2000 (8) TMI 44 - HC - Income Tax

Value of confiscated gold must be included in assessee's income under ss.69/69A/69B/69C; trading loss deduction denied

HC upheld the Tribunal's decision that the value of confiscated gold must be included in the assessee's income under ss.69/69A/69B/69C where the nature ... Unexplained Investments - income tax assessment u/s 69A - inclusion of confiscated gold - Whether, the Tribunal was right in law in holding that the assessee had been found in possession of gold valued and as such he was the owner of the said gold and the value of the said gold was liable to be included in the income of the assessee because of the fact that no explanation regarding source from which investment in the said gold had been made, had been given by the assessee ? - HELD THAT:- The scheme of sections 69, 69A, 69B and 69C of the Income-tax Act, 1961, would show that in cases where the nature and source of investments made by the assessee or the nature and source of acquisition of money, bullion, etc., owned by the assessee or the source of expenditure incurred by the assessee are not explained at all, or not satisfactorily explained, then, the value of such investments and money or the value of articles not recorded in the books of account or the unexplained expenditure may be deemed to be the income of such assessee. It follows that the moment a satisfactory explanation is given about such nature and source by the assessee, then the source would stand disclosed and will, therefore, be known and the income would be treated under the appropriate head of income for assessment as per the provisions of the Act. However, when these provisions apply because no source is disclosed at all on the basis of which the income can be classified under one of the heads of income under section 14 of the Act, it would not be possible to classify such deemed income under any of these heads including income from 'other sources' which have to be sources known or explained. When the income cannot be so classified under any one of the heads of income under section 14, it follows that the question of giving any deductions under the provisions which correspond to such heads of income will not arise. If it is possible to peg the income under any one of those heads by virtue of a satisfactory explanation being given, then these provisions of sections 69, 69A, 69B and 69C will not apply, in which event, the provisions regarding deductions, etc., applicable to the relevant head of income under which such income falls will automatically be attracted. It is, therefore, clear that, when the investment, in or acquisition of gold, which was recovered from the assessee was not recorded in the books of account and the assessee offered no explanation about the nature and source of such investment or acquisition and the value of such gold was not recorded in the books of account, nor the nature and source of its acquisition explained, there could arise no question of treating the value of such gold, which was deemed to be the income of the assessee, as a deductible trading loss on its confiscation, because, such deemed income did not fall under the head of income 'profits and gains of business or profession'. In our opinion, therefore, the Tribunal was perfectly right in holding that the value of the gold was liable to be included in the income of the assessee as the source of investment in the gold or of its acquisition was not explained and that the assessee was not entitled to claim that the value of the gold should be allowed as a deduction from his income. Both the questions referred to us are, therefore, answered in the affirmative, against the assessee and in favour of the Revenue. Issues Involved:The judgment involves issues related to income tax assessment under section 69A of the Income-tax Act, 1961, concerning the possession and inclusion of confiscated gold in the income of the assessee, as well as the deduction claim in respect of the confiscated gold.Issue 1 - Possession and Inclusion of Confiscated Gold:The case involved the possession of gold valued at Rs. 48.72 lakhs by the assessee, leading to the question of whether the value of the gold should be included in the income of the assessee u/s 69A due to lack of explanation regarding the source of investment in the gold. The Customs Department seized the gold from the assessee, and the Income-tax Officer added its value to the assessee's income. The Tribunal affirmed that the gold belonged to the assessee and should be included in his income as unexplained investment, not as profits from illegal business activities.Issue 2 - Deduction Claim for Confiscated Gold:The second issue revolved around the deduction claim in respect of the confiscated gold. The Tribunal found that no deduction could be allowed as the assessee failed to provide a satisfactory explanation for the possession of the gold, and it did not represent a trading loss. The Tribunal held that the value of the gold could not be claimed as a deduction from the assessee's income under the head of 'profits and gains of business or profession.'The judgment emphasized the provisions of sections 69, 69A, 69B, and 69C of the Income-tax Act, which deem unexplained investments, money, or expenditure as income of the assessee when the nature and source are not satisfactorily explained. It clarified that such deemed income does not fall under specific heads like 'profits and gains of business or profession,' and therefore, corresponding deductions applicable to those heads are not applicable to deemed income under these sections.In conclusion, the Tribunal's decision was upheld, stating that the value of the gold was rightly included in the assessee's income due to lack of explanation regarding its source, and the assessee was not entitled to claim the value of the gold as a deduction from his income. Both questions were answered in the affirmative, favoring the Revenue, and the reference was disposed of accordingly.