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1973 (2) TMI 25 - HC - Income TaxSeizure and confiscation of smuggled goods - Whether record of criminal court proceeding could be relied on in assessment proceedings and whether Evidence Act could be applied to assessment proceedings - if the proceeding section was enacted subsequent to the assessment year, whether it is applicable to the assessment proceedings i.e. the finding that assessee was in possession of gold during the seizure and was therefore the owner of it was justified - Whether smuggled goods confiscated by the Customs authorities can be claimed as business loss and provisions of set off are available
Issues Involved:
1. Reliance on criminal court judgments and evidence in income tax assessment. 2. Proof of ownership of gold by the petitioner. 3. Violation of principles of natural justice. 4. Applicability of Section 69 or 69A of the Income-tax Act. 5. Claim of loss due to confiscation of gold as a deductible loss. Detailed Analysis: 1. Reliance on Criminal Court Judgments and Evidence in Income Tax Assessment: The court held that the provisions of the Evidence Act do not apply to proceedings before the Income-tax Officer. It is permissible for the Income-tax Officer to rely on the judgment of the criminal court. The Punjab High Court in Anraj Narain Dass v. Commissioner of Income-tax and the Supreme Court in Dhakeshwari Cotton Mills Ltd. v. Commissioner of Income-tax supported this view. Thus, the Income-tax Officer was justified in relying on the material from the criminal court to assess the petitioner's income. 2. Proof of Ownership of Gold by the Petitioner: The court examined whether there was sufficient evidence to infer ownership of the gold by the petitioner. The Income-tax authorities relied on circumstantial evidence, such as the petitioner's control over the operation, possession of the gold, and his conduct in offering a bribe to the customs officials. The court concluded that these facts constituted sufficient material to infer ownership. The principle in Section 110 of the Evidence Act, which presumes ownership from possession, was also applicable. The petitioner's failure to provide an alternative explanation for possession further justified the inference of ownership. 3. Violation of Principles of Natural Justice: The court found no violation of natural justice. The petitioner did not offer himself as a witness nor did he request the cross-examination of witnesses before the Income-tax Officer. The grievance regarding cross-examination was raised for the first time before the Tribunal. Therefore, the contention of violation of natural justice was not supported by the facts. 4. Applicability of Section 69 or 69A of the Income-tax Act: The court acknowledged some confusion in the application of Section 69 or 69A by the lower authorities. However, it concluded that both sections are rules of evidence. Since Section 69A was in force at the time of the trial, it was applicable. The petitioner, found to be the owner of the gold, had the value of the gold presumed as income from undisclosed sources under Section 69A. 5. Claim of Loss Due to Confiscation of Gold as a Deductible Loss: The court examined whether the loss from confiscation of gold could be claimed as a deductible loss. It referred to the Supreme Court's decision in Haji Aziz and Abdul Shakoor Bros. v. Commissioner of Income-tax, which held that penalties for infraction of law are not deductible as they are not commercial losses. The court distinguished between commercial losses and penalties for illegal activities. It concluded that the loss from confiscation of gold, resulting from illegal activities, could not be considered a commercial loss deductible under the Income-tax Act. The court did not agree with the Punjab High Court's decision in Commissioner of Income-tax v. Piara Singh, which allowed such a deduction. Conclusion: The court dismissed the petition, upholding the assessment of income based on the ownership of the gold and denying the claim for deduction of loss due to confiscation. There was no order as to costs.
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