Income Tax Appellate Tribunal - Ahmedabad
Smt. Naynaben Mansukhlal Raichura vs Income-Tax Officer on 12 October, 1990
Equivalent citations: [1991]36ITD332(AHD)
ORDER
M.A.A. Khan, Judicial Member
1. This is an appeal from the order of the CIT(A)-II, Rajkot dated 17-11-89, confirming certain additions made to the total income of the assessee for A.Y. 1986-87.
2. The appeal was filed on 12-1-1990. By its order dated 16-2-90 passed on assessee's stay petition dated 24-1-90, the Tribunal had directed that the appeal be heard on priority basis. The appeal had accordingly been fixed for hearing on 30-4-90. However, by his application dated 24-4-90 the counsel for the assesssee informed the registry of the Tribunal that the assessee had died on 14-4-90 in a road accident, leaving behind him his young widow Smt. Naynaben, aged 34 years, son Jignesh, aged 7 years and daughters Meera and Avani, aged 8 years and 6 years respectively. By order dated 31-7-90, the Tribunal directed the substitution of the L.Rs of the deceased assessee and the amendment of the title of the case. Accordingly Smt. Naynaben Mansukhlal Raichura was brought on record as the legal representative of the deceased assessee for the purpose of the completion of the hearing of the appeal. The appeal was finally heard on 18-9-1990.
3. Through as many as 26 grounds of appeal, the order of the learned CIT(A) has been challenged on the following three points, viz.-
(1) Addition of Rs. 29,80,220 Under Section 69-A of the IT Act, 1961 (the Act);
(2) Interest disallowance of Rs. 12,000;
(3) Charge of interest under Sections 139(8) and 215 of the Act.
We propose to deal with the above points in the order they have been mentioned.
(1)Addition of Rs. 29,80,220 (Under Section 69A of the Act):
4. The deceased assessee was an individual earning income from his proprietory concern of Shreeji Minerals and Chemicals, share income from M/s Hindustan Transport Co. and interest. He had filed his return of income on 13-11-87 at Rs. 53,435. In the course of assessment proceedings, the ITO came to hold the opinion that the assessee, along with 13 others, was involved in a case of seizure of contraband goods with certain transport conveyances. The value of the contraband goods and the vehicles seized was determined at Rs. 1,53,55,006 by the customs authorities and a personal penalty of Rs. 3 lakhs was also imposed upon the deceased assessee, which was 19.73% of the total penalty imposed upon all the 14 persons involved in the case of seizure of contraband goods. By his notice dated 21-3-89, the ITO required the deceased assessee to show cause why the value of ownership of goods seized by customs authorities should not be added in his total income in proportion of penalty levied against him. By his reply dated 27-3-89, the deceased assessee contended, inter alia, that he was not the owner of the contraband goods or vehicles seized by the customs authorities, that appeals against the levy of personal penalty upon him was pending for decision before the Customs, Excise and Gold (Control) Tribunal, that he was acquitted of the charge Under Section 135(1)(a) & (b) of the Customs Act, 1962 by the Judicial Magistrate, Porbander, that instead of involving himself in any smuggling activities the assessee had given information to the customs authorities regarding the illegal transportation of certain contraband goods whereupon the deceased assessee had received a reward of Rs. 50,000 from the concerned authorities. In the alternative it was also submitted that in case the ownership of the proportionate value of the seized contraband goods is attributed to him then the same was required to be allowed as business loss as per the decision of the Supreme Court in the case of CWT v. S.C. Kothari [1971] 82 ITR 794. Another alternative submission was also made and that was to the effect that in any case all the 14 persons said to be concerned in the import and transportation of the contraband goods and who were penalised by the customs authorities were required to be assessed in the status of AOP and the deceased assessee alone should not be singled out for making any addition of a part of the value of the contraband goods to his total income. The ITO, relying upon the decision in the cases of Haji Aziz & Abdul Shakoor Bros. v. CIT [1961] 41 ITR 350 (SC) and J.S. Parkar v. V.B. Palekar [1974] 94 ITR 616 (Bom.), rejected the above contentions of the assessee. In para 7 of his order the learned ITO held that the assessee was actively engaged in smuggling activities during the year under consideration for which the customs authorities, besides confiscating the contraband goods valued at Rs. 1,51,05,006, had levied a personal penalty of Rs. 3 lakhs on the assessee. The ITO further held that the real ownership of contraband goods lay with the persons who were involved in the custom seizure case and the deceased assessee was one of such persons.
