1. This is a group of 30 cross appeals by the assessees and by the revenue in the case of five assessees (Rajeshkumar Porwal, Rakeshkuniar Porwal, Sushilkumar Porwal, Sunilkumar Porwal and Sanjivkumar Porwal) which were heard together since the issue involved in all these appeals is the same. These appeals are disposed of by a common and consolidated order for the sake of convenience.
2. Since the main order of the CWT (Appeals), Nagpur, dated 14-10-1988, is in the case of Sanjivkumar Porwal for the assessment years 1980-81, 1981-82 and 1982-83, we will deal with the facts and arguments stated in this order. The arguments advanced by the learned Departmental Representative and the learneu counsel for the assessees with reference to this order and our decision on the issues raised in this order will apply to other connected cases, namely, Rajeshkumar Porwal, Rakeshkumar Porwal, Sushilkumar Porwal and Sunilkumar Porwal. The brief facts as culled out from the papers filed before us and as slated by the counsel for both the parties are as follows : 3. One Shri Kesharimal Porwal, who had a beedi factory at Kamptee and a gold and silver shop at Mandsaur, died on 7-10-1952. He was survived by his widow Ratanbai, a daughter Shantabai and a son Nemkumar. Both Shantabai and Nemkumar had each, a son at the time of the death of Kesharimal. After the death of Kesharimal, his son Nemkumar had four more sons, who are the appellants/ assessees named herein. The said Kesharimal left a will dated 10-2-1952 whereby bequeathed certain gold and silver to his grandsons. It was provided in the will that each grandson would receive 500 tolas of gold at the time of marriage and the remaining gold would be equally divided among them. On 9-7-1968, the Officers of the Central Excise, Nagpur, searched the residential premises of Nemkumar and seized 10 slabs and 9 pieces of gold and 230 gold coins weighing about 42,404 grams having at that time a market value of Rs. 7,63,000, which were kept in a cupboard inside a big Godrej iron safe. The Collector of Central Excise confiscated the gold by his order dated 15-5-1970. The Gold Control Administrator confirmed the Collector's order on 23-2-1972. The assessees filed writ petitions before the Delhi High Court against the confiscatory order on 16-8-1973. A single Judge of the Delhi High Court cancelled the confiscation on 3-11-1981. A Division Bench of the same High Court allowed the letters patent appeal of the Excise authorities on 10-12-1982. The Delhi High Court, by its order dated 19-4-1983, declined to grant certificate of witness to appeal to the Supreme Court to the assessee. The Supreme Court granted special leave petition to the assessees on 25-7-1983, and on 27-8-1987 the Supreme Court vacated the order of the Division Bench and restored the gold to the assessees.
3.1 We are concerned in these appeals with the assessment years 1980-81, 1981-82 and 1982-83 for which the relevant valuation dates were 20-10-1979, 7-11-1980 and 27-10-1981 respectively. The short issue for consideration before us is whether on the facts stated above the value of the gold could be brought to tax as an asset belonging to the assessees concerned on the relevant valuation dates, and if it could be so assessed to wealth-tax, what should be the value of such gold. The CIT(Appeals), in an extremely well reasoned, detailed and erudite order, held that the assessees could not be considered to have property in gold on different valuation dates and that, therefore, the Dy.
Commissioner (Asst.) was not correct in adopting the value of gold on the valuation dates in the various cases under appeal. He further held that the assessee still had certain rights which he has described as "appellants vestigial interest of property character", namely, the confiscated gold. This interest entitled him to litigate for salvaging the gold that was confiscated. He determined the value of such interest at 15% of the actual value of gold as on the different valuation dates.
The revenue is in appeal against the CIT(A)'s finding that the value adopted by the Dy. Commissioner (Asst.) was not correct as the gold belonged to the assessees on the relevant valuation dates and the assessees are in appeal against the CWT(A)'s finding that the appellant had a right to litigate to salvage the gold and against the finding of the CWT(A) that the value of such right was 15% of the value of gold on the relevant valuation dates.
4. The appeals were argued at quite some length by Shri Keshav Prasad, the learned Departmental Representative for the department, and Shri S.E. Dastur, the learned counsel for the assessees. We will briefly state the case of the department first. The main issue, according to the Departmental Representative, was whether on the facts, the assessees could be treated as the owner of the gold on the relevant valuation dates. The learned Departmental Representative argued that the ownership did not mean possession; it related to the legal right to the property and the right in the property. Dwelling on the effect of the orders of the various Courts and the final order of the Supreme Court, the learned Departmental Representative pointed out that the writ petition was filed on 16-8-1973 and the order of the Single Judge was passed on 3-11-1981. On the last valuation date, the order of confiscation was in operation. Once the assessees chose to challenge the confiscation and stated claims of ownership of the gold, the assessees themselves took the stand that they were the owners of the gold which stand was upheld by the Single Judge whose decision became known on 3-11-1981. There was no confiscation after the Single Judge had set aside the order of confiscation and restored the gold to the assessees on 3-11-1981 which date fell after the last of the three valuation dates for the three years concerned.
