2003 (10) TMI 6
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....g to the assessee due to confiscation of gold by the customs authorities is to be deducted from the amount included in his income as unexplained investment?" The Central Excise Department, Jaipur on January 24, 1979, seized foreign gold weighing 1,469 grams worth Rs. 1,32,500 from the assessee at Jaipur under section 110 of the Customs Act, 1962 (for short, "the Act, 1962") for contravention of the restrictions/prohibitions imposed vide notification issued under section 11 of the Act, 1962, read with section 13(1) of the Foreign Exchange Regulation Act, 1973 (for short, "the Act, 1973"). In consequence of the information and material available with the Central Excise Department, proceedings were initiated by the Revenue against the assessee and a notice was issued under section 139(2) of the Act, 1961. In response to that notice the assessee filed his return of income on June 30, 1979. Since the case was completed without making necessary enquiries under section 143(1) of the Act, 1961, on November 26, 1980, necessary approval under the provisions of section 143(2)(b) thereof was obtained from the Inspecting Assistant Commissioner of Income-tax, Ajmer Range, Ajmer, so as to comp....
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.... was proposed to be added was the unaccounted money which was utilized for acquiring of gold. The assessee has filed appeal before the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur. Before the learned Tribunal the plea of the assessee was that the decision in CIT v. Piara Singh [1980] 124 ITR 40 (SC), fully applied in the present case. The learned Tribunal opined that since the entire facts go to indicate that the assessee had been carrying on the illegal business of smuggling, the loss thereon from deemed confiscation had to be deducted from the amount included as unexplained investment. The alternative contention raised before the learned Tribunal that the confiscation of the gold has to be termed as a short-term capital loss and, as such, be allowed under section 71(3) of the Act, 1961, it is held that this contention is only consequential. The Revenue filed an application under section 256(2) of the Act, 1961, and prayed for reference of the aforesaid questions for adjudication and decision to this court. Mrs. Parinitoo Jain, learned counsel for the Revenue, contended that before the learned Tribunal there was no material to conclude that the assessee was carrying on il....
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.... it to be income from other sources under section 69 of the Act, 1961. It was taken to be the income from other sources on account of unexplained investment, not recorded in the books of account of the assessee. The learned Tribunal has recorded a finding of fact that from various documents of the customs authorities it is established that the assessee was carrying on illegal business of smuggling of gold. The gold was confiscated from him. The Revenue added the value of the seized gold of Rs. 1,32,500 as income of the assessee under section 69 of the Act, 1961, on account of unexplained investment for the purpose of charging tax but when the question comes for the claim made by the assessee of loss suffered in a business, i.e., on account of confiscation of the gold, the defence has been taken that the smuggling was not the business of the assessee. This approach of the Department, leaving apart that it is the settled position of law on the point by their Lordships of the hon'ble Supreme Court in CIT v. Piara Singh [1980] 124 ITR 40, is unfair, unreasonable, unnatural and uncalled for. It is difficult to appreciate, what to say, to accept this approach of the revenue officers onl....
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....t while computing the profits of the business under section 10(1) of the Act, 1922 even if the business was illegal. Reference fruitfully may be made to another decision of the hon'ble apex court in CIT v. Piara Singh [1980] 124 ITR 40. Their Lordships of the hon'ble Supreme Court held as under: "In our judgment, the High Court is right. The income-tax 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 t....