These two appeals were heard together with consent of parties and are being disposed of by this common order. assessees are brothers and they resided together at Akhand Jyoti, Santacruz (East), Bombay. Shantilal Zavery is elder of these two brothers. There are other two brothers also one of whom is Kirti Zaveri while other is Suresh Zaveri. Shri Kirti Zaveri carried o n business in London and was non-resident. Suresh Zaveri, at relevant t i m e , was residing at Bangkok. It is alleged that he was subsequently absconding. assessment year with which we are concerned is 1975-76 and relevant accounting years of two assessee ended on 31-3-1975. 2. foreigner by name Vincente M. Cunnanan landed at Santacruz Air Port, Bombay on 6-5-1975. He was Third Secretary and Vice Counsel at Philippines Embassy, Rangoon. His baggage was detained and examined on 7- 5-1975. It contained wrist watches valued at Rs. 2,70,000. investigations in that case by customs authorities revealed Mr. Cunnanan made trip to Bangkok and contacted Suresh Zaveri, brother of present two assessees. said Suresh Zaveri was introduced to him as Sydny Zaveri in Victory Hotel in Bangkok. Accordingly, Mr. Cunnanan made trip to Bangkok on 14-8-1974 on his way to Manila. He contacted Mr. Sydny (Suresh) Zaveri on telephone and Suresh Zaveri proposed to Mr. Cunnanan to make trip to India on his behalf and on behalf of his brothers one of whom was Mr. Henry Zaveri (Himat Zaveri) one of present two assessees. When Mr. Cunnaman agreed to said proposition, Mr. Suresh Zaveri informed him that his brother Henry Zaveri was coming to meet him and at same time he would accompany. Mr. Cunnanan back to Bombay on same flight which Mr. Cunnanan would take. Mr. Cunnanan made several trips from Bangkok to Bombay on behalf of Zaveri Brothers and brought smuggled goods. In course of one of trips dated 14-12-1974 he carried two suitcases delivered by Mr. Suresh Zaveri at Bangkok to Delhi, which contained wrist watches. He also carried packets which contained precious stones. At Ashoka Hotel, New Delhi, these suitcases and packets were delivered by Mr. Cunnanan to assessee, Shanti Zaveri. photographs of assessees had been shown to Mr. Cunnanan at Bangkok by Mr. Suresh Zaveri so assessee would be identified by him. Similarly, on 28- 3-1975 Mr. Cunnanan brought suitcases to Delhi containing contraband articles. They were handed over to said assessee, who had informed Mr. Cunnanan that Suresh Zaveri would pay commission for work of transport. 3. above facts were revealed from statement of Mr. Cunnanan recorded on 28-5-1975 by customs authorities. residential flat at No. 2, Akhand Jyoti, Santacruz (East), Bombay was searched on 29-5-1975 in presence of witness. At time of search assessee Henry Zaveri was present. wife of other assessee Smt. Sheela Shantilal Zaveri was also present. Amongst articles that were found there was one white envelope with mark 'Henry' written in ink. One Indian passport issued by Indian Embassy of Bangkok on 23-4-1974 in name of assessee Himatlal Zaveri along with his old passport was also found. air ticket in name of Mr. Zaveri for Bangkok/Delhi/Jaipur/Bombay valid till 19-8-1975, and another air ticket in same name valid till 19-4-1976 for Jaipur/Delhi/Bangkok were found. Besides two, three more air tickets in name of Mr. H. N. Zaveri (assessee Himatlal N. Zaveri) for Bangkok were also recovered. 4. In course of assessments statements of two assessees were recorded. It was admitted by both assessees that they had been detained for long period under provisions of Conservation of Foreign Exchange and Prevention of Smuggling Act, 1974 (the COFEPOSA). However, denied that grounds for detention had been served on them. As regards air tickets found from residential premises, explanation of assessee Himatlal Zaveri was that they had been sent by his brother Kirti Zaveri who was carrying on business at London. These tickets had been sent, according to him, because of fact that he was looking after said brother's business. ITO found that there was no evidence to show that tickets in question had been purchased by brother residing at London and there was also no evidence to indicate that assessee Himatlal Zaveri was looking after business of Kirti Zaveri. customs authorities during search had found packets which were exclusively meant for packing precious stones. assessees