5. The case of the revenue has been more succinctly put by the CWT(A) in para 8 of his order. Briefly, what the revenue contends is that after the decision of the Supreme Court, the assessees were the owners of the gold on the valuation dates and the gold belonged to them because the order of confiscation has been finally cancelled by the Supreme Court. Thus, the gold belonged to the assessees on the various valuation dates although it was lying with the Central Excise authorities. When a superior court reverses the order of the lower court, the effect is that the order of the subordinate court never existed and the order of the Supreme Court relates back to an anterior date and the rights determined or declared by that order takes effect from the date from which these rights were extinguished or divested or taken away. In effect, the gold had to be treated as seized and not taken away. The assessees never gave up their claim or right over the gold. The right in property was always existent as on the valuation date. Further, it was argued that if the act of the State of confiscating amounted to deprivation of property illegally, as has been held by the Supreme Court, there was no vesting of ownership in the State at all by virtue of the illegality of the action of the State.
The ownership in the gold continued with the assessees who must be deemed to have access to the benefit of that ownership even at the time of confiscation and thereafter. Therefore, even if the assessees were divested of their rights in the gold on the valuation dates, still they were the owners on the valuation dates, more so because the order of divestment of their rights has been set aside by the Supreme Court and the order of he Supreme Court has a retrospective effect. Since the order of the Single Judge was operative on Diwali 1982 relevant to the assessment year 1983-84, in any case, for the assessment year 1983-84, the value of gold will be includible in the net wealth of the assessees.
6. The counsel for the assessees firstly emphasized the fact that the seizure of primary gold had taken place in the hands of Ratanbai and we are in the present appeals concerned with the wealth-tax assessment of her five grandsons. All the orders that were passed both by the Single Bench and the Division Benches as well as the Supreme Court were orders in writ petition and not in an appeal. Therefore, the question of the decision of the Supreme Court relating back does not arise. On 3-11-1981, the Single Bench decided in a writ petition that confiscation is bad. On 10-12-1982, the Division Bench reversed the order of the Single Bench and on 27-8-1987 the Supreme Court allowed the civil appeal filed by the assessees. We are concerned with the effect of confiscation of gold and the point of time when the confiscation stood or was in operation. The counsel pointed out that there was distinction between 'seizure' and 'confiscation' and Lald considerable emphasis on the observations of the Supreme Court to the effect that confiscation deprives the owner of his property to his loss and detriment. The assessees were deprived of the property by the order of the Excise authorities dated 15-5-1970. After the confiscation, the assessees could not be considered to be the owners of the gold or the gold cannot be conceived to be belonging to the assessees on the relevant valuation dates because on these dates the assessees were not in a position to either transfer by way of sale of exchange or gift the said gold nor could they use it in any form. As the assessees were not the owners of the gold on the valuation dates, they were not chargeable to wealth-tax and there is nothing in the Act to apply any fiction or during provision by which the assessees could be deemed to be the owners of the gold on the relevant valuation dates by virtue of the order of the Supreme Court which restored the gold to them as late as in 1987. None of the ingredients of ownership was present with the assessees on the relevant valuation dates. The assessees cannot be charged to wealth-tax in respect of the property of which they were owners in the past or the property which in future may become their property. The doctrine of relating back the order of the Supreme Court cannot be applied to an Act particularly with regard to the scheme of the Wealth-tax Act. The assessees were deprived of the ownership of the gold on 15-5-1970 and the ownership was restored to them on 15-1-1988 by virtue of the Supreme Court's order and during the intervening period the gold could not be said to be belonging to any of the assessees and hence the assessees could not be charged to wealth-tax in respect of the value of the gold on the relevant valuation dates.
