Skip to content


Ms. Reena H. Mirchandani Vs. Assistant Commissioner of - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Delhi
Decided On
AppellantMs. Reena H. Mirchandani
RespondentAssistant Commissioner of
Excerpt:
1. this is assessee's appeal against the order of cit(a) v, new delhi dt. 19th december, 1991 relating to asst. yr. 1988-89 and following grounds have been raised by the assessee : "1. that the learned asstt. cit has earned in law, on facts and in the circumstances of the case in treating rs. 7,59,000 as income from undisclosed sources and the learned cit(a) in confirming the same on wholly illegal, erroneous and untenable grounds. 2. that on the facts and in the circumstances of the case the addition of rs. 7,59,000 confirmed by the learned cit(a) be deleted." 2. facts are like this that on 2nd november, 1987 the dri seized indian currency worth rs. 7,59,000 and foreign currency equivalent to rs. 3,500 from assessee's possession when she was about to board the british airways flight no......
Judgment:
1. This is assessee's appeal against the order of CIT(A) V, New Delhi dt. 19th December, 1991 relating to asst. yr. 1988-89 and following grounds have been raised by the assessee : "1. That the learned Asstt. CIT has earned in law, on facts and in the circumstances of the case in treating Rs. 7,59,000 as income from undisclosed sources and the learned CIT(A) in confirming the same on wholly illegal, erroneous and untenable grounds.

2. That on the facts and in the circumstances of the case the addition of Rs. 7,59,000 confirmed by the learned CIT(A) be deleted." 2. Facts are like this that on 2nd November, 1987 the DRI seized Indian currency worth Rs. 7,59,000 and foreign currency equivalent to Rs. 3,500 from assessee's possession when she was about to board the British Airways Flight No. BA-019 from New Delhi to Hong Kong. In her statement recorded by the DRI authorities and later on by the IT authorities she stated that the Indian currency was handed over to her by a person named Mr. Raja at her residence when she was about to leave for the airport. It was also stated by her that this was to hand over to one Shri A. Sajwani, a Dubai based party. It was claimed by her that Shri A. Sajwani asked her to carry packets to Hong Kong which was to be collected by him there from her. She also claimed that she did not know that the packets contained the Indian currency. The assessee also did not know the address and whereabouts of Mr. Raja as well as Mr. A.Sajwani. The AO on these facts has made the addition of Rs. 7,59,000 as income for undisclosed sources in her hands. Assessee challenged this action of AO in appeal before first appellate authority and while reiterating the facts as stated before the AO she further stated that she has already been convicted for the possession of currency under the Customs Act and suffered imprisonment as per the order of the Court. It was, therefore, contended by her that she should not be punished again for the same offence under the provisions of the IT Act.

3. While deliberating upon this issue the learned CIT(A) noted that assessee was punished under ss. 132 & 135(1)(a) of the Customs Act, 1962 for trying to smuggle out of India the Indian currency worth Rs. 7,59,000 without any authorisation. Therefore, the penalty and the imprisonment suffered on that account will not give her immunity from the action to be taken under the provisions of IT Act. The burden was entirely on her to prove satisfactorily that the money was from her accounted sources. Since there is nothing on record to show that she discharged this burden at all, the learned CIT(A) held that the AO was fully justified under the provisions of IT Act, 1961, to treat the amount of Rs. 7,59,000 as income from undisclosed sources for the asst.

yr. 1988-89 under s. 69A of the IT Act. Thus the addition came to be confirmed.

4. Aggrieved by this order of learned first appellate authority assessee preferred further appeal and is before us. It was contented that AO had erred in law and on facts and in the circumstances of the case in treating Rs. 7,59,000 as income from undisclosed sources and its further confirmation by CIT(A) is wholly illegal, erroneous and untenable and, therefore, prayed for the deletion of the addition. All those facts which were put before the authorities below were reiterated here and it was submitted that since money did not belong to the assessee, the same should not be added as her income. At the time of commission of so-called offence, which has not actually been committed by the assessee and she has unnecessarily been implicated and she has also undergone imprisonment which further resulted into termination of services from British Airways in which she used to serve as stewardess earlier to this confiscation of currency and was going with the flight on her normal duty and not in connection with any other activity.

Moreover, this amount of Rs. 7,59,000 has been confiscated and has become property of the Government and the same has not come into the pocket of the assessee. Therefore, it is not liable to be taxed under the IT Act. Assessee's counsel further stated that assessee being innocent has been caught of her innocence negligence about not enquiring or looking into the contents of the packets handed over to her by one Mr. Raja for further giving to one Shri A. Sajwani at Dubai.

These all landed her into great trouble which not only resulted in harrasment, imprisonment, loss of reputation but loss of existing services also. So relying upon CIT vs. Piara Singh (1980) 124 ITR 40 (SC), Shri Vishnukumar Soni vs. CIT (1985) 155 ITR 34 (MP) and C.Krishna Lal Jain vs. CIT (1987) 163 ITR 747 (Kar) it was pleaded that even if it is taken that amount confiscated is that of assessee, deduction on account of confiscation is to be allowed in view of above-said judgment because for earning income of smuggling currency notes has to be set off with the amount confiscated treating it to be expenditure relatable to earning of the business. So net resultant has to be nil. It was also pleaded that it is the Revenue's case that assessee is the owner of the money. So corresponding expenditure has to be allowed. Assessee's counsel further relied upon Motilal Chhadami Lal Jain vs. CIT (1991) 190 ITR 1 (SC) on the proposition that very source has been wiped away as income has not been received at all and paramount title is with the State. Therefore, applying the ratio of the judgment of Supreme Court (1991) 190 ITR 1 (SC) (supra), and CIT vs.

Sital Das Tirath Das (1961) 41 ITR 367 (SC) for diversion of overriding title assessee cannot be taxed again. Since nothing was received by the assessee, addition of income made in the assessment of the assessee needs to be deleted.

5. The learned Departmental Representative on the other hand, relying upon the basis and reasoning as given by the authorities below pleaded that since assessee could not be able to establish the acquisition of money seized and confiscated by the DRI authorities, So it had to be treated and termed as income of the assessee for the year in which currency was found and seized. So far as judgments referred to by the assessee's counsel are concerned, those are not relevant to the facts of the case as assessee has nowhere admitted or pleaded that she is carrying on illegal business or activity of smuggling Indian currency to foreign country. So facts of the case as referred to by the assessee's representative are distinguishable because in those cases expenditure on account of confiscation of goods were allowed on the basis that assessee admitted having carried on illegal business or activity in which goods/currency were seized. As regards diversion of overriding title proposition is concerned that too has got no bearing on the case of the assessee and the same is distinguishable on facts.

