1999 (4) TMI 26

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....cated by the Customs Department was not allowable deduction from the business income of the assessee, as determined ?" The facts in a nutshell are as follows : The assessee is an individual and carries on business as a goldsmith. The assessment year in question is 1971-72 and the relevant previous year ended on March 31, 1971. As a sequel to a raid carried on by the Customs and Central Excise authorities at the residence of the assessee on October 7, 1970, the Income-tax Officer made the following additions after giving an opportunity to the assessee to show cause as to why such addition should not be made. Rs. Value of primary gold 8,892 Value of gold ornaments 26,592 Value of foreign gold 2,395 Cash seized 4,909 To....

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....f the business is illegal, neither the profits earned nor the losses incurred would be enforceable in law. But, that does not take the profits out of the taxing statute. Similarly, the taint of illegality of the business cannot detract from the losses being taken into account for computation of the amount, which can be subjected to tax as 'profits' under section 10(1) of the Act of 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." On the basis of the said observation of the Supreme Court, it was argued that the tax collector cannot be heard to say that, h....

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....ee, and the penalty was rightly held to fall on the assessee in some character other than that of a trader. The other case cited by the Revenue is reported in Soni Hinduji Kushalji and Co. v. CIT [1973] 89 ITR 112 (AP), where the court held that 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 infraction of the law in smuggling gold into the country. The Revenue also relied on another decision of the court reported in Maddi Venkataraman and Co. (P.) Ltd. v. CIT [1998] 229 ITR 534 (SC), where the ....