6.1 Further, it was argued by the counsel for the assessees that a right to litigate could not constitute an asset within the meaning of the Wealth-tax Act. On the relevant valuation dates, the position of litigation was such that the chances of the assessees succeeding were almost nil. What was confiscated was primary gold. Such gold was not only liable to be confiscated but the person responsible for keeping the primary gold was liable to be penalised or prosecuted. Under such circumstances, the chances of the assessees succeeding in the litigation were almost nil. The counsel relied on several authorities and, in particular, on the decision of the Gujarat Court in Jayantilal Amritlal v. CWT [1982] 135 ITR 742 and the observation at page 748 thereof and the decision of the Madhya Pradesh High Court in CWT v.Meghji Girdharilal [1989] 176 ITR 63. The counsel referred to Section 6 of the Transfer of Property Act to argue that mere right to sue was not a property. He also relied on the Tribunal decision in Miss P.Vidyalakshmi v. WTO [1984] 10 ITD 344 (Mad.) and in the case of P.P.Chandrasekhara Pai v. WTO [1991] 36 ITD 488 (Coch.) and the decision of the Tribunal in the case of Udhavdas Kewalram in WTA Nos. 949-950 (Bom.) of 1983 dated 13-12-1984, a copy of which was filed by the counsel in the course of the hearing before us. He relied finally on the decision of the Bombay High Court in the case of Shrikant Textiles v. C1T [1971] 81 ITR 222 in support of his contention that the effect of a decision in writ petition, which is in effect a judicial review, is different from a decision in appeal. The counsel relied on Wade's Administrative Law (6th Edition) in support of this argument.
7. Before dealing with the various arguments advanced by the counsel for both the sides, we would first record briefly the findings of the CWT(Appeals). These findings are summarized by the CWT(A) in para-28 of his order (pages 84-85 of the compilation or internal pages 76-77 of the order of the CWT-A). The summary of the findings itself runs into 2 pages and we find that in such summary the CWT(A) has also summarized some of the arguments which weighted with him while reaching these findings. In our opinion, the salient findings of the CWT(A) in brief are as follows : (1) The incidence of charge of interest under Section 3 of the Wealth-tax Act is on real wealth. Section 7 of the Wealth-tax Act contemplates a hypothetical market but does not contemplate deemed wealth in the assumed market.
(2) The concept of valuation date is statutorily defined and has been judicially interpreted. For the purpose of construction of charging section of the Wealth-tax Act, what is material is that the asset must belong to the assessee rather than owned by him.
(3) The order of confiscation transfer absolute title to the Government by immunising the offending goods of contraband character.
(4) The decision of the Supreme Court in Sushilkumar Porwal's case was only within the confines of the Gold (Control) Act.
(6) The triology of cases, namely, CWT v. H.H. Smt. Rajkuverba [1972] 86 ITR 783 (Mys.), CWT v. Amatul Kareem [1981] 127 ITR 549 (AP) and CWT v. G.M. Omar Khan [1981] 127 ITR 543 (AP) establishes, in effect that only real wealth as on the valuation date is liable to be charged to wealth-tax. The judicial decisions do not permit the ultimate determination by leap frog to the earlier valuation dates even though such decisions are retro-operative in other contexts.
7.1 The CIT(A) has further held that the assessees still had vestigial interests of a property character. This was the right to litigate and which the CIT(A) has valued at 15% of the market value of gold on the relevant valuation dates.
8. We called upon the assessee's counsel to produce papers relating to litigation. A separate compilation has been filed in which copy of the Writ Petition filed by Sushilkumar, son of Nemkumar Porwal and Ors., in Civil Appeal No. 1014/73, copy of the judgment dated 3-11-1981 in the above Writ Petition by Single Judge of the Delhi High Court and copy of the judgment dated 10-12-1981 by the Division Bench of the Delhi High Court in Letters Patent Appeal No. 28/82 against the above-referred judgment of Single Judge have been filed. We find that-the CIT(A) has only referred to these various judgments and has made a broad observation that these judgments as well as the final judgment of the Supreme Court have been given in the context of the Gold (Control) Act.
However, as a fact finding authority, we think it our duty to find out and ascertain the circumstances under which such litigation started, the facts which were presented by the Petitioners before the Court, the facts found by the judicial authorities and the context in which the various judgments were given. This exercise, in our opinion, is necessary to enable us to come to some conclusion about the correctness or otherwise of the CIT(A)'s order.
