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Undisclosed Stock taxable as unexplained Assets u/s 69 of Income Tax Act 1961
Income Tax Act has been amended drastically as far as section 69 are concerned whereby the tax rate could exceed the amount of income.
One of the common addition during the course of survey is addition of undisclosed stock. Whether undisclosed stock is taxable as business income or as unexplained assets is one of the important question.
The question has become all the more relevant and important as the tax rate could range from 30% to 138%.
There are judgement which concludes with the fact that the undisclosed stock is taxable u/s 69.
Here are 3 important judgments for the readers:
1.Bombay High Court
Ramanlal Kacharulal Tejmal vs Commissioner of Income-Tax, on 29 March, 1982
Equivalent citations: (1983) 32 CTR Bom 293, 1984 146 ITR 368 Bom, 1983 12 TAXMAN 130 Bom
Bench: M J Rao, M Chandurkar
JUDGMENT Kania, J.
- This is a reference on a case stated unders. 256(2)of the I.T. Act, 1961. The questions referred to us for our determination in this reference are as follows:
“(1) Whether there is any evidence to show that the cotton of the value of Rs. 1,06,066 (Rupees one lakh six thousand and sixty-six) represented the property of the applicant and that the value thereof was the income of the applicant assessable under section 69 of the Income-tax Act, 1961, on the ground that the applicant had not explained the source of its acquisition ?
(2) Whether the finding that the sum of Rs. 1,06,066 (Rupees one lakh six thousand and sixty-six) represented income of the applicant is based on suspicion, surmises and/or improper consideration of the evidence on record and is, therefore, unjustified in law ?”
- The facts giving rise to this reference are as follows :
The assessee is a Hindu undivided family (HUF) and one Kacharulal Tejmal, after whom the HUF is named, was the karta of the HUF. The assessment year with which we are concerned is the assessment year 1962-63 and the relevant previous year was the Samwat year 2017, which ended on 8th November, 1961. In respect of the income earned during the relevant previous year, the assessee stated that its sources of income were business in cotton, business of building contracts and as a partner in four firms, one of which was Shri Ramanlal & Company. We propeso to refer to the said firm hereafter as “Ramanlal & Company”. The assessee was supplying finance to three out of the said four firms in which it was a partner. For the purpose of obtaining finances the assessee borrowed moneys from banks in its overdraft accounts. These loans were obtained by pledge of goods. The ITO obtained information that the particulars of goods pledged by the assessee with the banks in its overdraft accounts as on 8th November, 1961, were as follows :
|Name of the bank
||Details of the goods pledged
||Value of the goods
|State Bank of India
||117 fully pressed cotton bales
|Punjan National Bank
||51 fully pressed cotton bales
||51 loose cotton bales
||188 quintals of raw cotton
|Central bank of India
||100 fully pressed cotton bales
This shows that in all, as on 8th November, 1961, there were 268 fully pressed cotton bales pledged by the assessee in its said accounts, and the total value thereof was Rs. 1,45,465. According to the assessee, these goods pledged with the banks did not belong to the assessee but to Ramanlal & Company. However, according to the books of the account of Ramanlal & Company, the stocks of that firm as on 8th November, 1961, were as below :
Bales Bojas Raw Cotton
No. Value No. Value Weight in Qt. Value
Khamgaon 30 6,000 24(50 Qts.) 10,250 150 15,250
Jalna 18 7,650 103(215 Qts.) 45,150 680 68,000
- This would show that on 8th November, 1961, Ramanlal & Company had only 48 fully pressed bales of cotton in its stocks, although it had 838 Qts. of raw cotton. This discrepancy was pointed out to the assessee, namely, as to how 268 bales of cotton belonging to Ramanlal & Company could have been pledged by the assessee with the said books when that firm had only 48 such bales in its stock. The stand of the assessee, firstly, was that the banks had given the loans against the pledge of raw cotton, which was in the process of conversion into bales. Secondly, it was urged that though certain bales were not actually available with Ramanlal & Company on 8th November, 1961, the goods were being transported from elsewhere to Khamgaon and the bank there had advanced loans on the strength of such information. Although called upon, the assessee failed to produce evidence in support of its stand. On the contrary, on inquiries from the ITO, the bankers categorically stated that it was only pressed cotton bales which were pledged with them. As the investment of the excess stock could not be explained by the assessee, the ITO added the value thereof to the income of the assessee under the provisions ofs. 69of the I.T. Act, 1961. It may be mentioned here that s. 69 provides that where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments, or the explanation offered by him is not, in the opinion of the ITO, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year. It is quite clear that in the present case the ITO rejected the explanation given by the assessee that the aforesaid bales of cotton pledged by the assessee in its overdraft accounts belonged to Ramanlal & Company, and added the aforesaid amount of Rs. 1,06,066 to the income of the assessee on the footing that the said bales represented unexplained investment by the assessess in the relevant previous year. The appeal preferred by the assessee against this order to the AAC failed and so did the appeal preferred by the assessee to the Income-tax Appellate Tribunal, save regarding some minor adjustments with which we are not concerned here. It is from this decision of the Tribunal that the aforesaid two questions have been referred to us.
