Betting is illegal but there is nothing wrong in adding the earnings from it to the total business income of an individual for income tax purpose, a tribunal has ruled.

“We are of the view that the estimate made by the Assessing Officer of the assessee’s income at 1 per cent 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,” a bench at the Income Tax Appellate Tribunal (ITAT), Ahmedabad, said in a recent order.

Based on a tip-off regarding cricket betting, police had raided the assessee’s house. Cash of about ₹43.88 lakh, some incriminating documents, and articles such as laptops, mobiles, TV were seized. The Income Tax Department investigated and the assessee claimed that the cash was commission income earned from real estate business.

Asked about transactions of over ₹33 crore and ₹111 crore related to assessment year 2011-12 and 2012-13, respectively, that were recorded in his laptop, the assessee admitted in writing that he was involved in cricket betting brokerage. It was explained that during a match the customer shares their deals over phone, which is entered into computers. The match may be for one day or three days or seven days and so on. On the day the match ends, the customer pays if there is a loss and receives payment if there is a profit. “As per our experience, 100 per cent people take their profits but 75-90 per cent people pay their losses. This is settled in cash immediately, for which no records were maintained,” it was said.

The assessing officer (AO), however, rejected the explanation.  “Considering the fact 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 per cent of the transactions, which works out to ₹33,09,019 for the AY 2011-12 and .₹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,” the AO said in his order. This was later confirmed by the first level of appeal and then upheld by ITAT.

Cash limit

Om Rajpurohit, Director (Corporate and International Tax), AMRG & Associates, says that due to the illegal nature of businesses such as betting or hawala, the explanation for seized cash or such transactions is extremely difficult to describe because there is always a lack of proper supporting documents and justification for the transactions trail.”

Notably, even in the Finance Act of 2017, strict measures were introduced to curb black money and cash transactions, including the addition of a new Section 269ST to the Income Tax Act, which states that no one can receive ₹2 lakh or more in cash in a single transaction in a day (subject to certain exceptions). Section 271DA was also introduced, which imposes a penalty equal to the cash received, regardless of the nature of the receipt. “As a result, now even if your business is legitimate, cash transactions of ₹2 lakh or more are no longer permitted, and will attract a heavy penalty despite proper supporting documentation,” he said.

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