8.1 The Petition gives firstly the family tree of Keshrimal Porwal, which is as follows: Nemkumar (son) Shantabai (daughter) | | Surendar Kumar (petititoner No. 6, | of unsound mind) |-------------|--------------|---------------|-----------------------| Sushil Rakesh Rajesh Sunil Sanjeev Kumar (son) Kumar (son) Kumar (son) Kumar (son) Kumar (son) Petitioner Petitioner Petitioner Petitioner Petitioner No. 1 No. 2 (Minor) No. 3 (Minor) No. 4(Minor) No. 5 (Minor) The first point made in the Petition is that a Will dated 18-2-1952 of Kesharimal Pyarechand Porwal was produced by Smt. Ratanbai, wife of the said Kesharimal, when the officers of the Central Excise, Nagpur, seized gold weighing 42,404 gms., from the premises of the said Ratanbai on or about 9-7-1968. It was pointed out to the officers that the gold which was seized on 9-7-1968 was the same gold which was mentioned in the Will dated 18-2-1952. It was also pointed out that the seized gold had been recovered just about 8 or 9 days prior to the date of the seizure at Mandsaur from the Cellar at Mandsaur House. The said Kesharimal had gold and silver business at Mandsaur. He died on 7-10-1952 and the Will made by him was kept secret and till June 1968 nobody came to know about the Will or the property mentioned therein.
On the basis of the facts disclosed in the Will, the underground Cellar in the House at Mandsaur was dug open and the seized gold and silver ingots were found. The said Ratanbai carried the said gold and silver from their house in Mandsaur, to her house at Kamptee without disclosing the said property to any one. Ratanbai came to know about the existence of the gold and silver only after it was found on excavating the said Cellar. The question, therefore, of being in possession, custody and control of the said gold and silver prior to 30-6-1968 did not arise. The Collector of Central Excise passed an order on 15-5-1970 and held the charge alleged against the said Ratanbai as proved and ordered absolute confiscation of the gold under Section 72(1) of the Gold (Control) Ordinance, 1968. Being aggrieved by this order, Ratanbai filed an appeal before the Gold Control Administrator. This appeal was first heard at Bombay by the then Administrator on 30-1-1971 and 2-2-1971. Before the appeal was decided, an amendment to Section 71 of the Gold (Control) Act, 1968 came in force and accordingly the said Ratanbai was asked if she desired to apply for reopening of the whole case for fresh adjudication or whether she would like the said appeal to be disposed of in accordance with the amended provisions of the Gold (Control) Act, 1968, particularly Section 71 of the Gold (Control) Act as amended. In her reply, Ratanbai contended, inter alia, that the gold seized and ordered to be confiscated does not belong to her but belongs to her grandsons.
Section 71 of the Gold (Control) Amendment Act, 1971, which was promulgated on 24-6-1971 and which was deemed to have come into force on 20-5-1971, read as follows: (1) Any gold in respect of which any provision of this Act or any rule or order made thereunder has been, or is being, or is attempted to be contravened, together with any package, covering or receptacle, in which such gold is found, shall be liable to confiscation : Provided that where it is established to the satisfaction of the officer adjudging the confiscation that such gold or other things belongs to a person other than the person who has, by any act or omission, rendered it liable to confiscation and such act or omission was without the knowledge or connivance of the person to whom it belongs, it shall not be ordered to be confiscated but such other action as is authorised by this Act, may be taken against the person who has, by such act or omission, rendered it liable to confiscation.
It was the case of the petitioner that the instant case was fully covered under proviso to Section 71(1) of the Gold (Control) Act as amended and that the gold in question, therefore, could not be confiscated.
8.2 On this petition, the Single Bench of the High Court at Delhi passed its order, as stated earlier, on 3-11-1981. The main issue before the Court, in the words of the Hon'ble Judge, was as follows : The main issues are whether the gold under confiscation is the same gold as was mentioned in the Will executed on the 18th February, 1952 by the late Shri Kesharimal and whether the gold in question was discovered towards the end of June 1968 and that prior to that the Applicant had no knowledge of its existence. The Government of India observes that the genuineness of the will is not in question.
What has been the question, however, is the identity of gold with the gold mentioned in the will.
The Court observed that the Gold Control authorities had found the Will to be genuine. The question before the Court was whether the gold seized is the same as that mentioned in the Will and the finding of the Court on this issue was as follows : Looking at the overall position, the most striking feature is that slabs, pieces and coins of gold and ingots of silver are the subject matter of the will, and what is seized is precisely the same. The numbers and the weights also tally, except in the two small respects noted by secretary. It is impossible to believe that this was all a coincidence. Therefore, no reasonable person could have arrived at the conclusion at which the Secretary did. This is borne out by the fact that neither the Collector nor the Administrator considered the point even worthy of notice. And, the point was an obvious one.
