TMI Blog2006 (11) TMI 261X X X X Extracts X X X X X X X X Extracts X X X X ..... he addition of Rs. 18,00,000 in respect of alleged unexplained investment in primary gold and US dollars without considering the concept of real income of the appellant. 5. Under the facts and circumstances of the case, the learned CIT(A), Alwar has erred in not allowing the deduction of the amount of goods and currency amounting to Rs. 18,00,000 confiscated by the customs authorities and not considering this loss in terms of the decision of Hon'ble apex Court in case of CIT vs. Piara Singh (1980) 17 CTR (SC) 111 : (1980) 124 ITR 40 (SC) while computing the income of appellant. 6. Under the facts and circumstances of the case, the learned CIT(A), Alwar has erred in not appreciating and following the ratio of Hon'ble Supreme Court in the case of Piara Singh and jurisdictional Rajasthan High Court in case of CIT vs. Hiranand (2004) 187 CTR (Raj) 32 while deciding the present appeal." 2. We have heard and considered the arguments advanced by the parties in view of orders of the lower authorities, material available on record and the decisions relied upon by them. 3. In the aforesaid grounds two issues have been raised. Firstly, as to whether the learned CIT(A) has erred in sus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me-tax in search case. We made it clear that the AO should complete the assessment in accordance with law taking into account all the decisions of their Lordship on the issue including the decision in the case of Piara Singh." 5. Keeping in view the aforesaid judgment of Hon'ble jurisdictional High Court, the AO made assessment making addition of Rs. 18,00,000 being unexplained investment in primary gold and US dollars seized during the course of search. He also made addition on estimated income from running of taxi, household expenses etc. The AO also did not allow loss to the assessee on account of confiscation of gold and foreign currency made by the Enforcement Directorate. The assessee went in first appeal but could not succeed. Hence, the assessee is now in second appeal before us against the said first appellate order. The grievance of the assessee is that the AO passed order dt. 26th March, 2004 in purported compliance of Hon'ble High Court judgment dt. 3rd Jan., 2003 and adopted the same income, which was worked out on passing of earlier assessment order in purported compliance of order dt. 31st July, 2000 of the Tribunal. The learned Authorised Representative alleged th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated items. In alternative it was argued that if it is held that the confiscated items belong to the assessee then claim of loss on the confiscated items may be allowed. 6. The learned Departmental Representative, on the other hand, placed reliance on the first appellate order while citing the following decisions in support: (i) Bimal Kumar Damani vs. CIT (2003) 181 CTR (Cal) 494 : (2003) 261 ITR 635 (Cal), (ii) CIT vs. Hiranand; (iii) CIT vs. Dr. T.A. Qureshi (2005) 197 CTR (MP) 683 : (2005) 275 ITR 352 (MP). The learned Departmental Representative also submitted that the assessee was very much in possession of the premises where search was conducted and items in question were confiscated. In this regard he referred first appellate order para Nos. 3.1 to 3.4 with the submission that as per observation of the learned CIT(A) in the first round he had observed from the assessment records of earlier years that the assessee himself had disclosed his address at Laxman Mandir upto asst. yr. 1986-87 and after the search operation, the assessee started referring the address of Dahi Wali Gali, Bharatpur. He submitted further that on earlier occasions the issue of possession was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of piara Singh including other decisions on the issue. We find from the lower authorities that they have rightly understood the spirit of the Hon'ble jurisdictional High Court in the aforesaid judgment and have complied the same properly while deciding the issue. Under the aforesaid facts and circumstances we are of the view that the learned CIT(A) has rightly followed the decision of Hon'ble Allahabad High Court in the case of Ishwar Das vs. CIT wherein similar facts as in the present case were there. The Hon'ble High Court was pleased to hold as under: "The Supreme Court has made a distinction for allowing losses incurred while indulging in infraction of law committed in carrying on lawful business and infraction of law committed in the business inherently unlawful. If lawful business is carried on by the assessee and the assessee commits infraction of law in smuggling gold resulting in confiscation of the said gold and loss occurs in such an event no deduction can be allowed as a loss in its lawful business. The present Case fell under the category where a business is carried on by the assessee in a legal manner and he indulges in infraction of law and the losses suffered due ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conclusion the Hon'ble High Court has been pleased to refer the decisions of Hon'ble Supreme Court in the cases of CIT vs. Piara Singh and M.B. Abdulla vs. CIT (1990) 82 CTR (SC) 362 : (1990) 183 ITR 96 (SC). 9. We thus fully subscribe our view with that of learned CIT(A) on the issues of sustaining the addition of Rs. 18,00,000 being unexplained investment in primary gold and US dollars seized during the course of search and denying of claim of loss to the assessee on account of confiscation of gold and foreign currency made by the Enforcement Directorate. So far as acquittal of assessee from levy of penalty of Rs. 50,000 on account of confiscation of gold and foreign currency from him by the FEMA Tribunal is concerned, we also agree with the view of the learned CIT(A) that the said learned Tribunal has cancelled the penalty after giving the assessee, the benefit of doubt. The penalty proceedings are also on different footings vis-a-vis the assessment proceedings. The IT Department thus cannot bank upon the conclusion arrived at in penalty proceedings while finalizing the assessment in a case. We thus uphold the first appellate order in question, The grounds are thus rejected. ..... 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