He, therefore, concluded that the value ofcontraband goods of 19.73% share of the assessee, which came to Rs. 29,80,220 was his income from undisclosed sources. He accordingly added the same to the total income of the assessee vide his order dated 27-3-89. This addition was confirmed by the CIT(A) in appeal for almost the same reasons.
5. Mr. K.C. Patel, learned Advocate appearing for the assessee has vehemently urged that for making addition of the amount in question to the total income of the deceased assessee under the provisions of Section 69A of the Act, the department had miserably failed to prove that the deceased assessee was or had been the owner of the contraband goods seized or any part thereof at any point of time. Mr. Patel further submitted that the addition in question has been made totally on wrong footing in as much as the orders passed by the customs authorities for confiscating the contraband goods and for imposing personal penalties upon the deceased assessee, besides others, have been made the basis for making the addition. According to Mr. Patel the customs authorities in passing those orders were not at all concerned with the question of possession of the assessee or other persons of the contraband goods seized and, therefore, such orders were not at all helpful to revenue to infer the ownership of the deceased assessee to the contraband goods seized or any part thereof for the purpose of Section 69 A of the Act. The learned counsel further pointed out that instead the Judicial Magistrate at Porbander who had tried the deceased assessee as also 13 others on the charge Under Section l35(1)(a)&(b)of the Customs Act, 1962 was very much concerned with the question of possession of the assessee and other persons over the contraband goods and the vehicles and since none of the persons who were accused before the learned Magistrate was found in possession of such contraband goods, an order of acquittal was recorded by the Magistrate in their favour. Mr. Patel thus strongly urged that there was no iota of evidence or any incriminating circumstance to prove even possession of the deceased assessee over the contraband goods seized or any part thereof so as to attribute the ownership thereof to the deceased assessee for the purposes of making addition to his total income under the provisions of Section 69-A of the Act.
6. In the alternative the learned counsel further submitted that in case the Tribunal comes to hold the opinion that ownership of any part of the contraband goods seized could be attributed to the deceased assessee and the value of such goods comes to Rs. 29,80,220, which has been added to his total income, as income from undisclosed sources, the same was required to be allowed as business loss as per decisions of the Supreme Court in the cases of Haji Aziz & Abdul Shakoor Bros, (supra) and S.C. Kothari (supra). In the end it was submitted that in the facts and circumstances of the case at the most all the 14 persons said to be involved in the import and transportation of the contraband goods were required to be assessed in the status of AOP and, therefore, the deceased assessee alone could not be assessed for any part of the value of the seized contraband goods and vehicles.
7. In support of his above mentioned arguments, the learned counsel made reference to the decisions in the cases of S.C. Kothari (supra), CIT v. Piara Singh [1972] 83 ITR 678 (Punj. & Har.) affirmed by the Supreme Court in CIT v. Piara Singh [1980] 124 ITR 40/3 Taxman 67, J.S. Parkar (supra), Addl. CIT v. S. Pichaimanickam Chettiar [1984] 147 ITR 251 (Mad.) and Chuharmal v. CIT [1988] 172 ITR 250/38 Taxman 190 (SC).
8. In reply, Mr. M.S. Kaushik, the learned D.R., supporting the order under appeal, submitted that it was clearly proved on record from the orders passed by the customs authorities that the deceased assessee had been seen supervising and controlling all the operations of unloading the contraband goods from the boats and loading the same on the trucks used for their transportation. The D.R. submitted that from the statements of S/s Bhanubhai, Driver and Mangal, Conductor of Truck No. GTF 3767, recorded by the customs authorities in the course of proceedings before them, it was fully proved that the deceased assessee was the person in possession of the contraband goods. According to the D.R. it can be safely inferred from the facts and circumstances of the case that the ownership of the contraband goods seized by the customs authorities between 10-9-85 and 17-9-85 vested in the deceased assessee and in case the deceased assessee denied his ownership to such goods, the burden to prove that he was not the owner of the contraband goods was upon the assessee. According to the D.R. the deceased assessee had miserably failed to discharge the burden which had been shifted upon him under the provisions of Section 69A of the Act in consequence of his having been found in possession of the contraband goods. This argument was sought to be supported by the Punjab & Haryana High Court decision in the case of CIT v. Bimal ParkashGupta [1989] 179 ITR 613/45 Taxman 292. Reliance was also placed on the cases relied upon by Mr. Patel.