The learned Judge summarized his findings as follows : (i) that the Will is genuine (it) that the gold seized is that mentioned in the Will and (iii) that Ratanbai had been in possession of the gold at least for 8 or 9 years before it was seized on 9-7-1968, if not from some earlier point of time, and from the fact that the Will is genuine, it inevitably follows that Kesharimal's grandsons became the owners of the gold from the moment of his death. Therefore, the learned Judge has proceeded to deal with the relevant Defence of India (Amendment) Rules, 1963, 1966, Gold Control Ordinance and the Act of 1968, etc. He also discussed the scope of the amended Section 71 of the Gold Control (Amendment) Act, 1971, and made the following observations at page 89 : The critical part is the proviso. Since the gold control authorities, and in particular the Collector, held the will to be genuine, it must follow that they were 'satisfied' that the gold belonged to the grandsons of Kesharimal : to wit, the petitioners.
The declaration in respect of the gold ought to have been made under rulel251 of the Defence of India Rules, 1962 by Nemkumar as their 'guardian'. The omission to do so was by him. It is that which rendered the gold 'liable to confiscation'. Similarly, he should have disposed of the gold before 1st September 1967 either by sale to a refiner or dealer or by conversion into ornaments. Again, the default was by him. Since, at all material times, the petitioners were minors, these omissions by Nemkumar were, or must be deemed to be without their 'knowledge or connivance'. As all the requirement of the proviso are met the gold could not be ordered to be confiscated.
8.3 Against this order, the Collector of Central Excise filed a letters patent appeal No. 28 of 1982 before the Division Bench of the Delhi High Court. The Division Bench took note of the findings of the Single Judge that before the confiscation could be ordered, notice under Section 79 should have been given to the petitioners in the Writ Petition, and as this has not been done, the order of confiscation was liable to be quashed. Before the Division Bench also, it was contended by the counsel for the respondents that notice under Section 79 should have been issued to the minors through the guardian but this had not been done in the present case. The main finding of the Division Bench in this appeal was as follows : 79. Giving of an opportunity to the owner of the gold etc. -- No order of adjudication of confiscation or penalty shall be made unless the owner of the gold, conveyance, or animal or other person concerned therewith. Admittedly, the gold was not in possession of the minors. The gold was in a safe, the keys of which were with Ratanbai. The house in which the gold was found at the time of the seizure possibly belonged to Nemkumar. It was from their possession that the gold was seized. They were, therefore, certainly persons concerned with the gold. Even when it ultimately transpired that there was a will and the ownership of the gold was of the minors, there was in our opinion, sufficient compliance of Section 79 when notice was issued under Section 79 to Nemkumar and his mother.
Nemkumar, as guardian and his mother as trustee of the gold were certainly persons concerned under Section 79 and notice should be given either to the owner of the gold or to the persons concerned with the gold. In any case, notice to the minors had to be given through their guardian who alone was competent to act on their behalf. In the present case it must be held that there was sufficient compliance of Section 79 as notice was in fact issued to Nemkumar, the guardian of the minors.
Against this decision, Sushilkumar Porwal and others the original petitioners, went in civil appeal, being Appeal No. 5807 of 1983, to the Supreme Court. After stating the relevant facts, their Lordships of the Supreme Court discussed the scope of Section 71(1) of the Gold Control Act as it stood before amendment and as it stood after amendment and framed the question to be decided by them as follows : The principal question that falls for our consideration is whether the proviso to Section 71(1) also relates to primary gold.The Supreme Court gave a finding (vide page 124 of the compilation) that in the instant case it was Ratanbai who had failed to either sell or convert the primary gold in question within the grace period of six months without the knowledge and connivance of owners thereof, that is, the grandsons of Kesharimal Porwal. [Emphasis supplied]. While dealing with the effect of the proviso to Section 71 of the Gold (Control) Amendment Act, 1971, the Supreme Court observed as follows : The proviso lays down the circumstances under which any gold which is liable to confiscation will not be confiscated. Confiscation deprives the owner of his property to his loss and detriment. Where primary gold is not to be confiscated in view of the proviso to Section 71(1), the owner thereof gets it back, but it does not mean that he will be entitled to retain possession of such primary gold which is forbidden by Section 8(1) of the Gold Control Act. In such a case, the owner has to sell the primary gold to a licenced refiner or dealer or deliver the same to a dealer or goldsmith, licensed or certified, as the case may be, that is to say, in the same manner and following the same procedure as was Lald down in sub-rule (1-B) of Rule 126-H of the Defence of India (Fourth Amendment) Rules, 1966 and, in our opinion, so interpreted there will be no conflict between the proviso to Section 71(1) and the provision of Section 8(1) of the Gold Control Act.
