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TMI Blog2003 (1) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... is as follows : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in upholding the addition of Rs. 5,14,170 as income of the assesses from undisclosed sources under section 69A of the Income-tax Act, 1961 ?" Mr. Khaitan, learned counsel for the assesses, urges that the learned Tribunal was not justified in adding the amount at the hands of the assesses while computing the income of the assessee, inasmuch as, the seizure was made from two persons, namely, Bimal Kumar Damani, the assesses, and Gopal Das Damani. Separate seizure lists were issued. Therefore, according to him, the possession of the amount recovered belonged to two different persons, i.e., US $ 24,500 to the assessee and US $ 23,200 to Gopal Das Damani. Though the assessee had not specified any amount anywhere but still then when he addressed a letter referring to the amount seized from him, that cannot be treated to be an admission that the entire amount belongs to him. However, he points out from the paper book being I. T. R. No. 39 of 1997, at page 94, where a reference has been made that the return submitted by Sri Gopal Das Damani was accepted by the Department. Therefore, acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... behalf of the respondent, has pointed out that the court cannot travel beyond the scope of the reference as has been referred to the court. He has pointed out that the question that has been referred to is in respect of addition of the amount. The question of deduction is nowhere referred to this court. Therefore, the court cannot go into such question. He relied on the decision in CIT v. Cellulose Products of India Ltd. [1991] 192 ITR 155 (SC), with reference to the scope of the jurisdiction of the court in respect of a question referred to the court under section 256(1) of the Income-tax Act, 1961. In the said decision, it was held that the court is only concerned with the question referred to and not beyond. However, the question of addition can be gone into having regard to the facts proved and the materials placed before the learned Tribunal. All the questions are to be confined within the scope of the materials that were presented before the learned Tribunal. It cannot look into any piece of material or evidence other than those laid before the learned Tribunal at the time when the order was passed. In case anything else is claimed, in that event, it was the burden of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hable. The decision in Piara Singh's case [1980] 124 ITR 40 (SC), being the later judgment and identical on the facts cannot be distinguished and is binding on this court. He then points out that there is no question of presumption until it is shown by the Department that the recovery was made from the assessee. Even if the material relating to the acceptance of return by Gopal Das is not brought before the authority concerned, it is already on record in the penalty proceedings. Therefore, notice of such fact goes to show that the finding of the learned Tribunal is perverse on the face of the evidence relating to the recovery made. In view of the question referred and the statement explaining that the other questions are expansion of the question referred, it is abundantly clear that all the questions formulated in the said four points raised by the assessee are to be gone into and considered in this case. He further relied on the decision in CIT v. Nopany Education Trust [1986] 159 ITR 367 (Cal), in support of his contention with regard to the scope of this reference which, according to him, includes all the four questions in respect of which reference was sought for by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... haitan as to what extent it comes within the scope and ambit of the question referred together with the other three questions being expansion of the question referred. We may now take up the questions as to the justifiability of the addition of the amount at the hands of the assessee as a whole when on the facts, it appears that only US $ 24,500 were recovered from the assessee and the balance US $ 23,200 were recovered from Gopal Das. This is, admittedly, the case of the Customs Department on the basis whereof the present assessment had proceeded to be made. From the seizure list, it appears that US $ 24,500 was found in the possession of the assessee and was seized and confiscated. The question of presumption of possession is confined to the amount recovered from a particular person. Possession of another cannot be presumed to be the possession of the assessee. If the ownership is disputed, the burden of proving that his possession was not the possession of the owner and the ownership is of someone else, is on the assessee. If the Department wants to assert that the assessee is the owner of the amount recovered from someone else, then the burden lies on the Department to pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an had pointed out that the amount that was recovered from the assessee was ultimately confiscated and as such it is business loss and the assessee is entitled to deduction. Mr. Mallick pointed out from section 37 that deduction is allowed of business expenditure. An amount seized on a solitary occasion on account of some illegal activities is neither a business nor can be treated to be a business expenditure. Therefore, the same does not come within the scope and ambit of section 37. Having regard to the facts referred to, we find that any such question though not formulated but seems to be implicit within the scope of the three questions, which were sought for but not referred to. Inasmuch as, addition is permissible only if the amount is held taxable upon computation of the income under section 28 of the Act, an income is computable in accordance with the provisions provided in the Act. Section 37 provides for deduction of business expenditure while computing the income. An income can be added if it is found to have accumulated in the hands of the assessee after it is computed. Computation includes consideration of the question of deduction. Therefore, the question of deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmulated but seems to be implicit within the scope of the three questions, which were sought for but not referred to. Inasmuch as, addition is permissible only if the amount is held taxable upon computation of the income under section 28 of the Act, an income is computable in accordance with the provisions provided in the Act. Section 37 provides for deduction of business expenditure while computing the income. An income can be added if it is found to have accumulated in the hands of the assessee after it is computed. Computation includes consideration of the question of deduction. Therefore, the question of deduction is implicit in the question of addition. Having regard to the facts and circumstances of the case, we do not find any reason to answer the question of deduction in favour of the assessee for the following reasons. Under section 69A of the said Act, a person is liable to taxation in respect of undisclosed or unexplained income. If such income is from a business, then the assessee will be entitled to the deduction of business expenditure available under section 37 of the Act. Business expenditure includes business loss. The question of loss is dependent on the que ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 124 ITR 40 (SC), and hold that on the facts, the said ratio cannot be applied to this case, which is more similar to the facts of the latter decision by the two-judge Bench in M. B. Abdulla's case [1990] 183 ITR 96 (SC). In Piara Singh's case [1980] 124 ITR 40 (SC), there was a finding of fact that the assessee therein was carrying on the business of smuggling. But in the present case, there is no such finding. Mr. Mallick had relied on the decision in Haji Aziz and Abdul Shakoor Brothers' case [1961] 41 ITR 350 (SC), in order to support the finding of the learned Tribunal. In Haji Aziz and Abdul Shakoor Brothers' case [1961] 41 ITR 350, the apex court had held that no expenditure which was paid by way of penalty for a breach of law even though it might involve no personal liability, could be said to be an amount wholly and exclusively spent for the purpose of the business of the assessee within the meaning of section 10(2)(xv) of the Indian Income-tax Act, 1922, and a fine paid by the assessee was not liable to deduction under that section. This provision of section 10(2)(xv) of the 1922 Act is pari materia identical with section 37 of the 1961 Act, which was referred to in Pia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned Tribunal. That apart the assessee had taken a stand that the amount seized did not belong to the assessee. Once he claims that it does not belong to him, he cannot put through a proposition that the loss of such amount would be a business loss attributable to him. One cannot lose an amount that does not belong to him. In fact he had taken an alternative stand and that too as a precautionary measure that if his explanation that the amount does not belong to him is not accepted, then it should be treated as a loss incidental to the business. Once having asserted first that the amount does not belong to him, he cannot claim alternatively the same to be a business loss, particularly, when he is disowning that he was carrying on any business in smuggling activities. Unless he claims that he was carrying on business activity in smuggling, he could not claim the same to be a business expenditure or business loss. If this amount is not an income from business, then it is surely an income from other sources and is liable to be added. Unless the smuggling can be said to be a business, or even if a business not in the nature of speculation, there is no scope for deduction o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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