9. To meet the alternative submission advanced by Mr. Patel, the D.R. submitted that the question of allowing the value of the contraband goods seized from the possession of the deceased assessee as business loss was not sub judice before the income-tax authorities. In any case since the loss had occasioned from the penal action of confiscation by the customs authorities for violation of the legal provisions of the Customs Act, 1962 and the same being in the nature of penalty, was not allowable as a business loss. He further pointed out that the value of the contraband goods attributed to the ownership of the deceased assessee has not been assessed under the head 'business income' and, therefore, the same was not allowable as business loss. In this behalf reliance was placed particularly on the decision of the Madras High Court in the case of S. Pichaimanickam Chetliar (supra).
10. The learned D.R. further submitted that the question of assessment Under Section 148 of the Act against the 14 persons in the status of AOP is being considered by the department. But not assessing other persons for their escaped income was no ground for not assessing assessee's income in question in the instant case, submitted the D.R.
11. After having heard the learned counsels for the parties at sufficient length and after having gone through the material placed before us we entertain no doubt that there exists no iota of evidence to attribute the ownership of the contraband goods and vehicles seized and confiscated by the customs authorities or any part thereof to the deceased assessce. In order to appreciate the submissions of the learned representatives for the parties in right perspective a closer study of the relevant facts is called for and that is as under.
12. During the course of patrolling in the early hours of the intervening night of 10/11-9-85 on Asmavati Ghat at Porbander, Shri R.K. Meena, Customs Inspector had noticed the movements of two boats and trucks on the sea shore near godown jetty. He could not identify the persons involved in unloading the goods from the boats and loading the same in the vehicles said to be standing at the sea shore. Mr. Meena, therefore, informed his supdt. about the said smuggling activities indulged in by certain unknown persons. By the time, Mr. D.B. Brahm Bhatt, Supdt. of Customs and other officers reached Asmavati Ghat, all movements at the godown jetty had disappeared. Shri R.K. Meena, along with sepoys Girnar and R.H. Chauhan and Behari Lal, Driver left for in search of the trucks transporting the smuggled goods. On reaching near Chump Ice Factory and Cold Storage, which was about 1 km. from the ghat, they noticed truck No. GTF 3767 coming to their side. They intercepted the same and after giving a short chase managed to stop the same. The truck was being driven by Bhanubhai, Driver and one Mangal, son of the owner of the truck was also there. They were taken to the Customs Divisional Office where in the presence of Ladha Madha and Jadavji Ladha, Panches, the contents of the truck were unloaded and seized. The truck was containing 80 packages of synthetic fabric of foreign origin and electronic goods which were collectively valued at Rs. 22,44,687.30 p. On interrogation Bhanubhai, Driver and Mangal, Conductor told the Customs officers that the truck belonged to Shri Govind Damji, Bhatia Bazar, Porbander and had been engaged on 9-9-85 for 10-9-85 by S/Shri Kanj Phula and Chagan Khopad for transporting certain smuggled goods from the godown jetty to some place in the city. They further stated that when they had reached the godown jetty at about 9 p.m. on 10-9-1985, along with their truck, they had seen another truck GTY 4045 being loaded with smuggled goods.
According to them Chagan Khopad had instructed them to wait and S/s Govind T.T., Kalia Bali, Kanji Fuli, Manubhai Raichura (the deceased assessee), Nandu Kharvee, Rambhai, Mana, Rasik Bhai were also standing there. Goods were being counted by Kalia Bali & Kanji Fuli. Govind T.T. was giving instructions to others engaged in loading the truck. In the meanwhile another truck No. GTG 1450 had also arrived there. According to the said two persons Chagan Khopad had instructed them that their truck was to be loaded after truck No. GTY 4045 had been loaded. They further stated that after their truck had been loaded Kanji Fuli had informed the deceased assessee that 80 packages had been loaded in the truck. According to the said persons Kanji Fuli then directed them to take the loaded goods to the godown of one Rasik Thanki in Udyognagar.
