1. The appellant has filed appeal against the order passed by the CIT(A) vide A. No. 75-HSP/91-92/CIT(A)/Jal. dated 30-3-1992 and taken following grounds in appeal :- "1. That the order under appeal is against law and facts of the case.
2. That the ld. CIT(A) has not appreciated the facts of the case and upheld order of the ITO only on the ground that the assessee is not a Smuggler and the cases cited are not applicable in the assessee's case.
3. That the Panchnamma prepared by the Custom Official/CIA Staff Dasuya was not at all written on the actual statement of the assessee and on actual facts prevailing at that time. In the FIR place is mentioned at near Diary Farm. G. T. Road, Dasuya, whereas the assessee was apprehended by the CIA staff at Bus Stand Dasuya at about 4 p.m., when the assessee was standing waiting for the Bus and some unknown person handed the bag containing 25 Gold Biscuits which we seized by the CIA Staff and ultimately confiscated by the Custom Deptt.
4. That the statement recorded by the Custom Official after torturing the assessee and the statement was written by the assessee's own hand as dictated by the Officials, 5. That the assessee is not the owner of the Gold Biscuits and there is no investment, simply because the assessee being innocent caught by the CIS Staff having biscuits of unknown person who sweeped away on scent of the Police does not come the assessee be treated as owner of Gold Biscuits.
6. That the said gold biscuits are confiscated by the Custom Deptt., the cases of Piara Singh (SC) and Sh. Ram Chander 159 ITR 689 are clearly applicable and the amount is to be allowed as deduction as business loss.
7. That the assessee was apprehended by the CIA staff on dated 5-9-1988 and gold biscuits were seized on 5-9-1988 and ultimately confiscated vide order dated 6-10-1989, so the claim of loss is on 5-9-1988 and the assessee has rightly claimed loss in the year under consideration.
8. That assessment order being against law and facts of the case is liable to be quashed." 2. During the search operations by the Custom Department gold biscuits weighing 2915 Gms. of the value of Rs. 8,94,905 were seized from the appellant. The Assessing Officer gave various opportunities to the appellant to explain the source and written explanation was filed by the appellant on 29-1-1990. In the written submission the appellant took plea that he is an innocent person and prey of bad luck. He submitted that on 5-9-1988 some unknown person handed over a bag to him for a moment on the pretext that he was going away to bathroom and meanwhile the Custom Authority searched the bag in his possession and gold Was confiscated from him. He has submitted that his case is covered by the case of Hon'ble Supreme Court in CIT v. Piara Singh  124 ITR 40 and no addition should be made. The Assessing Officer was not convinced with the explanation submitted by die appellant. The Assessing Officer observed that in the case of Piara Singh (supra) as well as in the case of Parkash Chand Sushil Kumar v. CIT  179 ITR 127/45 Taxman 295 (Punj. & Har.) both the persons were doing the business of smuggling whereas in the case of the appellant he is not doing the business of smuggling and therefore, both the case laws are not applicable on the facts and in the circumstances of the case of the appellant. The Assessing Officer invoked section 69A/69C of the Income-tax Act, 1961. Aggrieved against the order passed by the ITO the appellant filed appeal before the CIT(A). The Ld. CIT(A) dismissed the appeal filed by the appellant giving following observations :- "8. I find force in the observations of the Assessing Officer. In the case of CIT V. Piara Singh it has been observed :- "The respondent, who was carrying on smuggling activity, was apprehended by the Indian Police, while crossing the border into Pakistan and a sum of Rs. 65,000 in currency notes was recovered from his person. On interrogations he stated that he was taking the currency notes to Pakistan to purchase gold there and smuggle it into India. The Custom Authorities found that the assessee was carrying on the business of smuggling and that he was liable to income-tax on income from that business and such income was assessed to tax. The question was whether the assessee was entitled to deduction under section 10 of the Indian Income-tax Act, 1922, of the loss of Rs. 65,000, arising by the confiscation of the currency notes.
