at source. The Revenue will also be unable to verify whether tax is deducted at source in the case of individuals wherever it is applicable unless such records are available. Therefore, it is essential for the assessee to maintain proper records for all the payments made to individuals who had winnings from the Horse Race even though they are below the limit prescribed U/s. 194BB of the Act for deducting tax at source. It is also not clear whether from the winnings distributed by the licensed-book-makers tax was deducted at source and accounted by the assessee in the absence of particulars of 20 the recipients of the winnings. Apart from this it is also statutory liability on the part of the assessee to maintain these records as per the Companies Act and the Income Tax Act and Indian Stamps Act. Hence, receipts have to be mandatorily maintained containing at least the name, identity and signature of the recipient of the winnings which will be a reliable external evidence to prove the genuineness of the payment. Needless to mention that provisions of the Income Tax Act and various other statutes cannot be violated by simply stating that it is impossible to obtain receipts from the persons receiving the winnings. 25. However, on perusing the orders of the Ld. Revenue Authorities we find that they have not examined these issues in detail in the case of the assessee. For the enormous transactions made by the assessee, the assessee claims to have maintained the accounts through proper software. The genuineness of this software is also not examined by the Revenue to come to a conclusion that there could be no siphoning of funds or leakages. The Revenue has also not looked into the systems audit report. In spite of such examinations, purely based on presumption and assumptions the Ld. AO has estimated the income of the assessee @ 15% of the winnings of Rs. 1021,00,80,463/- which works out to Rs. 153,15,12,070/- does not seems to be appropriate. Estimation of income has to be based on some scientific and commercial principles. Since the Ld. CIT (A) has also not looked into all these aspects, we are of the considered view that the entire matter is required 21 to be examined afresh by the Ld. AO. Last but not the least, since our finding is that the facts and circumstances of the case has changed considerably from the AY 2004-05 to the relevant AY 2017-18 the decision rendered by the Hyderabad Benches of the Tribunal in the earlier instances shall not be applicable to the case of the assessee for the relevant assessment year. Hence, the decision of the Hon’ble Apex Court cited supra relied by the Ld. AR will not be applicable to the facts and circumstance of the assessee’s case for the relevant assessment year. Therefore, in the interest of both the parties, we hereby remit the entire matter back to the file of the Ld. AO for de-novo consideration in order to pass appropriate order in accordance with law and merit by thoroughly examining the facts of the case. 26. In the result, appeal of the Revenue is allowed for statistical purposes as indicated hereinabove. Pronounced in the open Court on 15 th December, 2021. Sd/- Sd/- (CHANDRA MOHAN GARG) (A. MOHAN ALANKAMONY) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, Dated: 15 th December, 2021. OKK Copy to:- 1) The DCIT, Cir cle-2(2), Ro o m No .513, 5 th Flo or , Signa tur e To wer , Oppo site Bo tanical Gar den, Ko ndapur – 500 084, Telangana. 2) M/s. Hyder abad Race Club, 16-10-1/A/1, Race-co ur se Ro ad, Malakpet, Hyderabad. 3) The CIT (A)-2, Hyder abad. 4) The Pr . CIT-2, Hyder abad. 5) The DR, ITAT, Hyder abad 6) Guard File