Section 69A ownership presumption limited to money in possession; confiscated smuggling proceeds not deductible as business loss.

For section 69A, ownership can be attributed only to money actually found in an assessee's possession; amounts recovered from another person cannot be added in the assessee's hands unless the Department proves that the assessee owned them. The burden of establishing such ownership lies on the Department, and the addition is confined to the sum actually recovered from the assessee. On deduction, a solitary smuggling incident was not treated as an established business activity, so the confiscated amount was not allowable as business expenditure or business loss under section 37. The illegal and speculative nature of the activity did not support a deduction.

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Issues: Whether the unexplained amount could be added in the assessee's hands under section 69A of the Income-tax Act, 1961 in respect of sums recovered partly from the assessee and partly from another person, and whether the confiscated amount recovered from the assessee could be treated as a deductible business loss.

Analysis: The reference was construed with the statement of case and the connected questions, but the Court confined itself to the issue of addition and the implicit question of deduction arising in that context. It held that possession raises a presumption of ownership only in relation to the amount actually found with a person. The amount recovered from the other person could not be attributed to the assessee without proof by the Department that the assessee owned it. The burden lay on the Department to establish such ownership. As regards deduction, the Court held that a solitary smuggling incident, on the facts found, did not amount to a business carried on by the assessee. Therefore the confiscated amount could not qualify as business expenditure or business loss under section 37. The Court also held that the speculative and illegal character of the activity did not assist the assessee in claiming a deduction.

Conclusion: The addition was upheld only to the extent of the amount actually recovered from the assessee, and the amount recovered from the other person could not be included in the assessee's income. The claim for deduction of the confiscated amount was rejected.

Ratio Decidendi: For purposes of section 69A, ownership cannot be attributed to an assessee in respect of money not found in his possession without proof by the Department, and a solitary illegal transaction not shown to be part of an established business does not yield a deductible business loss under section 37.

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