COMMISSIONER OF WEALTH TAX Vs. MEGHJI GIRDHARILAL

JUDGEMENT

(1.) BY this reference under Section 27(1) of the Wealth-tax Act, 1957 (hereinafter referred to as "the Act"), the Income-tax Appellate Tribunal, Indore Bench, has referred the following questions of law to this court for its opinion :

(2.) THE assessment year in question is 1964-65, for which the valuation date, in the case of the assessee, was Diwali 1963. In June 1965, there was a search of the premises of the assessee by the Central Excise Department and gold weighing 2.297 kilograms was recovered. In another search conducted by the Central Excise Officials in the house of the assessee in August. 1965, gold weighing 240.040 kilograms was recovered. As the assessee had not made a declaration with respect to the aforesaid quantity of gold, the Collector, Central Excise, passed an order in September 1966, confiscating that gold. While framing the assessment of the assessee under the Act for the assessment year 1964-65, the Wealth-tax Officer included the value of the aforesaid quantity of gold in computing the net wealth of the assessee. Aggrieved by that order, the assessee preferred an appeal before the Commissioner of Wealth-tax (Appeals). THE contention raised on behalf of the assessee in the appeal was that as the assessee had failed to declare the gold as required by law, it was liable to confiscation and hence the assessee could not be held to be the owner of the gold on the date of valuation and that it had no market value. This contention was not upheld by the Commissioner of Wealth-tax (Appeals). THE assessee, therefore, preferred a second appeal before the Tribunal. THE Tribunal held that as the gold found in the possession of the assessee was a prohibited article, it could not be held to belong to the assessee and that as it had no market value, its value would be nil as on the date of valuation. THE Tribunal also held that the cumulative tax liability as determined by the Wealth-tax Officer had to be deducted under Section 2(m) of the Act. In this view of the matter, the Tribunal allowed the appeal. Aggrieved by the order passed by the Tribunal, the Revenue sought reference and it is at the instance of the Revenue that the aforesaid questions of law have been referred to this court for its opinion,

(3.) NOW, it is "not disputed in the instant case that the seizure and confiscation of the gold in question did not take place in the assessment year in question 1964-65 but long after the valuation date, which was Diwali 1963. The seizure took place in June and August 1965, when the gold in question was recovered from the possession of the assessee and confiscation took place in September, 1966. Sub-rule (ii) of Rule 126-I of the Defence of India Rules provides that any person in possession of gold shall be presumed, unless the contrary is proved, to be the owner of that gold. The fact that the assessee was in possession of the gold in question on the valuation date, was not disputed on behalf of the assessee, but it was contended that as the assessee had failed to make a declaration as required by Rule 126-I, the gold possessed by the assessee was liable to be seized and confiscated at any time and hence the gold in question was not the wealth of the assessee in the assessment year 1964-65. It is, therefore, necessary to turn to the provisions of the Act to examine the correctness of this contention advanced on behalf of the assessee.