2010 (10) TMI 800 - HC - Wealth-tax

Gold - an asset belonging to the assessee on the relevant valuation date and the value includible in the net wealth of the assessee Held that - 66 kgs. of gold has not been returned to the assessee nor the same could be recovered by the police. No proceedings for recovery of the said gold are pending. The assessee s claim to get back the gold also stands barred by the law of limitation. Keeping all these facts in view, we find ample force in the contention of the assessee that the said gold stands lost. For including the value of an asset in the net wealth of the assessee, the asset must be in existence on the relevant valuation date. Since that gold was not in existence on the relevant valuation date, its value, in our opinion, is not includible in the assessee s net wealth, no flaw in the aforesaid reasoning and there is no reason to take a different view when for other assessment period the above finding has become final. Thus, we hold that this 66 kgs. of gold cannot be held to be an asset on the relevant valuation date and its value is not includible in the net wealth of assessee, it is also held that 123 kgs. of gold (57 kgs. 66 kgs.) was not an asset belonging to the assessee and value thereof is not includible in the net wealth of assessee. The question Nos. (1) and (4) are accordingly answered in favour of the assessee Silver - an asset belonging to the assessee on the relevant valuation date and its value is to be included in the net wealth of the assessee - deduction for the sum of Rs. 25 lakhs being the penalty imposed for contravention of the Gold Control Rules and remaining unpaid on the relevant valuation date - Tribunal directed the AO to include 50 per cent of the value of silver as determined by him in the assessment orders in the net wealth of the assessee Held that - WTO had made heavy addition on account of valuation of the silver bullion in question. The CWT(A) held that the silver bullion during the period was not an asset of the assessee, therefore, adopted nil value of the said asset. The Tribunal held that silver bullion in question was an asset of the appellant but the Tribunal because of the heavy addition accepted the contention of counsel for the assessee and took the discounted value of the silver bullion and directed the WTO to add 50 per cent of the additions adopted by him in the assessment order. We find substance in the argument of the counsel for the assessee that since the silver bullion was seized and it was not available to the assessee for use for such a long period of time, therefore, discounted value has rightly been adopted. The counsel for the respondent-Revenue could not point out as to what was wrong in adopting the discounted value of the silver bullion in the peculiar facts of the present case. Thus, this question is answered in favour of the assessee and against the Revenue

Summary

Issues Involved:
1. Inclusion of 123 kgs. of primary gold in the net wealth of the assessee.
2. Tribunal's consideration of a new plea by the Revenue regarding the possession of gold.
3. Tribunal's conclusion on the entrustment of gold to Ganpatlal and others.
4. Inclusion of 66 kgs. of untraceable gold in the net wealth.
5. Inclusion of silver in the net wealth.
6. Consideration of discounted value of silver for certain assessment years.
7. Inclusion of 240 kgs. of confiscated gold in the net wealth.
8. Valuation of gold on the relevant date.
9. Deduction of penalty imposed under the Gold Control Rules.
10. Tribunal's direction to include 50% of the value of silver in the net wealth.
11. Adoption of discounted value of silver bullion by the Tribunal.

Detailed Analysis:

Question No. (2): Tribunal's Consideration of New Plea by Revenue
The Tribunal erred in permitting the Revenue to raise a new factual plea at the argument stage, contrary to Rule 11 of the Income-tax (Appellate Tribunal) Rules, 1963. The Revenue had not contested the assessee's version at any previous stage, and no application was filed under Rule 11. Therefore, the Tribunal should not have considered this new factual plea. The question is answered in favor of the assessee.

Question No. (3): Tribunal's Conclusion on Entrustment of Gold
Since Question No. (2) is answered in favor of the assessee, Question No. (3) does not arise for consideration.

Question Nos. (1) and (4): Inclusion of 123 kgs. and 66 kgs. of Gold in Net Wealth
These questions are interlinked. For 57 kgs. of gold, the assessee claimed ownership, but it was not in possession due to legal proceedings, and the Supreme Court dismissed the SLP. The Tribunal and this Court had previously ruled that 57 kgs. of gold should not be included in the net wealth. For 66 kgs. of gold, it was neither returned nor recovered, and the civil remedy was time-barred. Hence, it should be treated as lost and not included in the net wealth. Both questions are answered in favor of the assessee.

Question Nos. (5) to (10): Inclusion of Silver and Other Issues
The counsel for the assessee did not press these questions, and they are answered against the assessee based on the statement made by the counsel.

Question at the Instance of the Revenue: Adoption of Discounted Value of Silver Bullion
The Tribunal adopted the discounted value of silver bullion due to its prolonged unavailability to the assessee. The Revenue could not demonstrate any error in this approach. The question is answered in favor of the assessee and against the Revenue.

Conclusion:
The Tribunal's decision to include 123 kgs. of gold in the net wealth of the assessee was incorrect. The Tribunal also erred in considering a new factual plea by the Revenue. The inclusion of silver and other issues were not pressed by the assessee and were answered against them. The adoption of discounted value for silver bullion by the Tribunal was upheld. The miscellaneous civil case is disposed of accordingly.