Following a search under section 132 on the assessee, a CA, incriminating documents revealed that he had fraudulently obtained Income-tax refunds of his clients using bogus challans and invested the proceeds in shares and deposits in his family’s HUF and other accounts, additions for which were confirmed by CIT(A) even after the matter was restored by the Tribunal for fresh consideration, rejecting the assessee’s claim that recovery of the refund money by the Government in subsequent years should be allowed as a deduction. On appeal, the Tribunal held that since the assessee had accepted the fraudulent activity and exercised tangible control and dominion over the funds, leveraging them for personal economic gains, the income was taxable in the year of accrual under the inclusive definition of income in section 2(24), which does not distinguish between legal and illegal earnings, and that subsequent recovery or restitution of the fraudulent income did not negate its taxability for the year of accrual under the doctrine of real income; the claim for deduction of the recovered amount failed to satisfy the conditions under section 57, since restitution of wrongful gains was not an expense incurred wholly and exclusively for earning income, and allowing such deduction would incentivise fraud, and accordingly the fraudulent income was upheld as taxable under “Income from other sources”. The Tribunal further directed the Revenue authorities to take appropriate deterrent action as permitted by law against such fraudulent claims defrauding the Income-tax Department (AY. 1992-93 , 1993-94)