Held, that the carriage of the currency notes across the border was an essential part of the smuggling operation and deduction by the customs authorities and on consequent confiscation was a necessary incident and constituted a normal feature of such an operation. The confiscation of the currency notes was loss occasioned in pursuing the business of smuggling, it was a loss in much the same way as if the currency notes had been stolen or dropped on the very while carrying on the business. It was a loss which sprang directly from the carrying on of the business and was incidental to it and its deduction had to be allowed under section 10." Thus, there is clear finding in this case that the assessee was carrying on business of smuggling and that he was liable to income-tax from that business and such income was assessed to tax. There is no such findings in the case of the appellant. The Assessing Officer has not assessed any income from smuggling activities and the appellant has also denied having ever indulged in such activities. On the other hand the addition has been made treating it as unexplained investment. Again observations made on page 28 in the case reported in 179 ITR 27 are worth nothing. These are reproduced as under :- "The matter is now covered by two decision of our court in CIT v. Piara Singh  83 ITR 678 and CIT v. Ram Chander  159 ITR 689, and the first decision of this court has been upheld by the Supreme Court in CIT v. Piara Singh  124 ITR 40. The facts in those cases are identical with the facts of the case in hand. All the authorities found that the assessee was carrying on the business of smuggling of gold and once that is so the confiscation of the gold amounted to loss which sprang directly from the carrying on of the business and thus the assessee was entitled to the deduction of the loss and the deduction had to be allowed under section 37 of the Act. The same view has been taken in the aforesaid decision.
Following the same, we answer the question in favour of the assessee, that is in the negative, to the effect that the Tribunal was not right in holding that addition of amount under section 69A of the Act on account of the value of gold biscuits of Rs. 42,000 seized by the Customs Authorities cannot be allowed deduction as a business loss. The deduction had to be allowed." Here also finding of the fact has been that the assessee was carrying on business of smuggling of gold. The allowing of loss under section 37 of the Income-tax Act, is consequential to the carrying on of the business. In the case reported in 159 ITR 689, again finding of the assessing authority was that the assessee had been carrying on smuggling of gold for the last several years and this finding was never challenged by the Revenue at any stage. The relevant observations which appear on page 690 are reproduced as under :- "The finding recorded by the assessing authority was that the assessee had been carrying on smuggling of gold for the last several years and this finding was never challenged by the Revenue at any stage. In view of this finding, the ld. counsel for the Revenue could not dispute that the present case is fully covered by the decision of this court in CIT V. Piara Singh  183 ITR 678 which is affirmed by the Supreme Court in CIT V. Piara Singh  124 ITR 40." As far as the case of the appellant is concerned there is no such finding recorded by the assessing authority that the appellant had been carrying on smuggling of gold for the last several years. On the other hand the appellant has himself denied having carried on any such business activities and this stands established by the Assessing Officer. He has not assessed any income from smuggling activities.
Therefore, the question of allowing loss under section 37 of the Income-tax Act is not the issue. Accordingly, I hold that the decisions relied upon by the counsel of the appellant are not applicable in the case of the appellant facts and circumstances of the case being different as discussed above. Another fact which needs mention here is that the appellant was found in possession of the said gold on 5-9-1988 which is relevant for the assessment year 1989-90. The gold was confiscated by the Customs Authority vide order dated 6-10-1989 which would be relevant only for the assessment year 1990-91. Thus, the claim of loss which occurred on 6-10-1989 cannot be considered in the assessment year 1989-90 which is the year under consideration is in this year. No such loss has occurred and on that ground too the appellant's claim for business loss stands negated. In view of these observations, it is held that the appellant was not entitled to claim of loss on account of confiscation of gold as no such business was being carried on by him and as also due to the fact that the loss did not arise in the year under consideration." 3. The Ld. Counsel of the appellant pleaded that from the circumstances of the case it is construed that the appellant is doing business of smuggling. The Ld. Counsel has pleaded that the notice issued by the Superintendent of Police shows that the gold was stitched in the jacket which was found in the possession of the appellant. Our attention was also drawn to the letter issued by the Superintendent of Police, Anti-Smuggling branch, placed at page 4 of the paper book. The said notice given to the appellant mentions that the appellant is indulging in smuggling of gold. The Ld. Counsel has also drawn our attention to the report of interrogation where it is mentioned that he was acting as a carrier of Kedar Nath Devi Prasad, Chandni Chowk Delhi. The Ld.
Counsel also brought to our notice the order passed by Sh. Jora Singh Chief Judicial Magistrate, Hoshiarpur, where in para 2 of the judgment given by the Magistrate, he has observed that during the interrogation of Police, the appellant pleaded that he was carrying gold biscuits belonging to one Jeweller at Delhi and these were to be handed over to other jeweller at Jammu. The Ld. Counsel pleaded that this shows that the appellant was only a carrier.
