TMI Blog1994 (2) TMI 125X X X X Extracts X X X X X X X X Extracts X X X X ..... before the Customs Excise Authorities was made by him under duress. He appears to have denied also the ownership and possession of the said biscuit. It further appears that it was also pleaded by him that the said biscuit had delivered to him in 1982 by his grand father. The Assessing Officer did not accept the contention of the assessee and made an addition of Rs. 36,900 being the value of the investment made in acquisition of the gold biscuit by the assessee. The assessee carried the matter to DC(A) in appeal. 3. Before the learned DC(A) it was urged on behalf of the assessee that the biscuit did not belong to the assessee and the conclusions of the ITO were based on presumption only. In the alternative it was also urged that the gold was confiscated as a result of which the assessee suffered an identical loss. Therefore, the assessee was entitled to the allowance of the identical loss. Reliance in this behalf was made on Supreme Court decision in the case of CIT v. Piara Singh [1980] 124 ITR 40. The learned DC(A) accepted the alternate contention of the assessee and deleted the addition. Hence this appeal. 4. It was urged by the learned Departmental Representative that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en applying the principle laid down in Badridas Daga v. CIT [1958] 34 ITR 10 (SC) and quoting with approval Grover J. in CIT v. S. C. Kothari [1971] 82 ITR 794 (SC) observed that-- "In our judgment, the High Court is right. The IT authorities found that the assessee was carrying on the business of smuggling. They held that he was, therefore, liable to income-tax on the income from that business. On the basis that such income was taxable, the question is whether the confiscation of the currency notes entitles the assessee to the deduction claimed. The currency notes carried by the assessee across the border constituted the means for acquiring gold in Pakistan, which gold he subsequently sold in India at a profit. The currency notes were necessary for acquiring the gold. The carriage of currency notes across the border was an essential part of the smuggling operation. If the activity of smuggling can be regarded as a business, those who are carrying on that business must be deemed to be aware that a necessary incident involved in the business is detection by the customs authorities and the consequent confiscation of the currency notes. It is an incident as predictable in the course ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated by the customs authorities was found unsustainable by the court. The decision in that case can be explained on the ground that the assessee was carrying on a lawful business in gold, silver and jewellery and committed an infraction of the law in smuggling gold into the country. Our attention has also been Invited to J.S. Parkar v. V.B. Palekar [1974] 94 ITR 616 (Bom.), where on a difference of opinion between two learned judges of the Bombay High Court, a third learned judge agreed with the view that the value of gold confiscated by the customs authorities in smuggling operations was not entitled to deduction against the estimated and assessed income from an undisclosed source. It was observed that the loss arose by reason of an infraction of the law and as it had not fallen on the assessee as a trader or businessman a deduction could not be allowed. Apparently, 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 the law committed in a business inherently unlawful and constituting a normal incident of it was not pointedly placed before the High Court in that case. We hold that the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... comes to this that herein the assessee was earning income from salary and property and carried on no business in gold whether lawful or unlawful. the assessee was found in possession of ten tolas of gold in the form of a biscuit and on being asked he could not, according to the IT authorities, explain the sources of investment in acquisition thereof. Here it may be observed that the assessee was found in possession of the gold biscuit at the shop of M/s. Kailash Chand Saraf, Alwar where he had allegedly gone to know about the purity of gold in the biscuit. At the assessment proceedings, the assessee took the plea that the gold biscuit had been given to him in 1982 by his grand father but such a plea could not be substantiated. The same plea appears to have been reiterated before the learned DC (Appeals) who does not appear to have dealt with it and, therefore, it shall be inferred that he had rejected such a plea. It may be observed that the assessee had filed neither a cross appeal nor a cross objection against DC (Appeals)'s not deciding his said plea in express terms and implied rejection thereof. Thus at no stage of the proceedings it was pleaded that the assessee had been car ..... X X X X Extracts X X X X X X X X Extracts X X X X
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