TMI Blog2021 (5) TMI 199X X X X Extracts X X X X X X X X Extracts X X X X ..... se 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 inop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MILIND N. JADHAV, JJ. Mr. Ashish Kamat a/w. Anoshak Davar, Ms. Kausar Banatwala, Gauri Sakhardande, Advocates i/by Mr. Tushar Goradia for the Appellants / Petitioners. Mr. Suresh Kumar a/w. Ms. Mohinee Chougule, Advocates for the Respondents. JUDGMENT : (PER : MILIND N. JADHAV, J.) 1. Heard Mr. Ashish Kamat a/w. Mr. Anoshak Davar, Ms. Kausar Banatwala, Ms. Gauri Sakhardande, Advocates i/by Mr. Tushar Goradia, Advocate for the appellants / petitioners and Mr. Suresh Kumar a/w. Ms. Mohinee Chougule, Advocates for the respondents. Proceedings before the Court :- 2. The appellants have filed Wealth-tax Application No.3 of 1984 under the provisions of section 27(3)(b) of the Wealth Tax Act, 1957 (hereinafter referred to as the said Act ) for a direction to the Income Tax Appellate Tribunal, Bombay Bench 'C', Bombay to refer the 5 questions of law arising out of its orders dated 19.07.1983 in WTA Nos.598 to 612(BOM)/1981 for the assessment years 1961-62 to 1975-76. By order dated 28.08.1984, this court admitted the above Wealth-tax Application and restricted rule to the following two questions of law : (i) Whether, on the facts and in the cir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 04.03.2003 passed by the Income Tax Appellate Tribunal, Bench - E, Mumbai in Wealth Tax Appeal Nos.221 and 222/Mum/2002 for the assessment years 1994-95 and 1995-96. 2.3. Income Tax Appeal Nos.362 of 2003 and 608 of 2003 have been filed under the provisions of Section 27A of the said Act to challenge the order dated 25.11.2002 and 04.03.2003 passed by the Tribunal in WTA Nos.178, 179 and 180/Mumbai/2002 for the assessment years 1996-97, 1997-98 and 1998-99 and WTA Nos.221, and 222/Mumbai/2002 for the assessment years 1994-95 and 199596. There were admitted by this court on 08.09.2006 and 20.10.2006 for determination of the following common questions of law:- (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 ? (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 coins 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the proposed auction sale of gold lying in the Treasury at Jaipur and after examining the legality, validity and propriety of the same to quash and set aside the same. 2.5. On 25.07.2005, this Court had passed the following order :- 1. Heard the learned counsel for the Petitioner and the learned counsel for the Respondents. Rule. Leave to amend prayer clause (c). Amendment to be carried out forthwith. There shall be interim relief in terms of prayer clause (b) and (c), however, it is made clear that the order of attachment, as per Exhibit MM dated 17.2.2005 to continue till the final hearing of the above Writ Petition. The above order, is without prejudice to the rights and contentions of both the parties. The learned counsel Dr. Daniel for the Respondents waives service. (2) The above Writ Petition be heard expeditiously alongwith Wealth Tax Reference Nos.2 of 1992, WTR No.4 of 1993, WTR No.8 of 1994, WTR No.8 of 1991, WTR No.3 of 1994, WTR No.102 of 1998, WTR No.11 of 2000 and Wealth Tax Appeal Nos. 608 of 2003 and WTA No.362 of 2003. Liberty to both the parties to move for a fixed date of hearing. 3. On 30.10.2018, Supreme Court passed a common order in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used the information elicited by him during his discussion with C.S. Goenka for the purpose of getting a warrant dated 24.11.1965 issued for search and seizure under Section 132 of the Income Tax Act, 1961 (hereinafter referred to as the Income Tax Act ); on executing the warrant 85,617.80 grams of gold alongwith other valuables including silver coins, silverware etc. were seized from C.S. Goenka's house and deposited with the Custodian of Income-Tax department in the Jaipur Treasury; in December 1965 the Custodian of Income Tax withdrew the gold from the Jaipur Treasury and thereafter it was seized by the Deputy Collector, Central Excise for violation of the Defence of India (Gold Control) Rules, 1962 (hereinafter referred to as the said rules ); on 03.02.1966 the Deputy Collector, Central Excise issued show cause notice to C.S. Goenka as to why the seized gold should not be confiscated under Rule 126(m) of the said rules. 5.3. By order dated 04.03.1966 the Income Tax Officer included the value of the seized gold in the estimate of income filed by the assessee C.S. Goenka under Section 132(5) of the Income Tax Act. 5.4. In March 1966 C.S. Goenka filed two separate wri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery Officer, Jaipur had served a notice of attachment directing that the gold should be held till further orders of the Tax Recovery Officer. 5.8. On 08.02.1971 the Tax Recovery Officer, Jaipur filed an appeal to challenge the order of the Collector, Central Excise dated 03.01.1970 before the Gold Control Administrator; on 25.03.1970 the appeal was dismissed by the Gold Control Administrator holding that the Tax Recovery Officer was not competent to file such an appeal and the remedy to modify the order of the adjudicating officer would lie by invoking the provisions of Sections 81, 82(2) and (3) of the Gold Control Act, 1968 (hereinafter referred to as the Gold Control Act ). 