TMI Blog1999 (1) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... confiscated by the Custom Deptt. 4. That the statement recorded by the Custom Official after torturing the assessee and the statement was written by the assessee's own hand as dictated by the Officials. 5. That the assessee is not the owner of the Gold Biscuits and there is no investment, simply because the assessee being innocent caught by the CIS Staff having biscuits of unknown person who sweeped away on scent of the Police does not come the assessee be treated as owner of Gold Biscuits. 6. That the said gold biscuits are confiscated by the Custom Deptt., the cases of Piara Singh (SC) and Sh. Ram Chander 159 ITR 689 are clearly applicable and the amount is to be allowed as deduction as business loss. 7. That the assessee was apprehended by the CIA staff on dated 5-9-1988 and gold biscuits were seized on 5-9-1988 and ultimately confiscated vide order dated 6-10-1989, so the claim of loss is on 5-9-1988 and the assessee has rightly claimed loss in the year under consideration. 8. That assessment order being against law and facts of the case is liable to be quashed." 2. During the search operations by the Custom Department gold biscuits weighing 2915 Gms. of the value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... art of the smuggling operation and deduction by the customs authorities and on consequent confiscation was a necessary incident and constituted a normal feature of such an operation. The confiscation of the currency notes was loss occasioned in pursuing the business of smuggling, it was a loss in much the same way as if the currency notes had been stolen or dropped on the very while carrying on the business. It was a loss which sprang directly from the carrying on of the business and was incidental to it and its deduction had to be allowed under section 10." Thus, there is clear finding in this case that the assessee was carrying on business of smuggling and that he was liable to income-tax from that business and such income was assessed to tax. There is no such findings in the case of the appellant. The Assessing Officer has not assessed any income from smuggling activities and the appellant has also denied having ever indulged in such activities. On the other hand the addition has been made treating it as unexplained investment. Again observations made on page 28 in the case reported in 179 ITR 27 are worth nothing. These are reproduced as under:- "The matter is now covered b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... blished by the Assessing Officer. He has not assessed any income from smuggling activities. Therefore, the question of allowing loss under section 37 of the Income-tax Act is not the issue. Accordingly, I hold that the decisions relied upon by the counsel of the appellant are not applicable in the case of the appellant facts and circumstances of the case being different as discussed above. Another fact which needs mention here is that the appellant was found in possession of the said gold on 5-9-1988 which is relevant for the assessment year 1989-90. The gold was confiscated by the Customs Authority vide order dated 6-10-1989 which would be relevant only for the assessment year 1990-91. Thus, the claim of loss which occurred on 6-10-1989 cannot be considered in the assessment year 1989-90 which is the year under consideration is in this year. No such loss has occurred and on that ground too the appellant's claim for business loss stands negated. In view of these observations, it is held that the appellant was not entitled to claim of loss on account of confiscation of gold as no such business was being carried on by him and as also due to the fact that the loss did not arise in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Custom Act and section 85 of the Gold Control Act, whereby he is liable for prosecution. Nowhere Court or Custom Authorities have given finding that the appellant is doing a regular business of smuggling. Since no evidence of lawful possession of the Gold was explained the logical presumption was the Gold of foreign Mint Mark was smuggled into the country. 6. It is the duty of the assessee to establish beyond doubt either by way of leading evidence or through circumstantial evidence that he was having a regular income from the smuggling business and the confiscated property was purchased for the purpose of smuggling business then alone section 28 of the Income-tax Act will be invoked. Section 28 of the Income-tax Act cannot be invoked in isolation without any evidence and that too for isolated transaction. This yard stick is also applicable for the person who claims to be carrier of the smuggled gold. The Tribunal has to give such finding with care and after marshalling leading or forceful evidence. 7. We are of the opinion that section 69A is rightly and correctly invoked by the Assessing Officer because the appellant has been found to be the owner of bullion and he was offer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the assessee had income which he had invested in purchasing the wrist watches and, as such, that income was subject to tax. In this view, the High Court was justified in justifying the Tribunal's holding that the assessee was the owner of the wrist watches and thus including the value in the assessment of the assessee as his income and so deemed to be the income of the assessee by virtue of section 69A of the Act coupled with the surrounding circumstances. Therefore, inclusion of the money in purchasing the wrist watches, that is to say, Rs. 87,455, was correct and proper for the assessment year under reference. In this connection, section 69A of the Act may usefully be set out which is as follows:- "Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the option of the Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carrying on regular smuggling activity which consisted of taking currency notes out of India and exchanging them with gold in Pakistan which was later smuggled into India. After the ITAT gave finding of facts, these facts never became point of controversy either before the High Court Hon'ble or before the Hon'ble Supreme Court. The Hon'ble Supreme Court gave following finding:- "In CIT v. S.C. Kothari [1971] 82 ITR 794, this court held that for the purpose of section 10(1) of the Indian Income-tax Act, 1922, a loss incurred in carrying on an illegal business must be deducted before the true figure of profits brought to tax can be computed. If the business i.e., illegal, neither the profits earned nor the losses incurred would be enforceable in law. But, that does not take the profits out of taxing statute. Similarly, the taint of illegality of the business cannot detract from the losses being taken into account for the computation of the amount which can be subjected to tax as 'profits' under section 10(1) of the Act, 1922. The tax collector cannot be heard to say that he will bring the gross receipts to tax. He can only tax profits of a trade or business. That cannot be done w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opinion that loss due to confiscation is nothing but a business loss and same should be allowed under section 10(1) of the Income-tax Act, 1922. 10. The Hon'ble Punjab Haryana High Court got an occasion to discuss the ratio of the decision Piara Singh, while deciding the issue in the case of CIT v. Ram Chander [1956] 159 ITR 689 (Punj. Har.). The Hon'ble High Court gave following observations:- "The finding recorded by the assessing authority was that the assessee had been carrying on smuggling of gold for the last several years and this finding was never challenged by the Revenue at any stage. In view of this finding, the ld. counsel for the Revenue could not dispute that the present case is fully covered by the decision of this court in CIT v. Piara Singh [1972] 83 ITR 678 which is affirmed by the Supreme Court in CIT v. Piara Singh [1980] 124 ITR 40. Accordingly, the said question is answered in the negative, i.e., in favour of the assessee and against the Revenue. The assessee shall also be entitled to costs which are assessed at Rs. 250." The Hon'ble High Court has clearly recorded the findings that when the Assessing Authority accepts that the assessee was carrying ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