Thus, there will be no difficulty in not confiscating the primary gold under the proviso, for, after such release the owner of primary gold will not be entitled to retain possession of the same, but will have to dispose it of or convert the same into ornaments. We do not, therefore, agree with the view expressed by the Division Bench of the High Court that the proviso to Section 71(1) of the Gold Control Act does not relate to primary gold. The Division Bench was greatly influenced by the fact that in view of Section 8(1) of the Gold Control Act, the possession of primary gold cannot be retained by any person. But, as already discussed above, such an interpretation is not possible to be made of the proviso to Section 71(1). The interpretation that we have put on Section 71(1) will not run counter to the provision of Section 8(1), in view of the fact that although the primary gold is not confiscated, it will not be allowed to be possessed by the owner but has to be disposed of by him or converted into ornaments in the manner as mentioned above or as directed by the Administrator by his said order dated 30-7-1976.
For these reasons, the Supreme Court set aside the order of the Division Bench, modified the order of the learned Single Judge directing that the seized primary gold shall be released in favour of the assessees and gave a direction that the assessees shall either sell the gold to a licensed dealer or deliver possession of the same to a licensed dealer or a certified goldsmith as may be specified by the Administrator immediately on the release of such primary gold.9. On a careful consideration of the facts that have emerged on the perusal of the papers relating to the litigation and the orders made on the petition of the appellants (assessees), certain basic facts emerge which have to be brought in bold relief for deciding the issues before us. The gold was confiscated in 1968. The gold that was seized was found to be the gold that was left by Kesharimal in the Will. This gold belonged to the grandsons of Kesharimal but since it was seized in 1968, it never came in the possession of the grandsons of Kesharimal, for whom it was meant. Thus, on the relevant valuation dates, the assessees herein, the grandsons of Kesharimal, never got the possession of the gold which was confiscated long before the relevant valuation dates. The effect of the decision of the Hon'ble Single Judge was only that it was held that the Will was genuine, that the gold seized was the gold mentioned in the Will and that the gold was in possession of Ratanbai long before it was seized. The Single Judge has also stated categorically that since at all material times the petitioners were minors (the assessees herein), the omissions by Nemkumar were or must be deemed to be without their knowledge or connivance. This would mean that the assessees (who were the said minors at the relevant time) were never aware of the existence of the gold at the relevant time and could not be charged, therefore, of commuting to disclose the gold. We also find that the finding of the Single Bench Judge substantially remains unaltered or has not been in any way modified or reversed by the decisions of the Division Bench and the Supreme Court. The Single Bench discussed the scope of Section 79 of the Gold (Control) Act and held that since the owners of gold were never given notice in writing or any notice at all informing them about the ground on which it was proposed to confiscate the gold nor were they given any opportunity of making a representation in writing against the confiscation and of being heard in the matter, on this ground the gold should be returned to Ratanbai.
It is this portion of the order of the Single Bench that was reversed by the Division Bench which (as stated on page 15 hereinabove) observed that there was compliance of Section 79 as notice was, in fact, issued to Nemkumar, the guardian of minors. However, what is relevant for the purpose of the present appeals is the observation of the Division Bench in the said paragraph to the following effect : Admittedly, the gold was not in possession of the minors. The gold was in a safe, the keys of which were with Ratanbai. The house in which the gold was found at the time of the seizure possibly belonged to Nemkumar. It was from their possession that the gold was seized.
The finding that the gold was not in possession of the minors has remained uncontroverted. Then again, the Supreme Court has not held the action of the Gold Control authorities as void or voidable.
9.1 We have heard the parties with reference to the various orders of the Delhi High Court and the Supreme Court. It was brought to our notice by the counsel for the assessees that whereas Ratanbai was a party to the proceedings before the Gold Control authorities, it was the assessees herein who were the parties in litigation before the Courts. Further, it was argued that the scope of litigation was different before the different judicial authorities. We are inclined to accept this argument after perusal of the various Court orders. If the Single Judge held that proper opportunity was not given under Section 79 of the Gold Control Act, the Division Bench held that such opportunity was given. But, the Division Bench also made the observations quoted above which would seem to support the case of the assessees. The Supreme Court has nowhere held that the State had illegally seized the gold. It was only interpreting Section 71(2) of the Gold Control Act, 1971 read with Section 8(1) and was pronouncing on the validity of the Division Bench decision. We have already extracted the relevant observations of the Supreme Court in the earlier part of the order. The main refrain of the learned Departmental Representative was that the order of the Supreme Court relates back. In our opinion, the CIT(A) has very elaborately dealt with this aspect of the matter. This order cannot be interpreted to mean that the appellants who at the relevant time were minors were found to be the owners of the gold on the relevant valuation dates. There is an extensive discussion of the doctrine of relating back in para 22 of the CIT(A)'s order and we are in full agreement with the conclusion reached therein by him. After hearing the parties and on the review of the facts emanating from the writ petition filed by the appellants (assessees) and the orders made by the Court therein, we are of the firm view that the gold in dispute never came in possession of the appellants (assessees), did not belong to them on the valuation date and, therefore, the value thereof could never be brought to wealth-tax under Section 3 read with Section 7(1) of the Wealth-tax Act.