It was further submitted that AO has rightly made the addition of the amount confiscated by customs Authorities (DRI) at the airport as income from undisclosed sources because rightful and accounted for source of acquisition of the same was not disclosed by the assessee at all. So CIT(A) was also justified in confirming the action of the AO.6. We have heard rival submissions, perused the record, gone through the voluminous paper book filed wherein all documents pertaining to start of seizure confiscation till conviction of the assessee and other action thereafter were made available and we have also gone through the case law as cited by the learned representative of the assessee. It is undisputed fact that no source of acquisition of Indian currency to the amount of Rs. 7,59,000 has been established by the assessee which could be termed as accounted for source and rather the assessee has claimed that she did not know that the packets contained Indian currency as these packets were handed over to her by one Mr. Raja at her residence when she was about to leave for the airport and further she admitted that this was to be handed over to one Shri A. Sajwani, a Dubai based party and the assessee did not know the address and whereabouts of either Mr. Raja or Mr. Sajwani. Similar situation arose before the Hon'ble Supreme Court in the case titled Chuharmal vs. CIT (1988) 172 ITR 250 (SC) where facts and circumstances as recorded in the judgment of Hon'ble Supreme Court are as under : "It appears that the petitioner had submitted his return of income for the asst. yr. 1974-75 showing a total income of Rs. 3,113 in response to a notice issued under s. 143(2) of the IT Act, 1961 (hereinafter called "the Act"). According to the petitioner, he had derived his income from 2 stores, i.e. M/s Mohanani Fancy General Stores and M/s Roopkala General Stores, Durg. It, however, appears that on 19th January, 1974 on the basis of the order passed by the Superintendent, Central Excise, Jagpur, dt. 25th December, 1975, there was confiscation of foreign watches from the house of the petitioner and levy of penalty of Rs. 2 lakhs under the Customs Act., 1962. Accordingly, the ITO issued a notice calling upon the assessee to show cause why the value of the watches seized from his residence should not be treated as his income from undisclosed sources. In this connection, it may be relevant to note that on 12th May, 1973, a search was made of the petitioner's bedroom from where a total of 565 wrist-watches of foreign make valued at Rs. 87,455 were seized from a suitcase and in a secret cavity of a locked steel almirah and also behind the almirah there were watches folded in a bundle of waste papers. A panchnama was prepared at the same time mentioning these facts. According to the Customs authorities, the petitioner found himself unable to make any statement at that time on account of which, recording of statements was deferred. However, it is stated, the petitioner went out of station on 14th May, 1973 (sic). The petitioner's statement was recorded on 13th May, 1973, as soon as he was available. In his statement (Annexure R.III) duly signed by him, he has admitted these facts but merely denied knowledge of the manner in which those watches came to be in his house.

It appears from the records of the customs case, with which we will have to deal later in S.L.P. No. 1008 of 1986, the petitioner was given a show-cause notice as to why the period of six months fixed under s. 110(2) of the Customs Act, 1962, should not be extended but no reply was given by the petitioner till 10th November, 1973, or even thereafter. Hence by an order dt. 10th November, 1973, before the expiry of six months, time was extended by the Collector of Customs for a further period of 6 months for giving a notice as required under s. 124(a) of the Customs Act, 1962. Under the proviso to sub-s. (2) of s. 110 of the Customs Act, 1962, a show-cause notice, specifying the requisite particulars, was given to be petitioner on 4th May, 1974. In the reply, the petitioner made a general denial. The enquiry was fixed on 30th October, 1975 for giving a personal hearing to the petitioner, when the petitioner's counsel appeared and sought for an adjournment to 20th November, 1975, which was granted. However on 20th November, 1975, counsel for the petitioner stated that the petitioner did not want to avail of the opportunity of personal hearing or even to cross-examine the witnesses in whose presence the Panchnama was made at the time of the seizure of the watches. It is necessary to bear these facts in mind because it has repercussions on the notice dt. 19th January, 1974, as mentioned hereinbefore, issued by the ITO to show cause why the aforesaid sum of Rs. 87,455 should not be treated as the petitioner's concealed income. The ITO further directed issuance of notice under s. 271(1)(c) of the Act.

Being aggrieved by the said order, the petitioner preferred an appeal before the AAC against the order dt. 20th February, 1976. The AAC dismissed the appeal and held that in view of the order passed by the Collector of Customs, the ITO was justified in including the cost of the watches in the income of the assessee for the asst. yr.

1974-75. Thereafter, on 29th March, 1978, the IAC issued notice of penalty under s. 271(1)(c) of the Act imposing a penalty of Rs. 90,000, the minimum imposable being Rs. 87,455 and the maximum imposable being Rs. 1,74,910. Being aggrieved thereby, the petitioner filed two appeals before the Tribunal. The Tribunal, by its order dt. 19th August, 1980 dismissed these appeals. The petitioner has further stated that in the meanwhile, the State of Madhya Pradesh initiated criminal proceedings under s. 125 r/w s.

111 of the Customs Act, 1962, and the learned Chief Judicial Magistrate, Durg, by his order convicted the petitioner and awarded one year's rigorous imprisonment. Thereafter, on 2nd November, 1982, the petitioner filed an appeal in the Court of the Additional Judge in the Court of Sessions, who by his judgment, allowed the appeal and acquitted the petitioner of the said criminal charge.