denied that they were kept for packing precious stones. According to them they were lying at home without any use. 5. Both assessees filed copies of affidavit dated 6-9-1975 alleged to have been sworn by Mr. Cunnanan on 6-9-1975 at Manila. In this affidavit Mr. Cunnanan had retracted from his earliest statement against assessees. He stated in his alleged second affidavit that assessee Himatlal Zaveri had been requested by him to work for him in his smuggling operation but assessee Himatlal Zaveri refused to co-operate and work for him. He suspected that Himatlal Zaveri had informed authorities against him and for that reason he had been caught in while smuggling goods, Out of sheer vengeance and in hot temper he falsely implicated Himatlal Zaveri and his family in his statement to authorities in India. ITO observed that this document had no evidentiary value because Mr. Cunnanan was not available for cross-examination and he was out of reach of Indian authorities. 6. assessee Himatlal Zaveri had disclosed income of Rs. 1,500 in his return being income from brokerage. No books of account were produced and assertion on his behalf was that none had been maintained. No details had been furnished. ITO therefore, added Rs. 1,000 in brokerage income. ITO came to conclusion that he was carrying on smuggling activities for which no accounts had been furnished. He estimated income from smuggling activities at Rs. 50,000 and added this amount to returned income. 7. other assessee Shantilal Zaveri had disclosed income of Rs. 19,000 in return being commission earned during year. ITO added Rs. 2,000 from income on investment about which details were not furnished. He also added Rs. 50,000 as estimated income from smuggling activities. 8. Both assessees filed appeals before AAC. In appeal for assessee Himatlal Zaveri, AAC considered all materials on record and found that assessee had derived income from smuggling activities which have not been disclosed in return. According to him, estimate of Rs. 50,000 made by ITO was fair and reasonable. He, therefore, confirmed addition of Rs. 50,000 which had been challenged in appeal by assessee. 9. In appeal filed by other assessee Shantilal Zaveri, AAC deleted addition of Rs. 2,000 made by ITO for income from investments. He, however, confirmed addition of Rs. 50,000 as income from smuggling activities. materials produced indicated that assessee had derived income from smuggling activities. Before him, assessee had made request that assessment be set aside and be restored to ITO as no reasonable opportunity had been given by restored to ITO to place material in support of return. This request was rejected by learned AAC. He observed that no account books or any record of income mentioned in return was produced before him although opportunity to produce same was given. assessee admitted before, AAC that no record had been maintained by him. learned AAC, therefore, deleted addition of Rs. 2,000 and confirmed addition of Rs. 50,000. 10 Both assessees have filed appeals before us and their only grievance is against confirmation of addition of Rs. 50,000 in assessment of each assessee. 11. Before us submission on behalf of two assessees was that as far as assessee Himatlal Zaveri was concerned, there was some material on record but that material was not sufficient to come conclusion that said assessee had engaged himself in business of smuggling in relevant accounting year. As far as other assessee, namely, Shantilal Zaveri was concerned, according to learned representative there was no material to draw any inference against him. 12. We shall first deal with case of assessee Himatlal Zaveri. One of materials against him is statement of Mr. Cunnanan recorded on 28-5- 1975. In his statement he has clearly stated that assessee's brother Suresh Zaveri alias Sydny Zaveri had contacted him at Bangkok and had made proposal to make trips to India on his behalf and on behalf of his brothers on India, namely, Himatlal Zaveri and Shantilal Zaveri. name of Himatlal Zaveri was given as Henry Zaveri so that Mr. Cunnanan who was foreigner and who had difficulty in remembering Indian names may easily remember English name. He has clearly stated that assessee Himatlal Zaveri alias Henry Zaveri came from Bombay and stayed at Shorten Hotel in Bangkok. Mr. Cunnanan gave description of assessee as tall man (about 6') of dark complexion and dark straight hair with set of protruding upper teeth. This description has not been challenged as wrong description. He has disclosed that on 19-8-1974 and 16-9-1974 he had undertaken trips to India from Bangkok. Since he was diplomat, he enjoyed immunity as far as checking of baggage was concerned. H e has described in detail about suitcases and packages given to him for carriage to India for being handed over to Zaveri brothers. On 20th August both of them landed at Bombay and assessee Himatlal Zaveri went ahead and met him at Taj Hotel at Bombay> He then made trips from same hotel to take away goods from suitcases. On other occasion also assessee Himatlal Zaveri had collected goods from Mr. Cunnanan. copy of statement of Mr. Cunnanan was given to assessee Himatlal Zaveri and he was asked to explain allegations made against him. assessee admitted that his brother Suresh Zaveri was staying at hotel in Bangkok. He also admitted that envelope containing word 'Henry' was found in his room. He, however, did not give any satisfactory explanation as to how word 'Henry' was there. He also admitted that empty packages to pack precious stones were also found. He did not give any satisfactory explanation as to how word 'Henry' was there. He also admitted that empty packages to pack precious stones were also found. He did not give any explanation as to why they had been kept in his house. He admitted in his statement that he had met Mr. Cunnanan in hotel in Bangkok in August 1974 and that he had talk of about one hour with him. However, according to him, talk was innocent and was not about smuggling business. He also admitted that on 19-8-1975 he and Mr. Cunnanan travelled to India by same flight from Bangkok. However, according to him this was merely accidental. He admitted that there was conversation on some business proposals and that he came to know at that time that Mr. Cunnanan was diplomat. He also admitted that he had met Mr. Cunnanan at Taj Mahal Hotel where he was staying after coming to Bombay. He admitted that he carried five packets from room of Mr. Cunnanan but according to him these packets were placed by him in car of some unknown person. According to him Rs. 3,000 were paid to him at that time and he was told that those packets contained watches. size of boxes according to him was 8 x 5 x 3. He admitted that Mr. Cunnanan used to call him Henry. He also admitted that on another occasion he carried according to him, he was paid Rs. 3,200 for that job. He admitted that he knew that those packets contained watches. He admitted that air tickets seized from room were for his journey to Bangkok. above admissions corroborate statement of Mr. Cunnanan against assessee. explanation of assessee that he carried packets from hotel room of Mr. Cunnanan to some third party for commission of Rs. 3,000 on each of two occasions is not acceptable. It is obvious that packets containing contraband watches and stones had been delivered to him in course of smuggling business carried on by him with assistance of his brother Suresh Zaveri and with co-operation of Mr. Cunnanan. 13. copy of alleged subsequent affidavit of Mr. Cunnanan cannot b e relied on. Mr. Cunnanan had left India and was out of reach of Indian authorities. He had nothing to lose by retracting earlier statements. Besides his version in alleged subsequent affidavit is too unnatural to inspire confidence. story mentioned therein is wholly unbelievable. It is not possible to believe that out of sheer anger he would name Zaveri brothers. It is obvious that said copy was given to assessees in order to help them in income-tax assessments. Considering all circumstances we are of opinion that assessee Himatlal Zaveri was engaged in business of smuggling of goods from Bangkok and that Mr. Cunnanan who enjoyed diplomatic immunity assisted him in said business. exact amount earned from smuggling is not disclosed by assessee Himatlal Zaveri. Consequently, n estimated is required to be made. estimate of Rs. 50,000 is fair and reasonable in circumstances of present case. We see no reason to interfere in order of lower authorities. We, therefore, confirm order of Commissioner (Appeals). 