1. The assessee is an individual. His valuation date for the assessment year 1976-77 was 13-4-1976. The controversy in the present appeal centres round mainly on the addition of Rs. 6,96,544 added by the WTO as the value of gold and gold coins. The addition was made by the WTO on the ground that the aforesaid gold and gold coins continued to be the property of the assessee, even though they had been seized originally by the income-tax authorities from the assessee on 17-1-1975 and later by the customs authorities, from the custody of the income-tax authorities, on 18-1-1975.
2. According to the assessee, however, the said assets were ultimately confiscated by the Collector of Customs vide order dated 29-6-1978 and this confiscation, according to him, would relate back to the date of the seizure and so it will have to be presumed as if the assessee did not own the said assets from 17-1-1975.
3. As the entire controversy in the present case has turned on the interpretation of the various sections of the Customs Act, 1962, it will be convenient to note down the various provisions of the Customs Act, on the interpretation of which the present controversy has to be resolved.
4. Under Section 110 of the aforesaid Act contraband goods are seized.
Sub-section (1) of Section 110, so far as it is relevant for our purpose, reads as follows : (1) If the proper officer has reason to believe that any goods are liable to confiscation under this Act, he may seize such goods : Section 111 of the Customs Act describes the imported goods which are liable to confiscation. Clause (d) of this section is relevant for our purpose and may be extracted hereinbelow as follows : 111. The following goods brought from a place outside India shall be liable to confiscation : (d) any goods which are imported or attempted to be imported or are brought within the Indian customs waters for the purpose of being imported, contrary to any prohibition imposed by or under this Act or any other law for time being in force ; . . .
Section 112 of the Customs Act stipulates imposition of penalty for improper importation of goods as described in Section 111.
Section 122 of the Customs Act provides for the adjudication of confiscation and penalty proceedings in respect of the improperly imported goods. It describes the officer who would do such adjudication.
Section 124 of the Customs Act provides for the issue of show cause notice before the confiscation of goods. Section 126 of the Customs Act provides the consequences of the order of confiscation. The said section reads as follows : 126. (1) When any goods are confiscated under this Act, such goods shall thereupon vest in the Central Government.
(2) The officer adjudging confiscation shall take and hold possession of the confiscated goods.
Section 128 of the Customs Act provides for appeals, etc., against the aforesaid orders of confiscation.
5. In the setting of the aforesaid provisions of the Customs Act, the contention of the learned counsel for the assessee was that once the confiscation order is passed, the goods which in fact were all along lying with the customs authorities remained with them forever and that the passing of the confiscation order merely formalises the transfer of ownership of the assets in question from the assessee to the Government but that possession which is, according to the learned counsel, 9/10 of the ownership was already with the Government from 19-1-1975 and it is this possession which becomes finally complete in law as on the date of the passing of the adjudication order, i.e., 29-6-1978, and in view of taking this pragmatic and realistic approach to the problem, it should be held on the facts and circumstances of the present case that the assets in question were not the assessee's wealth as on the valuation date under consideration and that their inclusion in the assessee's wealth by the authorities below was wrong.
6. The contention of the learned departmental representative, on the other hand, is that the seizure did not amount to the extinguishment of the ownership right of the assessee in the said property and that by merely seizing a property, the ownership in them is not transferred from the assessee to the Government. The ownership in the seized assets gets vested in the Government only on the passing of the confiscation order by the competent authority. Such an event had admittedly taken place after the valuation date under consideration, i.e., on 29-6-1978, and, therefore, the contention of the assessee that he was not the owner of the said assets on the valuation date was wrong.
7. The learned departmental representative also pointed out that the order of confiscation had not become final because the assessee was in appeal against the aforesaid order in terms of Section 128 and till such appeal was disposed of the confiscation order could not be said to have become final.
8. In rejoinder, the learned counsel for the assessee pointed out that the assessee had not appealed against ,the seizure of the gold bars and so the order of the confiscation passed by the Collector of Customs in this regard was final but the assessee had appealed against the confiscation of the gold coins and the said appeal was still pending.