13. On the basis of certain intelligence collected by the PSI., Porbander, thecustoms staff and the police staff had gone for patrolling the area surrounding the godown jetty and had recovered 34 packages of contraband goods on 11-9-85 at around 0530 hours and had brought the same to the Customs Divisional Office, Porbander. These 34 packages contained synthetic fabrics of foreign origin and electronic goods, collectively valued at Rs. 11,77,527. The same had been seized and later on confiscated.
14. The customs shore guard staff, while patrolling the area on the national highway from Porbander to Ranavav had found 20 packages lying in a pit behind the hospital on 11-9-85 at around 1500 hours. The packages contained fabrics of foreign origin valued at Rs. 4,42,169.13 p. which were seized by the custom's officers and later on confiscated.
15. On the basis of intelligence collected, the Customs Divisional Office staff of Jamnagar and staff of Customs Division, Porbander had been drafted to work out the intelligence to locate the premises and recover the contraband goods. Accordingly the aforesaid parties had moved around and on 11 -9-85 at about 1600 hours located the premises of Rose Chemicals situated in Udyognagar, Porbander in GIDC 126/1-2. The gate of the said premises was locked and as no occupants were found there at that time the officers had broken open the locks of the compound gate and then found 66 packages containing synthetic fabrics, VCR, Vedio Cassettes, wrist watches, clock movements etc., collectively valued at Rs. 97,06,885 from a godown inside the said factory premises. The same were seized and later on confiscated under the Customs Act, 1962.
16. During patrolling in the intervening night of 16/17-9-85 on Advana road, after Niyani cross road, the officers of the customs collectorate had chased truck No. GTG 1544 on the basis of their suspicion regarding transportation of smuggled goods. The occupants of the truck had escaped in the darkness abandoning the truck. The truck along with its contents was brought to the customs division office and the search thereof resulted in the recovery of 46 packages of synthetic fabric of foreign origin and electronic goods, collectively valued at Rs. 15,33,738. The same was seized and later on confiscated along with the truck valued at Rs. 1 lakh.
17. Truck No. GTG 1450 had been found abandoned near Babar village and the same was seized and confiscated at value of Rs. 50,000.
18. The seizure and confiscation of contraband goods and the vehicles transporting them brings out the following position:
---------------------------------------------------------------
Sr. Seizure No. of Value of Value Total value
No. packages contd. goods of Truck of seizure
seized
---------------------------------------------------------------
1. By customs Rs. Rs. Rs.
staff at Porb-
ander on
10/11-9-85 from
the truck No. GTF
3767 80 22,44,687.30 1,00,000 23,44,687.30
2. By customs and
police on
11-9-85 34 11,77,527.00 - 11,77,527
3. By shore guard
staff on 11-9-85
unclaimed. 20 4,42,169.13 - 4,42,169.13
4. By customs Div.
Jamnagar staff,
Hq. Ahmedabad
staff DR1 staff
and MP staff on
11/12-9-85 66 97,06,885.00 - 97,06,885
5. By Hqs. Ahmedabad
staff on 16/17-9-85
truck No. GTG
1544 46 15,33,738.00 1,00,000 16,33,738
6. By customs shore
guard staff on
13-9-85 truck
No. GTG 1450 - - 50,000 50,000
----------------------------------------------
246 1,51,05,006.43 2,50,000 153,55,006
----------------------------------------------
19. From the narration of above facts it is clear that the ownership of the value of confiscated contraband goods and the vehicles, proportionate to the amount of penalty levied upon the deceased assessee, has been attributed to the deceased assessee mainly on the strength of the statements of Bhanubhai, Driver and Mangal, Conductor, who were arrested along with truck No. GTF 3767 by R.K. Meena, Customs Inspector near Chump Ice Factory and Cold Storage. Mr. Patel has pointed out that those two persons, being co-accused in the case before the Judicial Magistrate had retracted their confessional statements given to the customs authorities and, therefore, their testimony was of no value in accepting even the presence of the deceased assessee at the time of loading and unloading of the contraband goods at the godown jetty.