14. We now come to appeal of assessee Shantilal Zaveri. Out attention was drawn to fact that he was discharged by Additional Chief Metropolitan Magistrate in criminal prosecution under action 120B of Indian Penal Code, 1860, read with section 135(1) (a) and section 135(1) (b) of Customs Act and section 5 of Imports and Exports (Control) Act, 1947. Copy of order of discharge dated 21-12-1982 was filed before us. This order Copy of order of discharge dated 21-12-1982 was filed before us. This order indicates that assessee Shantilal Zaveri was prosecuted before said Magistrate along with Mr. Cunnanan, other assessee Himatlal Zaveri, assessee's brother Suresh Zaveri and three others. Out of eight accused four were found to be absconding. Mr. Cunnanan and assessee's brother Suresh Zaveri were amongst those four who were absconding. Consequently, trial could not proceed against those four persons. As against assessee Shantilal Zaveri only evidence was confessional statement of Mr. Cunnanan. learned Magistrate held that that evidence alone was not sufficient to frame charge against assessee Shantilal Zaveri. He, therefore, discharged him. T h e learned Magistrate found that there was enough material on record to connect other assessee Himatlal Zaveri with Crime and, therefore, t r i l proceeded against him. standard of proof required for criminal prosecution is different from that required to draw inferences about earning of income by assessee. It was not learned Magistrate's finding that case against assessee Shantilal Zaveri was false: his finding was that evidence on record was not sufficient to connect him with offense. thus, mere fact that assessee Shantilal Zaveri was discharged in criminal case would not be conclusive proof in assessment proceeding in respect of fact that he did not carry on activity of smuggling. 15. Our attention was also drawn to fact that Tribunal for forfeited property had passed order on 10-1-1980 setting aside order of competent authority forfeiting shares worth Rs. 3,550. We have perused that order and we find nothing contained therein is of any assistance to assessee Shantilal Zaveri as far as question involved in present assessment proceeding is concerned. 16. As far as inference of ITO and AAC to effect that assessee Shantilal Zaveri had indulged in smuggling activity in relevant accounting year is concerned, we have first, statement of Mr. Cunnanan recorded on 28-5-1975. He has specifically mentioned that he had entered into contract with Suresh Zaveri for carrying contraband goods to India on behalf of Suresh Zaveri and his brothers. brothers of Suresh Zaveri mentioned by him were obviously Himatlal Zaveri and Shantilal Zaveri. We have already discussed evidence regarding Himatlal Zaveri and admission of Himatlal Zaveri in his statement before ITO about connection with Mr. Cunnanan. Mr. Cunnanan has stated that he had brought on some occasions suitcases and packets to India from Bangkok which were sent by Suresh Zaveri. Apparently they contained wrist watches and precious stones. As already stated packages for packing precious stones were found in premises in which assessee Shantilal Zaveri resided with Himatlal Zaveri. This indicated that packets had reached residence where assessee Shantilal Zaveri resided. Mr. Cunnanan has stated that when he came to India from Bangkok on 14-12-1974, and 28-3-1985, assessee Shantilal Zaveri had met him in Ashoka Hotel, New Delhi and packets containing wrist watches and two smaller packets containing precious stones were given by him to assessee Shantilal Zaveri, who was brother of Suresh Zaveri. Mr. Cunnanan gave description of assessee Shantilal Zaveri as person of about middle height (about 5'5") and receding hairline. According to him he was of plumped dark complexion, dark eyed and dark hired. This description is not challenged as incorrect. He has specifically stated that assessee Shantilal Zaveri told him that commission for transfer of goods would be paid by Suresh Zaveri in Bangkok. other assessee Himatlal Zaveri has stated in his statement before ITO that on one occasion he had gone to meet Mr. Cunnanan along with other assessee Shantilal Zaveri in car. Both brothers, according to Himatlal Zaveri, met Mr. Cunnanan. Himatlal Zaveri has no doubt stated that his brother Shantilal Zaveri had no direct contact with Mr. Cunnanan and that it was only he (Himatlal Zaveri) who had direct contact with him. However, fact that both of them had gone together to meet Mr. Cunnanan indicated that assessee Shantilal