BIJJALA SHIVALINGAM Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE Income-tax Appellate Tribunal, Hyderabad Bench "B" (for short "the Tribunal"), has referred the following questions stated to arise out of the order of the Tribunal passed in I.T.A. No. 1131/Hyd of 1987, dated August 9,1990, for the assessment year 1983-84 at the instance of the assessee under Section 256(1) of the Income-tax Act, 1961 (for short "the Act").

(2.) THE petitioner is the assessee and he is carrying on business as a retail dealer in silver and silver articles. THE assessee has no licence to deal in gold or gold ornaments. THE assessee filed his return of income for the year 1983-84 on July 25, 1983, disclosing his total income at Rs. 27,165. THE assessee subsequently filed a revised return of income on October 24, 1985, disclosing total income at Rs. 28,980. In the meanwhile, the Central Excise authorities had conducted a search at the residential premises of the assessee on May 5, 1982, and seized gold biscuits and jewellery articles valued at Rs. 3,30,400 (value of 1,955.900 gms. of gold biscuits Rs. 3,25,000 and value of 38.900 gms. of gold jewellery Rs. 5,400) and cash amounting to Rs. 2,20,000 in Indian currency. On receipt of this information, the Commissioner of Income-tax, Andhra Pradesh-I, Hyderabad, issued a warrant of requisition under Section 132A of the Income-tax Act, 1961 (for short "the Act"), to the authorised officer to requisition the said gold and jewellery articles and also cash in Indian currency from the Assistant Collector (Preventive), Central Excise and Customs Department, Hyderabad. THE Income-tax Department was informed that the entire gold and jewellery articles seized from the petitioner-assessee were confiscated by the Central Excise Department under the Customs Act and the rules framed thereunder and it also levied a penalty of Rs. 1,50,000 on the assessee thus leaving the balance of confiscated cash at Rs. 70,000. THE said sum of Rs. 70,000 was requisitioned in favour of the Income-tax Department. THE value of the gold biscuits and gold jewellery at Rs. 3,30,400 was treated by the Income-tax Officer as the income of the assessee from undisclosed sources, and accordingly, an addition of Rs. 3,30,400 was made under Section 69A of the Act and, accordingly, the said sum of Rs. 3,30,400 was assessed as income in the hands of the petitioner-assessee. On being aggrieved by the said action of the Income-tax Officer, the assessee filed an appeal before the Commissioner of Income-tax (Appeals) contending that the addition of Rs. 3,30,400 as his income by the Income-tax Officer is not sustainable. THE Commissioner of Income-tax (Appeals) held that the authorities of the Central Excise Department have found that the assessee was dealing with gold illegally without proper license. So opining and placing reliance on the judgment of the apex court in CIT v. Piara Singh the Commissioner of Income-tax (Appeals) allowed the appeal of the assessee. Aggrieved by the said order of the Commissioner of Income-tax (Appeals), the Revenue preferred an appeal to the Tribunal. THE Tribunal taking into account the admission of the assessee that he was not carrying on any business in gold and gold ornaments and the confiscated gold does not belong to him and the fact that the gold was seized from the residential premises of the assessee and not from his shop and, therefore, it did not form part of the closing stock, held that the petitioner is not entitled to deduction. In that view of the matter, the Tribunal set aside the order made by the Commissioner of Income-tax (Appeals) and restored the addition made by the Income-tax Officer.

(3.) THE only question that arises for decision is whether the value of the gold biscuits and the gold jewellery confiscated by the Central Excise authorities would constitute an admissible deduction ?