Instead, contended Mr. Patel, the order of acquittal recorded by the Judicial Magistrate, Porbander in favour of the accused including the deceased assessee go a long way to prove that none of the accused before the Judicial Magistrate was proved to be in possession of any contraband goods or vehicles transporting such goods. On the other hand, Mr. Kaushik has laid much stress upon the orders passed by the customs authorities confiscating the contraband goods and imposing personal penalties upon the persons involved in the smuggling activities. In our opinion neither the orders recorded by the customs authorities confiscating the contraband goods and vehicles and imposing the personal penalties upon the persons involved in smuggling activities nor that of the learned Judicial Magistrate acquitting the accused persons including the deceased assessee of the charge of violating the provisions of Section 135(1)(a) & (b) of the Customs Act, 1962 can be good basis for deciding the controversy in the present appeal. The reason is obvious. Neither the customs authorities nor the Judicial Magistrate were concerned with the question of ownership of the deceased assessee to the contraband goods or any part thereof. The ingredients of Sections 111,112,115 and 135 of the Customs Act, 1962 as were for the consideration of the customs authorities and the Judicial Magistrate were altogether different from the point which is presently before us for consideration. In this respect we fully agree with Mr. Kaushik that the approach to be adopted in the assessment proceedings which are in fact in the nature of civil proceedings is altogether different from the approach adopted in the quasi-criminal or fully criminal proceedings which were before the customs authorities and the Judicial Magistrate. Whereas the proceedings before those authorities may be required to be decided on the doctrine of proof beyond doubt regarding the acts of commission of offence contemplated under the Customs Act, 1962, the assessment proceedings are required to be decided on the basis of preponderance of probabilities. When that is done what would be needed to be appreciated is that Bhanubhai, driver and Mangal, Conductor had given different versions at different times without calling the prior and subsequent versions by the names of 'confessional' 'or' 'retracted confessional' statements. For the purposes of assessment proceedings they would be statements of those persons which would be valued in the totality of circumstances.
20. The only incriminating evidence that has been tried by revenue to be brought against the deceased assessee to prove his possession of the contraband goods so as to give rise to the presumption of ownership required for the purposes of Section 69 A of the Act is available in the statements of Bhanubhai and Mangal. As stated above soon after their arrest those two persons had given the version that they had loaded the contents of their truck No. GTF 3767 at jetty godown and that at that time 14 to 15 persons were involved in the activities of loading the trucks and maintaining accounts of the loaded goods. According to those two persons the deceased assessee was very much present there and the only part played by him was to have been informed by Kanji Fuli about the loading of 80 packages in truck No. GTF 3767. It is also available in their statements that instructions to the labourers as also to Bhanubhai, driver himself were given by Chagan Khopad and Govind T.T. besides Kanji Fuli. In fact Kanji Fuli is stated to have been playing the prominent part inasmuch as it was he and Chagan Khopad who had engaged the truck and at the time of loading of the truck they both were playing the prominent part. It is the admitted position that later on those two persons, viz., Bhanubhai and Mangal had resiled from their above statements and had stated that such statement had been obtained from them under coersion and undue influence.
21. Be that as it may, we have more than one statements of Bhanubhai and Mangal before us. The question arises which of the statements may be accepted. As we are not concerned with any confessional statement or retracted confessional statement of the said two persons in these proceedings, we would take their statements recorded at different times at their face value. The first/Statement wherein they had involved the deceased assessee had been given by them just after their arrest and naturally that must carry sufficient weight, provided the force or coersion or undue influence or threat or promises exercised or extended to them at that time, which was allegedly meted out to them as stated in their subsequent statements, is ignored altogether. Thus taking their first statement at their face value with regard to the assessee that he was simply present at jetty godown and the part played by him was that of receiving the information of loading of 80 packages from Kanji Fula, the question arises whether this piece of evidence only can be said to be sufficient to prove the deceased assessee as a person in possession of the contraband goods so as to infer the ownership of the goods or any part thereof to him for the purposes of Section 69A.
22. In fact the theory of exclusive possession of the contraband goods by the assessee and consequent inference of his exclusive ownership to the goods repudiated by revenue's own stand. Admittedly the deceased assessee was simply one of the 14 or 15 persons who were prosecuted for contravention of the provisions of the Customs Act, 1962 and their involvement in the import and transportation of the contraband goods. That he could not be the sole possessor and owner of the contraband goods is proved by the fact that he was jointly prosecuted for the contravention of the provisions of Customs Act along with others. The penalty levied is also no indicator of the fact that the deceased assessee was the main person who may be considered to be in possession of the contraband goods at the jetty godown. The Addl. Collector, Customs (P.) had levied penalties ranging from Rs. 50,000 to Rs. 5 lakhs upon the 14 persons. Govind Kara Torania alias Govind T.T. was levied a personal penalty of Rs. 5 lakhs whereas the assessee was levied a penalty of Rs. 3 lakhs. Obviously, therefore, quantum of penalty levied could not be a good guide to attribute possession and consequent ownership of the seized goods to the deceased assessee. If quantum of penalty can be a good guide on that point then certainly Govind T.T. may be said to be the main person in charge of all the affairs and not the deceased assessee.