4. We have gone through the records and also taken note of the submissions made by the Ld. Counsel and the Ld. D.R. Nowhere, it is established that the appellant is dealing in the business of smuggling.
Neither there is direct evidence towards the smuggling activities nor there are any circumstantial and indirect evidence to establish that he is either doing business of smuggling or he is indulging in the activity of carrier. The only logical finding of the fact is that the gold biscuits were found in the possession of the appellant. We are, therefore, in agreement with the finding given by the Ld. CIT(A) as well as Assessing Officer that the ratio of the decision of Piara Singh (supra) decided by the Hon'ble Supreme Court are not applicable on the facts and in the circumstances of the case.
5. The appellant was given show-cause notice for violation of the provisions of the N.F.N. 12(ii) F1/48-Df 25, section 13(1) of FERA 1973 and 55 of Gold Control Act, 1968 read with section 111 of the Customs Act, 1962 and section 71 of the Gold Control Act. The order under section 111 was passed to confiscate the seized Gold under section 135 of the Custom Act and section 85 of the Gold Control Act, whereby he is liable for prosecution. Nowhere Court or Custom Authorities have given finding that the appellant is doing a regular business of smuggling.
Since no evidence of lawful possession of the Gold was explained the logical presumption was the Gold of foreign Mint Mark was smuggled into the country.
6. It is the duty of the assessee to establish beyond doubt either by way of leading evidence or through circumstantial evidence that he was having a regular income from the smuggling business and the confiscated property was purchased for the purpose of smuggling business then alone section 28 of the Income-tax Act will be invoked. Section 28 of the Income-tax Act cannot be invoked in isolation without any evidence and that too for isolated transaction.
This yard stick is also applicable for the person who claims to be carrier of the smuggled gold. The Tribunal has to give such finding with care and after marshalling leading or forceful evidence.
7. We are of the opinion that section 69A is rightly and correctly invoked by the Assessing Officer because the appellant has been found to be the owner of bullion and he was offered no explanation regarding nature and source of acquisition of the said bullion to the Assessing Officer. In case of Chuharmal v. CIT  172 ITR 250/38 Taxman 190 the Hon'ble Supreme Court has dealt with the situation like this which is under consideration. The Hon'ble Supreme Court has held the it section 69A is a deeming provision and the Income has wide meaning which mean anything which came in or resulted in gain. The Hon'ble Supreme Court has held that the ownership can be presumed in such circumstances. The Hon'ble Calcutta High Court in the case of CIT v.Soorajmall Nagarmall  181 ITR 340/ 45 Taxman 151 has held that the presumption of law is that person in whose possession article or thing is found is presumed to be owner of that article or thing unless and until that presumption is rebutted by the compelling evidence.
8. We would like to develop the case with the discussion of the case decided by the Hon'ble Supreme Court in the case of Chuharmal (supra).
The facts of the case before the Hon'ble Supreme Court was applicability of section 69A. On May, 12,1973, search and seizure was conducted by the Customs Authorities and consequential to the search 565 wrist watches of foreign made of the value of Rs. 87,455 were seized from the bedroom of the assessee and a Panchnama was prepared.
The Income-tax Officer processed the case and the amount invested in wrist watches was brought to tax by the Assessing Officer in the hands of the assessee under section 69A of the Income-tax Act treating the petitioner as owner of the watches. Subsequently penalty under section 271(1)(c) was imposed. The Hon'ble Supreme Court dealt the issue and gave following finding regarding the section under which income can be assessed. The observation of the Hon'ble Supreme Court is reproduced below : "We are of the opinion that this is the correct approach and following this principle, the High Court in the instant case was right in holding that the value of the wrist-watches represented the concealed income of the assessee.