Thereafter, there was a reference to the High Court on two questions against the order of the Tribunal under s. 256(1) of the Act. The questions are as follows : '(i) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee was the owner of the watches and thus including the value thereof in the assessment of the assessee (ii) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the Department had discharged its burden of establishing concealment of income by the assessee for the year under consideration and thus confirming the penalty of Rs. 90,000 levied by the IAC ?' The High Court in its order noted that the raiding party by virtue of the search entered into the bedroom of the assessee on 12th May, `1973, and seized the watches. A Panchnama was prepared. The Department found that the assessee was the owner. Sec. 110 of the Evidence Act is material in this respect and the High Court relied on the same which stipulates that when the question is whether any person is owner of anything of which he is shown to be in possession, the onus of proving that he is not the owner is on the person who affirms that he is not the owner. In other words, it follows from the well-settled principle of law that normally, unless the contrary is established, title always follows possession. In the facts of this case, indubitably, possession of the wrist-watches was found with the petitioner. The petitioner did not adduce any evidence, far less discharge the onus of proving that the wrist-watches in question did not belong to the petitioner. Hence, the High Court held, and in our opinion rightly, that the value of the wrist-watches is the income of the assessee. In this connection, reference may be made to the views expressed by Justice Tulzapurkar, as his Lordship then was, of the Bombay High Court in the case of J. S. Parkar vs. V. B. Palekar (1974) 94 ITR 616 (Bom), where, on a difference of opinion between Justice Deshpande and Justice Mukhi, Justice Tulzapurkar agreed with Justice Deshpande and held on the question whether the evidence established that the petitioner was the owner of the gold seized, though there was no direct evidence placed before the taxing authorities to prove that the petitioner had actually invested moneys for purchasing the gold in question, the inference of the ownership of the gold in the petitioner in that case rested upon circumstantial evidence. There also gold was seized from a motor launch belonging to the petitioner in that case. There, a contention was raised that the provision in s. 110 of the Evidence Act. where a person was found in possession of anything, the onus of proving that he was not the owner was on the person who affirmed that he was not the owner, was incorrect and inapplicable to taxation proceedings. This contention was rejected. The High Court of Bombay held that what was meant by saying that the Evidence Act did not apply to proceedings under the Act was that the rigour of the rules of evidence contained in the Evidence Act was not applicable but that did not mean that when the taxing authorities were desirous of invoking the principles of the Act in proceedings before them, they were prevented from doing so. Secondly, all that s. 110 of the Evidence Act does is that it embodies a salutary principle of common law of jurisprudence which could be attracted to a set of circumstances that satisfy its conditions.

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.

Sec. 69A of the Act was inserted in the Finance Act, 1964, and it came into force w.e.f. 1st April, 1964. The High Court has rightly held that the expression 'income' as used in s. 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 and so deemed to be the income of the assessee by virtue of s. 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 s. 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 opinion of the ITO, 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.' So far as the first question is concerned, the High Court answered accordingly and, in our opinion, rightly." The Hon'ble Supreme Court in the case referred to above has further gone to the extent in confirming action of Hon'ble High Court in answering the second question in favour of the Revenue in confirming the penalty of Rs. 90,000 with respect to amount involved in acquisition of 565 wrist watches of foreign make valued at Rs. 87,455 which were seized by the customs authorities.

7. As the facts of the case in hand and those of the case decided by the Hon'ble Supreme Court as referred to supra are almost similar, we are of the considered opinion that since assessee has not been able to show or prove acquisition of currency seized from any legitimate source, the action of AO for treating the same as income from other sources, during the year under consideration, as currency has been found and confiscated on 2nd November, 1987 which falls in the relevant accounting year, is held to be valid and proper. From the facts emerging from the record available it is admitted fact that assessee has nowhere admitted having conducted any activity pertaining to smuggling of currency. As regards setting off of confiscated amount is concerned, we, after having considered case law as cited and in view of facts and circumstances, are of the view that such set off cannot be allowed as assessee has nowhere admitted having carried on business of smuggling of currency notes and moreover in view of latest judgment of Hon'ble Supreme Court of India in the case of Maddi Venkataraman & Co.

Ltd. vs. CIT (1998) 229 ITR 534 (SC) wherein it was held that expenses incurred in transaction carried out in violation of provisions of FERA not deductible. So action of AO and CIT(A) is found to be valid and relevant extracts of said judgment are reproduced as below : "The assessee company carried on the business of exporting tobacco.

In its return for the asst. yr. 1970-71, it claimed deduction of Rs. 2,95,000 as business expenditure/loss. According to the assessee, in the course of carrying on its business, by the year 1968, it had accumulated 329.2 tonnes of sub-standard quality tobacco which it could not export over the last three years. Since the accumulated stock of tobacco was of sub-standard quality, it could not be sold at the floor price fixed by the Government of India for such tobacco. According to the assessee, it had no alternative but to sell the tobacco at a discount of 20 per cent, to a Singapore party.

On paper, the full sale price was paid by the Singapore party, but in reality 20 per cent of the price paid by the party was remitted back to him through one S. In pursuance of this agreement, the tobacco was sold and the full floor price was received by the assessee from the Singapore party. The assessee paid a sum of Rs. 2,88,000 to S who remitted the equivalent amount in Singapore currency to the Singapore party. Thus, according to the assessee, it had no alternative but to enter into such a transaction with a view to dispose of the said unsold stock of inferior quality tobacco. It was claimed by the assessee that the amount of Rs. 2,80,000 paid to S ought to be deducted as business expenditure or treated as business loss. The ITO, however, disallowed the claim. The Tribunal allowed it but the High Court was of the view that the sum of Rs. 2,88,000 had not been repatriated in a straightforward manner but had been sent to Singapore through an illegal channel. it was not a case of money being diverted under an overriding legal obligation.

The High Court ultimately concluded that the agreement, being illegal and contrary to law, could not be recognised by a Court of law nor could entering into such transaction be a normal incidence of carrying on business. The High Court further held that the argument based on real price was of no substance. It disallowed the deduction. On appeal to the Supreme Court : Held, dismissing the appeal, that the assessee had indulged in transactions in violation of the provisions of the Foreign Exchange (Regulation) Act. The assessee's case was that it would have incurred a loss. This cannot be a justification for contravention of law." 8. In the case in hand, the assessee when confronted by AO in assessment proceedings about the source of acquisition of Indian currency of Rs. 7,59,000 seized by DRI on 2nd November, 1987, along with foreign currency equivalent to Rs. 3,500 from her possession when she was about to board the British airways flight No. BA-019 from New Delhi to Hong Kong, she stated that abovesaid currency did not belong to her and this was delivered to her by one Shri Raja for handing over the same to Mr. A Sajwani at Dubai and whereabouts of either of these two persons are not known to her. She also denied to have knowledge of even of contents of packets handed over to her by Mr. Raja for further handing them over to Mr. Sajwani of Dubai. Except denial of ownership or of knowledge of contents of packets, no other evidence or material was adduced and neither either of so-called Mr. Raja or Mr. Sajwani were ever produced who could own the Indian currency seized at the airport from assessee nor assessee could show any legitimate source of acquisition of the currency amount. In view of the facts and circumstances and judgments of Hon'ble Supreme Court ratios of which are found to be fully applicable to the facts of this case, we are of the considered opinion, that the Indian currency in question has to be presumed, that to be of the assessee, for the purposes of s. 69A of IT Act, 1961, as the assessee has failed to prove that the same belongs either to someone else, or to the assessee from her known source, and the Revenue authorities, in this case, has rightly done so and their action is fully justified.

9. Therefore, while following the ratios of the judgments of Hon'ble Supreme Court as referred to in the preceding paragraphs and in view of facts and circumstances of the case, we do not find any merits in the appeal of the assessee and dismiss the same while confirming the order of the learned CIT(A). As a result, appeal of the assessee gets dismissed.

