9911796707
TMI Blog1991 (8) TMI 124X X X X Extracts X X X X X X X X Extracts X X X X ..... l, Rakeshkumar Porwal, Sushilkumar Porwal and Sunilkumar Porwal. The brief facts as culled out from the papers filed before us and as stated by the counsel for both the parties are as follows : 3. One Shri Kesharimal Porwal, who had a beedi factory at Kamptee and a gold and silver shop at Mandsaur, died on 7-10-1952. He was survived by his widow Ratanbai, a daughter Shantabai and a son Nemkumar. Both Shantabai and Nemkumar had each, a son at the time of the death of Kesharimal. After the death of Kesharimal, his son Nemkumar had four more sons, who are the appellants/assessees named herein. The said Kesharimal left a will dated 10-2-1952 whereby bequeathed certain gold and silver to his grandsons. It was provided in the will that each grandson would receive 500 tolas of gold at the time of marriage and the remaining gold would be equally divided among them. On 9-7-1968, the Officers of the Central Excise, Nagpur, searched the residential premises of Nemkumar and seized 10 slabs and 9 pieces of gold and 230 gold coins weighing about 42,404 grams having at that time a market value of Rs. 7,63,000, which were kept in a cupboard inside a big Godrej iron safe. The Collector of Centra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation dates. 4. The appeals were argued at quite some length by Shri Keshav Prasad, the learned Departmental Representative for the department, and Shri S.E. Dastur, the learned counsel for the assessees. We will briefly state the case of the department first. The main issue, according to the Departmental Representative, was whether on the facts, the assessees could be treated as the owner of the gold on the relevant valuation dates. The learned Departmental Representative argued that the ownership did not mean possession ; it related to the legal right to the property and the right in the property. Dwelling on the effect of the orders of the various Courts and the final order of the Supreme Court, the learned Departmental Representative pointed out that the writ petition was filed on 16-8-1973 and the order of the Single Judge was passed on 3-11-1981. On the last valuation date, the order of confiscation was in operation. Once the assessees chose to challenge the confiscation and stated claims of ownership of the gold, the assessees themselves took the stand that they were the owners of the gold which stand was upheld by the Single Judge whose decision became known on 3-11-1981 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeals concerned with the wealth-tax assessment of her five grandsons. All the orders that were passed both by the Single Bench and the Division Benches as well as the Supreme Court were orders in writ petition and not in an appeal. Therefore, the question of the decision of the Supreme Court relating back does not arise. On 3-11-1981, the Single Bench decided in a writ petition that confiscation is bad. On 10-12-1982, the Division Bench reversed the order of the Single Bench and on 27-8-1987 the Supreme Court allowed the civil appeal filed by the assessees. We are concerned with the effect of confiscation of gold and the point of time when the confiscation stood or was in operation. The counsel pointed out that there was distinction between ' seizure ' and ' confiscation ' and laid considerable emphasis on the observations of the Supreme Court to the effect that confiscation deprives the owner of his property to his loss and detriment. The assessees were deprived of the property by the order of the Excise authorities dated 15-5-1970. After the confiscation, the assessees could not be considered to be the owners of the gold or the gold cannot be conceived to be belonging to the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal decision in Miss P. Vidyalakshmi v. WTO [1984] 10 ITD 344 (Mad.) and in the case of P.P. Chandrasekhara Pal v. WTO [1991] 36 ITD 488 (Coch.) and the decision of the Tribunal in the case of Udhavdas Kewalram in WTA Nos. 949-950 (Bom.) of 1983 dated 13-12-1984, a copy of which was filed by the counsel in the course of the hearing before us. He relied finally on the decision of the Bombay High Court in the case of Shrikant Textiles v. CIT [1971] 81 ITR 222 in support of his contention that the effect of a decision in writ petition, which is in effect a judicial review, is different from a decision in appeal. The counsel relied on Wade's Admnistrative Law (6th Edition) in support of this argument. 7. Before dealing with the various arguments advanced by the counsel for both the sides, we would first record briefly the findings of the CWT (Appeals). These findings are summarized by the CWT(A) in para-28 of his order (pages 84-85 of the compilation or internal pages 76-77 of the order of the CWT-A). The summary of the findings itself runs into 2 pages and we find that in such summary the CWT(A) has also summarized some of the arguments which weighted with hiin while reaching t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng authority, we think it our duty to find out and ascertain the circumstances under which such litigation started, the facts which were presented by the Petitioners before the Court, the facts found by the judicial authorities and the context in which the various judgments were given. This exercise, in our opinion, is necessary to enable us to come to some conclusion about the correctness or otherwise of the CIT(A)'s order. 