We have two appeals before us. One is by department; other is by assessee. 2. assessee is firm carrying on business in money-lending and in dealing in silver ornaments. original assessment for assessment year 1976- 77 was completed on 27-1-1977 on total income of Rs. 35,127. 3. On 3-6-1975, Gold Control authorities had raided business premises of assessee and found primary gold weighing 182 gms. and brand new gold ornaments weighing 1038.5 gms. total weight being 1220.5 gms. and value as estimated by those authorities being Rs. 61,000. Those authorities found that assessee was carrying on business in gold although assessee had not obtained any licence for said business and as such assessee had contravened provisions of Gold (Control) Act. Collector of Customs passed order in April, 1976 imposing penalty of Rs. 10,000 on firm and Rs. 2,500 on each of two partners under section 74 of said Act. He ordered that gold and gold ornaments found on business premises be confiscated under section 71 of said Act. He further directed u/s. 73 of said Act that on payment of Rs. 20,000 as fine in lieu of confiscation assessee would be entitled to redeem confiscated gold and gold ornaments. assessee paid fine of Rs. 20,000 imposed u/s. 73 of said Act and redeemed gold and gold ornaments. assessee also paid fine of Rs. 15,000 imposed u/s. 71 of Act. Thus total fine paid was Rs. 35,000. 4. After redeeming gold and gold ornaments from confiscation, assessee declared 635 gms. of gold ornaments in December, 1975 under voluntary disclosure scheme. assessee returned income of Rs. 25,000 in respect of said ornaments and paid tax. 5. On receipt of information about confiscation of gold and gold ornaments, Income-tax Officer reopened assessment. He valued gold and gold ornaments weighing 1220.500 gms. at Rs. 531 per 10 gms. and added value thereof (Rs. 65,047) in total income by raising presumption under section 69 of Income-tax Act, 1961. He rejected claim for assessee for deduction of Rs. 35,000 paid as fine. 6. In appeal filed by assessee, Commissioner of Income-tax (Appeals) held that since value of 635 gms. of ornaments (Rs. 25,000) had already been declared under voluntary disclosure scheme, said amount of Rs. 25,000 should be deducted from value of gold and gold ornaments to b e added in total income. He directed accordingly. As regards rate at which gold and gold ornaments should be valued, he directed that gold should be valued at Rs. 531 per 10 gms. while as far as gold ornaments were concerned figure of Rs. 531 should be discounted by 8 per cent because of fact that there was impurity of 8 per cent in gold ornaments. He deleted disallowance of Rs. 35,000 paid as fine. According to him, since business of gold carried on by assessee was illegal business, expenses of said illegal business were deductible and that said amount of Rs. 35,000 represented expenses of illegal business. Both assessee and department are in appeals before us. 7. in assessee's appeal two grounds have been raised. first is that rate of gold ornaments should have been adopted at Rs. 400 per 10 grams. second is that Commissioner of Income-tax (Appeals), instead of directing reducing addition by Rs. 25,000 because of voluntary disclosure should have directed that value of gold and gold ornaments weighing 585.5 gms. (1220.5 gms. minus 635 gms. disclosed under VDS) should have been added. 8. In department appeal only one ground has been raised. That ground relates to allowance of deduction of fine of Rs. 35,000. 9. We have heard parties. As already stated, weight of gold seized was 182 gms. and weight of gold ornaments seized was 1038.5 gms. As far as gold is concerned, it is not disputed that price of Rs. 531 per gm. should be adopted. dispute is regarding price to be adopted for gold ornaments. Income-tax Officer adopted Rs. 531 per 10 gms. in respect of gold ornaments also. Income-tax Officer was obviously wrong in this regard. This is because gold ornaments were not of 24 carat purity while rate of Rs. 531 was for gold of said purity. Commissioner of Income-tax (Appeals) estimated impurity at 8 per cent and directed Income-tax Officer to make discount of 8 per cent in computation. assessee's representative submits that because of shouldering, ornaments if melted would be of 15 per cent impurity and as such discount of 15 per cent should be made. We have not been supplied with any valuation report regarding ornaments by any approved valuer. It is to be noted that ornaments were "brand new" ornaments according to gold control authorities. They were for sale. assessee was found by Gold Control authorities doing business in gold ornaments. price that would be required to be considered is price which these ornaments would fetch if sold in open market. Since ornaments were new, there would be no need to melt them before selling. There would be open market for sale of new ornaments. purchaser would pay for not only value of gold contained in ornaments but also labour charges or making charges as they are called. These charges r e quite considerable. Consequently, direction to give only 8 per cent discount in computation of value of Rs. 531 per 10 gms. does not call for any interference. rate of Rs. 400 per 10 grams claimed by assessee was wholly unacceptable. We accordingly confirm order of Commissioner of Income-tax (Appeals) regarding price at which gold and gold ornaments should be valued. 10. As regards second point, we are of opinion that it is only income disclosed under voluntary disclosure scheme which was liable to be excluded from regular assessment. It is admitted that income disclosed was Rs. 25,000 in respect of 635 gms. of ornaments. Consequently, it is only this income which is liable to be excluded. 