The Bombay High Court ruled that the wealth tax assessment liability will arise once seized gold, jewellery, cash is released.
The assessee, Nirajkumar N. Rungta has sought order and direction to the respondents to forthwith release 85617 grams of gold, jewellery, cash, and other valuable articles from the premises as per the panchnama and hand it over to the petitioners / Applicants. In view of the Wealth Tax References and Income Tax Appeals being answered by us in the above manner, the writ petition is now required to be adjudicated. The writ petition specifically challenges notice of recovery issued under sub-section (2) to section 223 of the Income Tax Act, 1961 seeking recovery in accordance with the provisions of Section 222 to Section 232 of the Income Tax Act and the second schedule to the said Act and the Rules made thereunder along with interest, cost, charges, and expenses.
The facts which have been narrated in the writ petition are identical to those in the references in as much as the same relate to the seizure of 85617 grams of gold from the original assessee and consequential notice of demand for Rs.5,01,86,611.00 along with interest. Petitioners have challenged the notice of demand on various grounds i.e the notice of demand does not contain any details of the alleged dues of the estate of late Shri. C.S. Goenka.
The petitioners could not have been issued notice of recovery as the petitioner was never served with any notice of demand earlier; the Income Tax Officer failed to give effect to all the orders of the appellate authorities and give credit to the amounts recovered by the department from the debtors of late Shri. C.S. Goenka (original assessee); if such credit was given then there would not be any tax dues payable by the estate of late Shri. C.S. Goenka, rather the estate shall be entitled to refund; that the notice of recovery issued is without application of mind and without considering various orders passed by the Adjudicating Authorities and this Court from time to time; the petitioners have challenged the notice of demand pertaining to wealth tax demand in the sum of Rs.2,07,67,923.00 as being incorrect because the petitioners were never served with any notice of demand under Section 31(2) of the Wealth Tax Act and finally unless and until the amount of wealth tax dues payable is quantified, no such recovery can be made.
The division bench of Justice Milind N. Jadhav and Justice Ujjal Bhuyan noted that Petitioners i.e Nirajkumar N. Rungta and Bharti Saraf are the son and daughter of Smt. Sushila N. Rungta. Petitioners have to place on record the documentary evidence of they being the true and legal heirs of Sushila N. Rungta in order to seek release of the aforesaid articles to themselves.
“Not to mention that once the above articles are released into the hands of the petitioners, petitioners shall be liable to wealth tax assessment in respect of the value of the said articles in accordance with the law. The present petitioners shall place the appropriate documentation of they being the only legal heirs of Sushila N. Rungta to the satisfaction of the respondents for seeking the release of the articles. The seized gold shall be released by the respondents within a period of 6 (six) weeks of furnishing of the required documents by the petitioners,” the court added.