2015 (1) TMI 443 - AT - Customs

Seizure of the Indian currency - sale proceeds of contraband gold biscuits of foreign origin - retraction of statement - Held that - Appellant at the time of seizure of the Indian currency stated that the amount in question was the sale proceeds of the contraband gold. It is seen that subsequently the appellant by his representation dated 27.4.1985 to the Collector of Central Excise, Madurai stated that the amount in question was taken as loan from Shri S.S. Arumugam @ Raja Rathinam of Sri Lanka. We find that this issue went up to the ITAT. The Income Tax Officer by order dated 19.9.1989 for the Assessment Year 1986 - 87 added the amount of ₹ 5,50,000/- as borrowed from S.S. Arumugam of Melur during the previous year. - There are no materials to indicate that the sum of ₹ 5,50,000/- represents the concealed income of the assessee. Although when the customs authorities searched the assessee s premises it was stated that the money represented sale proceeds of contraband gold biscuits, the contention of the assessee is that such statement was signed by the assessee out of force and immediately thereafter on 27.4.1985 the assessee stated before the authorities that the seized money represents the deposits received from Rajarathinam, a Srilankan. Sri Rajarathinam on 8.4.85 has field before the assessing officer an intimate that he had migrated from Sri Lanka to India and he has also stated that he brought a sum of ₹ 7,95,000/- out of his earnings in Sri Lanka. The ITO has acknowledged this declaration on 9.4.85. Amounts as seized from the appellant was lent by Shri S.S. Arumugam @ Rajarathinam which is accepted by the ITAT and so there is no reason to consider the said amount as sale proceeds of contraband goods. At this stage, the learned AR for Revenue doubted the authenticity of ITAT orders. We find that the appellant filed photocopy of ITAT orders in their appeal before the Tribunal. There is no need to say that the Revenue is always at liberty to verify the authenticity of the ITAT orders - Impugned order set aside - Decided in favour of assesse.

Issues Involved:
1. Waiver of predeposit of penalty.
2. Confiscation of Indian currency.
3. Legitimacy of the seized amount as loan versus sale proceeds of contraband gold.
4. Validity of statements under Section 108 of the Customs Act.
5. Relevance of Income Tax Appellate Tribunal (ITAT) findings.
6. Penalty proceedings under the Income Tax Act.

Detailed Analysis:

1. Waiver of Predeposit of Penalty:
The applicant sought a waiver of the predeposit of penalty. Considering the age of the case, the tribunal waived the predeposit and proceeded to dispose of the appeal during the stay petition hearing.

2. Confiscation of Indian Currency:
The Assistant Collector of Customs Preventive Section, Madurai, conducted a search on 23.4.1985 and seized Indian currency amounting to Rs. 5,45,000/- from the appellant's premises. The adjudicating authority, in its order dated 30.9.1988, confiscated the currency under Section 121 of the Customs Act, 1962, deeming it as the sale proceeds of contraband gold, and imposed a penalty of Rs. 25,000/- on the appellant.

3. Legitimacy of the Seized Amount as Loan versus Sale Proceeds of Contraband Gold:
The appellant initially admitted that the seized amount was from the sale of contraband gold but later claimed it was a loan from Shri S.S. Arumugam @ Rajarathinam of Sri Lanka. The appellant provided a promissory note and a medical certificate to support his claim, which was later found to be unauthentic by the customs officers. The appellant's claim was further supported by the ITAT, which acknowledged the loan from Rajarathinam and deleted the addition of the amount as income.

4. Validity of Statements under Section 108 of the Customs Act:
The Revenue argued that the statements recorded under Section 108 of the Customs Act are valid evidence, and the appellant's retraction was an afterthought. The customs officers' thorough investigation revealed that all persons related to the appellant admitted the currency was from smuggled goods.

5. Relevance of Income Tax Appellate Tribunal (ITAT) Findings:
The ITAT, in its order dated 31.12.1996, supported the appellant's claim that the amount was a loan from Rajarathinam. The ITAT noted that Rajarathinam had declared bringing Rs. 7,95,000/- from Sri Lanka and had given Rs. 5,50,000/- to the appellant. The ITAT found no material to indicate the amount was concealed income and deleted the addition made by the Income Tax Officer. The tribunal emphasized that Rajarathinam was a bona fide migrant from Sri Lanka, and the department should have accepted the appellant's explanation.

6. Penalty Proceedings under the Income Tax Act:
The Income Tax Assessing Officer had levied a penalty of Rs. 3,83,183/- under Section 271(1)(c) of the Income Tax Act, which was set aside by the Commissioner of Income Tax (Appeals). The ITAT upheld this decision, confirming that the penalty was not sustainable as the amount was not concealed income. The ITAT's order dated 25.7.2003 dismissed the appeal filed by the Income Tax Department, reinforcing that the penalty was wrongly imposed.

Conclusion:
The tribunal concluded that the seized amount was indeed a loan from Shri S.S. Arumugam @ Rajarathinam, as accepted by the ITAT, and not the sale proceeds of contraband goods. The impugned order was set aside, and the appeal filed by the appellant was allowed with consequential relief.

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