5.9. On 01.06.1971 the Gold Control Administrator exercising suo moto powers under the said rules issued show cause notice to C.S. Goenka to show cause as to why the order of the Collector dated 03.01.1970 should not be set aside and the gold be confiscated; this show cause notice was challenged by C.S. Goenka by filing a writ petition before the Delhi High Court; Delhi High Court dismissed the writ petition; an appeal was thereafter filed against the judgment of the Delhi High Court before the Supre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) action that the assessee had been deprived of the chance of investing the gold in Gold Bonds and getting the exemption. 5.14. C.S. Goenka filed 15 appeals challenging each of the separate orders computing the wealth-tax liability for the period 196162 to 1975-76 before the CIT (Appeals). CIT (Appeals) partly allowed the 15 appeals and granted certain reductions for each of the years i.e. 1961-62 to 1975-76. Thereafter C.S. Goenka filed 15 second appeals before the Tribunal challenging the wealth-tax assessments for the period 1961-62 to 1975-76. Tribunal by two consolidated orders dated 26.09.1982 for the assessment years 1961-62 to 1967-68 and dated 18.10.1982 for the assessment years 1968-69 to 1975-76 partly allowed the appeals and granted further reliefs to C.S. Goenka. Tribunal however dismissed 8 wealth-tax appeals filed by C.S. Goenka for the assessment years 1976-77 to 1998-99. It was the contention of C.S. Goenka before the aforesaid authorities that the value of the gold had been wrongly included while computing his total wealth for the period 1961-62 to 1998-99. Being aggrieved C.S. Goenka filed 39 reference applications in respect of the assessment years 1961-62 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment years 1961-62 to 1975-76 and restricted the hearing of the reference to the first two questions of law only as extracted in paragraph 2 above. 5.17. Similarly Wealth-tax Reference Application Nos. 8 of 1991, 2 of 1992, 4 of 1993, 3 of 1994, 8 of 1994, 102 of 1998 and 11 of 2000 were also admitted by this Court on the aforementioned 2 questions of law subsequently by passing similar order as passed on 28.08.1984. 5.18. On 24.11.1985 C.S. Goenka expired. Thereafter the name of Sushila Nirmalkumar Rungta (daughter and sole executrix of the will of C.S. Goenka) was substituted in place of C.S. Goenka in the proceedings. Sushila N. Rungta filed Writ Petition Nos.3535 of 1990 and 529 of 1994 seeking stay of recovery proceedings by the IncomeTax department. Writ Petition No.3565 of 1990 was withdrawn on 09.04.1991 with liberty to file a fresh writ petition. Writ Petition No. 529 of 1994 was allowed and the additional condition of adequate security to be furnished by the assessee was set aside. 5.19. On 22.09.2004 Notice of Demand was issued to Sushila N. Rungta by the Recovery Officer calling upon her to pay ₹ 5,01,86,611.00 alongwith interest. On 17.02.2005 order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to hear the same expeditiously. 5.23. This Court thereafter allowed the civil applications for substitution of the names of the applicants / appellants in place of Sushila N. Rungta in the various proceedings pending before this Court. In the above background and circumstances we have heard the parties at length. 5.24. On 06.01.2021 when this group of matters was heard by this Court, the appellants / petitioners prayed for amendment to the prayer clause in Writ Petition No.793 of 2005 as under :- 1. After prayer clause (a) the following be added as prayer clause a-1 :- a-1. That this Hon'ble Court be pleased to pass an Order and/or direction directing the Respondents to forthwith release 85617 grams of gold, jewellery, cash and other valuable articles seized from the premises as per the Panchanama and hand it over to the Petitioners / Applicants. 5.25. Since all the above cases were already taken up for final hearing by this Court, the amendment was not immediately granted and kept in abeyance for consideration at a later stage. Hearing by the parties was concluded on 11.03.2021 and judgment reserved. 5.26. In the above background we are therefore ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 ? 6. C.S. Goenka is the original assessee. He expired on 24.11.1985 leaving behind a will. Sushila N. Rungta his daughter claimed to be his sole executrix and beneficiary. She expired on 07.09.2017, leaving behind her son Nirajkumar Rungta and daughter Bharati Saraf as her legal heirs. Save and except the above statement that Sushila N. Rungta is the daughter and sole executrix and beneficiary of the will of C.S. Goenka, no other document evidencing the above issue by a civil court / statutory authority is placed on record in the present proceedings. Ofcourse, the same is also not disputed by the respondent. 