- The first submission of Mr. Munim, learned counsel for the assessee, was that, on the evidence, there was no nexus shown between the assessee and the pledged goods. In our opinion, this argument has only to be stated to be rejected. The said goods were pledged by the assessee in its overdraft accounts, which would clearly indicate that they were pledged on the footing that they belonged to the assessee. In these circumstances, one fails to see how it could ever be said that there was no nexus between the assessee and the said goods. It is possible that the assessee could have given an explanation to satisfy the tax authorities that, although the goods were pledged by the assessee on the aforesaid footing, they really did not belong to the assessee. But, it can never be suggested that, in these circumstances, there was no nexus between the assessee and the said goods.
- The next submission pur forward by Mr. Munim, by way of an alternative submission, was that the assessee had on the evidence prima facie established that the said goods belonged to Ramanlal & Company and that the burden was on the Revenue to show that this explanation was false. This argument is also without any substance. Besides the bare word of the assessee, nothing was produced before the authorities concerned to show that the said goods belonged to Ramanlal & Company. No affidavit was produced of any of the other partners of Ramanlal & Company to show that these goods belonged to Ramanlal & Company. Stocks shown in the books of Ramanlal & Company not only failed to support the explanation given by the assessee but contradicted the same, because this stock statement established that on 8th November, 1961, Ramanlal & Company had only 48 bales of fully pressed cotton in its godown, whereas a much larger quantity of such bales was pledged by the assessee in its overdraft accounts. We may mention that even the explanation of the assessee that some of the raw cotton belonging to Ramanlal & Company was in the process of being converted into bales and that it was raw cotton which was shown by the banks in their statements as pressed cotton bales was totally unsupported by evidence. Nothing was shown, either from the books of Ramanlal & Company or books of any pressing factory, to show that this explanation was correct. Nor was any affidavit produced of any partner of Ramanlal & Company to support this story of the assessee. In these circumstances, we fail to see how it could be said that there is no evidence to support the conclusion arrived at by the Tribunal or by the I.T. authorities, or how it could be said that the conclusion arrived at by them was based on conjectures, suspicions or surmises or on utter misappreciation of the evidence.
- In the result, the question referred to us are answered as follows :
Question No. 1 : In the affirmative and against the assessee.
Questin No. 2 : In the negative and against the assessee. The assessee to pay the costs of the reference to the Commissioner.
- High Court Of Punjab & Haryana
B.T. Steels Ltd. Vs. Commissioner Of Income Tax on6th October, 2010
Adarsh Kumar Goel & Ajay Kumar Mittal, JJ.
IT Appeal No. 186 of 2004
(2010) 236 CTR (P&H) 471 : (2010) 328 ITR 471 : (2011) 196 TAXMAN 362 : (2010) 47 DTR 227
Decision in favour of Revenue
Counsel appeared : S.S. Narula, for the Assessee : Denesh Goyal, for the Revenue
ADARSH KUMAR GOEL, J.
