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2020 (1) TMI 686 - AT - Income TaxAddition on undisclosed income u/s. 68 - Loss from the illegal activity of providing accommodation entry - Survey proceedings - HELD THAT:- In this case on hand the assessee for this year had estimated his undisclosed income to the tune of ₹ 3 cr. from his illegal activity of providing accommodation entry after survey on his premises on 22.08.2014. Since the survey in his premises attracted media attention his customers/beneficiaries distanced from him, which resulted in assessee losing ₹ 1.68 cr. (non-recovery of commission from the illegal activity of providing accommodation entry) so, we find that the loss occurred to the assessee springs directly from the carrying on of the business of providing accommodation entry to the beneficiaries and is thus incidental to it has to be allowed as a deduction. Though the AO and Ld. CIT(A) noted that the assessee is in the illegal activity of providing accommodation entry did not appreciate the true significance of the distinction between an infraction of the law committed in the carrying on of a lawful business and an infraction of law committed in a business inherently unlawful and constituting a normal incident of it's activity [CIT Vs. Piara Singh [1980 (5) TMI 2 - SUPREME COURT] and, therefore, in the present case in hand since the assessee has suffered the loss in his unlawful activity of giving accommodation entry which resulted in the beneficiaries not giving the income to the assessee is an allowable deduction. Thus, even if the assessee's estimation of ₹ 3 cr. as his income as per the disclosure petition is accepted, still the assessee's loss of ₹ 1.68 cr. has to be given as deduction and, therefore, the addition in any case was not warranted. So, we direct deletion of ₹ 1.68 cr. as discussed supra. - Appeal of assessee is allowed.
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