1. I have carefully read the order of my learned brother in the light of the rival submissions and perused the record and went through the voluminous paper book which contained all the relevant documents of the case. In spite of that, I failed to persuade myself with the conclusion drawn by him.

2. It is a fact admitted that the assessee Ms Mirchandani was a stewardess in the British Airways. On 2nd November, 1987, the DRI seized Indian currency worth Rs. 7,59,000 and foreign currency equivalent to Rs. 3,500 from her possession as she was about to board the British Airways flight No. BA-019 from New Delhi to Hong Kong. Ms Mirchandani stated before the Customs authorities that Indian currency was to be handed over to one Mr. A. Sajwani, a Dubai based party. It was also stated by her in the statement that two packets were delivered to her by one Mr. Raja at her residence when she was about to leave for the airport. In the complaint filed before the Court of Shri Bharat Bhushan, Addl. Chief Metropolitan Magistrate, New Delhi under s. 132 and 135(1)(a) of the Customs Act, Shri Anil Kumar Wadhwa, Intelligence Officer of the DRI stated that the assessee Ms Mirchandani while admitting the recovery and seizure of the Indian and foreign currencies from her possession, inter alia, stated that about 4 years back she met a gentleman called Mr. A Sajwani in Dubai at a party. Shri A. Sajwani had a company called "Sajwani Exchange Co., P.O. Box 178, Dubai". His telephone numbers in Dubai were : office 282315 and tel : 227897. After their social acquaintance the assessee had been asked for favours off and on which she had declined. He, however, called her on Sunday mid-day 1st November and asked for a favour to carry some goods for him to Hong Kong which he would personally pick up from her in Hong Kong.

It was further stated that the agent of Mr. A Sajwani in Delhi by the name of Mr. Raja would deliver the goods to her at her residence.

Accordingly the said Raja arrived at her residence at approximately 21.30 hrs. On Sunday night after calling her on telephone and ascertaining her address and delivered two packages saying the contents of these packages were food stuff, personal effects and some Indian currency which she put in her brown diplomat suit-case and one in her leather bag. This Indian currency was seized by the DRI officers on examination of her baggage on 2nd November, 1987 as described in the Panchnama. The Judicial Magistrate took cognizance and recorded a finding that there were sufficient grounds to proceed against the accused for offence under ss. 132 and 135(1)(a) of the Customs Act, 1962. By the judgment dt. 30th September, 1988, the accused was held guilty for offences punishable under the above sections and she was convicted accordingly.

3. In the meanwhile the Dy. Collector Customs (ADJ), IGI Airport, New Delhi confiscated the currency total value of Rs. 7,62,500 including Indian currency of Rs. 7,59,000 seized from Ms Mirchandani vide order dt. 21st December, 1988.

The assessee filed revision application before the Competent Authority under s. 129DD of the Customs Act and the Competent Authority vide order dt. 9th July, 1991 reduced the penalty amount as follows : "Ms Reena Mirchandani was heard. Her plea is basically of mercy. She appeals that she has learnt her lesson and should be helped to lead a normal life as a law-abiding citizen; that as observed by lower authorities, somebody made use of her on which account she underwent rigorous imprisonment of eight months and as she could not pay fine of Rs. 40,000 imposed by the Addl. Metropolitan Magistrate, New Delhi, she underwent a further imprisonment of 14 days; that she has realised her mistake and is now trying to forget her past and start a fresh life; that she basically does not have any arguments to challenge the action taken against her except that she is presently not in a position to bear the penalty amount [though reduced by Collector of Customs (Appeals) to Rs. 30,000]; that it will further add to her woes if she were to borrow the money at all she succeeds against heavy odds; that her relatives are not prepared to help her and she lost her parents early. She has shown her bank pass book where she has a current balance of Rs. 4,800 only. She is now jobless without any family member to support her and is just earning small amounts on ad hoc assignments working as sub-agent for booking tickets, which is itself somewhat humiliating as compared to her earlier status as an air hostess.

Government after hearing the applicant, sanguinely accepting the plea and prayer on face value, hoping that these are genuine cries of a repentant person determined to reform herself and not just smart talk of a misguided youth on road to self-destruction is inclined to take a lenient view and help the applicant to rehabilitate herself and revert to honourable life. In this spirit while upholding the imposition of penalty, Government reduces its amount to Rs. 2,500 (Rs. two thousand five hundred only) in the facts of the case particularly that she has been in prison for about nine months and must have come out as new person." On the basis of these facts, the AO treated the Indian currency of Rs. 7,59,000 as income from undisclosed sources of the assessee as she was not able to give proper explanation regarding the whereabouts of Mr. A Sajwani nor that of Mr. Raja.

4. On appeal, the learned CIT(A) upheld the addition observing as follows : "5.2. I have considered the facts and the circumstances of the case and arguments of the appellant. The appellant was punished under ss.

132 and 135(1)(a) of the Customs Act, 1962 for trying to smuggle out of India the Indian currency worth Rs. 7,59,000 without any authorisation. Therefore, the penalty and the imprisonment suffered on that account will not give her immunity for the evidence under the provisions of IT Act. It is a fact that she was found in the possession of Indian currency worth Rs. 7,59,000 during the financial year relevant to the asst. yr. 1988-89. Under the provisions of s. 69A of the IT Act, the burden was entirely on her to prove satisfactorily that the money was from her accounted sources. There is nothing on record to show that she discharged this burden at all. Therefore, the AO was fully justified under the provisions of IT Act, 1961 to treat the amount of Rs. 7,59,000 as an income from undisclosed sources for asst. yr. 1988-89 under appeal under s. 69A of the IT Act, 1961. The addition of Rs. 7,59,000 will be confirmed." 5. From the above orders of the AO and the CIT(A), it is seen that the findings given by the DRI have been treated by them to be a conclusive finding treating the assessee as owner of the Indian currency. The proceedings before the DRI were entirely for a different reason. Sec.

132 of the Customs Act is in regard to false declaration and s.

135(1)(a) is offence in relation to any goods in a way knowingly concerned in any fraudulent evasion or attempt at evasion of any duty chargeable thereon or of any prohibition for the time being imposed under this Act or any other law for the time being in force with respect to such goods. For punishment under the above sections, it is not necessary for the Customs authorities to prove the ownership of goods. It is enough if there is an attempt by any person including a carrier at evasion of any duty chargeable thereon or of any prohibition for the time being imposed under the Customs Act. The assessee was, therefore, convicted for false declaration and evasion of duty or prohibitions as contemplated under the above sections. The question of ownership has not been adjudicated upon by the Customs authorities nor by the Magistrate who convicted the assessee as the same is not relevant for punishment under the Customs Act.

