1997 (6) TMI 359 - AT - Income Tax

Summary

Issues Involved:
1. Addition to income on account of unexplained investment.
2. Validity of reopening the assessment.
3. Ownership of seized gold bars.
4. Eligibility for set-off of goods seized by customs authorities.
5. Levy of interest u/s 217.

Summary:

1. Addition to Income on Account of Unexplained Investment:
The CIT(A) confirmed the addition of the value of gold and foreign currency seized from the assessee, holding her as the owner based on section 110 of the Evidence Act. The Tribunal, however, found that the assessee was only a carrier of the gold, not the owner, and thus, the onus of proving ownership lay on the department. The Tribunal upheld the addition of Rs. 26,234 for foreign currency as income from "Other sources" but reduced the addition for gold to 5% commission on Rs. 5,41,723 (I.M.V.), totaling Rs. 53,320.

2. Validity of Reopening the Assessment:
The assessee contended that the reopening of the assessment was improper and invalid. However, the Tribunal did not find merit in these arguments and upheld the reopening of the assessment.

3. Ownership of Seized Gold Bars:
The CIT(A) held the assessee as the owner of the seized gold bars based on section 110 of the Evidence Act. The Tribunal disagreed, stating that the department failed to prove ownership. The Tribunal concluded that the assessee was merely a carrier of the gold and not the owner.

4. Eligibility for Set-off of Goods Seized by Customs Authorities:
The CIT(A) denied the set-off of the seized goods as business loss, citing lack of evidence that the assessee was engaged in the business of smuggling. The Tribunal, however, held that if the assessee were considered the owner, the loss due to confiscation should be allowed as a deduction based on the Apex Court's decision in Piara Singh's case.

5. Levy of Interest u/s 217:
The assessee argued against the levy of interest u/s 217, citing the definition of "Regular Assessment" as per the Bombay High Court's decision in M/s. French Dyes and Chemical (India) Pvt. Ltd. The Tribunal held that interest should be levied only till the date of the original assessment and granted relief accordingly.

Conclusion:
The appeal of the assessee was partly allowed, reducing the addition to Rs. 53,320, and the appeal of the Revenue was dismissed, confirming the valuation based on International Market Value.