Section 69A of the Act was inserted in the Finance Act, 1964, and it came into force w.e.f. April 1, 1964. The High Court has rightly held that the expression 'income' as used in section 69A of the Act has wide meaning which meant anything which came in or resulted in gain. Hence, in the facts of this case, a legitimate inference could be drawn that the assessee had income which he had invested in purchasing the wrist watches and, as such, that income was subject to tax. In this view, the High Court was justified in justifying the Tribunal's holding that the assessee was the owner of the wrist watches and thus including the value in the assessment of the assessee as his income arid so deemed to be the income of the assessee by virtue of section 69A of the Act coupled with the surrounding circumstances. Therefore, inclusion of the money in purchasing the wrist watches, that is to say, Rs. 87,455, was correct and proper for the assessment year under reference. In this connection, section 69A of the Act may usefully be set out which is as follows :- "Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the option of the Income-tax Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year." The Hon'ble Supreme Court has decided the law of Evidence for the tax authorities and held that the rigorous rules of evidence contained in the Evidence Act was not applicable to the fiscal law like Income-tax.
However, the Taxing Authority can take benefit of principles of the Evidence Act in the proceedings before them. The second ratio decided by the Hon'ble Supreme Court deals with section 110 of the Evidence Act, 1872 whereby the Hon'ble Supreme Court has held that in case a person was found in possession of anything, the onus of proving that he was not its real owner was on that person. The Hon'ble Supreme Court widened the expression of income mentioned in section 69A of the Income-tax Act and observed that the meaning of income includes anything which comes in or results in gain. We are of the opinion that under such circumstances and in such cases, the Hon'ble Supreme Court has decided the issue that section 69A is clearly and squarely applicable.
9. We will like to discuss the observation of the Hon'ble Supreme Court in the case of Piara Singh (supra). The second para of the judgment is reproduced as follows :- "The respondent, Piara Singh, was apprehended in September, 1958, by the Indian Police while crossing the Indo-Pakistan border into Pakistan. A sum of Rs. 65,500 in currency notes was recovered from his person. On interrogation he stated that he was taking the currency notes to Pakistan to enable him to purchase gold in that country with a view to smuggling it into India. The Collector of Central Excise and Land Customs ordered the confiscation of the currency notes.' The facts narrated in the above mentioned judgment give rise to very important conclusion and existence of fact that Sh. Piara Singh admitted that he was taking currency notes to Pakistan to enable him to purchase gold in that country with a view to smuggle it to India. This evidence is an admission regarding existence of the business of smuggling. Before the ITAT Sh. Piara Singh represented that in case he is engaged in smuggling of gold then he is entitled to deduction under section 10(1) of the Income-tax Act as a loss incurred in the business.
The ITAT again gave finding of fact that the assessee was carrying on regular smuggling activity which consisted of taking currency notes out of India and exchanging them with gold in Pakistan which was later smuggled into India. After the ITAT gave finding of facts, these facts never became point of controversy either before the High Court Hon'ble or before the Hon'ble Supreme Court. The Hon'ble Supreme Court gave following finding :- "In CIT v. S. C. Kothari  82 ITR 794, this court held that for the purpose of section 10(1) of the Indian Income-tax Act, 1922, a loss incurred in carrying on an illegal business must be deducted before the true figure of profits brought to tax can be computed.
If the business i.e., illegal, neither the profits earned nor the losses incurred would be enforceable in law. But, that does not take the profits out of taxing statute. Similarly, the taint of illegality of the business cannot detract from the losses being taken into account for the computation of the amount which can be subjected to tax as 'profits' under section 10(1) of the Act, 1922.
The tax collector cannot be heard to say that he will bring the gross receipts to tax. He can only tax profits of a trade or business. That cannot be done without deducting the losses and the legitimate expenses of the business.
Reliance was placed by the revenue on Haji Aziz an and Abdul Shakoor Bros. v. CIT  41 ITR 350 (SC). In that case, however, the assessee carried on the lawful business of importing dates from abroad and selling them in India. The import of dates by steamer was prohibited. Nonetheless he imported dates from Iraq by steamer, and the consignments were confiscated by the customs authorities. But the dates were released subsequently on payment of fine. The assessee's claim to deduction under section 10(2)(xv) of the Indian Income-tax Act, 1922, was rejected on the ground that the amount was paid by way of penalty for a breach of the law. An infraction of the law was not a normal incident of business carried on by the assessee, and the penalty was rightly held to fall on the assessee in some character, other than that of a trader. Reference was made by the revenue to Soni Hinduji Kushalji & Co. v. CIT  89 ITR 112 (AP). The assessee's claim to the deduction of the value of gold confiscated by the customs authorities was found unsustainable by the court. The decision in that case can be explained on the ground that the assessee was carrying on a lawful business in gold, silver and jewellery and committed an infection of the law in smuggling gold into the country. Our attention has also been invited to J. S. Parkar v. V. B. Palekar  94 ITR 616 (Born.) where on a difference of opinion between two learned Judges of the Bombay High Court, a third learned Judge agreed with the view that the value of gold confiscated by the customs authorities in smuggling operations was not entitled to deduction against the estimated and assessed income from an undisclosed source. It was observed that loss arise by reason of an infraction of the law and as it had not fallen on the assessee as a trader or business man a deduction could not be allowed. Apparently, the true significance of the distinction between an infraction of the law committed in a business inherently unlawful and constituting a normal incident of it was not pointedly placed before the High Court in that case.' It is absolutely clear that the decision of the Hon'ble Supreme Court starts from the basic finding that an illegal business was in existence. If an illegal business is in existence then the Hon'ble Supreme Court is of the opinion that loss due to confiscation is nothing but a business loss and same should be allowed under section 10(1) of the Income-tax Act, 1922.
