COMMISSIONER OF INCOME TAX Vs. JYOTI PRASHAD

JUDGEMENT

(1.) WE have heard the learned counsel for the parties in connection with the present application for reference under S. 256(2) of the IT Act, 1961, which relates to the asst. year 1971 -72, and arises, (a) on the substantive assessment of the assessee, and (b) from an order imposing a penalty against the assessee. The facts of the case are that some watches were seized by the Customs authorities and they were being smuggled by a German National. It was claimed in the proceedings before the Customs officials that the smuggling was done or attempted at the instance of the assessee; the assessee, however, denied this fact and the ownership of the watches was also not claimed by him. In these proceedings, the watches were confiscated and a penalty of Rs. 25,000 was imposed against the assessee which is still under challenge in proceedings under the Customs Act. The ITO had added Rs. 1,10,000 to the assessee's income on account of smuggling business. This was reduced on appeal by the AAC to Rs. 70,000 as being the value of the unexplained investment in the watches.

(2.) THE Tribunal, on a further appeal, held that even this addition of Rs. 70,000 could not be made as the watches had been confiscated and had not been claimed by the assessee. Amongst other things, it was held as follows:

(3.) THUS , the real doubt was expressed by the Tribunal as to whether the amount had been invested by the assessee. This would be a question of fact. However, in the Customs, case, a fine has been imposed against the assessee but, in the criminal proceedings, the assessee has been acquitted. In these circumstances, we have to decide whether a question of law arises out of the order.