This appeal has been preferred by the assessee under s. 260A of the IT Act, 1961 (for short, “the Act”) against the order dt. 30th Jan., 2004 of the Tribunal, Chandigarh in ITA No. 16/Chd/1999 for the asst. yr. 1995-96 proposing to raise following substantial questions of law : “(a) Whether the variation between the stocks hypothecated with the bank and the stock shown in the books of accounts empowers the AO to invoke the provisions of s. 69 of the IT Act, 1961 and make additions of difference in stock as appeared in the books of accounts towards unexplained investment in the stocks ?
(b) Whether the assessing authority was right in equating the hypothecation of stock with that of pledging of stock when the two situations are not identical and have separate meaning and thus erred in invoking the provisions of s. 69 of the IT Act, 1961 ? (c) Whether the order passed by the AO as restored by the learned Tribunal is without jurisdiction and the stock statement furnished to the bank in the case of hypothecation of stock falls within the meaning of investment or expenditure ? (d) Whether the impugned action of the assessing authority orthe learned Tribunal are not without jurisdiction and non-application of mind ?”
- The AO made additions to the declared income of the assessee on the basis of stock available with it but not reflected in the books of account. Stock statement of hypothecated goods furnished to the bank was also at variance with the stock entered in the books of account. On appeal, the CIT (A) deleted the additions by observing that without verification from the bank, the stock statement furnished to the bank could not have been relied upon. On further appeal, the Tribunal set aside the order of CIT(A) and restored that of the AO. The observations made by the Tribunal are as under : “13. The matter has been dealt with by the AO in reason No. (i) in the third para at p. 4 of the assessment order. It has been mentioned therein, and the learned CIT(A) does take note thereof, that the bank furnished the photocopies of the proforma for supervision/follow up and monitoring of advances in respect of the visit report to the assessee in respect of stocks as on 31st Dec., 1994. The bank stated that the records of the visits to the units of the assessee-company on other dates/occasions during the year 1994-95, were not available with them. In the proforma report as on 31st Dec., 1994, it was confirmed by the regional officer of the bank that the assessee was having stock with it as per the statement given to the bank. The position of non-availability of records of the bank’s visits to the units of the assessee-company on dates other than 31st Dec., 1994, was reflected in the AO’s report submitted to the learned CIT(A). The learned CIT(A) took this fact into consideration in arriving at the conclusion that no adverse inference could be drawn against the assessee. However, this does not appear to be a correct conclusion, since the fact giving rise to this conclusion was taken in isolation from other closely related facts, such as that as per the proforma report as on 31st Dec., 1994; the regional officer of the bank confirmed the assessee to be having stocks as per the statements given to the bank. Also the signed statement given to the bank contained the self-same fact so far as regards the quantity of stock with the assessee. It has been nowhere denied that the bank officers/officials visited the assessee in respect of the stock with it as on 31st Dec., 1994. The very concept of hypothecation of goods and visits require periodic check up by the bank. The fact that the bank admitted not having the records of visits to the assessee on other dates during the assessment year, could not undermine the value of the report of the visit conducted on 31st Dec., 1994. In fact, this report supports the statement of the assessee, to which statement is attached a presumption of truth so far as regards the contents thereof. The bank authorities found that the stock shown in the stock statement was actually lying with the assessee. It was on these facts that the AO concluded that the assessee had a stock of consumable stores valuing Rs. 30,72,570 as on 24th Aug., 1994. The learned CIT(A) has erringly ignored this attendant position. In view of these glaring facts, an adverse inference does call for to be drawn against the assessee and the assessment order cannot be given a summary go-by in this regard.