6. If the case of the assessee is examined in the light of the above findings, it is seen that the claim of the assessee which was part of the plaint filed before the Metropolitan Magistrate that she was carrying the items including the Indian currency on behalf of Shri A.Sajwani of Sajwani Exchange Co., P.O. Box 178, Dubai has not been looked into. The telephone numbers of Shri A. Sajwani were given as 282315 and 227897 at Dubai. The assessee never claimed ownership of these items including the Indian currency. Right from the beginning she was claiming that she was only carrier on behalf of the persons named above. If this claim of the assessee is examined in the light of the facts on record and in the line of this type of business, it cannot be said to be a totally false contention. In the black market and smuggling business, the carrier normally does not have direct access to the principal i.e. the seller nor to the buyer. Arrangements are normally made in such a way that the seller and the buyer could not be traced out. The AO in this case treated the assessee as the owner on the reasoning that she could not give details of one Mr. Raja who delivered the parcel. Similarly the whereabouts of Shri A. Sajwani were not known to the assessee. On these findings of fact, it was presumed by him that the money belonged to her. Apparently the provisions of s.

69A of the IT Act are applied.

7. It is seen that the provisions of s. 69A are not conclusive presumptions. It is rebuttable presumption and the same is to be applied only in a case where the assessee offers no explanation about the nature and source of acquisition of the money, etc. or such explanation was not satisfactory in the opinion of the AO. The assessee in this case right from the beginning stated that it was Shri A.Sajwani whose address and telephone numbers were given before the DRI who sent the packet through Mr. Raja who identified himself as Mr. Raja before handing the packet to her. Arrangement also was stated to have been made by Mr. A. Sajwani to collect the money from her at Hong Kong.

When the arrangement failed due to the interception of the DRI, it is but natural that these people will not come forward. The assessee is a victim of circumstances. There is, therefore, no reason to hold that her explanation was not true and that she was the owner of the money.

The presumption of the Revenue is not rational nor probable in view of the fact that the assessee was only a stewardess in the British Airways. She was flying from New Delhi to Hong Kong. There is no apparent reason for the assessee to carry such amount of money as her expenses have been taken care of by the employer British Airways while on duty. It is, therefore, more probable to accept the explanation of the assessee that she was carrying the money on behalf of somebody, to be delivered at Hong Kong.

8. It is also stated by the assessee that as the job of stewardess is such that people always approach them to carry the parcel or purchase certain items from abroad. The air-crew are generally inundated with such requests from friends and acquaintances including people who are not direct friends. It is, therefore, evident that Shri A. Sajwani took advantage of this practice and requested the assessee to carry the packet for delivery at Hong Kong.

9. Since there is no finding by the AO that there is no such person as A. Sajwani of Sajwani Exchange Co. P.O. Box 178, Dubai with telephone numbers 282315 and 227897 at Dubai, it cannot be said that the presumption under s. 69A has not been rebutted by the assessee.

10. Assuming that the assessee has been doing this business of carrying items for customers on payment, then also the activities by itself will assume a character of business, a carrier business and, therefore, the decision of the Hon'ble Supreme Court in the case of CIT vs. Piara Singh (supra) relied upon by the learned counsel of the assessee will apply and the same has to be deducted after confiscation by the Customs Department. This presumption also is in line with the finding of the Competent Authority, copy of which was extracted earlier. In that case, the Competent Authority accepted the plea and prayer of the assessee as genuine cries of a repentant person determined to reform herself. He, therefore, took a lenient view to help the assessee to rehabilitate herself and revert to honourable life. The presumption, therefore, is that the assessee has been indulging in illegal activities which is an offence under the Customs Act. Since the assessee has been acting as carrier for this illegal and prohibited items under the law, such activities can safely be treated as business of the assessee and, therefore, the loss has to be allowed if the amount is treated as income of the assessee. I hold accordingly and delete the addition.

1. On a difference of opinion between the Members constituting the Division Bench, the following point of difference has been referred to me as Third Member by the Hon'ble President of the Tribunal under s.

255(4) of the IT Act : "Whether the addition of Rs. 7,59,000 is liable to be deleted or not." 2. The admitted facts of the case are that the assessee Mrs. Reena H.Mirchandani was a stewardess in British Airways. On 2nd Nov. 1987 the Directorate of Revenue Intelligence (DRI) seized Indian currency worth Rs. 7,59,000 and foreign currency equivalent to Rs. 3,500 from her possession when she was about to board the British Airways flight No.BA-019 from New Delhi to Hong Kong. Her statement was recorded under s.

108 of Customs Act, 1962 on the same day, in pursuance of summons issued by Asstt. Director, DRI, IP Estate, New Delhi. In this statement Ms. Reena H. Mirchandani stated before the Customs authorities that Indian currency was to be handed over to one Mr. A. Sanjwani, a Dubai base party. It was also stated by her that two packets were delivered to her by one Mr. Raja at her residence when she was about to leave for the airport. While delivering these two packets, Mr. Raja told her that the contents of these packets were food stuffs and personal effects and some foreign currency. In the complaint filed before the Chief Metropolitan Magistrate, New Delhi under ss. 132 and 135(1)(a) of the Customs Act, Shri Anil Kumar Wadhwa, Intelligence Officer of DRI stated before the Court that Ms. Mirchandani while admitting the recovery of Indian and foreign currency from her possession, inter alia, stated that about 4 years back she met a gentleman called Mr. A. Sanjwani in Dubai at a party, who had a company called Sanjwani Exchange Co., P.O.Box No. 178, Dubai. His telephone Nos. in Dubai were, off. 282315 and tel. 227897. After having social acquaintance, the assessee had been asked for favours off and on, which she had declined. Mr. Sajwani called her on Sunday mid-day 1st November, 1987 and asked for a favour to carry some goods for him to Hong Kong which he would personally pick up from her at the airport in Hong Kong. This packet would be delivered by his agent in Delhi by the name of one Mr. Raja at her residence.

Accordingly the said Raja arrived at her residence at approximately 21.30 hours. On Sunday mid-night after calling her at telephone and ascertaining her address Mr. Raja delivered two packets saying that the contents of these packets were foodstuff, personal effects and some Indian/foreign currency, which she put in her brown diplomat suit-case and one is her leather bag. She had also stated that she never carried any civil hand goods either into or out of India and have been a very law-abiding citizen of India. The Indian currency was seized by the DRI officers on examination of her baggage on 2nd November, 1987, as described in the Panchnama. The Judicial Magistrate took cognizance and recorded a finding that there were sufficient grounds against the accused under ss. 132 and 135(1)(a) of the Customs Act, 1962 vide order dt. 30th September, 1988. Hence the accused Ms. Reena Mirchandani, the assessee, was held guilty of offences punishable under the above sections and she was convincted accordingly.

