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TMI Blog1990 (10) TMI 110X X X X Extracts X X X X X X X X Extracts X X X X ..... Mansukhlal Raichura was brought on record as the legal representative of the deceased assessee for the purpose of the completion of the hearing of the appeal. The appeal was finally heard on 18th Sept., 1990. 2. Through as many as 26 grounds of appeal, the order of the learned CIT(A) has been challenged on the following three points, viz., (1) Addition of Rs. 29,80,220 under s. 69A of the IT Act, 1961 (the Act); (2) Interest disallowance of Rs. 12,000; (3) Charge of interest under ss. 139(8) and 215 of the Act. We propose to deal with the above points in the order they have been mentioned. (1) Addition of Rs. 29,80,220 Under s. 69A of the Act 4. The deceased assessee was an individual earning income from his proprietory concern of Shreeji Minerals and Chemicals, share income from M/s Hindustan Transport Co. and interest. He had filed his return of income on 13th Nov., 1987 at Rs. 53,435. In the course of assessment proceedings, the ITO came to hold the opinion that the assessee, alongwith 13 others, was involved in a case of seizure of contraband goods with certain transport conveyances. The value of the contraband goods and the vehicles seized was determined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontraband goods valued at Rs. 1,51,05,006, had levied a personal penalty of Rs. 3 lakhs on the assessee. The ITO further held that the real ownership of contraband goods lay with the persons who were involved in the customs seizure case and the deceased assessee was one of such persons. He, therefore, concluded that the value of contraband goods of 19.73 per cent share of the assessee, which came to Rs. 29,80,220, was his income from undisclosed sources. He accordingly added the same to the total income of the assessee vide his order dt. 27th March, 1989. This addition was confirmed by the CIT(A) in appeal for almost the same reasons. 5. Mr. K.C. Patel, learned Advocate appearing for the assessee has vehemently urged that for making addition of the amount in question to the total income of the deceased assessee under the provisions of s. 69A of the Act, the Department had miserably failed to prove that the deceased assessee was or had been the owner of the contraband goods seized or any part thereof at any point of time. Mr. Patel further submitted that the addition in question has been made totally on wrong footing in as much as the orders passed by the customs authorities for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned counsel made reference to the decisions in the cases of CIT vs. S.C. Kothari, CIT vs. Pyara Singh (1980) 17 CTR (SC) 111 : (1972) 83 ITR 678 (P H) affirmed by the Supreme Court in (1980) 124 ITR 40 (SC), J.S. Parkar vs. V.B. Palekar and Ors., Addl. CIT vs. S. Pichaimanickam Chettiar (1983) 34 CTR (Mad) 139 : (1984) 147 ITR 251 (Mad) and Chuharmal vs. CIT (1988) 70 CTR (SC) 88 : (1988) 172 ITR 250 (SC). 8. In reply, Mr. M.S. Kaushik, the learned Departmental Representative, supporting the order under appeal, submitted that it was clearly proved on record from the orders passed by the customs authorities that the deceased assessee had been seen supervising and controlling all the operations of unloading the contraband goods from the boards and loading the same on the trucks used for their transportation. The Departmental Representative submitted that from the statements of S/S/ Bhanubhai, Driver and Mangal, Conductor of Truck No. GTF 3767, recorded by the customs authorities in the course of proceedings before them, it was fully proved that the deceased assessee was the person in possession of the contraband goods. According to the Departmental Representative, it can be safe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ership of the contraband goods and vehicles seized and confiscated by the customs authorities or any part thereof to the deceased assessee. In order to appreciate the submissions of the learned representatives for the parties in right perspectiver a closer study of the relevant facts is called for and that is as under. 12. During the course of patrolling in the early hours of the intervening night of 10/11th Sept., 1985 on Asmavati Ghat at Porbander, Shri R.K. Meena, Customs Inspector had noticed the movements of two boats and trucks on the sea shore near godown jetty. He could not identify the persons involved in unloading the goods from the boats and loading the same in the vehicles squid to be standing at the sea shore. Mr. Meena, therefore, informed his Sipdt. about the said smuggling activities indulged in by certain unknown persons. By the time, Mr. D.B. Brahm Bhatt, Supdt. Of Customs and other officers reached Asmavati Ghat, all movements at the godown jetty had disappeared. Shri R.K. Meena, alongwith sepoys Girnar and R.H. Chauhan and Behari Lal, Driver left for in search of the trucks transporting the smuggled goods. On reaching near Chum Ice Factory and Cold Storage, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ronic goods, collectively valued at Rs. 11,77,527. The same had been seized and later on confiscated. 14. The customs shore guard staff, while patrolling the area on the national highway from Porbander to Ranavav had found 20 packages, lying in a pit behind the hospital, on 11th Sept., 1985 at around 1500 hours. The packages contained fabrics of foreign origin valued at Rs. 4,42,169.13 which were seized by the Customs Officers and later on confiscated. 