As per the case facts a search by revenue intelligence officers at the assessee's rented premises led to the recovery of a significant amount of silver slabs and ingots The ... assessee was arrested under the Customs Act for an offense and the Collector of Customs ordered the confiscation of the silver considering it smuggled and imposed a penalty During assessment proceedings the Assessing Officer applied provisions of the Income Tax Act as the assessee could not explain the source of the silver The revenue appealed to the Supreme Court after the High Court allowed the assessee's appeals The question arose whether a loss incurred from an activity that is an offense or prohibited by law such as confiscation and penalty under the Customs Act is deductible as a business loss under the Income Tax Act Finally the Supreme Court allowed the revenue's appeal holding that any loss incurred from an expenditure for a purpose which is an offense or prohibited by law is not deductible Such an expenditure is not deemed for business or profession and a penalty or confiscation is not incidental to any business thus not available for deduction The Court found previous contrary decisions incorrect in light of the relevant explanations to the Income Tax Act