- The other reason recorded by the learned CIT(A) for arriving at the conclusion that he did is that the AO could not justify the rejection of the arguments of the assessee that had the stock statement been confronted to the director Shri Bhupinder Singh, he would have admitted a huge inflation in the value of consumable stores as shown to the bank. The statement of Shri Bhupinder Singh, director of the assessee-company who looked after the dealings of the assessee with the banks, was recorded under s. 131 of the Act, on 19th Jan., 1998. The assessment order, at p. 6 thereof, states that vide office letter dt. 22nd Dec., 1997, the assessee was again afforded an opportunity to explain the difference in stock and to state as to why an addition of Rs. 28,83,620 be not made to its total income, representing the unaccounted investment in the stock as on 24th Aug., 1994; that however, the assessee did not file any reply to this letter till date (29th Jan., 1998 i.e. the date of passing the assessment order); and that, therefore, it was presumed that the assessee had nothing to say as regards the unaccounted investment in stocks as on 24th Aug., 1994, more than what had been stated by it vide its letter dt. 4th Nov., 1997.
- This factual position remains unrebutted, meaning thereby, that the argument raised by the assessee does not hold water. Otherwise also, the statement in question was made by a director of the assessee company and that too, a director looking specifically after the dealings of the assessee with the banks. So far as regards the stock statement given to the bank, that statement, as discussed above, in itself, is a signed statement, the contents whereof are duly verified by the deponent. The contents of that statement carry a presumption of truth. Rebuttable though, such presumption may be, it is not the case that such presumption stands rebutted. The stock statement, therefore, binds the assessee. Even if such statement were before Shri Bhupinder Singh witness and Shri Bhupinder Singh, as the assessee tries to make out, ‘……..would have admitted a huge inflation in the value of consumable stores as shown to the bank…….’ it would have served no purpose. Obviously, therefore, there was no reason for the AO to reject the argument raised by the assessee. The learned CIT(A) has observed that the AO could not bring on record anything to defend his case. To our mind, in view of the above discussion, there was nothing to be brought on record by the AO. The facts are self-speaking.
- Still further, though the learned CIT(A) has observed that there being numerous decisions and the law being settled that the statements given to the bank for hypothecation of stocks are not good evidence unless it can be proved that stock was actually inspected, no such decision forms part of the impugned order. Moreover, it is not a case where the stock was not inspected. The stock being hypothecated with the bank, the bank has to inspect the stock and this was the procedure explained by the bank authorities when enquiries in this regard were made by the AO. Also, as discussed above, the report of the visit of the bank officials at the units of the assessee company on 31st Dec., 1994 amply demonstrates the stock having been actually inspected. 16A. Moreover, the difference in the value of consumable stores as shown to the bank at Rs. 30,72,570 and as shown in the books at Rs. 1,88,950, is Rs. 28,83,620, which comes to seven times. It is not the case of the assessee that the difference was only on account of value and not on account of quantity. No reconciliation of the same has been brought on record at any stage. In fact, the learned counsel for the asessee conceded that this was a manipulation done by the assessee for the purpose of claiming higher loans. These material facts have wrongly been overlooked by the learned CIT(A).”
We have heard learned counsel for the parties. Learned counsel for the assessee submits that mere difference in the value of stock furnished to the bank and shown in the books of account, was not sufficient to make addition. Reliance has been placed on judgment of Madras High Court in CIT vs. N. Swamy (2000) 241 ITR 363 (Mad) and judgment of this Court dt. 12th Oct., 2006 in CIT vs. Chauhan Papers (P) Ltd. IT Appeal No. 358 of 2006. We are unable to accept the submissions. Whether difference in the statement of value of stock furnished to the bank and entries in the books of account, justify addition, is a question of fact in each individual case.
The object of assessment is to tax the real income of the assessee. The AO has to determine the same on the basis of books of accounts and other material available. Burden of showing taxable income is on the Revenue. The said burden can be discharged by drawing appropriate inference from the material on record. Reference may be made to judgment of the Hon’ble Supreme Court in Kundan Lal Rallaram vs. Custodian, Evacuee Property AIR 1961 SC 1316.
In the present case, the AO drew inference from statement furnished by the assessee to the bank and made addition on that basis. The Tribunal has held that the AO not only had the bank statement before him but also the verification thereof by the regional officer that the stock was actually lying with the assessee. The assessee was given due opportunity to explain the difference, but it could not give any satisfactory explanation. In these circumstances, the CIT(A) was not justified in deleting the addition.