23. The above discussion of the material brought on record shows that on the basis of the first statements of Bhanubhai and Mangal what can be stated is that the deceased assessee was one of the persons concerned in the transportation of the contraband goods through certain trucks. His concern in carrying, removing, depositing, harbouring, keeping, concealing or in any other manner dealing with the contraband goods could be a punishable act under the provisions of the Customs Act, 1962 but certainly such "concern" would not be sufficient to attribute ownership of the goods to him which is required for the applicability of Section 69A of the Act. "To be concerned in" used in the language of Section 122(b) and 135(1)(b) of the Customs Act, 1962 means 'to take part in' or 'to be related to'. Another expression "acquires possession" used in the language of the two provisions of the Customs Act is not synonymous with the concept of "possession" which raises a presumption of ownership for the purpose of Section 69A of the Act. For the administration of the Customs Act, 1962, keeping or possession of contraband goods need not be as owner or purchaser. Even temporary possession of contraband goods is punishable as Section 135 does not make any distinction between temporary possession and permanent possession. But that is not the position of the term "possession" leading to the presumption of ownership Under Section 69A of the Act
24. It is the settled law that Section 110 of the Evidence Act, 1872 embodies a salutary principle of common law jurisprudence to the effect that if a person is found in possession of something he is deemed to be its owner by virtue of possessor title and the onus would be on him if he wants to disown the ownership. In order to avail of the benefit of this principle of the Evidence Act, the person concerned shall have to be proved to be in possession of something which or the value of which is required to be added to his income under the provisions of Section 69A of the Act. We wish to observe that there are many meanings of the word "possession". 'Possession' can only be usefully defined with reference to the purpose in hand. 'Possession' may have one meaning in one connection and another meaning in another connection. Possession of physical objects which is called "corporial possession" is the "continuing exercise of a claim to the exclusive use of it". The exercise of this claim involves two ingredients, viz., "corpus possessions" and "animus possidendi". Hence "corpus" and "animus" are two conditions generally required for the acquisition of "possession". Such a possession only can give rise to the presumption pf ownership of a person" to a thing. For, ownership in its most comprehensive signification denotes the relation between a person and any right that is vested in him. That, which a man owns in this sense, is in all cases of rights. Ownership can thus be described as a right - indefinite in point of user -unrestricted in point of disposition - unlimited in point of duration - over determinate thing. In the instant case, as has been discussed above there is no material on record to hold that the deceased assessee was in possession of the contraband goods so as to infer his ownership to such goods with the help of presumption Under Section 110 of the Evidence Act, 1872. That he was concerned in removing and transporting the contraband goods from the jetty godown through the trucks - if the statements of Bhanubhai and Mangal are to be accepted on their face value -does not lead to the conclusion that the deceased assessee was in possession of such contraband goods so as to attribute the ownership thereof to him for the purposes of Section 69 A of the Act. It, therefore, necessarily follows that the addition in question could have not been made to the total income of the deceased assessee for the year under consideration.
25. In fact Mr. Patel has very rightly pointed out that in the instant case the income-tax authorities have proceeded to make the disputed addition on totally unconceivable and unacceptable grounds. As is evident the personal penalty levied upon the assessee Under Section 112 of the Customs Act, 1962 was made the sole basis for making the addition in question. Addition to the returned income may make a basis for levy of penalty but vice versa can hardly be right in law. This is also clear from the fact that under the Customs Act, 1962 the quantum of personal penalty levied does not necessarily represent the value of the confiscated goods. It was really a very unique method adopted by the ITO to work out the quantum of addition to be made to the total income of the deceased assessee on the basis of the ratio of the penalty imposed upon him viz-a-viz others and the value of the confiscated goods. Evidently this could not have been a proper method of working out any addition in the facts and circumstances of this case, for obvious reasons.