7. Mr. Kamat, learned counsel appearing for the appellants / petitioners at the outset submitted that the Order-in-Original dated 03.01.1970 passed by the Collector Central Excise, New Delhi directi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quisite forms and documents and had submitted the said documents to the officials in the State Bank of India, Indore Branch; however the said approach of C.S. Goenka and disclosure was misused by the Wealth-tax Officer and C.S. Goenka was raided leading to seizure of the gold from his possession. He submitted that the Rajasthan High Court order dated 22.03.1979 therefore is a defective order in as much as despite the adjudication order dated 03.01.1970 being available on record the same was not considered at all. 7.3. He submitted that the order dated 18.02.1981 passed by the 1st Appellate Authority i.e. the Wealth Tax Commissioner (Appeals) for the assessment year 1961-62 is also erroneous when it holds that gold becomes exempted assets under the Wealth-Tax Act only when the said gold is invested in the Gold Bond Scheme and the Bonds are issued to the assessee; ignoring the fact that the gold was seized from C.S. Goenka and never in the custody and possession of C.S. Goenka to enable him to invest in the Gold Bond Scheme; the said order confirming addition of the value of the seized gold as if in the hands of C.S. Goenka was contrary to law and did not adhere to and take into c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Gold (Control) Act was repealed without a saving clause, Section 6 of the General Clauses Act would not apply; thus the original show cause notice for confiscation of the seized gold would therefore no longer survive. He submitted that the Supreme Court in its order dated 30.10.2018, after considering the submissions of the parties and the effect of the Gold (Control) Repeal Act, 1990 finally concluded that the original show cause notice dated 01.06.1971 for confiscation would no longer survive; however considering that in the interregnum since the wealth tax references were made and pending with the Bombay High Court, the same were directed to be disposed of alongwith the pending writ petition. 7.6. He submitted that C.S. Goenka, his legal heir Sushila N. Rungta and the petitioners were not in a position to exercise their right of ownership in the seized gold on the respective dates of valuation since the gold was seized on 06.12.1965 and continues to remain so till date; that though the gold belonged to the ownership of the assessee, his right on the valuation date was in jeopardy and mere legal ownership in the seized gold was not enough to fasten wealth tax liability on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the seizure was effected during the relevant previous year but, ultimately, it was confiscated on June 29, 1978. On the valuation date the goods were seized and lying with the Customs Authority, and those goods were liable to confiscation in view of the contravention of the provisions of section 126 of the Customs Act, 1962. The fact of confiscation is no doubt a subsequent event. But the value of such a property belonging to the assessee which is liable to confiscation has to be arrived at. 9. We may also refer to the observation of the Division Bench in that case to the following effect (at page 43) : Counsel for the assessee, in our opinion, was justified in contending that a man who was the owner of movable property like a diamond or jewellery and if that property or goods had been lost due to stealing or theft, even then if the assessee was made liable as the owner of that property and as such liable to pay wealth-tax ad infinitum year after year in respect of that property that would lead to great hardship and anomaly. We might here mention the observations of the Select Committee on the 'assets stolen, lost or destroyed' which is noted in paragraph 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the language used. Paragraph Nos.46 and 47 read thus :- 46. Where the plain literal interpretation of a statutory provision produces a manifestly unjust result which could never have been intended by the legislature, the Court might modify the language used by the legislature so as to achieve the intention of the legislature and produce a rational construction. The task of interpretation of a statutory provision is an attempt to discover the intention of the Legislature from the language used. It is necessary to remember that language is at best an imperfect instrument for the expression of human intention. It is well to remember the warning administered by judge Learned Hand that one should not make fortress out of dictionary but remember that statutes always have some purpose or object to accomplish and sympathetic and imaginative discovery is the surest guide to their meaning. 