The finding recorded by the Tribunal being a finding of fact does not call for any interference. We may now refer to the judgments relied on behalf of the assessee. In N. Swamy (supra), it was observed that statement of the assessee to a third party could not be acted upon unless there was material to corroborate the same. Burden of showing that the assessee had undisclosed income was on the Revenue, which was not discharged by referring to the statement made to the third party.
The judgment relied upon is distinguishable on facts. There is no doubt about the proposition that burden of proving taxability of income is on the Revenue, as held in Parimisetti Seetharamamma vs. CIT (1965) 57 ITR 532 (SC), referred in the above judgment. For discharging the said burden, it is not necessary that some positive evidence must be led by the Revenue. In a given case, even by drawing inference from the material available, if explanation of the assessee is found to be unreliable, claim of the assessee can be rejected. In such situation, burden on the Revenue can be held to have been discharged. In the present case, the assessee had given stock statement to the bank which was at variance with entries in books of accounts.
No doubt, it was a statement to a third party, but neither the said statement was denied by the assessee nor any valid explanation furnished about the discrepancy. On the other hand, the verification from the bank showed that the assessee had excess stock, which justified addition to the income. In these facts, the judgment relied upon is distinguishable. In Chauhan Papers (P) Ltd. (supra), on facts, it was found by the Tribunal that the statement furnished to the bank did not justify the addition. Therein, the assessment was made on the basis of GP rate and there was no discrepancy in figure of purchases or sales.
This Court held that in absence of perversity of findings, no substantial question of law arises for consideration. In the present case, the findings recorded by the Tribunal, reproduced above, have not been shown to be perverse and the said findings justify the additions made by the AO. For above reasons, the questions of law framed by the assessee have to be answered against it. Accordingly, the appeal is dismissed.
3.Gujarat High Court
Fakir Mohmed Haji Hasan vs Commissioner of Income-Tax on 10 August, 2000
Equivalent citations: 2001 247 ITR 290 Guj
Bench: R Abichandani, A Dave
JUDGMENT R.K. Abichandani, J.
- The Income-tax Appellate Tribunal, Ahmedabad Bench “C”, has referred the following questions under Section 256(1)of the Income-tax Act, 1961 (hereinafter referred to as “the Act”), for the opinion of this court :
“(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessee had been found in possession of gold valued at Rs. 48.72 lakhs 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 ?
(2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that no deduction in respect of the value of the gold which had been confiscated was allowable from the income of the assessee ?”
- The relevant assessment year is 1984-85. The assessee derived income from the firm of Fakir Mohmed Haji Hassan and Co., Jam-Khambhalia, of which the assessee was a partner. His minor son’s share in the said firm was liable to be included in his income. The assessee filed a return for the assessment year 1984-85 on February 12, 1985, declaring an income of Rs. 48,520. The Income-tax Officer issued notice under Section 143(2)of the Act seeking certain information. In response thereto, the assessee’s accountant had attended the office of the Income-tax Officer and explained the return. The Income-tax Officer called upon the assessee to give information about the incident of seizure of gold worth Rs. 48,72,000 on April 19, 1983. The assessee disclosed to the Income-tax Officer that the customs department had confiscated the gold in question and the proceedings under the Customs Actwere pending against the assessee. The Collector of Customs, in adjudication proceedings, had imposed penalty of Rs. 25 lakhs on the assessee by his order dated November 30, 1983, passed under Section 112of the Customs Act, 1962, in connection with the smuggling of 2,320 tolas of gold of foreign origin valued at Rs. 48,72,000. The Income-tax Officer recorded a finding that the value of the said gold was liable to be added in the income of the assessee under Section 69A of the Act and made the addition accordingly. During the search by the customs authorities, an amount of Rs. 46,000 was also recovered, which was not explained by the assessee and that amount was also consequently added in the income of the assessee by the Income-tax Officer. In appeal, the Commissioner of Income-tax (Appeals) confirmed the additions and in further appeal, the Tribunal upheld those decisions.
