Per Shri P. V. B. Rao, Vice President (NZ) - This appeal raises an interesting question under the Wealth-tax Act, 1957 (the Act), in the following circumstances :
The assessed is an employee of Gwalior Transport (P.) Ltd., While he was staying in the guest house of the company known as Daga Sadan at Ujjain the customs and central excise authorities searched the room in which the assessed was staying and found certain wooden boxes concealed under the bed. Gold and silver ornaments and cash were recovered from the wooden boxes seized by the customs and central excise authorities. The value of gold and silver ornaments plus the case came to Rs. 3,32,076. The customs authorities (Collector of customs) initiated proceedings against the assessed for contravention of sections 11 and 11D of the Customs Act, 1962 and sections 7 and 16 of the Gold Control Act, 1968. The Collector of customs in a fairly well discussed and elaborate order dated 17-4-1978 held that the assessed is not in any way connected with the gold and cash recovered. He, thereforee, found him not guilty. No penalty was imposed on the assessed. Since, however, the gold was found to be smuggled gold, the same was confiscated under section 11.
2. When the income-tax proceedings of the assessed were taken up, the matter of seizure by the customs and central excise authorities came to the knowledge of the ITO. The assessed stated that he was not be owner of the gold and silver ornaments and cash and he produced the order of the Collector of customs. But the ITO refused to accept the order of the Collector of customs and he drew his own conclusions. The ITO placed reliance on a confessional statement before the excise authorities which has been rejected by the Collector of customs because of other overwhelming evidence. He, accordingly, treated the sum of Rs. 3,32,076 as income from undisclosed sources as the assessed was found in possession of the same. The matter thereupon came up in appeal before the AAC. The AAC held that there was no evidence brought on record by the ITO except the proceedings before the customs and central excise authorities and, thereforee, it is not possible to uphold the action of the ITO. He accordingly, deleted the sum of Rs. 3,32,076. At the instance of the revenue, the matter came up before the Tribunal in IT Appeal No. 564 (Delhi) of 1981. The learned Members, who heard the matter remitted the matter back to the ITO for fresh decision according to law. It is useful to quote the following.
'In view of the above, we set aside the Appellate Commissioners order and restore the matter to the ITO for fresh decision according to law after giving to the assessed reasonable opportunity of being heard. In addition to making further enquiry on the aspects brought out by the learned Appellate Commissioner in the shape of aforesaid observations, learned ITO would also find whether subsequent to order dated 17-4-1978 of the Collector of central excise, Indore, any further section and if so what has been taken by the customs and excise authorities with reference to provisions of section 112 of the Customs Act. Revenue succeeds to the said extent.'
In the meanwhile, the WTO while making the assessment of the assessed included the sum of Rs. 3,32,076 as the wealth of the assessed on the valuation date, i.e., 31-3-1976. The assessed pleaded that since he is not held to be the owner, the same should not be included in his wealth. The WTO, however, rejected the assesseds objections. The AAC, who heard the Wealth-tax appeal referred to the order passed by the Commissioner (Appeals) in the income-tax appeal and held that the amount cannot be treated as part of the assesseds wealth. The same has been accordingly deleted. Against this order of the AAC the appeal is filed by the revenue.
3. The learned senior departmental representative Mr. Dave argued that since the order of the Commissioner (Appeals) has been set aside and the matter remanded to the ITO, the same course of action should be adopted and the matter should go back to the WTO. We are greatly impressed by this submission and we indicated to the learned counsel appearing for the respondent by the learned counsel for the assessed very strongly objected to this by contending that the proceedings under the 1961. are totally different from the proceedings under the Wealth-tax Act, 1957. He emphasised that when the assessed hs denied the ownership of the gold can cash and it was accepted by the authority competent to decide the matter, there is no wealth of the assessed to be included on the valuation date. He has further argued that there is no evidence on the basis of which it could be stated that the gold and silver ornaments and the cash belonged to the assessed as a part of his wealth, apart from what has been produced by the assessed in the shape of the order of Collector of customs which held that the assessed is not the owner. Mr. Sharma also contended that the very fact that the gold is smuggled gold, the same was liable to be confiscated under any circumstances and there can be no value remaining to be included as part of the assesseds wealth. Mr. Dave, in further reply contended that it is only when the confiscation took place it could be said that the assessed ceased to be the owner and not at the time when the search was made and gold and silver ornaments and cash were found and that date is definitely before the valuation date.
