Parkash Chand Sushil Kumar vs Commissioner of Income Tax

Gokal Chand Mital, J.—On a mandamus issued by this court, the Income Tax Appellate Tribunal, Amritsar, has referred the following question :

"Whether, on the facts and circumstances of the case, the Tribunal is right, in holding that the addition u/s 69A of the Income Tax Act on account of value of gold biscuits Rs. 42,000 seized by the customs authorities cannot be allowed deduction as a business loss ?"

The assessee was carrying on sarafa business. Sushil Kumar, one of the partners of the assessee firm, was caught redhanded by the Customs Department on February 10, 1971, at Lakhanpur Check Post with 20 gold biscuits weighing 200 tolas which were recovered from his attache case while he was travelling from Pathankot in the bus bound for Jammu. Ultimately, the gold biscuits were confiscated by the Customs Department by order dated March 25, 1977, and penalty of Rs. 2 lakhs was imposed on the partner from whose possession the gold was recovered. The value of the gold biscuits was treated by the Income Tax Officer as the income of the assessee from undisclosed sources, and an addition of Rs. 42,000 was made u/s 69A of the Act. The assessee''s appeal before the Appellate Assistant Commissioner failed as also before the Tribunal.

The assessee had claimed deduction of the value of the gold as a trading loss u/s 37 of the Income Tax Act, 1961 (for short "the Act"), in view of the confiscation order passed by the Customs Department which was disallowed by all the authorities up to the Tribunal, and, on these facts, this court issued mandamus and got the question referred, as has been noticed above.

The matter is now covered by two decisions of our court in COMMISSIONER OF Income Tax, PATIALA Vs. PIARA SINGH. [1971] 82 I. T. R. (SH. N.) 27., , and Commissioner of Income Tax Vs. Shri Ram Chander, , and the first decision of this court has been upheld by the Supreme Court in Commissioner of Income Tax, Patiala Vs. Piara Singh, . The facts in those cases are identical with the facts of the case in hand. All the authorities found that the assessee was carrying on the business of smuggling of gold and once that is so, the confiscation of the gold amounted to loss which sprang directly from the carrying on of the business and thus the assessee was entitled to the deduction of the loss and the deduction had to be allowed u/s 37 of the Act. The same view has been taken in the aforesaid decision. Following the same, we answer the question in favour of the assessee, that is, in the negative, to the effect that the Tribunal was not right in holding that addition of amount u/s 69A of the Act on account of the value of gold biscuits of Rs. 42,000 seized by the Customs Authorities cannot be allowed deduction as a business loss. The deduction had to be allowed. There will be no order as to costs.