3. In the meanwhile the Dy. Collector (ADJ), IGI, New Delhi confiscated the currency totalling worth Rs. 7,62,500, including the Indian currency of Rs. 7,59,000 seized from Ms. Mirchandani vide order dt.

21st December, 1988.

4. The assessee filed revision application before the Competent Authority under s. 129DD of the Customs Act and the Competent Authority vide order dt. 9th July, 1991 reduced the penalty to Rs. 2,500.

5. On the basis of these facts, the AO treated the Indian currency of Rs. 7,59,000 as income of the assessee from undisclosed sources as she was not able to give proper explanation regarding the whereabouts of Mr. A. Sanjwani nor that of Mr. Raja. Aggrieved by that order, the assessee filed appeal before the CIT(A). The learned CIT(A) upheld the addition observing that the assessee was punished under ss. 132 and 135(1)(a) of the Customs Act, 1962 for trying to smuggle Indian currency out of India without any authorisation. Therefore, the penalty and imprisonment suffered on that account will not give her immunity for the evidence under the provisions of the IT Act. Under the provisions of s. 69A of the IT Act, 1961 the burden was entirely on her to prove satisfactorily that the money found in her possession was from her accounted sources. There is nothing on record to show that she has discharged this burden. Therefore, the addition of Rs. 7,59,000 was confirmed.

6. Aggrieved by that order, an appeal was filed before the Tribunal.

The learned Judicial Member basically relying on the decision of the Hon'ble Supreme Court in the case of Chuharmal vs. CIT (1988) 172 ITR 250 (SC), came to the conclusion that assessee has not been able to show or prove the acquisition of currency from any legitimate sources.

As such the action of the AO of treating the same as income from other sources, during the year under consideration, as currency has been found and confiscated on 2nd November, 1987, which falls in the relevant accounting year, is held to be valid and proper. He also referred the decision of Hon'ble Supreme Court in the case of Maddi Venkataraman & Co. (P) Ltd. vs. CIT (1988) 229 ITR 534 (SC) for the proposition that expenses incurred in transaction carried out in violation of provisions of FERA not deductible. While coming to this conclusion he also observed that the assessee failed to give whereabouts of either Mr. A. Sajwani or that of Mr. Raja. She also denied to have knowledge of even contents of the packets delivered to her by one Mr. Raja for further handing over them to Mr. A. Sanjwani of Dubai. Except denial of ownership or of knowledge of contents of the packets, no other evidence or material was adduced and neither either of so-called Raja or Mr. Sanjwani were produced, who could own the Indian currency seized at the airport. Therefore, the burden, which lay upon the assessee, has not been discharged. So the Indian currency found in possession of assessee has to be presumed to be that of the assessee for the purposes of s. 69A of the IT Act.

7. The learned Accountant Member (Senior Vice-President) in a detailed order differed with this finding of the learned Judicial Member, summarily on the ground that the proceedings before the DRI were : (i) the proceedings before the DRI were entirely for a different reason.

Sec. 132 of the Customs Act is in regard to false declaration and s.

135(1)(a) of Customs Act is offence in relation to any goods (sic) way knowingly concerned in any fraudulent evasion or attempt at evasion of any duty chargeable thereon, or of any prohibition for the time being imposed under this Act or any other law for the time being in force with respect to such goods. For punishment under the above sections it is not necessary for the Customs authorities to prove ownership of the goods. It is enough if there is any attempt by a person found in possession is a carrier and evading any duty chargeable under the Customs Act. The assessee, therefore, was convicted for false declaration and evasion of duty or prohibitions as contemplated under the above sections. The burden of proving the ownership is entirely on the Department as per the provisions of s. 69A of the IT Act. The provisions of s. 69A are not conclusive presumptions. It is rebuttable presumption and the same is to be applied in a case where the assessee offers no explanation about the nature and source of acquisition of money or such explanation was not satisfactory, in the opinion of the AO. The assessee had given address of Mr. A. Sanjwani as Sanjwani Exchange Co., P.O. Box No. 178, Dubai and had also given telephone numbers 282315 and 227897 of Dubai. She never claimed ownership of these items including that of Indian currency right from the beginning.

The assessee was simply a carrier of the goods when she was intercepted. No ownership had been proved by the Department. Assuming that assessee had been doing business of carrying items for customers on payment, the presumption therefore is that the assessee has been indulging in illegal activities, which is an offence under the Customs Act. Since the assessee has been acting as carrier such activity can safely be treated as business of the assessee. therefore, the loss has to be allowed, if the amount is treated as income of assessee.

8. The learned counsel for the assessee argued that the AO treated the finding given by the DRI to be a conclusive finding treating the assessee as owner of the Indian currency ignoring the fact that proceedings before the DRI were entirely for the different reason. In this connection, our attention was invited to the fact that the proceedings before the DRI were under different section, namely, s. 132 of the Customs Act in regard to false declaration and s. 135(1)(a) in regard to an offence in relation to any goods in a way knowingly concerned in any fraudulent evasion or attempt at evasion of any duty chargeable thereon or of any prohibition for the time being imposed under this Act or of any other law for the time being in force with respect to such goods. It is pointed out that for punishment under s.

132 or s. 135(1)(a) of the Customs Act, it is not necessary for the Customs authorities to prove the ownership of the goods. It is enough if the Customs authorities prove that there is an attempt by a person including a carrier for evasion or any duty chargeable thereon or of any prohibition for the time being imposed under the Customs Act, the persons concerned could be held guilty under those sections. In the present case the Revenue authorities sustain addition against the assessee under s. 69A of the IT Act. In order to invoke s. 69 of the IT Act, 1961 it is necessary to prove that the assessee must be shown to be owner of the assets. The section contemplates acquisition of the asset by assessee and the same being owned by him. It is pointed out that assessee in this case never claimed ownership of these items, including the Indian currency right from the beginning, when her statement was recorded on 2nd November, 1987. The presumption under the provisions of s. 69A are not conclusive presumption. It is rebuttable presumption and the same is to be applied only in a case where the assessee offers no explanation about the nature and source of the acquisition of the money, etc. or such explanation was not satisfactory in the opinion of the AO. It is highlighted that in proceedings under ss. 132 and 135(1)(a) of the Customs Act there is no question of ownership. Anyone found in possession of goods or is found carrier, the penalty can be imposed under those sections. The learned counsel for the assessee further pointed out that the learned Judicial Member was guided by the fact that at the time of arrest, she could not state whereabout of either of Mr. A. Sajwani of Dubai or that of Mr. Raja, who delivered these packets and she has also denied to have knowledge of its contents. But this fact is not correct. In her statement she has clearly mentioned that about four years back she met a gentleman called Mr. A. Sajwani in Dubai at a party who had a company, called Sajwani Exchange Company, P.O. Box. No. 178, Dubai. She further intimated telephone numbers of Mr. Sajwani as office 282315 and tel. 227897. She further told that after social acquaintance with the assessee, the gentleman had asked for favour. Thus, the conclusion arrived at by the learned Judicial Member on this basis is incorrect.

