O/TAXAP/505/2009 JUDGMENT IN HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 505 of 2009 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER 1 Whether Reporters of Local Papers may be allowed to see judgment ? 2 To be referred to Reporter or not ? 3 Whether their Lordships wish to see fair copy of judgment ? 4 Whether this case involves substantial question of law as to interpretation of Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to civil judge ? RAMA NATHA GADHAVI....Appellant(s) Versus INCOME TAX OFFICER....Opponent(s) Appearance: MR RK PATEL, ADVOCATE for Appellant(s) No. 1 MR PRANAV G DESAI, ADVOCATE for Opponent(s) No. 1 CORAM: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER Date : 04/12/2014 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1. This is appeal by appellant- Page 1 of 7 HC-NIC Page 1 of 7 Created On Fri May 12 11:53:29 IST 2017 O/TAXAP/505/2009 JUDGMENT assessee, seeking to challenge order of learned ITAT, Rajkot Bench (for short, Tribunal ), Dated : 21.11.2008, rendered in ITA No. 75/Rjt/2007 for A.Y. 1994-95, whereby, Tribunal dismissed appeal filed by assessee. 2. brief facts leading to filing of present tax appeal are that Ice Factory premises of assessee, herein, came to be raided by Revenue on 19.06.1993 conjointly with police. Since, at premises of assessee certain imported items, such as computer parts, air conditioners etc., were were found, personnels from Custom Authorities were called and they seized aforesaid goods, amounting to total Rs.31,70,000/-. Pursuant thereto, residence of brother of assessee, namely Khimanand Nathabhai Gadhvi, also came to be raided, from where electrical items, i.e. wrist-watches and other electrical goods worth Rs.39,385/- in all were seized. Hence, concerned AO assessed total income of assessee at Rs.1,39,69,385/-. Being aggrieved with same, assessee approached learned CIT(A), who, vide its reasoned order dated 09.11.2006. dismissed appeal of assessee. assessee, hence, approached learned Tribunal, which passed impugned order Page 2 of 7 HC-NIC Page 2 of 7 Created On Fri May 12 11:53:29 IST 2017 O/TAXAP/505/2009 JUDGMENT dated 21.11.2008. Hence, assessee preferred present appeal. 3. At time of admitting this appeal, this Court framed following question for consideration; 1. Whether on facts Tribunal is right in confirming levy of penalty at Rs.62,34,760/- under section 271(1) (c) of Income-tax Act, 1961, as consequence to addition of Rs.1,39,69,385/- being confirmed in quantum proceedings before Tribunal? 4. Mr. Patel, learned Advocate for appellant-assessee, submitted that CIT(A) as well as Tribunal committed grave errors in dismissing appeals of assessee, inasmuch as they failed to appreciate material on record in its proper perspective. He, further, submitted that CIT(A) as well as Tribunal ought to have appreciated that addition of certain amount is not ground to impose penalty on assessee. He, then, invited our attention to decision of this Court in Tax Appeal No.1062 of 2005, Dated : 05.11.2014, wherein, under more or less similar circumstances, assessee s appeal was allowed for A.Y. 1994-95. He, more particularly, placed reliance on Paras-3 to 5 of aforesaid order, wherein, this Court observed Page 3 of 7 HC-NIC Page 3 of 7 Created On Fri May 12 11:53:29 IST 2017 O/TAXAP/505/2009 JUDGMENT as under; 3. business premises of appellant was raided by police on 19.06.1993 and on finding foreign made computer parts and air conditioner police informed Customs Department. Assessing Officer assessed total income of assessee after raid to be around Rs. 1,39,69,385/-. appellant preferred appeal before first appellate authority who confirmed order of Assessing Officer. Being aggrieved by order of learned CIT(A), appellant preferred appeal before Tribunal. Tribunal dismissed appeal by disregarding contention of appellants on facts as well as in law. 4. This appeal was ordered to be heard with Tax Appeal No. 107 of 2004 which has already been decided by this Court vide judgment dated 16.10.2014 wherein this Court has passed following order: 1.By way of this Tax Appeal, appellant has challenged judgment and order dated 29.01.2004 passed by Income Tax Appellate Tribunal, Rajkot Bench, Rajkot whereby Tribunal has dismissed Appeal. 2.While admitting matter on 21.12.2004, this Court had framed following issue :- Whether, on facts and in circumstances of case, Tribunal has substantially erred in disregarding fact that business is being carried on by appellant and Page 4 of 7 HC-NIC Page 4 of 7 Created On Fri May 12 11:53:29 IST 2017 O/TAXAP/505/2009 JUDGMENT hence, loss incidental to business is allowable u/s 28 and provision of Section 37(1) of Income Tax Act, 1961 cannot override provision of Section 28? 3.The facts giving rise to Appeal are that :- appellant individual deals in bullion and gold jewelery. On 12.01.1999, search was carried out on residential as well as business premises of appellant and substantial quantities of bullion was found and seized by Income Tax Department. On 18.01.1999, notice under Section 158BC was issued and in response, return for block period was furnished on 04.03.1999 by appellant disclosing total undisclosed income at Rs.1,39,75,834/=. It is case of appellant that Assessing Officer did not accept figure of undisclosed income as stated in computation of income furnished by appellant for block assessment period and additions/disallowances were made alongwith charging of interest u/s.158BFA(1) of Income Tax Act, 1961. One of disallowance was pertaining to claim of deduction of Rs.40,34,898/- on account of gold seized by Custom Authorities. appellant preferred first appeal before learned CIT (Appeals) who confirm allowances by rejecting contentions of appellant. appellant preferred second appeal before Tribunal and raised contentions and Page 5 of 7 HC-NIC Page 5 of 7 Created On Fri May 12 11:53:29 IST 2017 O/TAXAP/505/2009 JUDGMENT explanations supported by documentary evidence on record to impress upon Hon'ble Tribunal that claim for deduction of Rs.40,34,898/- on account of gold seized by Custom Authorities was allowable business expenditure under Income Tax, 1961. However, Tribunal dismissed appeal of appellant. 4.Learned Counsel for appellant contended that in view of decision of Hon'ble Apex Court in case of Dr. T.A. Quereshi v. Commissioner of Income-tax, Bhopal reported in 287 Income Tax Reports 547, loss which was incurred during course of business even if same is illegal is required to be compensated and for loss suffered by appellant, Court is required to answer this Tax Appeal in favour of assessee. 5.Having heard learned Advocates appearing for parties, this Appeal is answered in favour of assessee and against revenue. 6.The Appeal is allowed to aforesaid extent. 5. In view of aforesaid decision, since present appeal is also governed by same set of facts, this appeal also deserves to be answered in favour of assessee and against revenue. Present appeal is therefore allowed to aforesaid extent. 5. In above view of matter, facts of present appeal being similar in nature, will Page 6 of 7 HC-NIC Page 6 of 7 Created On Fri May 12 11:53:29 IST 2017 O/TAXAP/505/2009 JUDGMENT be governed by decision of this Court in Tax Appeal No. 1062 of 2005. 6. In result, this appeal is ALLOWED and question of law raised in this appeal is answered in favour of appellant-assessee and against revenue. No order as to costs. (K.S.JHAVERI, J.) (K.J.THAKER, J) UMESH Page 7 of 7 HC-NIC Page 7 of 7 Created On Fri May 12 11:53:29 IST 2017 Rama Natha Gadhavi v. Income-tax Officer