Zaveri had also connection with Mr. Cunnanan. As already stated, Mr. Cunnanan has expressly stated that assessee Shantilal Zaveri had received packets from him at Delhi. Shantilal Zaveri was detained under COFEPOSA from August 1975 to March 1977 on allegations that he was indulging in smuggling in conspiracy with Mr. Cunnanan. It is no doubt true that Shantilal Zaveri produced before learned AAC original affidavit of Mr. Cunnanan sworn in Manila. We have already referred to this affidavit while dealing with case of assessee Himatlal Zaveri. As stated earlier, statement of Mr. Cunnanan in this subsequent affidavit that implicated Zaveri brothers because of sheer vengeance is wholly unbelievable. As already stated one of brothers, namely, Himatlal Zaveri has admitted connections with Mr. Cunnanan and to have carried packets from Mr. Cunnanan's room on two occasions. There was no question of implicating on account of anger and vengeance. Mr. Cunnanan is out of reach of Indian authorities and as such it was not unnatural on his part to resile from his earlier statement. His earlier statement which stands corroborated from other materials on record is acceptable while his subsequent affidavit is not acceptable. very fact that assessee Shantilal Zaveri could obtain original affidavit from Mr. Cunnanan indicated close intimacy of assessee Shantilal Zaveri with Mr. Cunnanan. In absence of close intimacy he could not have been able to obtain same. material on record clearly proves that assessee Shantilal Zaveri had also indulged in smuggling activity in relevant accounting year. As regards estimate of income from smuggling activity, estimate of Rs. 50,000 made by ITO appears to be fair and reasonable in circumstances of present case. assessee failed to produce books of account before either ITO or AAC. Before AAC he stated that he did not maintain any books of account. Even counterfoils of cheque books or bank certificate were not produced. On basis of all materials on record addition of Rs. 50,000 as uncounted income from smuggling activity was fully justified. We, therefore, confirm order of AAc on this point. 17. Before parting with these appeals we may mention that learned representative of assessees had laid stress on fact that in first statement dated 7-5-1975 Mr. Cunnanan had not made any reference to these two assessees and that reference to these assessees was made only in second statement dated 28-5-1975. It is obvious to us that at time of first statement on 7-5-1975 Mr. Cunnanan was required to explain possession of wrist watches which had been seized from him at air port. These wrist watches had been brought on behalf of some other smuggler. consignments were not in respect of transactions concerning present assessees. Consequently, names of present assessees were not mentioned in that statement. On 28-5-1975 he gave details of all smuggling activities carried on by him. In that statement names of assessees figured because assessees were some of other persons who had indulged in smuggling activities. We may also mention that reliance was placed before us on three decisions, namely, Ram Khelawan and Sahu Thakur Das, In re. [1939] 7 ITR 607 (All.), CIT v. Bikaner Trading Co. Ltd. [1970] 78 ITR 12(SC) and Lalchand Bhagat Ambica Ram v. CIT [1959] 37 ITR 288 (SC). We have gone through these decisions and none of them is of any assistance. In first decision it is mentioned that local reputation cannot be said to be judicial basis on assessment proceeding. We have not relied on local reputation but on statements of assessee, materials found during search and statement of Mr. Cunnanan as corroborated by other circumstances. other two cases were cited in support of proposition that particular income must be proved to have been earned during relevant accounting year. We have come to conclusion that both assessees had indulged in smuggling activity in relevant accounting year. One of them had made trips to Bangkok. From materials on record we have come to conclusion that income of each of assessees from smuggling activities in relevant accounting year must have been not less than Rs. 50,000. This estimate, according to our opinion, is fair and reasonable. Consequently, above decisions are of not any assistance to assessees. In result, appeals fail and are dismissed. *** HIMATLAL N. JHAVERI v. SEVENTH INCOME TAX OFFICER