10. We will now briefly turn to some of the legal issues which were raised in the course of the hearing. The first such issue is the principle of relating back. It was the assessee's counsel's case that the proceedings before the Single Judge, Division Bench and the Supreme Court were writ proceedings and an order in writ petition was in the nature of a judicial review and could be distinguished from an order in appeal. Therefore, in such order, i.e., order of judicial review, the question of the Court's order relating back did not arise. Our attention was drawn in this regard to the observations of the learned author H.W.R. Wade in his Administrative Law (Sixth Edition). While contrasting review and appeal, the learned author has observed that when hearing an appeal the court is concerned with the merits of the decision under appeal. When subjecting some administrative act or order to judicial review, the court is concerned with its legality. On an appeal, the question is "right or wrong?". On review, the question is "Lawful or unlawful?". Rights of appeal are always statutory. Judicial review, on the other hand, is the exercise of the court's inherent power to determine whether action is lawful or not and to award suitable relief. For this no statutory authority is necessary. The court is simply performing its ordinary functions in order to uphold the rule of law. The basis of judicial review, therefore, is common law. Instead of substituting its own decision for that or for some other body, as happens when an appeal is allowed, the court on review is concerned only with the question whether the act or order under attack should be allowed to stand or not. In the present case, the Supreme Court was only concerned with deciding whether the action of the Gold Control authorities was lawful. On interpretation of the provisions of Section 71(1) of the Gold (Control) Act, and in particular the proviso thereof, read with the provisions of Section 8(1), the Supreme Court observed that although the primary gold is not confiscated, it will not be allowed to be possessed by the owner, but has to be disposed of by him or converted into ornaments in the manner as mentioned above or as directed by the Administrator. The Supreme Court reversed the order of the Division Bench and modified the order of the Single Judge, but it did not decide or was not required to decide whether the decision of the Gold Control authorities was correct or not. Therefore, in the present set of circumstances, the question of the order of the Supreme Court relating back to the years under appeal does not arise at all. The orders of the various courts, being orders on writ petition, were in the nature of judicial review and, as observed above, were distinguishable from orders in appeal. Therefore, in our opinion, the principle of relating back does not apply to such order. No finding has been given by any of the courts that the appellants (assessees) concerned should be deemed to have been in possession of the confiscated gold even during the period of confiscation. On the other hand, as we have pointed out earlier, the Single Judge Bench has clearly held that the gold was taken away from its owners even before it could reach them as per the terms of the Will. On the relevant valuation dates, the gold was never in possession of the appellants (assessees) and could not be said to be belonging to them on the valuation dates. For this reason alone the conclusion reached by the CIT(A) regarding the taxability of the value of gold is confirmed.
10.1 The second such issue is the effect of confiscation. The assessee's counsel drew a distinction between 'seizure' and 'confiscation' and argued that we were concerned with the period of time when the confiscation of gold still was operative. The effect of seizure has been discussed by the Gujarat High Court in Jayantilal Amritlal's case (supra). In that case, the Income-tax authorities searched the premises of the assessee on 21-11-1964 and had recovered gold worth Rs. 2,83,320 which was subsequently seized by the Central Excise authorities. The assessee unsuccessfully challenged the seizure of gold. The gold was returned to the assessee on 30-9-1975. In wealth-tax returns for the assessment years 1965-66 to 1972-73, which were filed after the seizure of the gold, the assessee mentioned the market value of the gold but it did not include the value in his net wealth on the ground that as the whole gold articles were seized and the proceedings were pending, their value on the relevant valuation dates was nil. On these facts, the Gujarat High Court held that the gold articles were merely seized by the Excise authorities. They were not confiscated on the relevant valuation dates although, in view of the contravention of the relevant rules of the Gold (Control) Rules, they were liable to be confiscated. The seizure and possibility of confiscation, however, did not in any way impair the ownership of the assessee in the articles. Their Lordships of the Gujarat High Court page 748 of the report observed as follows : If the gold articles were confiscated, the assessee would have lost his ownership over them, but till that event occurred the assessee continued to be the owner thereof.
