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TMI Blog1988 (8) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... 243.778 Kgs. of gold was not the assessee's wealth for the assessment year 1964-65 ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the said gold had no value for inclusion in the taxable wealth of the assessee for the assessment year 1964-65 ? (3 ) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the cumulative tax liability of the assessee for earlier years, which is outstanding on the valuation date and is challenged by the assessee in appeal, is also deductible from the assessee's wealth ?" The material facts giving rise to this reference, briefly, are as follows : The assessment year in question is 1964-65, for which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lue would be nil as on the date of valuation. The Tribunal also held that the cumulative tax liability as determined by the Wealth-tax Officer had to be deducted under section 2(m) of the Act. In this view of the matter, the Tribunal allowed the appeal. Aggrieved by the order passed by the Tribunal, the Revenue sought reference and it is at the instance of the Revenue that the aforesaid questions of law have been referred to this court for its opinion. Shri Mukati, learned counsel for the Revenue, contended that the gold in question was not confiscated in the assessment year in question and that on the valuation date, it was the property of the assessee. It was also contended that the Tribunal erred in holding that the gold in question ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpowered seizure of gold in respect of which there was contravention of the Rules. Rule 126M provided that the gold so seized would be liable to confiscation. Now, it is not disputed in the instant case that the seizure and confiscation of the gold in question did not take place in the assessment year in question 1964-65 but long after the valuation date, which was Diwali 1963. The seizure took place in June and August 1965, when the gold in question was recovered from the possession of the assessee and confiscation took place in September, 1966. Sub-rule (ii) of rule 126-1 of the Defence of India Rules provides that any person in possession of gold shall be presumed, unless the contrary is proved, to be the owner of that gold. The fact t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e date. In our opinion, till an asset is confiscated according to law, it would continue to be an asset belonging to an assessee. On behalf of the assessee, it was contended, relying on the decision in Sheoshankar v. State Government of Madhya Pradesh [1951] AIR 1951 Nag 58 [FB], that what had been rendered contraband, could not be an object of property. The observations in Sheoshankar's case, AIR 1951 Nag 58, have to be read in the context that the court in that case was called upon to decide the question as to whether noxious object could be a legitimate object of "property" for the purpose of article 19 of the Constitution and whether the State could prohibit person from acquiring or possessing that property. That decision cannot be cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... officer must assume that there is an open market in which the asset can be sold and proceed to value it on that basis. The use of the words 'if sold' creates a fictional position which the tax officer has to assume." The aforesaid observations were approved by the Supreme Court in Ahmed G. H.Ariff v. CWT [1970] 76 ITR 471, And it was observed as follows (p. 477) : "Mr. Sen has laid emphasis on the language of section 7(1) of the Act and has contended that the right to a share in the income is not capable of any valuation and the price which it would fetch, if sold in the open market, could not possibly be ascertained. Such an argument was fully examined in the Bombay case, CWT v. Purshottam N. Amersey [1969] 71 ITR 180, in which the Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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