8.1 The Petition gives firstly the family tree of Keshrimal Porwal, which is as follows : Keshrimal Porwal (Will executed on 19-2-1952 died on 7-10-1952) Smt. Ratannbai (died on 16-4-1973) Nemkumar (son) Shantabhai (daughter) Surendar Kumar (petitioner No. 6, of unsound mind) Sushil Rakesh Rajesh Sunil Sanjeev Kumar (son) Kumar (son) Kumar (son) Kumar (son) Kumar (son) Petitioner Petitioner Petitioner Petitioner Petitioner No. 1 No. 2 (Minor) No. 3 (Minor) No. 4 (Minor) No. 5 (Minor) The first point made in the Petition is that a Will dated 18-2-1952 of Kesharimal Pyarechand Porwal was produced by Smt. Ratanbai, wife of the said Kesharimal when the officers of the Central Excise, Nagpur, seized gold weighing 42,404 gms., from the premises ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or is being, or is attempted to be contravened, together with any package, covering or receptacle, in which such gold is found, shall be liable to confiscation : Provided that where it is established to the satisfaction of the officer adjudging the confiscation that such gold or other things belongs to a person other than the person who has, by any act or omission, rendered it liable to confiscation and such act or omission was without the knowledge or conivance of the person to whom it belongs, it shall not be ordered to be confiscated but such other action as is authorised by this Act, may be taken against the person who has, by such act or omission, rendered it liable to confiscation." It was the case of the petitioner that the instant case was fully covered under proviso to section 71(1) of the Gold (Control) Act as amended and that the gold in question, therefore, could not be confiscated. 8.2 On this petition, the Single Bench of the High Court at Delhi passed its order, as stated earlier, on 3-11-1981. The main issue before the Court, in the words of the Hon'ble Judge, was as follows : " The main issues are whether the gold under confiscation is the same gold as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Defence of India Rules, 1962 by Nemkumar as their ' guardian '. The omission to do so was by him. It is that which rendered the gold ' liable to confiscation '. Simiarly, he should have disposed of the gold before 1st September 1967 either by sale to a refiner or dealer or by conversion into ornaments. Again, the default was by him. Since, at all material times, the petitioners were minors, these omissions by Nemkumar were, or must be deemed to be without their ' knowledge or connivance '. As all the requirement of the proviso are must the gold could not be ordered lo be confiscated." [Emphasis supplied] He, therefore, allowed the petition. 8.3 Against this order, the Collector of Central Excise filed a letters patent appeal No. 28 of 1982 before the Division Bench of the Delhi High Court. The Division Bench took note of the findings of the Single Judge that before the confiscation could be ordered, notice under section 79 should have been given to the petitioners in the Writ Petition, and as this has not been done, the order of confiscation was liable to be quashed, Before the Division Bench also, it was contended by the counsel for the respondents that notice under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 71 of the Gold (Control) Amendment Act, 1971, the Supreme Court observed as follows : " The proviso lays down the circumstances under which any gold which is liable to confiscation will not be confiscated. Confiscation deprives the owner of his property to his loss and detriment. Where primary gold is not to be confiscated in view of the proviso to section 71(1), the owner thereof gets it back, but it does not mean that he will be entitled to retain possession of such primary gold which is forbidden by section 8(1) of the Gold Control Act. In such a case, the owner has to sell the primary gold to a licenced refiner or dealer or deliver the same to a dealer or goldsmith, licensed or certified, as the case may be, that is to say, in the same manner and following the same procedure as was laid down in sub-rule (1-B) of rule 126-H of the Defence of India (Fourth Amendment) Rules, 1966 and, in our opinion, so interpreted there will be no conflict between the proviso to section 71(1) and the provision of section 8(1) of the Gold Control Act." Finally, they gave their finding in the appeal as follows : " Thus, there will be no difficulty in not confiscating the primary gold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l was genuine, that the gold seized was the gold mentioned in the Will and that the gold was in possession of Ratanbai long before it was seized. The Single Judge has also stated categorically that since at all material times the petitioners were minors (the assessees herein), the omissions by Nemkumar were or must be deemed to be without their knowledge or connivance. This would mean that the assessees (who were the said minors at the relevant time) were never aware of the existence of the gold at the relevant time and could not be charged, therefore, of commuting to disclose the gold. We also find that the finding of the Single Bench Judge substantially remains unaltered or has not been in any way modified or reversed by the decisions of the Division Bench and the Supreme Court. The Single Bench discussed the scope of section 79 of the Gold (Control) Act and held that since the owners of gold were never given notice in writing or any notice at all informing them about the ground on which it was proposed to confiscate the gold nor were they given any opportunity of making a representation in writing against the confiscation and of being heard in the matter, on this ground the gold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the owners of the gold on the relevant valuation dates. There is an extensive discussion of the doctrine of relating back in para 22 of the CIT(A)'s order and we are in full agreement with the conclusion reached theerein by him. After hearing the parties and on the review of the facts emanating from the writ petition filed by the appellants (assessees) and the orders made by the Court therein, we are of the firm view that the gold in dispute never came in possession of the appellants (assessees), did not belong to them on the valuation date and, therefore, the value thereof could never be brought to wealth-tax under section 3 read with section 7(1) of the Wealth-tax Act. 10 We will now briefly turn to some of the legal issues which were raised in the course of the hearing. The first such issue is the principle of relating back. It was the assessee's counsel's case that the proceedings before the Single Judge, Division Bench and the Supreme Court were writ proceedings and an order in writ petition was in the nature of a judicial review and could be distinguished from an order in appeal. Therefore, in such order, i.e., order of judicial review, the question of the Court's order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en by any of the courts that the appellants (assessees) concerned should be deemed to have been in possession of the confiscated gold even during the period of confiscation. On the other hand, as we have pointed out earlier, the Single Judge Bench has clearly held that the gold was taken away from its owners even before it could reach them as per the terms of the Will. On the relevant valuation dates, the gold was never in possession of the appellants (assessees) and could not be said to be belonging to them on the valuation dates. For this reason alone the conclusion reached by the CIT(A) regarding the taxability of the value of gold is confirmed. 10.1 The second such issue is the effect of confiscation. The assessee's counsel drew a distinction between ' seizure ' and ' confiscation ' and argued that we were concerned with the period of time when the confiscation of gold still was operative. The effect of seizure has been discussed by the Gujarat High Court in Jayantilal Amrillal's case. In that case, the Income-tax authorities searched the premises of the assessee on 21-11-1964 and had recovered gold worth Rs. 2,83,320 which was subsequently seized by the Central Excise autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Wealth-tax Act. 10.2 The next issue which emanates from the argument about relating back is whether an asset which by subsequent event is deemed to be belonging to the assessee can be brought to tax for an earlier year under section 3 read with section 7(1) of the Wealth-tax Act by operation of the concept of deeming. There are certain sections under the Wealth-tax Act which specifically provide for inclusion of certain assets although such assets may not stand in the name of the assessee. Section 4 of the Wealth-tax Act provides that in computing the net wealth of an individual, there shall be included as belonging to that individual the value of the asset which on the relevant valuation dates are held by the spouse of such individual to whom such assets are transferred directly or indirectly or by a minor child of such individual to whom such assets have been transferred or by a person or AOP to whom such assets have been transferred by the individual directly or indirectly otherwise than for adequate consideration for the immediate and deferrd benefit of the individual or by a person or an AOP to whom such assets have been transferred by the individual otherwise than un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mere right to sue was an inchoate right which could not be brought within the definition of the term ' net wealth ' under section 2(m) of the Wealth-tax Act. The right to sue carried with it the possibility of failure in the litigation proposed, in which case such right would convert itself into a liability which the assessees would incur by way of litigation expenses. We are of the opinion that the right to litigate or attempt to get back the gold is not an asset, the value of which can be brought to tax under the Wealth-tax Act. This is not an asset which is capable of exact or reasonably accurate valuation. In fact, it is not an asset in the strict sense of the term in view of the hazards of protracted litigation with consequential financial strain that such litigation would entail. We are, therefore, of the opinion that the CIT(A) was wholly unjustified in holding first that this was a right exigible to tax within the meaning of section 2(m) read with section 3 of the Wealth-tax Act and in further valuing such right, in our opinion, on a somewhat ad hoc basis at 15 % of the market value of the gold under the relevant valuation dates. We would, therefore, completely reverse this ..... X X X X Extracts X X X X X X X X Extracts X X X X
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