This observation appears to support the argument of the counsel and the finding of the CWT(A) in the present case. The Madhya Pradesh High Court in a more recent case in Meghji Girdharilals case (supra) held that any person in possession or control of any gold, not being ornaments, would be presumed, until the contrary was proved, to be the owner thereof. If there was a contravention of the rules, the gold could be seized and confiscated. Until the gold seized from a person is confiscated according to law, it would continue to be the asset of the person from whom it was recovered and who is unable to prove that he was not the owner of the gold so seized. In the present case, the gold was not seized but was confiscated. Such confiscation was done according to law and no court has in terms held that the confiscation order of the Gold (Control) authorities was not in accordance with law.
In this view of the matter, we would uphold the order of the CIT(A) that during the period of confiscation, which was in operation on the relevant valuation dates, the impugned gold did not constitute an asset belonging to the appellants (assessees) on the relevant valuation dates and, therefore, could not be brought within the charge of the Wealth-tax Act.
10.2 The next issue which emanates from the argument about relating back is whether an asset which by subsequent event is deemed to be belonging to the assessee can be brought to tax for an earlier year under Section 3 read with Section 7(1) of the Wealth-tax Act by operation of the concept of deeming. There are certain sections under the Wealth-tax Act which specifically provide for inclusion of certain assets although such assets may not stand in the name of the assessee.
Section 4 of the Wealth-tax Act provides that in computing the net wealth of an individual, there shall be included as belonging to that individual the value of the asset which on the relevant valuation dates are held by the spouse of such individual to whom such assets are transferred directly or indirectly or by a minor child of such individual to whom such assets have been transferred or by a person or AOP to whom such assets have been transferred by the individual directly or indirectly otherwise than for adequate consideration for the immediate and deferred benefit of the individual or by a person or an AOP to whom such assets have been transferred by the individual otherwise than under irrevocable transfer and so on and so forth. Now, such deeming provisions are specifically provided for under the Wealth-tax Act only under Section 4 which is also in a way in charging section. However, the inclusion of assets in terms of Section 4 by operation of the principle of deeming has to be construed strictly since it is restrictive in nature. The principle of deeming an asset the belonging to an individual on an interior valuation date by operation of a decree or order of a court of law given at a subsequent date has no place in any of the provisions of Section 4 and certainly not in the main charging Section 3 of the Wealth-tax Act. To this extent, we agree that we cannot bring to tax in the hands of the assessees assets which they did not possess on the valuation dates, which did not belong to them on the valuation date, which they could not transfer or gift away on the relevant valuation dates merely because the Supreme Court have at a later date reversed the order of the Division Bench which was in favour of the Gold Control authorities.
The effect of the Supreme Court's order would be that if the gold was found to be belonging to the assessee, it would have to be simultaneously disposed of by them if not confiscated in the manner as mentioned or directed by the Administrator by his order dated 30-7-1976. Therefore, in any case, the value of the primary gold cannot be brought to tax on the valuation date as even, according to the Supreme Court, the assessees could not have been allowed to continue to hold the gold in the form in which it was at the time of its confiscation. Since no effort has been made to alternatively bring to tax the expected sale proceeds of such gold or the expected value of gold ornaments into which the assessees were expected to convert such gold, we would decline to enter into the realm of hypothetical situations that could have arisen even if we were to assume that the order of the Supreme Court related back to the valuation dates. For all these reasons, we would confirm the order of the CIT(A) insofar as it relates to his finding that the value of the gold bars confiscated could not be brought to tax on the relevant valuation dates.
10.3 The next issue is whether right to sue or litigate is a valuable right which could be brought within the ambit of the charging section of the Wealth-tax Act. It was argued that mere right to sue was an inchoate right which could not be brought within the definition of the term 'net wealth' under Section 2(rn) of the Wealth-tax Act. The right to sue carried with it the possibility of failure in the litigation proposed, in which case such right would convert itself into a liability which the assessees would incur by way of litigation expenses. We are of the opinion that the right to litigate or attempt to get back the gold is not an asset, the value of which can be brought to tax under the Wealth-tax Act. This is not an asset which is capable of exact or reasonably accurate valuation. In fact, it is not an asset in the strict sense of the term in view of the hazards of protracted litigation with consequential financial strain that such litigation would entail. We are, therefore, of the opinion that the CIT(A) was wholly unjustified in holding first that this was a right exigible to tax within the meaning of Section 2(m) read with Section 3 of the Wealth-tax Act and in further valuing such right, in our opinion, on a somewhat ad hoc basis at 15% of the market value of the gold under the relevant valuation dates. We would, therefore, completely reverse this portion of the order of the CIT(A).
11. In the result, the appeals by the revenue would be dismissed and those by the assessees allowed.