4. We are impressed by the submissions made by Mr. Sharma. We felt that it is not proper merely to take the course of action that has been adopted in the income-tax proceedings. The essential requirement in the income-tax proceedings is about the source of acquisition. Whether the gold is smuggled or not, once it can be held that the assessed is found in possession of gold or any other property, it is for him to explain the source. In Wealth-tax proceedings one has to find out whether a particular asset belonged to the assessed or that the asset has any value in order to be included in his net wealth. thereforee, it is not proper and safe to go only what happened in the income-tax proceedings specially in a case like this as well presently show.
5. From the beginning the assessed denied the ownership of the seized articles This has been accepted by Collector of customs on a consideration of the evidence brought on record before him. apart from what the Collector has found on the evidence which has been discussed, there is no other material brought on record by the WTO or for that matter the ITO. All the findings recorded by the ITO and by the WTO trace to what has been found by the excised authorities and as noticed by the Collector of customs in his order. The Collector of customs accepted the position that the assessed is not the owner of the seized articles. In other words, the assertion made by the assessed that he is not the owner of the seized articles has been accepted by the Collector of customs. The same position, namely, that the assessed is not the owner of the seized articles, holds good before the ITO as well as before the WTO. The Collector of customs further found that the assessed was not the only person in the room and, thereforee, he was not in possession and control of the seized articles. In fact, possession and control alone are not enough for the purpose of wealth-tax. It must be found that the assessed is the owner or in other words it must be found that the assets belonged to the assessed and then only the value of such assets can be included in his wealth. There is no such finding that the assets belonged to the assessed not there can be on the basis of material bought on record by the WTO. The ITOs finding at best was that the assessed was found in possession by it cannot be said that there is any evidence of the ownership of the assets lying with the assessed especially in the face of his categorical declaration that he is not owner of such seized goods. In our opinion this finding is sufficient enough to dislodge the inclusion of the amount in the hands of the assessed as his wealth. However, we would also like to point out the alternative contention of Mr. Sharma.
5. Once the seized article were confiscated by the Collector of customs in view of his finding, nothing further remained with the assessed at all. No doubt, Mr. Dave pointed out that until the confiscation order is passed, it cannot be said that the seized articles do not belong to the assessed. Apart from the question that it cannot be said that the seized articles belong to the assessed, which finding we have already given above the moment the smuggled gold is found, there is a liability for confiscation attached thereto under the customs Act. The customs authorities are entitled. to confiscate the gold and gold ornaments. There is only one provisions by way of section 126 when notice can be given to a person to pay fine in lieu of the seized gold so that he can get back the same. But such a notice obviously has not been held to be the owner. thereforee, a situation emerges where entire gold was liable to be the owner. thereforee, a situation emerges where entire gold was liable to be confiscated the moment it was seized and, thereforee, nothing remained with the assessed, the value of which can be included in his wealth-tax assessment. We may also mention here that nothing further has been done nor any material brought on record to take a view different from the one taken by the Collector of customs even though the Tribunal remanded the matter as early as on 3-8-1982 in the income-tax proceedings. We may also mention that when Collector of customs, who is competent authority to decide the ownership of the property and the same has not been challenged so far, it is proper and fair to accept that finding especially when there is no other evidence except the evidence before the Collector of customs.
7. Thus, for the foregoing reasons, we are unable to accept the appeal of the revenue. Accordingly, the order of the AAC is upheld and the appeal is dismissed.