RAJESH BALIA, J. - (1.) IN this appeal the following questions were framed as substantial questions of law arising for consideration in this appeal: (i) Whether in the facts and circumstances of the case, when the gold in question was recovered by the authority under the Gold Control Act during search conducted on 14th Oct., 1987 and subjected to proceeding under the Gold Control Act much before search under Section 132 of IT Act took place on 17th Nov., 1988 on the premises that the gold in question was not recovered from the possession of inmate of the premises under search under Section 132 of the IT Act, the presumption under Section 69 of the IT Act, 1961 could at all be raised about the ownership to their property in question and if raised stands rebutted by the decision of CEGAT? (ii) Whether in the facts and circumstances of this case, when gold in question was found much prior to search conducted on 17th Nov., 1988 and had been subjected to proceeding under the Gold Control Act under which the gold has been found and finding has been reached about the ownership of said gold by the CEGAT in those proceedings is binding on the proceedings under Section 132 in respect of the properties which have been found and subjected to proceeding under the Gold Control Act independently?
(2.) THE facts emerging from the material placed before us and relevant for the present purposes are that in a search conducted at the premises of the Mangi Lal Agarwal, the assessee, since deceased and represented by his heirs and legal representatives, by the customs authorities, 11 pieces of primary gold weighing 765.150 and 53 gms. of gold ornaments were recovered from his house and the same were seized by the customs authorities. The proceedings for confiscating the primary gold were pursued. However, the adjudicating authority did not find that the assessee was in possession of gold ornaments in breach of provisions of Gold Control Act or the Customs Act and the same were released. Adjudicating authority under the Gold Control Act did not accept the assessee's explanation that the primary gold weighing 765.150 gms. did not belong to him except 6.800 gms. which were small articles used for Pooja. The assessee has claimed that he has received primary gold from 3 different goldsmiths to whom the ornaments were brought by Shri Bhopal Singh, Om Prakash Gupta and Shri Gauri Shanker Singhal respectively for the purpose of making new ornaments and since making of new ornaments required dye cutting of the primary gold which came into existence by melting gold ornaments for the purpose of making new ornaments, were delivered to the assessee for getting the primary gold dye cut through some registered goldsmiths having the facility of dye cut. Adjudicating authority having not accepted the aforesaid explanation furnished by the assessee ordered confiscation of the primary gold and also levied penalty with an option to redeem the same on payment of the redemption fee. On appeal before the CEGAT as was then existing of the JM and TM differed, the opinion of TM was for affirmation of the order of adjudicating authority and JM reached different conclusion on considering the material before him and recorded his conclusions as under: It is on record that the owners of the primary gold filed their affidavit before the adjudicating authority. Copies of the statutory record of the certified goldsmiths concerned were also filed, but the adjudicating authority discarded them mainly taking into consideration the human conduct, but forgetting the aforesaid vital and material evidence on the record. Under these circumstances, I hold that the primary gold except the three pieces weighing totally 6900 gms. belonged to the said owner. In fact, this fact is also borne out by the record of the case. In his impugned order, while ordering for the confiscation of the primary gold with an option to redeem the same on payment of a redemption fine, the adjudicating authority also ordered that on redemption, the primary gold shall be converted into ornaments by licensed gold dealers. Accordingly, the appellants redeemed the same and returned the same to the respective owners after getting it converted into ornaments by a licensed gold dealer and informed the adjudicating authority accordingly. The relevant communication is on our record. There being difference of opinion, the matter was referred to the Third Member, who after considering the state of affairs of the evidence agreed with the finding reached by the learned JM and appeal was allowed. The gold was released from confiscation under Gold Control Act. From the aforesaid, it is apparent that so far as the fact that assessee was found in possession of 765.150 gms. of primary gold and 53 gms. gold ornaments on 14th Oct., 1987 relevant to asst. yr. 1988 -89 and in respect of gold ornaments, no breach of provisions of Gold Control Act was found on the part of the assessee by the customs authorities and in respect of primary gold except 6.900 gms., it was categorically found at the end of the proceedings that it was owned by other persons and not by the assessee. This fact assumes significance in the context of controversy raised in this appeal arising under IT Act and its effect on the conclusion reached by the AO and other authorities.
(3.) SECTION 71 of the Gold Control Act under which any gold found in contravention of the provisions of the Gold Control Act is to be confiscated reads as under: Section 71. Confiscation of gold. - (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 thing 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. (2) Where any package, covering or receptacle referred to in Sub -section (1) contains any other goods, such contents shall also be liable to confiscation. (3) Where any gold is liable to confiscation under Sub -section (1), it shall be so liable notwithstanding any change in its form, and where such gold is mixed with other goods in such manner that it cannot be separated from those other goods, the whole of such goods, including the gold, shall be liable to be confiscation. (4) On and from the commencement of Gold (Control) Amendment Act, 1971 (21 of 1971), the proviso to Sub -section (1) shall also apply to any gold or other thing which is liable to confiscation under Sub -section (2) or Sub -section (3). From the aforesaid provisions, it is apparent that where a person is found in possession of any gold in breach of any provision of the Act or rule or order made thereunder, such gold together with any package, covering or receptacle in which such gold is found, shall be liable to be confiscated. The only defence against the confiscation of such gold in the hands of the person in whose possession the gold is found is that it is established to satisfaction of the officer adjudging the confiscation that such gold or other thing belongs to a person other than the person from whom it has been seized. Therefore, the avoidance of confiscation cannot be merely on the basis of technical ground but has to be on substantive finding on the basis of material on record that it belongs to person or persons other than the persons in whose possession it was found and seized. Avoidance of confiscation does not depend on mere satisfaction that it is not proved or that it cannot be said that the seized gold belongs to the person in whose possession it was found. The finding is required to be made in a positive manner on substantive aspect of the ownership vesting in third person.;