47. We have noted the object of Section 16(3) of the Act which has to be read in conjunction with Section 24(2) in this case for the present purpose. In the purpose of a particular provision is easily discernible from the whole scheme of the Act which in this case is, to counteract the effe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... compliance is a judicial invention, equitable in nature, designed to avoid hardship in cases where a party does all that can reasonably expected of it, but failed or faulted in some minor or inconsequent aspects which cannot be described as the essence or the substance of the requirements. Like the concept of reasonableness , the acceptance or otherwise of a plea of substantial compliance depends upon the facts and circumstances of each case and the purpose and object to be achieved and the context of the prerequisites which are essential to achieve the object and purpose of the rule or the regulation. Such a defence cannot be pleaded if a clear statutory prerequisite which effectuates the object and the purpose of the statute has not been met. Certainly, it means that the Court should determine whether the statute has been followed sufficiently so as to carry out the intent for which the statute was enacted and not a mirror image type of strict compliance. Substantial compliance means actual compliance in respect to the substance essential to every reasonable objective of the statute and the court should determine whether the statute has been followed sufficiently so as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oresaid decisions rendered by one or the other Court, the settled law can be summarized as follows: [i] The words 'if sold in open market' do not contemplate actual sale or the actual state of the market, but only enjoins that it should be assumed that there is an open market and the property can be sold in such a market and on that basis, the value has to be found out. It is a hypothetical case which is contemplated and the Tax Officer must assume that there is an open market in which the asset can be sold. [ii] Whenever there is any restriction on transfer of any land, value of the property or land, as the case may be, would be normally reduced and the valuation is to be ascertained taking note of the restrictions and prohibitions contained in the Ceiling Act as if the land is notified as excess land. [iii] Once the competent authority issues any notification under Section 10[1] or Section 10[3] of the Land Ceiling Act, the land has to be deemed to have been acquired by the Government and what the assessee owned was the right to compensation and in such case, the compensation amount would only be the maximum compensation as provided under the Ceiling Act wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on on the basis of theory of conversion could not be accepted; case of the assessee that the seized gold had no value for the assessee on the respective valuation dates because of seizure was erroneous; the seized gold had to be valued even though the same was not released and returned back to the assessee as the value of the gold in the hands of the respondents did not reduce. He therefore submitted that the decision of the Tribunal be upheld and the appellants / assessee are not entitled to exemption of the value of the seized gold from computation of net wealth for the respective years. Therefore the references be answered accordingly. 10. In support of his submissions, Mr. Suresh Kumar has referred to and relied on the following decisions :- (i) Jayantilal Amritlal Vs. Commissioner of Wealth Tax (supra) (ii) Commissioner of Wealth Tax Vs. Purshottam N. Amersey [1969] 71 ITR 180 (Bombay) (iii) Ahmed G.H. Ariff Vs. Commissioner of Wealth Tax [1970] 76 ITR 471 (SC) 10.1. In the case of Jayantilal Amritlal (supra), the income tax authorities had searched the assessee's premises between November 18 and 21 November 1964 and large quantity of gold in var ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luation dates. It was held that the mere possibility of confiscation cannot be said to impose any legal restriction, limitation or impediment on the ownership of the assessee and that the mere fact that the gold in question was liable to confiscation did not in any way affect the market value of the gold under Section 7(1) of the Wealth TAx Act, 1957. This decision was relied upon by the Tribunal in its judgment and order dated 19.09.1982. 10.3. Reliance is placed by Mr. Suresh Kumar on paragraph Nos.1 and 7 of the above judgment which read thus:- 1. The Income Tax Appellant Tribunal (hereinafter referred to as the Tribunal ) has, at the instance of the assessee, referred the following two questions for our opinion under Section 27 of the Wealth Tax Act, 1957 (hereinafter referred to as the Act ) : 1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee was the owner of the seized gold articles on each of the eight valuation dates ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the cloud on ownership in the form of seizure did not reduce the value o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow, what is important to be borne in mind is that in the case before the House of Lords, there was a legal impediment or restriction against a transfer of the shares. The articles of association of the company imposed restriction upon the alienation and transfer of share in the company. The restriction was real and not imaginary and it had its basis in law. The purchaser, who would purchase shares in the open market, was, therefore, bound to take into account the limitation attached to the shares while purchasing it. It is no doubt true that if there is a legal bar or restriction or impediment upon the alienation and transfer, such bar, restriction or impediment has to be taken into account. But if there is no such bar, restriction