15. On the basis off intelligence collected, the Customs Divisional Office staff of Jamnagar and staff of Customs Division, Porbander had been drafted to work out the intelligence to locate the premises and recover the contraband goods. Accordingly the aforesaid parties had moved around and on 11th Sept., 1985 at about 1600 hours located the premises of Rose Chemicals situated in Udyognagar, Porbander in GIDC 126/1-2. The gate of the said premises was locked and as no occupants were found there at that time the officers had broken open the locks of the compound gate and then found 66 packages containing synthetic fabrics, VCR, Video Cassettes, Wrist watches, clock movements, etc., collectively valued at Rs. 97,06,885 from a god ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith truck No. GTF 3767 by R.K. Meena, Customs Inspector near Chump Ice Factory and Cold Storage. Mr. Patel has pointed out that those two persons, being co-accused in the case before the Judicial Magistrate had retracted their confessional statements given to the customs authorities and, therefore, their testimony was of no value in accepting even the presence of the deceased assessee at the time of loading and unloading of the contraband goods at the godown jetty. Instead, contended Mr. Patel, the order of acquittal recorded by the Judicial Magistrate, Porbander in favour of the accused including the deceased assessee go a long way to prove that none of the accused before the Judicial Magistrate was proved to be in possession of any contraband goods or vehicles transporting such goods. On the other hand, Mr. Kaushik has laid much stress upon the orders passed by the customs authorities confiscating the contraband goods and imposing personal penalties upon the persons involved in the smuggling activities. In our opinion neither the orders recorded by the customs authorities confiscating the contraband goods and vehicles and imposing the personal penalties upon the persons involved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... According to those two persons the deceased assessee was very much present there and the only part played by him was to have been informed by Kanji Fuli about the loading of 80 packages in truck No. GTF 3767. It is also available in their statements that instructions to the labourers as also to Bhanubhai, driver himself were given by Chagan Khopaid and Goving T.T. besides Kanji Fuli. In fact Kanji Fuli is stated to have been playing the prominent part in as much as it was he and Chagan Khopadi who had engaged the truck and at the time of loading of the truck they both were playing the prominent part. It is the admitted position that later on those two persons viz. Bhanubai and Mangal had resiled from their above statements and had stated that such statement had been obtained from them under coersion and undue influence. 21. Be that as it may, we have more than one statements of Bhanubhai and Mangal before us. The question arises which of the statements may be accepted. As we are not concerned with any confessional statement or retracted confessional statement of the said two persons in those proceedings, we would take their statements recorded at different times at their face v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statements of Bhanubhai and Mangal what can be stated is that the deceased assessee was one of the persons concerned in the transportation of the contraband goods through certain trucks. His concern in carrying, removing, depositing, harbouring, keeping, concealing or in any other manner dealing with the contraband goods could be a punishable act under the provisions of the Customs Act, 1962 but certainly such "concern" would not be sufficient to attribute ownership of the goods to him which is required for the applicability of s. 69A of the Act. "To be concerned in" used in the language of ss. 112(B) and 135(1)(b) of the Customs Act, 1962 means `to take part in' or `to be related to'. Another expression "acquires possession" used in the language of the two provisions of the Customs Act is not synonymous with the concept of "possession" which raises a presumption of ownership for the purpose of s. 69A of the Act. For the administration of the Customs Act, 1962, keeping or possession of contraband goods need not be as owner or purchaser. Even temporary possession of contraband goods is punishable as s. 135 does not make any distinction between temporary possession and permanent poss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A of the Act. It, therefore, necessarily follows that the addition in question could have not been made to the total income of the deceased assessee for the year under consideration. 25. In fact Mr. Patel has very rightly pointed out that in the instant case the income-tax authorities have proceeded to make the disputed addition on totally unconceivable and unacceptable grounds. As is evident, the personal penalty levied upon the assessee under s. 112 of the Customs Act, 1962 was made the sole basis for making the addition in question. Addition to the returned income may make a basis for levy of penalty but vice-versa can hardly be right in law. This is also clear from the fact that under the customs Act, 1962 the quantum of personal penalty levied does not necessarily represent the value of the confiscated goods. It was really a very unique method adopted by the ITO to work out the quantum of addition to be made to the total income of the deceased assessee on the basis of the ratio of the penalty imposed upon him vis-a-vis others and in the value of the confiscated goods. Evidently, this could not have been a proper method of working out any addition in the facts and circumstan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... muggled goods had been seized from the possession of the assessee and confiscated. The assessee had been convicted by the Magistrate. That is also not the position in the case before us. 28. In view of our finding on the main arguments advanced on behalf of the assessee, the question of consideration of the alternative arguments regarding allowance of the amount added to the total income of the assessee as business loss and the assessment of the value of the entire contraband goods in the case of all the 14 persons in the status of AOP does not arise. At any rate, we see no necessity of deciding the alternative submissions in that respect. 29. In the result, the main argument of Mr. Patel on the point on hand that the deceased assessee was not the owner of the contraband goods or any part thereof as seized and confiscated by the customs authorities is accepted and the addition in question is directed to be deleted. That disposes of ground Nos. 1 to 20 in the memorandum of appeal. (2) Interest Disallowance of Rs. 12,000. 30. On verification of the accounts, the ITO noted that the assessee had debited Rs. 46,514 as payment of interest. The assessee had paid interest to hi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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