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2021 (5) TMI 199 - HC - Wealth-taxWealth tax assessment - ownership of the Gold in possession of the assessee - Limited power to deal with the Gold - Legal heirs - including the market value of the said gold in the computation of net wealth of the original petitioner - whether the Tribunal erred in law in rejecting the assessee's submissions that even if the said gold were to be included in the net wealth, the value thereof to be taken ought to be NIL or ought to be arrived at, bearing in mind the liability for confiscation, fine and penalty and bearing in mind that what had to be valued was the price which the assessee claim to be restored possession of the said gold would fetch, if sold in the open market ? - HELD THAT - Applying the ratio in the case of Murari Mohan Dutta 1991 (9) TMI 17 - CALCUTTA HIGH COURT we are inclined to hold in the present case that there cannot be any market value ascribed for valuation of the seized gold on the respective valuation dates in view of the fact that the gold being seized was in the custody of the Central Excise Authorities on the respective valuation dates and the right of the original assessee was in jeopardy. Thus, we do not agree with the findings returned by the Tribunal in its order dated 29.09.1982 in so far as the issue of valuation is concerned. (1) Whether, on the facts and in the circumstances of the case, the Tribunal erred in law in including the market value of the gold and gold coins in the computation of net wealth of the appellant ? - Ans. Yes (2) Whether, on the facts and in the circumstances of the case, the Tribunal erred in law in rejecting the assessee's submissions that even if the gold and gold were to be included in the net wealth the value thereof to be taken ought to be NIL, or ought to be arrived at, bearing in mind the liability for confiscation, fine and penalty and bearing in mind that what had to be valued was the price which the assessee claim to be restored possession of the gold would fetch, if sold in the open market ? - Ans. Yes (3) Whether, on the facts and in the circumstances of the case, Tribunal erred in law in rejecting the assessee's claim that matter had to be considered on the footing of the assessee having invested the said gold and gold coins in gold bonds which were exempt from wealth-tax ?- Ans. Yes (4) Whether, on the facts and in the circumstances of the case, the Department having knowingly and consciously prevented the assessee from investing the gold and gold coins in the purchasing of the gold bonds under the Gold Bond Scheme which was then in operation, can in law charge the assessee to wealth-tax on the footing that the assessee continues to be the owner of the gold (and not gold bonds) and was thus liable to wealthtax on the value of the said gold and gold coins ? - Ans. No (5) Whether, the Tribunal erred in law in holding that the rules and principles of equity would have no application to the present case ? - Ans. Yes (6) Whether, the Tribunal erred in law in valuing gold on the basis of a national sale when the assessee was not in possession of the gold and could not have sold the gold but could have at best entered into an agreement to sell the gold with a condition to deliver the gold, if and when he became entitled to and acquired possession thereof ? - Ans. Yes (7) Whether, instead of determining the value of gold on the basis of a notional sale of gold which was not legally possible, the Tribunal ought to have included, if at all, the consideration which any wise and prudent person would have offered for entering into an agreement to purchase the gold subject to the condition that delivery of gold would be given and sale would be completed, if and when the assessee became entitled to and acquired possession of gold ? - Ans. In view of the answers to the questions (1) to (6) herein above, the Tribunal ought not to have included any consideration for the seized gold for computation of wealth tax assessment on the respective valuation dates as the gold still stands seized and not released. Recovery proceedings - notice issued for the sum along with interest being the alleged dues of income tax and wealth tax payable by the estate of Shri. C.S. Goenka (original assessee) - HELD THAT - A perusal of recovery notice does not evince confidence in the Court as the same is inadequate in terms of any details. Therefore, we are inclined to set aside the notice of recovery dated 22.09.2004 with liberty to the respondents / Revenue / Income Tax department to issue a fresh notice in accordance with law and if permissible in law to the legal heirs of the original assessee. If such a recovery notice is issued, it shall be open to the petitioners to contest the same whereafter law will take its own course. In so far as the amended prayer for seeking forthwith release of 85,617.80 grams of gold, jewellery, cash and other valuable articles form the premises of the original assessee as per the panchnama to the petitioners is concerned, it is seen from the record i.e IA No.16 of 2015 in Civil Appeal No.723 of 1973 filed in the Supreme Court, that the late Shri. C.S. Goenka had three legal heirs namely Smt. Sushila N. Rungta - daughter, Radheshyam Goenka - son and Rajkumari R. Goenka - daughter. It appears that an arbitrator was appointed by the Supreme Court vide order dated 01.11.1991 to settle the dispute as to who would be the legal heir to the estate of late Shri. C.S. Goenka. Probate Suit No.65/85 was also filed wherein the genuineness of the will dated 29.10.1982 of the original deceased assessee C.S. Goenka was held undisputed and the genuineness of the will was conceded on 27.10.1999 by the non applicants therein. The learned arbitrator passed an award holding that the will in favour of Sushila N. Rungta was inoperative and Radheshyam was the sole heir as adopted son. This award was challenged by Sushila N. Rungta in the Supreme Court. On 01.12.2000 the Supreme Court held