TMI Blog2006 (10) TMI 100X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 of I.T. Act took place on 17.11.88 on the premises and the gold in question was not recovered from the possession of inmate of the premises under search u/s.132 of the I.T. Act, the presumption u/s.69 of the Income Tax Act, 1961 could at all be raised about the ownership to their property in question and if raised stands rebutted by the decision of CEGAT? (ii) Whether in the facts and circumstances of this case, when gold in question was found much prior to search conducted on 17.11.88 and had been subjected to proceeding under the Gold Control Act under which the gold has been found and finding has been reached about the ownership of said Gold by the CEGAT in those proceedings is binding on the proceedings u/s.132 in respect of the properties which have been found and subjected to proceeding under the Gold Control Act independently". 2. The facts emerging from the material placed before us and relevant for the present purposes are that in a search conducted at the premises of the Mangi Lal Agarwal, the assessee since deceased and represented by his heirs and legal representatives, by the customs authorities, 11 pieces of primary gold weighing 765.150 and 53.00 grams of gol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fine, the Adjudicating Authority also ordered that on redemption the primary gold shall be converted into ornaments by licensed gold dealers. Accordingly, the appellants redeemed the same and returned the same to the respective owners after getting it converted into ornaments by a licensed gold dealer and informed the Adjudicating Authority accordingly. The relevant communication is on our record." 6. There being difference of opinion, the matter was referred to the third Member, who after considering the state of affairs of the evidence agreed with the finding reached by the learned Judicial Member and appeal was allowed. The gold was released from confiscation under Gold Control Act. 7. From the aforesaid, it is apparent that so far as the fact that assessee was found in possession of 765.150 grams of primary gold and 53.00 grams gold ornaments on 14.10.1987 relevant to assessment year 1988-89 and in respect of gold ornaments, no breach of provisions of Gold Control Act was found on the part of the assessee by the Customs Authorities and in respect of primary gold except 6.900 grams, it was categorically found at the end of the proceedings that it was owned by other perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stablished to satisfaction of the officer adjudging the confiscation that such gold or other thing belongs to a person other than the person from whom it has been seized. Therefore, the avoidance of confiscation cannot be merely on the basis of technical ground but has to be on substantive finding on the basis of material on record that it belongs to person or persons other than the persons in whose possession it was found and seized. Avoidance of confiscation does not depend on merely satisfaction that it is not proved or that it cannot be said that the seized gold belongs to the person in whose possession it was found. The finding is required to be made in a positive manner on substantive aspect of the ownership vesting in third person. 11. Coming to the proceedings under Income Tax Act, the Assessing Officer while assessing the total income of the assessee for the assessment year 1988-89 during which the assessee was found in possession of the aforesaid primary gold and gold ornaments by the Customs Authority resorted to Section 69A (wrongly mentioned as 69) for calling upon the assessee's explanation about the nature and sources of acquisition of such primary gold and orna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht by Shri Gauri Shanker Singhal. Apparently, the assessee has attributed ownership to all the three persons. 14. The finding recorded by the Assessing Officer in respect of Om Prakash is as under:- "On the basis of above, it is clear that the claim of Sh. Om Prakash Gupta regarding ownership of the gold ornaments weighing 264.400 gms. is not genuine." 15. The finding recorded by the Assessing Officer in respect of Shri Gauri Shanker Singhal is as under:- "On the basis of above, it is clear that ornaments were not belonging to Sh. Gauri Shanker as claimed by the assessee." 16. On the anvil of these findings and by referring to the reasoning which weighed with the adjudicating authority under the Customs and Gold Control Act which has been set aside by the majority opinion of the CEGAT the assessee's explanation was rejected and the value of the primary gold and gold ornaments were added in the income of the assessee for the assessment year 1988-89. 17. On appeal, the CIT (Appeals) vide his order dated 7.2.1994 affirmed the finding of the ITO and those findings were affirmed by the Tribunal also. 18. In the aforesaid circumstances, the aforesaid appeal has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in possession of the assessee rests on the Revenue and not with the assessee. What amount of evidence to establish ownership would depend on facts and circumstances of each case. In the present case, the Assessing Officer has started with the presumption of ownership merely on the basis that the assessee was found in possession of the aforesaid primary gold and gold ornaments by Customs Authority apprehending the possession of the assessee in breach of provisions of Gold Control Act. However, with clear finding reached by the CEGAT, which was though not binding but was relevant material to go into consideration, the assessee has displaced the presumption about ownership arising from mere possession of the primary gold and gold ornaments on 14.10.1987. Therefore, the ultimate burden rested with the assessing officer to reach a finding about the ownership of such valuables vesting in the assessee with some material having nexus with the finding of such ownership. We have noticed above that the finding reached in respect of all the three persons from whom the assessee claimed to have received the aforesaid valuables and on the basis of receipt he was claiming to be the owners the on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g new ornaments and the primary gold found in possession of assessee was released from confiscation only on a clear finding that such primary gold belong to the above named three persons. The said persons had admitted their ownership in Income Tax proceedings also. The three persons existence is not in doubt. Their affidavits have been brought on record. The fact that because the ornaments were brought by these three persons, the assessee has described them as owners of the gold cannot be held against the assessee to hold him to prove the ownership. If these persons had not stated correctly about the ownership of the gold ornaments brought to assessee by them it cannot be evidence of the ownership of the assessee over the primary gold and gold ornaments found in his possession on 4.10.1987 brought by said three persons to the assessee. There is nothing to rebut the statements of said three persons brought different weight to gold ornaments to the assessee for remaking the new ornaments. Thus, the finding recorded by the Income Tax Authorities remains a finding on a wrong view of the burden of proof, by erroneous reading of the requirement of Section 69A for the purpose of making a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... himself. 26. Reference in this connection may be made to the decision of the Supreme Court in Commissioner of Income-Tax (Central), Calcutta V. Daulat Ram Rawatmul l [1973] 87 ITR 349 which arose in similar circumstances. It was a case in which a sum of Rs.5 lacs standing in the name of B was sought to be assessed in the hands of assessee firm as belonging to it. The Assessing Officer has found that said Rs.5 lacs stood deposited in the name of B, did not belong to B and found that it is belonging to the assessee firm and assessed as income from undisclosed sources of the assessee. However, the CIT (Appeals) had set aside the said additions and utpo the Tribunal, the finding was affirmed. On a reference being submitted to the High Court in terms of directions issued under Section 66(2) of the Indian Income Tax Act, 1992, the High Court set aside the additions made on account of undisclosed income in relation to said amount. On appeal, affirming the judgment of the High Court, the Supreme Court said ( headnote ):- "That the question was not whether the amount of Rs.5 lacs belonged to B, but whether it belonged to the respondent-firm. The fact that B had not been ab ..... 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