2006 (12) TMI 91

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....ace called "Garoth" in District Mandsaur. On July 18, 1985, CBI sleuths arrested the appellant while transporting a huge quantity of a contraband article (the narcotic drug heroin) in a jeep Gonga) RSO 3592. This led to further raid in his residential premises. In this raid, one clandestine laboratory to manufacture heroin powder along with several contraband drugs was recovered. All these contraband articles were seized and proceedings under the Narcotic Drugs and Psychotropic Substances Act, 1985 were initiated against the assessee. We are not concerned with these proceedings. So far as proceedings under the Income-tax Act are concerned, with which we are concerned, the assessee-appellant filed his return for the assessment year 1986-8....

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....ingh [1980] 124 ITR 40, the Tribunal allowed the deduction of Rs. 2lakhs out of the gross total income of the assessee. It is against this view of the Tribunal that the Revenue felt aggrieved and filed the appeal before the High Court which, as stated above, was admitted for final hearing on the following questions of law. "1. Whether possession of heroin in contravention of provisions of the Narcotic Drugs and Psychotropic Substances Act, 1985, can be treated to be stock-in-trade possessed by a medical practitioner? 2. Whether such medical practitioner can be permitted to deduct Rs. 2 lakhs from such stock of heroin as loss during the trade? 3. Whether the order passed by the Income-tax Appellate Tribunal, Indore....

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....come-tax authorities that the appellant was engaged in manufacture of heroin and selling it for material gain. No doubt, the assessee had contended that he was only earning income from his medical profession and was not doing any illegal activity of manufacturing and selling of heroin. However, the finding of fact of the Tribunal in its order dated March 31, 1993, is that the assessee was engaged in manufacture and selling of heroin. Thus the income-tax authorities themselves have recorded a finding that the assessee was engaged in manufacture and selling of heroin. No doubt the order of the Tribunal dated March 31, 1993, was subsequently recalled by the Tribunal, but since with the ultimate order dated October 14, 1998, the Tribunal has....

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.... fully satisfied and hence the question of claiming any deduction for the value of the seized article did not arise nor was the assessee entitled to claim any such deduction who was found indulging in such heinous and illegal business unconnected with his pious professional activity. Indeed, it was a disgrace for the doctor community where one doctor vyas found indulging in such kind of activities against the humanity." In our opinion, the High Court has adopted an emotional and moral approach rather than a legal approach. We fully agree with the High Court that the assessee was committing a highly immoral act in illegally manufacturing and selling heroin. However, cases are to be decided by courts on legal principles and not on one'....