10. The Hon'ble Punjab & Haryana High Court got an occasion to discuss the ratio of the decision Piara Singh (supra), while deciding the issue in the case of CIT v. Ram Chander  159 ITR 689 (Punj. & Har.).
The Hon'ble High Court gave following observations :- 'The finding recorded by the assessing authority was that the assessee had been carrying on smuggling of gold for the last several years and this finding was never challenged by the Revenue at any stage. In view of this finding, the ld. counsel for the Revenue could not dispute that the present case is fully covered by the decision of this court in CIT V. Piara Singh  83 ITR 678 which is affirmed by the Supreme Court in CIT v. Piara Singh  124 ITR 40. Accordingly, the said question is answered in the negative, i.e., in favour of the assessee and against the Revenue. The assessee shall also be entitled to costs which are assessed at Rs. The Hon'ble High Court has clearly recorded the findings that when the Assessing Authority accepts that the assessee was carrying on smuggling of gold for the last several years then alone the ratio of Piara Singh's case (supra) will be squarely applicable.
11. In order to assess income from profits and gains of business or profession, the assessee has to establish that the income chargeable to Income-tax under the head profit and gains of business or profession were carried on by the assessee at any time during the previous year under consideration. In the instant case the assessee is totally denying that he is carrying on business of gold smuggling. There is no evidence that such business was conducted in earlier previous years or any of the subsequent previous years. The onus is on the assessee to establish beyond doubt the existence of the smuggling business and in case he fails to establish the onus rather there is abundance of evidence to establish that no such business was in existence except the charge framed by the Customs Authorities. The Custom law is attracted only from the point of view of the violation of the Custom Law. The main fact that the Customs Authorities have mentioned in the charge that he was dealing in smuggling does not give conclusive evidence and proof regarding existence of such business. The Hon'ble Supreme Court has given the meaning of business in two historic judgments, namely CIT V. Distributors (Baroda) (P.) Ltd.  83 ITR 377 (SC) and Narain Swdeshi Wvg. Mills v. CEPT  26 ITR 765 (SC). The Hon'ble Supreme Court has held that the business income has to be real, substantial and earned in an organised activity conducted in regular course and conducted for business purpose. For business activity a continuation of the activity is one of the required prerequisite as held by the Hon'ble Supreme Court in CIT v. Calcutta National Bank Ltd.  37 ITR 171 (SC) and Barendra Prasad Ray v. ITO  129 ITR 295 (SC). The appellant has never shown any profit earned from the smuggling business activity arid no profit is shown during the year under consideration.
The Hon'ble Supreme Court has held in Senairam Doongarmall v. CIT  42 ITR 392 (SC) that the business activity must be towards direction of caming profit by regular process and continuous methodology adopted for earning such profit. It is only after the business is established then the expenditure related to such business can be allowed. The case of the appellant fails on the first fact that the existence of business is neither admitted nor established.
12. Before parting, we would like to give a observation that confiscation does not means loss because confiscation means to put the confiscated material in the state custody which will become property of the state as and when the case is finally decided. The confiscated property remains under custody of the State arid retains the ownership of the person from whom it is confiscated till the decision of the final authority on the issue is delivered under the Custom Act. Keeping in view the above discussions, we are of the opinion that the Assessing Officer has rightly made an addition and the ratio of Piara Singh's case (supra) is not applicable on the facts and circumstances of the case.