11. Section 8(1) of Voluntary Disclosure Scheme of Income and Wealth Act, 1976 lays down that amount of voluntarily income shall not be included in total income of declarant in regular assessment. Hence bar against inclusion is regarding income disclosed. Mention of weight or ornaments in said declaration is of no significance. Even if assessee had mentioned higher weight, Officer accepting disclosure declaration would have assessed only in respect of income disclosed and not on market value of ornaments referred in said declaration. There is no provision for exclusion of value of asset in which income disclosed is invested. Commissioner of Income-tax (Appeals) was right in giving direction for excluding Rs. 25,000 (which represents income disclosed under voluntary disclosure scheme) and (which represents income disclosed under voluntary disclosure scheme) and there was no justification for enhancing exclusion so as to equate it to value of gold ornaments. We accordingly reject grounds raised in appeal filed by assessee. 12. We now come to appeal filed by department. We have already stated that Collector of Customs (Preventive) Bombay had imposed (i) fine of Rs. 10,000 on assessee-firm, and (ii) fine of Rs. 250 on each of two partners of assessee-firm. Total fine imposed is Rs. 15,000 and it has been imposed under section 74 of Gold (Control) Act. Besides, he ordered gold and gold ornaments to be confiscated u/s. 71 of Act and gave u/s. 73 of t h e Act option to assessee-firm to redeem said gold and gold ornaments on payment of fine of Rs. 20,000. Thus total fine payable by assessee-firm was Rs. 35,000. By raising additional ground before Commissioner of Income-tax (Appeals) assessee claimed deduction of Rs. 35,000 in computing profits and gains of business. Commissioner of Income-tax (Appeals) relied on decision of Supreme Court in CIT v. Piara Singh [1980] 124 ITR 40 and granted deduction of said amount. department is in appeal before us. 13. submission on behalf of department is that Commissioner o f Income-tax (Appeals) had failed to appreciate fact that deduction for redemption fine and penalty paid by assessee amounting to Rs. 35,000 was not admissible deduction in view of decision of Supreme Court in Haji Aziz & Abdul Shakoor Bros. v. CIT [1961] 41 ITR 350. It was further submitted that ratio of decision in Piara Singh's case (supra) was not applicable on facts of case inasmuch as income from illegal business has not been assessed or taxed. submission on behalf of assessee, on other hand, was that addition of value of gold and gold ornaments represented income from illegal business of gold and as such, penalty which was incidental to illegal business was allowable as deduction. According to assessee, in return filed after service of notice u/s. 148, assessee had treated value of gold and gold ornaments as business income. It was submitted that principle laid down in case of Piara Singh (supra) applied and that principle laid down in case of Haji Aziz & Abdul Shakoor Bros. (supra) did not apply. 14. We have considered rival submissions. In assessment order, it i s mentioned that representative of assessee submitted that assessee had, in return filed u/s. 148, included value of 585.5 gms. (1220.5 grams minus 635 grams declared under V. D. S.) as income but assessee did not admit that said value represented income of assessee from business. Declaration of income, according to assessee, was by way of precautionary measure. It was also submitted before Income-tax Officer that assessee did not admit that said ornaments belonged to firm. Even 635 gms. declared under V. D. S., according assessee, did not belong to firm. In view of these submissions, Income-tax Officer took resort to section 69 of Act and included value of gold and gold ornaments seized under provisions of said section. 15. Section 69 lay down that where in financial year immediately preceding assessment year assessee has made investments which are not recorded in books of account, if any, maintained by him for any source of income and assessee offers no explanation about nature of source of investments or explanation offered by him is not, in opinion of Income-tax Officer satisfactory, value of investments may be deemed to be income of assessee for that financial year. In present case assessee is found to have made investments in gold and gold ornaments which were seized on 7-5-1976. These investments are not recorded in books of account. explanation of assessee has been rejected. In these circumstances, value of gold and gold ornaments representing assessee's unexplained investments have been treated as income. assessee has not disclosed details if business transactions in gold and gold ornaments. assessee had not stated as to what income assessee had earned in said business. What all assessee stated was that value of gold and gold ornaments be treated as income. value of gold and gold ornaments has been treated as income because it represented unexplained investment in gold and gold ornaments. Separate addition have not been made in respect of business transactions in lending and dealing in silver ornaments. That was lawful business. In course of that lawful business assessee made investments in gold and gold ornaments for which there is no satisfactory explanation and as such presumption that said investments represented income is drawn under section 69 of Act. On these facts, principle laid down in case of Piara Singh (supra) would not apply. In that case, income tax authorities had found that assessee was carrying on business in smuggling and had assessed him on income from business of smuggling. In present case, although gold control authorities inferred that assessee was carrying on business in gold and gold ornaments, there was no material before Income tax Officer to hold that assessee had derived income from business of gold or gold ornaments. So no income from business of gold ornaments was assessed. What is presumed as income is unexplained investments in gold and gold ornaments seized on 03.06.1975. presumption is raised u/s. 69 of Act. Consequently, there is no question of any deduction u/s 37(1) of Act in respect of fine paid by assessee. We accordingly hold that amount of fine i.e. Rs. 35,000 was not allowable as deduction either u/s. 37(1) of Act, as expenses of business or u/s. 28 of Act as business loss on facts of present case. We set aside order of Commissioner of Income-tax (Appeals) on this point and restore disallowance made by Income tax Officer in respect of amount of Rs. 35,000. 16. departmental appeal is allowed. cross objection is dismissed. *** FIFTH INCOME TAX OFFICER v. HASTIMAL MADANRAJ & CO.