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5. In view of the non-satisfactory explanation given by the assessee to the customs authorities, as a result, the foreign currency came to be confiscated, the currency equivalent to the value of Indian Rs. 4,56,980/- was deemed to be the income of the assessee for the Financial Year 1981-82 in which year the same was found with him.

6. The assessee claimed that he was entitled to have money confiscated treated as a loss which the tax authorities/revenue rejected. The assessee in claiming the loss of Rs. 4,56,980/- had relied upon the decision of the Supreme Court in the case of Piara Singh (supra). However, both the ITO and CAT rejected the contention distinguishing the case of Piara Singh from the present case pointing out that Piara Singh was apprehended with the sum of Rs. 65,000/- in hard currency notes while carrying on smuggling activities, while crossing the border between India and Pakistan. The assessee, on the other hand, has denied that the said foreign currency of Rs. 4,56,980/-was his. In the case of Piara Singh, it was held that the loss of currency was in the process of smuggling which was the business of Piara Singh and therefore, the confiscation of the money from Piara Singh was treated as business loss. So far as the assessee is concerned, he, on his own showing, was not running any smuggling activity. In fact, he denied that he was the owner of the foreign currency and therefore, while the Revenue has treated the said amount as his income from undisclosed source under section 69A, it has rejected his claim for treating the said amount as a loss as smuggling admittedly was not the business of the assessee.

15. After explaining and distinguishing the various cases referred to and relied upon by the Revenue in Piara Singh's case, the Apex Court negatived the contention of the Revenue and affirmed the view taken by the Punjab and Haryana High Court and allowed the deduction of Rs. 65,500/-which was confiscated from Piara Singh while smuggling the same across the border, as a business loss.

16. In the case on hand it is the contention of the Revenue that since that the assessee was admittedly not a smuggler and not carrying any illegal business of smuggling, that smuggling was not the business of assessee and therefore, he was not entitled to deduction of Rs. 4,56,980/-being equivalent of foreign currency seized from him. However, learned Counsel for the Revenue has pointed out that although the Asses see had denied before the customs authorities that he wassmuggler and was carrying the foreign currency as a part of his smuggling activities, the fact remained that customs authorities confiscated the same as currency being smuggled and also levied penalty of Rs. 1,50,000/- thereby treating him as smuggler. Further, it is pointed out that this High Court in the Criminal Writ Petition/Application No. 33/82 filed by the assessee challenging his detention under Cafeposa, has confirmed that the detenue/the petitioner i.e. the assessee herein was a member of a gang involved in smuggling.

The Assessee has produced a copy of the Oral Judgment dated 18th March, 1982 passed by this Court in the said petition. Para 5 of the said order of this Court reads as follows :

"This is a case of conspiracy wherein more than one person was involved in smuggling. The detenu is a member of group of conspirators, but the detention order is solely based on a finding that the foreign currency found belonged to the detenu and not to Aboobakar. Though in the grounds of detention it is stated by the detaining authority that the detenu was smuggling the currency out with Aboobakar, who was a co-conspirator, his case was not considered for detention either because there was no proposal or for the reason best known to the detaining authority. Unless the whole material against aboobakar was considered, a conclusion could not have been reached as to whether it was the detenu alone who was responsible for smuggling and the foreign currency did not belong to Aboobakar and belonged only to the detenu. It is no doubt true that it is not necessary in a case of conspiracy that a finding should be recorded before the detention order could be issued because every member of conspiracy is equally responsible and liable for the act of co-conspirator. But in this case the detention belonged to the detenu and not to Aboobakar who was alone co-conspirator."

17. Thus, it is seen that although the assessee has before the customs authorities denied that he was carrying on the business of smuggling and that foreign currency seized from Aboobakar belonged to him, the fact remains that the assessee was treated as smuggler, his subsequent detention under Cafeposa confirmed that he was treated as smuggler and the business of the assessee was that of smuggling and therefore, the foreign currency recovered from Aboobakar, a co-conspirator of the assessee was the amount involved in the smuggling activity and the confiscation of the said amount was, therefore, business loss suffered by the assessee in conducting his business of smuggling. It may be noted that it is not the case of the revenue that the assessee was carrying on any other business, lawful as otherwise, for which the foreign currency was being illegally transported out the country. The business of the Assessee was smuggling of foreign currency, the confiscation of foreign currency equivalent to Indian Rupees 4,56,000/-was, therefore, a loss of stock-in-trade of the assessee. The Revenue while bringing to tax the sum of Rs. 4,56,980/- as income of the assessee under Section 69A, can not deprive the assessee the benefit of treating the said amount as a business loss.