LAXMI PRASAD Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS case has come before us on a reference made by the Patna Bench of the Income Tax Tribunal. Assessee is an individual and he has submitted his return as such. He was intercepted by the Custom Authorities while he was en -route to Patna and on his personal search, gold bars of foreign origin weighing 599.200 Grams valued at Rs. 1,38,000/ - were recovered from him. They were seized by the Custom Authorities and the assessee was arrested. Before the Assessing Officer father and son did not deny the ownership of the gold bars, but in the written explanation filed by the assessee's counsel it was pointed out that the gold bars did not belong to him and in case it is held to be belonging to him, the deduction should be allowed as the same has been seized by the Custom Authorities. The Assessing Officer did not accept the contention on its finding that the assessee is not carrying on the business of smuggling. It also added a sum of Rs. 1,38,000/ -, the value of the gold as unexplained investment. On appeal by the assessee, the Commissioner of Income Tax (Appeal) noticed that the assessee earlier on 4.8.1989 was apprehended while carrying gold bars and on that basis came to the conclusion that he is engaged in business of gold biscuits' smuggling. On its finding he held that the confiscation of gold was a loss incurred in the course of business and as such the value of the gold i.e. Rs. 1,38,000/ - is fit to be allowed as a business loss.

(2.) REVENUE carried the matter in second appeal before the Income Tax Tribunal (hereinafter referred to as the Tribunal). There were differences of opinion amongst the members constituting the Tribunal. The Accountant member concurred with the finding of the Commissioner of Income Tax (Appeal) and held that confiscation of gold was a loss incurred in the course of business of smuggling and a sum of Rs. 1,38,000/ - was allowable as business loss. Commissioner also held that the amount added as income from other sources deserves to be set -off. The Judicial member did not concur with the Account member and as provided, the matter was referred to the third member.

(3.) ON these facts the Tribunal has referred the following questions: -