that the award of the learned arbitrator was inoperative and on the basis of the probated will, Sushila N. Rungta was the legal heir of the deceased C.S. Goenka. Therefore, Sushila N. Rungta made an application before the Supreme Court that she be brought on record as the sole heir and representative of the deceased original assessee C.S. Goenka. On 18.07.2008, the Supreme Court was pleased to allow Interim Application No.15/2008 filed by Sushila N. Rungta and brought her name on record as the legal heir and representative of the appellant i.e Shri. C.S. Goenka. The copies of the above orders and the probate however are not on record so as to guide us in considering and directing the amended prayer as sought for by the petitioners. If the petitioners place the certified copies of the aforesaid orders and probate order on record to the satisfaction of the concerned authorities i.e the respondents / department of Income Tax, we direct that the respondents shall forthwith release 85617 grams of gold, jewellery, cash and other valuable articles as per the panchnama and hand it over to the petitioners being the legal heirs of Sushila N. Rungta. Petitioners i.e Nirajkumar N. Rungta and Bharti Saraf are the son and daughter of Smt. Sushila N. Rungta. Petitioners have to place on record the documentary evidence of they being the true and legal heirs of Sushila N. Rungta in order to seek release of the aforesaid articles to themselves. Not to mention that once the above articles are released into the hands of the petitioners, petitioners shall be liable to wealth tax assessment in respect of the value of the said articles in accordance with law. The present petitioners shall place the appropriate documentation of they being the only legal heirs of Sushila N. Rungta to the satisfaction of the respondents for seeking release of the articles. The seized gold shall be released by the respondents within a period of 6 (six) weeks of furnishing of the required documents by the petitioners.
Issues Involved:
1. Inclusion of market value of gold in the computation of net wealth. 2. Valuation of gold considering liability for confiscation, fine, and penalty. 3. Consideration of gold investment in Gold Bonds exempt from Wealth Tax. 4. Impact of the Department preventing investment in Gold Bonds on Wealth Tax liability. 5. Application of rules and principles of equity. 6. Valuation of gold based on notional sale. 7. Determination of value based on potential agreement to purchase gold. Detailed Analysis: Issue 1: Inclusion of Market Value of Gold in Net Wealth The Tribunal erred in law by including the market value of the gold in the computation of the net wealth of the appellant. The High Court concluded that mere legal ownership is not sufficient to fasten liability for wealth tax when the right to the property is in jeopardy due to seizure. Issue 2: Valuation Considering Liability for Confiscation, Fine, and Penalty The High Court found that the Tribunal erred in rejecting the assessee's submissions that the value of the gold should be NIL or should consider the liabilities for confiscation, fine, and penalty. The Court emphasized that the seized gold's market value should be considered NIL due to the restriction on ownership and the jeopardy of the right to the property. Issue 3: Investment in Gold Bonds Exempt from Wealth Tax The Tribunal erred in rejecting the claim that the matter should be considered on the footing that the gold was invested in Gold Bonds, which were exempt from Wealth Tax. The Court acknowledged that the assessee was prevented from investing the gold in the Gold Bond Scheme due to its seizure. Issue 4: Department Preventing Investment in Gold Bonds The Department knowingly and consciously prevented the assessee from investing the gold in Gold Bonds. Consequently, the Court held that the assessee could not be charged wealth tax on the basis that the assessee continued to be the owner of the gold. Issue 5: Application of Rules and Principles of Equity The Tribunal erred in holding that the rules and principles of equity would not apply. The High Court applied the principles of equity, recognizing that the Department's actions deprived the assessee of the chance to invest in Gold Bonds and obtain exemption. Issue 6: Valuation Based on Notional Sale The Tribunal erred in valuing the gold based on a notional sale when the assessee was not in possession of the gold and could not have sold it. The High Court held that the market value of the seized gold should be NIL for wealth tax purposes. Issue 7: Determination of Value Based on Potential Agreement to Purchase Instead of determining the value based on a notional sale, the Tribunal should have considered the value any prudent person would offer for an agreement to purchase the gold subject to the condition of delivery upon the assessee acquiring possession. However, the High Court concluded that the value of the seized gold should not be included in the wealth tax assessment as it remains seized. Writ Petition No. 793 of 2005: The petitioners challenged the notice of demand for recovery of dues. The High Court set aside the notice of recovery dated 22.09.2004 and directed the respondents to issue a fresh notice in accordance with the law. The Court also directed the release of 85,617 grams of gold, jewelry, cash, and other valuable articles to the petitioners upon furnishing appropriate documentation proving their status as legal heirs of Sushila N. Rungta. Conclusion: The High Court answered all seven questions of law in favor of the assessee, concluding that the market value of the seized gold should not be included in the computation of the net wealth for wealth tax purposes. The Court emphasized the principles of equity and the impact of the Department's actions on the assessee's rights. The writ petition was disposed of with directions for the release of the seized gold and issuance of a fresh recovery notice.
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