26. From the Chart mentioned above it is clear that contraband goods worth Rs. 11,77,507 had been recovered and seized in 34 packages from the area surrounding godown jetty. Similarly 20 packages containing synthetic fabric of foreign origin valued at Rs. 4,42,169.13 had been seized from a pit behind the hospital. Again, contraband goods worth Rs. 97,06,885 had been recovered and seized from the premises of Rose Chemicals situated in Udyognagar at Porbander in GIDC 146/1-2 belonging to and possessed by Rasik Thanki. Contraband goods worth Rs. 15,33,738 in 46 packages had been seized from the abandoned truck GTG 1544 on the Advana Road ahead of Niani cross road. The deceased assessee could not have been in possession of all these goods. Atleast there is no evidence on record to show even his concern with the above mentioned contraband goods. In arriving at the total value of the contraband goods confiscated by the customs authorities, the value of thethree vehicles seized and valued at Rs. 2,50,000 hadalso been taken into account. Admittedly these trucks were not owned by the deceased assessee. Thus the total value of the confiscated goods at Rs. 1,53,55,006.43 could not have been a correct figure wherein the share of the deceased assessee could have been determined on the basis of the ratio of personal penalty levied upon him by the customs authorities. From that angle also the addition in question is not at all sustainable.
27. Since we are of the considered opinion that the deceased assessee has not been proved to be in possession of the contraband goods or any part thereof seized and confiscated by the customs authorities so as to attribute ownership thereof to him, the cases relied upon by the learned D.R. are not at all helpful to confirm the addition. In the case of Bimal Parkash Gupta (supra), the gold was found in the possession of the assessee and, therefore, an inference had to be drawn that he was the owner of the gold and had income which he had invested in purchasing the same. That is not the position in the instant case. Similarly in S.C. Kothari's case (supra) the wrist watches had been seized from the bed room of the assessee and the explanation offered by the assessee had not been accepted. That also is not the position in the instant case. In the case of J.S. Parkar (supra) smuggled goods had been seized from the possession of the assessee and confiscated. The assessee had been convicted by the Magistrate. That is also not the position in the case before us.
28. In view of our finding on the main arguments advanced on behalf of the assessee, the question of consideration of the alternative arguments regarding allowance of the amount added to the total income of the assessee as business loss and the assessment of the value of the entire contraband goods in the cases of all the 14 persons in the status of AOP does not arise. At any rate we see no necessity of deciding the alternative submissions in that respect.
29. In the result, the main argument of Mr. Patel on the point on hand that the deceased assessee was not the owner of the contraband goods or any part thereof as seized and confiscated by the customs authorities is accepted and the addition in question is directed to be deleted. That disposes of ground Nos. 1 to 20 in the memorandum of appeal.
(2) Interest Disallowance of Rs. 12,000 : -
30. On verification of the accounts, the ITO noted that the assessee had debited Rs. 46,514 as payment of interest. The assessee had paid interest to his depositors but, the ITO noted, the assessee had given loan of Rs. 1 lakh to his HUF and had charged no interest. The ITO was of the opinion that the assessee had to make payment of interest because he had lent money to his HUF without interest. He, therefore, disallowed proportionate interest of Rs. 12,000. In appeal, the CIT(A) confirmed the disallowance for the same reasons.
31. It was no doubt urged by Mr. Patel that charging of interest on the sum advanced by an assessee is in the discretion of the assessee and he cannot be made to earn income where he has not intended to earn income. In principle the argument is correct but in practice the facts remains that the assessee had made payment of Rs. 46,514 as interest on the deposits of his creditors. Rs. 50,000 had been advanced by the assessee to his HUF from personal account and Rs. 50,000 from the accounts of Shreeji Minerals and Chemicals. On these facts the income-tax authorities seem to be correct in their view that interest bearing deposits were diverted to interest -free loans. In that sense of the matter the disallowance of interest at Rs. 12,000 seems to be justified and is left undisturbed. This disposes of ground Nos. 21 to 23.
(3) Interest Under Sections. 139(8) & 215:
32. Charge of interest Under Section 139(8) is automatic if the conditions of charge of such interest exist in a given case. The waiver of interest may be claimed by an assessee before the ITO, provided the conditions necessary for waiver are established. We would, therefore, not like to disturb the order of charge of interest Under Section 139(8) in the instant case.
33. Charge of interest Under Section 215 is consequential to the relief given to the assessee. The ITO shall recompute such interest at the time of giving effect to this order.
34. In the result, the appeal is partly allowed.