9. The learned Accountant Member has given finding that the burden of proving ownership lies upon the Department which has not been discharged by the Revenue, nor there is a finding that she was found to be owner. There is no material on record to hold that she was owner.

Therefore, in these circumstances the view taken by the learned Accountant Member in the facts and circumstances of the case is correct. Reliance was placed on the following decisions, for the proposition that the onus lies on the Department to prove the ownership under s. 69A of the IT Act, 1961 : (2) Addl. CIT vs. S. P. Chainanickam Chettiar (1984) 147 ITR 251 (Mad); 9.1. He further argued that even if it is assumed that the assessee had been doing the business of carrying items for customers on payment, then also the activities by her will assume the character of business, a carrier business, and therefore, the loss incurred by her, where the money has been confiscated by the Customs authorities, be allowed as a deduction, in view of the decision in the case of CIT vs. Piyara Singh (1980) 124 ITR 40 (SC). Reliance was also placed on decision in the case of Vishnu Kumar Soni vs. CIT (1985) 155 ITR 34 (MP) and CIT vs.

Shri Ram Chander (1986) 159 ITR 689 (P&H) for the same proposition. On the point that the case was rightly decided on probabilities, the learned counsel for the assessee relied on the decision of the Hon'ble Bombay High Court in the case of Mrs. Malini Ramnath Rele vs. ITO (1994) 48 TTJ (Bom)(TM) 295 : (1994) 205 ITR (AT) 52. The learned counsel for the assessee pointed out that the decisions relied on by the learned Judicial Member are distinguishable on its facts.

Therefore, the ratio laid down in those decisions cannot be applied to the facts of the present case.

10. The learned Departmental Representative accepted that for making addition under s. 69A of the IT Act, it is necessary to prove the ownership of the goods in order to attract this provision. However, it is submitted that the possession of the goods is indicative of the fact that the person carrying it is the owner. Her explanation that one Mr.

A. Sajwani is the owner has not been substantiated by any evidence.

Therefore, the explanation given by her was not found satisfactory and presumption was rightly drawn that she is the owner of the goods for making addition under s. 69A of the IT Act. The learned Departmental Representative tried to distinguish the decision of Mr. Rose Ben (supra). Ultimately it was submitted if it is found that enquiry of ownership has not been made by the AO, the matter could be set aside for making further enquiry.

11. I have considered the rival submissions and have gone through the relevant material available on record. Sec. 69A of the IT Act, 1961 reads as under : "Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery of 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 opinion of the AO, 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." 11.1. It is not in dispute that presumption contained in s. 69A is a rebuttable presumption. In order to invoke s. 69A of the IT Act, it is necessary to prove that the assessee must be shown to be the owner of the asset. The section contemplates an acquisition of the asset by the assessee and the same being owned by him before that asset is taken into account as income of the assessee from undisclosed sources.

Therefore, it has to be decided on the basis of available material which was brought to notice of the Department, whether the assessee could be properly regarded as owner of currency found with her. In the case of Lal Chand Bhabhut Mal Jain (supra), the Hon'ble Bombay High Court has held that the onus of proving, that assessee was the owner of seized valuables, lay on the Department. The onus had to be established as in ordinary civil trial and no more.

11.2. In the present case, I find that the AO and the CIT(A) based their orders on the finding given by the DRI and treated the same to be conclusive finding, treating the assessee as owner of the Indian currency ignoring the fact that the proceedings before the DRI were entirely under different Act. Secs. 132 and 135(1)(a) of the Customs Act are provisions in regard to false declaration and offences in relation to any goods in a way knowingly concerned in any fraudulent evasion or attempt at evasion of any duty chargeable thereon or any prohibition for the time being imposed under this Act or any other law for the time being in force with respect to such goods. It should be borne in mind that for punishment under the above sections, it is not necessary for the Customs authorities to prove the ownership of the goods. It is enough if there is an attempt by any person, including a carrier, of evasion of any duty chargeable thereon or of any prohibition for the time being imposed under the Customs Act.

Therefore, I find that the assessee was convicted for false declaration and evasion of duty for prohibition as contemplated under those sections. The Customs authorities has no occasion to consider the issue of ownership nor it has been adjudicated upon by the Customs authorities. Therefore, the finding given by the Directorate of Revenue Intelligence cannot be made basis for presumption of ownership against the assessee, contemplated under s. 69A of the IT Act for making addition under that section.

11.3. In the present case right from the beginning the assessee was claiming that she was only a carrier on behalf of Mr. A. Sajwani of Sajwani Exchange Co., P.O. Box No. 178, Dubai, whose telephone numbers were 282315 and 287897 of Dubai. Therefore, it is clear that the assessee never claimed ownership of these items, including the Indian currency. From this statement, it is clear that the assessee disclosed the name of Mr. A. Sajawani and his address with telephone numbers known to her at the first occasion when her statement was recorded.

Therefore, the observation of the learned J.M. that she could not tell the whereabouts of Mr. Sajwani is not correct. So much so she has disclosed the contents of packets, as per her knowledge from Mr. Raja, as food stuff, personal effects and some foreign currency. If I examine the case of assessee in the light of facts on record and probabilities in this type of business, it cannot be said that the contention of the assessee is totally false. The learned Accountant Member rightly observed in his order that in the black market and smuggling business, the carrier normally does not have direct access to the principal i.e.

the seller not to the buyer. The arrangements are normally made in such a way that the seller and the buyer could not be traced out. Where there is no direct evidence of a clinching nature, the issue involved was to be decided on the basis of material available on record and on the basis of probabilities. This view was taken by the Tribunal in the case of Mrs. Mali Ram Nath Reli vs. ITO (supra). The Revenue authorities as well as the learned Judicial Member treated the assessee as the owner on the reasons that she could not give details of Mr.

