1982 (3) TMI 35

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..... rence under s. 256(2) of the I.T. Act, 1961, which relates to the assessment year 1971-72, and arises, (a) on the substantive assessment of the assessee, and (b) from an order imposing a penalty against the assessee. The facts of the case are that some watches were seized by the Customs authorities and they were being smuggled by a German National. It was claimed in the proceedings before the Cust .....

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..... " It is not the assessee's case that this logs is to be adjusted against his income. In fact, it is the case of the Department that the amount invested for the purchase of these watches was the undisclosed income of the assessee. Now, we do not know whether the amount had actually been paid to Mr. Sidhwani or was yet to be paid after the selling of these watches or part had already been paid or p .....

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..... ls but the deduction was disallowed as it was held that it did not arise out of any business or trade. We are dealing with a reverse case. If these watches belonged to the assessee and were lying in a shop, there is no doubt that the amount could be added to his income as an unexplained credit. We see little difference why a similar inference cannot be raised if the watches were smuggled by the .....

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..... he circumstances of the case, the Tribunal is legally correct in holding that the addition of Rs. 70,000 as investment in the smuggling activity is not called for ? 2. Whether, on the facts and in the circumstances of the case, and on the material brought on record, it cannot be held that smuggling activity relating to the watches was not financed by the assessee ? 3. Whether, the Tribunal wen .....

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..... 00 is to be added, then the loss is also to be subtracted as a loss resulting from the seizure and confiscation of the watches. The second question was left open by the Tribunal, so it does not arise. And the third question was also not dealt with by the Tribunal in the manner proposed in the question. The following question would represent the real question which arises and which we think should .....

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