1984 (6) TMI 37 - HC - Income Tax

Summary

Issues:
1. Addition of income under section 69 of the Income-tax Act, 1961.
2. Consideration of confiscated watches as a loss while computing income.

Analysis:

Issue 1: Addition of income under section 69 of the Income-tax Act, 1961.
The case involved a dispute regarding the addition of income of Rs. 10,060 from undisclosed sources of the assessee for the assessment year 1975-76. The amount represented the value of 80 wrist watches seized by the Customs authorities from the possession of the assessee. Despite initially confessing ownership of the watches, the assessee later claimed that they belonged to someone else, which he failed to prove. The Income Tax Officer (ITO) added the sum to the assessee's income as income from other sources since the assessee could not provide evidence supporting his claim. The assessee's appeals to the Appellate Authority and the Tribunal were both dismissed. The acquittal by the criminal court in a prosecution under the Customs Act was deemed irrelevant for the Income-tax Act. The court held that since the assessee was unable to prove he was not the owner of the watches, he must explain the source of investment for their purchase as per section 69 of the Act.

Issue 2: Consideration of confiscated watches as a loss while computing income.
The assessee argued that the entire price of the confiscated watches should be considered a loss while computing his income, citing a Supreme Court decision regarding deduction in a similar scenario. However, the court noted that the assessee did not claim to be engaged in smuggling activities, and therefore, the contention could not be considered for the first time in the reference. The court emphasized that the Income Tax Act does not differentiate based on the method of earning income, whether legal or illegal, but in this case, the assessee's inconsistent contentions prevented the consideration of the claimed loss.

In conclusion, the court answered the referred question in the affirmative and against the assessee, upholding the addition of income under section 69 of the Income-tax Act and rejecting the consideration of the confiscated watches as a loss while computing income due to the assessee's inconsistent contentions.