or impediment, there would be no fetter which would in any way affect the market value of the property in question. In the instant case, gold articles were merely seized by the excise authorities. They were not confiscated on the relevant dates though in view of the contravention of the relevant rules of the Gold (Control) Rules, they were liable to be confiscated. In our opinion, the seizure and possibility of confiscation, however did not in any way im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ees as the benefiaries under the trust fund and assess the assessees along with their other considerable wealth. The question which had therefore arisen for determination was whether, in the facts and circumstances of the case the Tribunal was justified in holding that the interest of the assessee under the trust had 'Nil' value. This Court after deliberating on the above issue and considering the terms of the trust and the interest granted to the assessee held that the conclusion reached by the Tribunal that the value of the said interest was 'Nil' was erroneous. It was held that merely because the property was not capable of being transferred is not a consideration which ought to have prevailed with the Tribunal. This Court held that the words 'if sold in the open market' as appearing in sub-section (1) of Section 7 would have to be interpreted in a manner of proper construction of the provisions of the said Section. 10.5. In the case of Ahmed G.H. Ariff (supra) the appellants, who were the beneficiaries under the deed of wakf, were paying income-tax on the amount which was being received by them in terms of that deed from the mutawalli. In the year 195 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such a market hypothetically and that the tax officer must assume that it is an asset on the open market and assume that the asset can be sold. 11. Mr. Suresh Kumar submitted that based on the above 3 judgments the finding returned by the Tribunal is a correct finding and thus the contention of the appellants that the value of the subject gold seized by the authority was 'Nil' for the purpose of assessment under the Wealth -tax Act as on the relevant date of valuation cannot be accepted. 12. Submissions made by learned counsel for the parties have been considered. Also duly examined and considered the materials on record. 13. Before we advert to adjudicate the issues, we may briefly refer to the relevant statutory provisions as are applicable to the present case. 13.1. Section 7 of the Wealth Tax Act, is relevant and reads thus :- 7. Value of assets how to be determined. - (1) Subject to the provisions of sub-section (2), the value of any asset, other than cash, for the purposes of this Act shall be its value as on the valuation date determined in the manner laid down in Schedule III. (2) The value of the house belonging to the assessee and exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the said seized assets belong to the assessee. The Court held that on the valuation date the right of the assessee was in jeopardy and therefore having regard to the definition of net wealth and asset as appearing in Section 2(e) of the Wealth-tax Act, the Wealthtax Officer was not justified in estimating the value of such asset. Relevant portions of paragraph Nos.8, 9 and 10 of the said judgment are extracted hereinbelow and read thus :- 8. Our attention has been drawn to a decision of this court in the case of CWT v. Smt. Sumitra Devi Jalan [1974] 96 ITR 35 . In that case, the Division Bench observed as follows (at page 43) : the right, however, was in jeopardy on the relevant valuation date because according to the assessee she had lost the shares because of stealing or otherwise. Therefore, all that she had at the relevant moment was the right to recover her equitable ownership in respect of these shares. The Tribunal or the Revenue authority, however, had not considered whether that right of equitable ownership was capable of having any market value in terms of Section 7 (1) of the Wealth-tax Act, 1957. We need not, therefore, advert to this aspect of the mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee but his right on the valuation date was in jeopardy being subjected to confiscation proceedings. Such a right has to be valued. This aspect of the matter was not adverted to by the Tribunal. The Tribunal proceeded on the legal contention as to whether the assessee was the owner of the seized goods on the relevant valuation date. 16. In the above background, it is required to be decided as to whether the petitioners are entitled to get the benefit of exemption from including the value of the gold which though belonged to the petitioners, but was seized in 1965 and continues to remains seized till date with the Collector of Central Excise, for the purpose of filing wealth tax returns. Interpretation of sub-section (1) of Section 7 and more specifically the expression if sold in the open market do not contemplate actual sale and the actual state of the market as held in the case of Aims Oxygen Pvt. Ltd. (supra); however in the facts of the present case if the petitioners predecessor was prevented from exercising his right due to seizure of the gold, it could not be said that the assessee continued to be the full owner of the said gold on the relevant valuation dates. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer, Bombay to have correctly guided the original assessee C.S. Goenka to avail the concession of the Gold Bond Scheme so granted by the Government Notification. It was further held that the records of the case and the evidence led by the defence counsel revealed that the original assessee had submitted an application in the revised form meant for tendering of gold to the State Bank of India, Indore Branch and further taking into possession the gold by the Central Excise Authorities from the Income Tax department was not maintainable in law as seizure. Considering the above facts, the Adjudicating Officer returned the findings in paragraphs 14 to 20 of the said order which are extracted below for reference:- 14. Considering all the facts and circumstances of the case, I hold that the seizure of this gold by Central Excise officers on 9.12.65 was valid. I do not accept the plea of the party charged that since gold was not seized under Gold Control Rules on 6.12.65, it cannot be confiscated under Gold Control Rules. I also do not accept the plea of the party charged that the proceedings under the Gold Control Rules are barred just because the gold had been seized by the Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I impose upon him a penalty of ₹ 25,000/(Rupees twenty-five thousands only) under Rule 126L(16) of the Gold Control Rules, 1962 (Corresponding to Section 74 of the Gold Control Act, 1968). 19. The Income Tax department filed an appeal before the Gold Control Administrator against the above order which came to be dismissed on 08.02.1971. The relevant findings returned by the appellate authority in paragraphs 15 to 17 of the said order are extracted herein below for reference:- 15. I do not also believe that the finding given by the Collector in his order was in any way binding on the Income-tax authorities in their proceedings under the Income-tax and other allied Acts. In fact, after the Collector passed the order, the Income-tax authorities served an attachment order on the gold. The contention made by Shri. Joshi that the order passed by the Collector is binding on the Income-tax Officer by virtue of the provisions of Section 84 of the Gold (Control) Act does not have much force as the finality referred to in the aforesaid section is with reference to the proceedings under the Gold (Control) Act. 16. A point could be raised that even in a case where a patent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve valuation dates. At this stage we may usefully refer to the definition of 'Gold' as appearing in Section 8(4)(a) of the Wealth Tax Act, 1957 which reads as follows:- (a) Gold means gold, including its alloy, whether virgin, melted, remelted, wrought or unwrought, in any shape or form, and includes any gold coin whether legal tender or not), any ornament and any other article of gold. 19.2. We may also extract the provisions of Section 8(2) of the said Act relevant to computation of the net wealth of a person under the Wealth Tax Act, 1957. Section 8(2) reads as follows:- 8(1) .... (2) In computing the net wealth of a person under Wealth-tax Act, 1957 (27 of 1957) the value of the assets represented by the income, which under sub-section (1) is not includible in his income profit or gains, shall, notwithstanding anything contained in the said Act, not be taken into account in an assessment or reassessment for any assessment year made under the said Act on or after the 20th day of October, 1965. 20. From the above, it is discernible in the present case, that the original assessee would not be liable to wealth tax assessment on the value of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lery, cash and other valuable articles from the premises as per the panchnama and hand it over to the petitioners / Applicants. In view of the Wealth Tax References and Income Tax Appeals being answered by us in the above manner, the writ petition is now required to be adjudicated. The writ petition specifically challenges notice of recovery issued under sub-section (2) to section 223 of the Income Tax Act, 1961 seeking recovery in accordance with the provisions of Section 222 to Section 232 of the Income Tax Act and the second schedule to the said Act and the rules made thereunder along with interest, cost, charges and expenses. The facts which have been narrated in the writ petition are identical to those in the references in as much as the same relate to seizure of 85617 grams of gold from the original assessee and consequential notice of demand for ₹ 5,01,86,611.00 along with interest. Petitioners have challenged the notice of demand on various grounds i.e the notice of demand does not contain any details of the alleged dues of the estate of late Shri. C.S. Goenka; petitioners could not have been issued notice of recovery as the petitioner was never served with any notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 28. 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 assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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