- The Tribunal found that the facts as disclosed in the customs proceedings, which were relied on in the income-tax proceedings, were that specific information was received by the Customs Department, Ahmedabad, indicating that the assessee would bring imported gold on April 19, 1983, in his car and would make delivery thereof at a place near Quality Restaurant, Kankaria, Ahmedabad. On the basis of such information, a watch was kept and at about 4.30 p.m. when the customs officers spotted the persons who were concerned and accosted them and after a scuffle apprehended three persons, one of whom was the assessee. The car was seized in the presence of the panch witnesses and at that time during search 232 gold bars of foreign markings valued at Rs. 48,72,000 were recovered. These were concealed in five cotton strips kept in the dashboard behind the air-conditioner of the car. A bag containing currency notes of Rs. 46,000 was also recovered. All these articles were seized. The statements which were recorded under Section 108of the Customs Act were considered in the adjudication proceedings and the gold was confiscated absolutely to the Government by an order made by the customs authorities. The assessee was given an option to redeem the car on payment of fine of Rs. 28,000.
- The Income-tax Officer found that all the surrounding circumstances indicated that it was the assessee who was the owner of the gold, which was found concealed in the car, and the value of the gold was, therefore, added in his income, which finding was confirmed by the first appellate authority. The Tribunal, on appreciating the evidence, also held that the only inference that could be drawn from the facts of the case was that it was the assessee who had kept the gold in question in the car, and that he had come to Ahmedabad to dispose of it and, since he was the owner of the gold, the value thereof was liable to be added as income of the assessee under Section 69Aof the Act. The Tribunal also found that it was not the assessee’s case that he had derived any income from any business of smuggling and therefore it could not be said that confiscation of gold represented a trading loss in the hands of the assessee. No deduction could therefore be allowed as claimed by the assessee,
- In our opinion, the Tribunal has come to these findings on the basis of the material on record, reaching a fair decision in the process. The Tribunal rightly held that the ratio of the decisions in CIT v. S.C. Kothari 82 ITR 794 (SC); CIT v. Piara Singh 124 ITR 40 (SC) and CIT v. Ram Chander  159 ITR 689 (P&H) did not apply to the facts of the present case because, what was included in the assessee’s income was not the profits of an illegal business, but an unexplained investment in gold, which was found in the possession of the assessee.
- Under Section 4of the Income-tax Act, income-tax is to be charged in accordance with the provisions of the Act in respect of the total income of the previous year of every person. As provided by Section 5, the total income of any previous year of a person would, inter alia, include all income from whatever source derived which is received or is deemed to be received by such person, subject to the provisions of the Act. It will be seen from Section 69Aof the Act that where the bullion, jewellery or other valuable article is not recorded in the books of account and there is no explanation about the nature and source of its acquisition, or the explanation is not satisfactory, the value thereof may be deemed to be the income of the assessee of the financial year immediately preceding the assessment year in which the assessee is found to be the owner of such bullion, etc.
- 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 14of 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, 69Band 69C will riot 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.
- The opening words of Section 14″save as otherwise provided by this Act” clearly leave scope for “deemed income” of the nature covered under the scheme of Sections 69, 69A, 69Band 69C being treated separately, because such deemed income is not income from salary, house property, profits and gains of business or profession, or capital gains, nor is it income from “other sources” because the provisions of Sections 69, 69A, 69B and 69C treat unexplained investments, unexplained money, bullion, etc., and unexplained expenditure as deemed income where the nature and source of investment, acquisition or expenditure, as the case may be, have not been explained or satisfactorily explained. Therefore, in these cases, the source not being known, such deemed income will not fall even under the head “Income from other sources”. Therefore, the corresponding deductions which are applicable to the incomes under any of these various heads, will not be attracted in the case of deemed incomes which are covered under the provisions of Sections 69, 69A, 69B and 69C of the Act in view of the scheme of those provisions.
- 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 he 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. The reference stands disposed of accordingly with no order as to costs.