9. We have carefully examined the rival submissions in the light of the various provisions of the Customs Act enumerated above. According to us, there is merit in the departmental stand that the mere seizure of the goods alleged to be contraband and liable to be confiscated in terms of Section 111, does not extinguish the ownership of the assessee in the seized assets. There is also no merit in the assessee's stand that the order of confiscation as finally passed by the Collector of Customs related back to the date of the seizure of the goods, for Section 126 specifically makes a distinction between the period up to which the goods were in the custody of the Customs Officer who had seized them, and the period commencing from the date on which the confiscation order is passed. On the date when the confiscation order is passed, the officer who had adjudged confiscation is required to take over the possession of the confiscated goods from the Customs Officer concerned and hold possession thereof thereafter. The goods also vested in the Central Government only upon the order of confiscation being passed. The use of the word 'thereupon' in Sub-section (1) of Section 126 is important in this context. We are, therefore, unable to accept the assessee's contention that the order passed under Section 126 relates back to the date of the seizure of the goods with regard to the vesting of the goods in the Central Government. The contention of the learned counsel for the assessee that the order dated 29-6-1978 had confirmed the confiscation with effect from 18-1-1975 is entirely without factual or legal basis. What had happened on 18-1-1975 was not confiscation ; it was seizure of the goods. The said seizure does not amount to confiscation. The seizure of the goods is an administrative act whereas confiscation of the goods is a quasi-judicial order passed by the officer who adjudges the confiscation. There was, therefore, no question of confirming the confiscation with effect from 18-1-1975 as urged by the assessee's learned counsel as there was no confiscation on that date which needed ex post facto sanction. The doctrine of relating back which had been canvassed by the learned counsel for the assessee would be relevant only if the statute is silent on the issue. In the present case, as noted above, the statute is eloquent on this issue and makes the two acts, namely, of seizure and of confiscation, distinct and the goods get confiscated only on the date when the adjudication order is passed and not prior to it and that is why, on the date of the confiscation, the goods passed from the custody of the executive branch of the customs to the custody of the adjudicating officer.
10. The learned counsel for the assessee had relied on the decision of the Supreme Court in R.B. Jodha Mai Kuthiala v. CIT  82 ITR 570, in support of his submission that he was not the owner of the seized goods with effect from the date of the seizure itself and that, therefore, the said assets could not be assessed in his hands. We have gone through the aforesaid decision carefully and it appears to us that it has no relevance whatsoever with the question before us. There the question for determination before their Lordships of the Supreme Court was whether an assessee whose property remained vested in the custodian of an evacuee property by virtue of Section 6(1) of the Pakistan (Administration of Evacuee Property) Ordinance, 1949 as the evacuee property was the owner of the said property for the purposes of Section 9 of the Indian Income tax Act, 1922, and whether the income from the said property could be taxed in his hands in terms of the said section.
After going through the various provisions of the 1922 Act, their Lordships pointed out that case that the assessee had some residual beneficial interest in that property that he left in Pakistan ; and that residual beneficial right cannot be considered to be the ownership for the purposes of Section 9. Section 6(1) of the aforesaid Pakistan Ordinance provided that all evacuee property shall vest and shall be deemed to be always vested in the custodian with effect from the 1st day of March, 1947. Sub-section (2) of Section 29 of the aforesaid Ordinance gave to the custodian the power to sell any evacuee property.
It was after considering the above and the other provisions of the Ordinance that their Lordships came to the conclusion that the assessee in that case merely had some beneficial interest in that property and that even though that residual interest, in a sense, was ownership, the legal owner of the said property nevertheless was the custodian. At page 574 of the report their Lordships observed that 'in the eye of the law, the custodian was the owner of that property, the position of the custodian was no less than that of a trustee'.
11. In view of the above position, it is difficult to say as to how the aforesaid case would help to advance the assessee's case, in the setting ft of the facts in the present case. Here it cannot be said that in law the ownership in the seized assets vested in the Government on the date of the seizure itself. The date on which the seized goods vested in the Government is given in Section 126 of the Customs Act and it is the date on which the adjudication order of confiscation is passed and not earlier.
12. In view of what we have stated above, the assessee's appeal on this point has failed. No argument was advanced by the assessee with regard to the valuation of the seized property nor there is any ground of appeal on this point. We, therefore, do not express any opinion with regard to this point.
13. The last ground of appeal, in this appeal, is with regard to the value of shares of Basumati (P.) Ltd. The assessee's case is that consequent upon the passing of the Basumati (P.) Ltd. (Acquisition of Undertaking) Act, 1974, the undertaking of Basumati (P.) Ltd. had stood transferred to and stood vested in the State of West Bengal with effect from 9-1-1974, free from all trust liabilities and encumbrances, and as such the value of all the shares in the Basumati (P.) Ltd. had become nil with effect from the date of the acquisition. It appears that the learned Commissioner had taken note of the aforesaid Act and had thereafter observed as follows : It appears that the appellant has filed a claim before the Government of West Bengal for obtaining the value (sic) of shares.
Such claim was pending before the State Government for disposal. No final order has yet been passed on such claim. The right entitled (sic) to the shares belonging to the assessee had not been totally denied. Hence, the WTO was right in assessing the value of such shares on the basis of last assessment.
14. The finding of the learned Commissioner is, in our opinion, erroneous. It is true that the claim of the assessee, that the value of the shares is nil, cannot be sustained because the assessee has claimed compensation from the Government of West Bengal for the said shares, but at the same time it cannot be said that the value of the said shares would be the same as the value of the shares in the last year.
There has been change in the facts and so there would be difference in the valuation of the shares also. In fact, the shares no more exist, and what exists is the right to demand, compensation from the Government of West Bengal in lieu of these shares. What is to be valued is this right of compensation and inasmuch as the authorities below has not valued it, we restore the matter back to the WTO with the direction that he would determine the value of the assessee's right to receive compensation on the valuation date and include that in the assessee's wealth.