Raja, who delivered the parcel. Similarly, the whereabouts of Mr. A.Sajwani were not known to the assessee. On these findings of fact, it was presumed that the money belonged to her. It is seen that the provisions of s. 69A of the IT Act are not conclusive presumption, it is rebuttable presumption and the same is to be applied where the assessee offers no explanation about the nature and source of acquisition of money, etc. or such explanation was not found satisfactory, in the opinion of the AO. In the present case, the assessee right from the beginning disclosed that Mr. A. Sajwani, whose address and telephone numbers were given before the DRI, who sent the packets through Mr. Raja who identified himself as Raja before handing over the packets to the assessee. She also stated that Mr. Sajwani informed on telephone that he will collect the packets from her in Hong Kong. This arrangement failed due to interception by DRI authorities.

It is quite probable that when the carrier is intercepted by the DRI, these persons will not come forward to save the carrier. The presumption of the Revenue is not rational and probable in the given facts and circumstances, in view of the fact that the assessee was a stewardess in British Airways and she was flying from New Delhi to Hong Kong. There is no reason to carry such amount when she have been taken care of by the employer. Under the circumstances, it is most probable that the assessee was victim of circumstances. Therefore, the explanation given by the assessee that she was carrying the packets on behalf of somebody to be delivered at Hong Kong is most probable in the given facts and circumstances of the case. I cannot ignore the facts that friends and acquaintance, including the person who are not directly friends, approach the air-crew for carrying parcel or items from destination to abroad and abroad to destination. Therefore, in all probabilities, Mr. Sajwani took advantage of this practice and requested the assessee to carry the packets to Hong Kong.

11.4. The AO made addition on the basis of finding given by the Customs authorities only and there is no independent finding of the AO, much less the enquiry that there was no such person as Mr. Sajwani at the given address. Therefore, it cannot be said that the presumption under s. 69A has not been rebutted by the assessee or the explanation given by her is not probable in the given facts and circumstances of the case.

11.5. In the case of Ms. Rose Ben (supra), the facts were that Customs authorities seized and confiscated gold bars and U.S. dollars smuggled by the assessee, an airhostess. Consequently, the assessee's assessment was reopened. Assessee explained before the AO that she was only a carrier and had no ownership, interest in the gold or currency. She, however, did not name the owner of the seized goods and added that she used to receive commission. In those facts and circumstances the Tribunal held that the onus of proving that the assessee was the owner of the seized valuables, lay upon the Department and there was no material to hold that the Department has discharged this burden.

11.6. The case of the assessee before us is on much better footing. In this case the assessee at the point of time had given the address and telephone numbers of Mr. A. Sajwani. Therefore, the decision of the Tribunal squarely applies to the facts of the present case.

11.7. In the case of S. P. Chainanickam Chettiar (supra), assessee and other person were found in possession of 500 gold tolas and they were arrested by the Customs authorities. The gold was confiscated. The ITO included the value of gold as income of the assessee under the head 'Other sources'. The matter travelled before the Hon'ble Madras High Court and the Madras High Court has held that the mere possession of gold, ownership thereof could not be presumed in the person who possessed the gold at a particular point of time. The fact that the assessee was convicted under s. 135(b)(ii) of the Customs Act indicated that he was only a carrier of gold and not its owner. Further, where the Revenue had not produced any other material to indicate that the gold belong to the assessee, the provisions of s. 110 of the Evidence Act could not be invoked. The assessee was not assessable on the value of gold seized from him.

11.8. So far as the decision relied on the Hon'ble Judicial Member in the case of Chuhar Mal vs. CIT (1988) 172 ITR 250 (SC) is concerned, I find that the facts of that case are distinguishable from the facts of the present case. That was a case of raid in which the goods seized were of foreign marking an no statement was recorded about those watches. There was no evidence to prove that those watches did not belong to the assessee. Afterwards in a statement the facts, but merely denied knowledge of how the goods came to his house. In that case witness was not cross-examined by petitioner in whose presence Panchnama was drawn. Therefore, it was presumed that the petitioner was owner because of possession, in view of s. 110 of the Evidence Act. In that case, conviction was upheld under s. 125 of the Customs Act.

11.9. In the present case, the proceedings were undertaken under ss.

132 and 135(1)(a) of the Customs Act, where the question of ownership has not to be adjudicated upon by the Customs authorities, nor by the Magistrate, who convicted the assessee. Further a statement was recorded at the time of arrest, in which she denied the ownership and claimed that she carried the goods of one Mr. Sanjwani of Dubai and whose address and telephone numbers were given in the statement.

11.10. The facts in the case of Maddi Venkataraman & Co. (P) Ltd. vs.

CIT (1998) 229 ITR 534 (SC), relied on by the learned Judicial Member, are also distinguishable on the fact that that was a case for violation of FERA in which the assessee was carrying a lawful business, in which expenditure for unlawful activities were claimed. The amount claimed was the money sent abroad through illegal means. In that case, the case of Piara Singh (supra) was not considered, though at p. 539 of the report, the Hon'ble Supreme Court has observed as under : "One exception to this rule, which has been recognised by the Courts where the entire business of the assessee is illegal and that income is sought to be taxed by the ITO, then the expenditure incurred in the illegal activities will also have to be allowed as deduction." 11.11. Therefore, the ratio laid down by the Hon'ble Supreme Court does not apply to the facts of the present case. If we have to hold that assessee had been doing this business of carrying items for customers on payment, then this activity will assume the character of carrying business and in that case the benefit of the decision of the Hon'ble Supreme Court in the case of Piara Singh has to be given. For this the learned Accountant Member was right in holding that the loss has to be allowed, in view of the ratio laid down by the Hon'ble Supreme Court if the amount is treated as income of the assessee. This view also find support from the observation of the Supreme Court in the case of Maddi Venkataraman & Co. (P) Ltd. (supra).

12. I, therefore, agree with the view taken by the Hon'ble Accountant Member.

13. The matter would now go back to the Division Bench to pass an order in accordance with the majority opinion.

1. In this case there was a difference of opinion between the Members constituting the Bench and following point of difference was referred to the Hon'ble President of the Tribunal for nomination of Third Member under s. 255(4) of the IT Act, 1961 : "1. Whether the addition of Rs. 7,59,000 is liable to be deleted or not." 2. The Hon'ble President of Tribunal nominated Shri J. P. Bangra, J.M.as Third Member who vide his order dt. 31st May, 1999 has agreed with the view taken by Hon'ble Sr. Vice President the Accountant Member in this case.

3. In view of majority decision, the addition of Rs. 7,59,000 made under s. 69A of the IT Act gets deleted.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //