# GOPALDAS UDHAVDAS AHUJA AND ANR v. UNION OF INDIA AND ORS

- **Citation:** [2004] Supp. 2 S.C.R. 942
- **Court:** Supreme Court of India
- **Decided:** 2004-07-06
- **Case number:** Civil Appeal No. 2335 of 1996
- **Bench:** Ruma Pal, S.H. Kapadia
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/gopaldas-udhavdas-ahuja-and-anr-v-union-of-india-and-ors-20132
- **Pages:** 40

## Headnote

Gold (Control) Act, 1968 :
Sections 7 l (1), 71 (I) proviso and section 7 4--Possession of gold in
C contravention of the Act-Confiscation order-Sustainability of-Held :
D
Gold \l'US luwfully seized but conscious possession of gold by possessor not
estublished-Hence, possessor entitled to benefit of proviso to section
71 ( l )---Confiscation order and levy o,f penalty thus not sustainable and set
aside.
Sections 64(b), 66 and 105--Search and seizure of primary gold by
Income Tax Authorities--Taking over of seized gold by Gold Control
Ofjicer--Legality and validity of-Held: Sections 64(b) and 105 empower
the Gold Control Officer to call upon Income Tax Officer to produce sei::ed
E gold before him for taking action---Circulur of CBDT that Income Tax
Officer to give necessary information to Gold Control Officer on seizureAlso power of seizure under 1968 Act and 1961 Act different-Further,
when gold was seized by Gold Comrol Officer he had reason to believe
that the provisions of Act had been contravened-Hence, take over of
F primary gold by Gold Control Officer law/id seizure-Income Tax Act,
1961-Section 132(2).
Sections 71(1) and 85 read with Sections 8(1) and 98B-Possession
of gold in contravention of the Act--Confiscation of primary gold under
Section 7 l ( l) and prosecution for illegal possession under Section 85(1)-
G Possession--Nature of---Held : Possession ipso facto is prohibitedMens rea, in the sense of knowledge of possession of unauthorised articles
is essential ingredient of offence-Hence, possession is conscious
possession-In absence, possessor to prove beyond reasonable doubt that
he had no knowledge of possession cf unauthorised articles under proviso
H to section 71 in case of confiscation and under section 98B in case of
942
•
G.U. AHUJA v. U.O.l.
943
prosecution.
A
Sections 71(1), 85(1J(ii) read with 8(1)-Confiscation of primary
gold under Section 71 (}) and prosecution for illegal possession under
Sectio1185( 1 )-Recove1y of incriminating articles being the same-Acquittal
order in prosecution proceedings-Effect of, on confiscation order-Held: B
Confiscation proceedings are separate and independent of prosecution
proceedings-Mere acquittal does not result in nullifj;ing confiscatio11
order-However, ll'hen possessor proved beyond reasonable doubt that he
had no knowledge of possession of gold under section 98B, confiscation
proceedings cannot stand against acquittal-Section 98B.
Sections 71 {I), 74 and 85-Voluntary Disclosure of Income and
Wealth Ordinance, 1975-Conjiscation of gold, levy of penalty and
prosecution-Immunity ji-om under the Ordinance-Claim of-Held :
c
Under the Ordinance declarant is entitled to claim immunity if before
marking the declaration the gold was not seized and no proceeding was D
pending before any authority under the Act-Proceedings initiated with
regard lo confiscation of gold were pending at the time of filing declaration
and also seizure made was in accordance with /aw-Hence, declorant not
entitled to immunity.
Words and Phrases :
'Reason to believe' and 'any person '-Meaning of in the context of
section 66!64(b) of the Gold (Control) Act, 1968.
Income Tax Authorities conducted search of the residential
premises of appellant No. 1-Karta of HUF, in his presence and
recovered primary gold and gold items weighing 37,398.300 gms worth
E
F
Rs. 18.70 lacs. Panchnama was prepared. In accordance with the
Circular issued by CBDT, Income Tax Authorities intimated the Gold
Control Officer about the recovery and on 30.8.1974 the Officer took G
over the custody of the seized gold in presence of appellant No. 1 ·from
the Income Tax Authorities and prepared a Panchnama. Gold Control
Officer issued notice to the appellants-appellant No. I and his step
mother as to why gold should not be confiscated and penalty not
'ii.
imposed under section 71(1) and 74 of the Gold (Control) Act, 1968. H
944
SUPREME COURT REPORTS (2004] SUPP. 2 S.C.R.
A It alleged contravention of section 8(1) read with section

## Text

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A
GOPALDAS UDHAVDAS AHUJA AND ANR.
v
UNION OF INDIA AND ORS.
JULY 6, 2004
B
(RUMA PAL AND S.H. KAPADIA. JJ.]
Gold (Control) Act, 1968 :
Sections 7 l (1), 71 (I) proviso and section 7 4--Possession of gold in
C contravention of the Act-Confiscation order-Sustainability of-Held :
D
Gold \l'US luwfully seized but conscious possession of gold by possessor not
estublished-Hence, possessor entitled to benefit of proviso to section
71 ( l )---Confiscation order and levy o,f penalty thus not sustainable and set
aside.
Sections 64(b), 66 and 105--Search and seizure of primary gold by
Income Tax Authorities--Taking over of seized gold by Gold Control
Ofjicer--Legality and validity of-Held: Sections 64(b) and 105 empower
the Gold Control Officer to call upon Income Tax Officer to produce sei::ed
E gold before him for taking action---Circulur of CBDT that Income Tax
Officer to give necessary information to Gold Control Officer on seizureAlso power of seizure under 1968 Act and 1961 Act different-Further,
when gold was seized by Gold Comrol Officer he had reason to believe
that the provisions of Act had been contravened-Hence, take over of
F primary gold by Gold Control Officer law/id seizure-Income Tax Act,
1961-Section 132(2).
Sections 71(1) and 85 read with Sections 8(1) and 98B-Possession
of gold in contravention of the Act--Confiscation of primary gold under
Section 7 l ( l) and prosecution for illegal possession under Section 85(1)-
G Possession--Nature of---Held : Possession ipso facto is prohibitedMens rea, in the sense of knowledge of possession of unauthorised articles
is essential ingredient of offence-Hence, possession is conscious
possession-In absence, possessor to prove beyond reasonable doubt that
he had no knowledge of possession cf unauthorised articles under proviso
H to section 71 in case of confiscation and under section 98B in case of
942
•
G.U. AHUJA v. U.O.l.
943
prosecution.
A
Sections 71(1), 85(1J(ii) read with 8(1)-Confiscation of primary
gold under Section 71 (}) and prosecution for illegal possession under
Sectio1185( 1 )-Recove1y of incriminating articles being the same-Acquittal
order in prosecution proceedings-Effect of, on confiscation order-Held: B
Confiscation proceedings are separate and independent of prosecution
proceedings-Mere acquittal does not result in nullifj;ing confiscatio11
order-However, ll'hen possessor proved beyond reasonable doubt that he
had no knowledge of possession of gold under section 98B, confiscation
proceedings cannot stand against acquittal-Section 98B.
Sections 71 {I), 74 and 85-Voluntary Disclosure of Income and
Wealth Ordinance, 1975-Conjiscation of gold, levy of penalty and
prosecution-Immunity ji-om under the Ordinance-Claim of-Held :
c
Under the Ordinance declarant is entitled to claim immunity if before
marking the declaration the gold was not seized and no proceeding was D
pending before any authority under the Act-Proceedings initiated with
regard lo confiscation of gold were pending at the time of filing declaration
and also seizure made was in accordance with /aw-Hence, declorant not
entitled to immunity.
Words and Phrases :
'Reason to believe' and 'any person '-Meaning of in the context of
section 66!64(b) of the Gold (Control) Act, 1968.
Income Tax Authorities conducted search of the residential
premises of appellant No. 1-Karta of HUF, in his presence and
recovered primary gold and gold items weighing 37,398.300 gms worth
E
F
Rs. 18.70 lacs. Panchnama was prepared. In accordance with the
Circular issued by CBDT, Income Tax Authorities intimated the Gold
Control Officer about the recovery and on 30.8.1974 the Officer took G
over the custody of the seized gold in presence of appellant No. 1 ·from
the Income Tax Authorities and prepared a Panchnama. Gold Control
Officer issued notice to the appellants-appellant No. I and his step
mother as to why gold should not be confiscated and penalty not
'ii.
imposed under section 71(1) and 74 of the Gold (Control) Act, 1968. H
944
SUPREME COURT REPORTS (2004] SUPP. 2 S.C.R.
A It alleged contravention of section 8(1) read with section 8(6) and
section 16(1) read with section 16(5) of the Act as the appellants
possessed primary gold which they failed to dispose of within the given
time in terms of Rule I 26H(l )(8) of Defence of India Rules and failed
to file declaration in respect of gold articles. appellants were also
B charged for the offence of possession of authorized gold under Section
85(l)(ii) read with section 8(1) of 1968 Act. Appellants contended that
the entire gold was recovered from a secret cavity inside the dome of
one cupboard in the eastern bedroom and they were unaware of the
same and also did not possess the keys of the secret vault.
c
Authorised Officer ordered <:onfiscation of the gold bars, coins
and sovereigns and imposed penalty holding that the entire gold was
seized from one cupboard in the eastern bedroom. On remand of the
matter by the Appellate Authority, Authorised Officer again held that
the appellants were in conscious possession of gold and ordered for
D confiscation but this time held that the gold was recovered from
cupboard in eastern bedroom and also from the cupboard in western
bedroom and telephone room. Thereafter, in appeal and revision
application order of the Authorised Officer was again upheld. In the
meantime, appellant No. 1 on 27.12.1975 had filed declaration under
E Voluntary Disclosure of lncom,e and Wealth Ordinance, 1975,
promulgated on 18.10.1975. The declaration was also rejected since it
was filed after commencement of proceedings under I 968 Act.
Appellants then filed writ petition for a declaration that the said gold
was unlawfully seized and as such were entitled to immunity from
F proceedings for prosecution, confiscation and penalty. In the meantime,
before the trial court, the appellaints proved beyond doubt that they
were not in conscious possession of gold and the court acquitted the
appellants for the offences under section 85(1)(ii) read with section 8(1)
of 1968 Act. High Court upheld the acquittal order. This Court also
upheld the order later.
G
Single Judge of High Court al1lowed the writ petition and quashed
the orders of confiscation and penalty holding that the appellants were
innocent possessors of the said gold. Aggrieved respondent filed LPA.
Division Bench allowed LPA upholding the orders of the Authorised
H Officer on the ground that appellants were in conscious possession of
G.U. AHUJA v. U.0.1.
945
I
gold as it was found in several c:Upboards. It also held that the findings A
of the criminal c?urt were not·relevant for adjudicating confiscation.
Hence the present appeal.
Appellants contended that merely taking over the primary gold
from Income Tax officers by Gold Control Officer does not constitute B
seizure under section 66 of the 1968 Act and is in contravention of
section 132(5) of the lncotne Tax Act; that primary gold held in
contranntion of section 8(1) was an offence under section 71(1) and
also under section 85(1) and the word 'possession' in sections 8(1),
71(1) and 85(1) refers to conscious possession; that the appellants were C
acquitted for offence under section 85(1) read with Section 8(1) and,
as such were entitled to the benefit of acquittal in the matter of
confiscation also; that the Single Judge rightly concluded that the
appellants were not in conscious possession of the said gold; and that
there were no proceedings pending when the declaration was tiled and
also there was no seizure in law and therefore, appellants were entitled D
to claim immunity under Voluntary Disclosure Scheme, 1975.
Respondents contended that there was no illegality in the seizure
made since the Income Tax Authorities recovered the said gold from
the residence of the appellants during the search and informed the E
Gold Control Officer about the seizure in compliance with the circular
issued by CBDT and the said officer visited the officer of Income Tax
Department on 30.8.1974 and in the presence of appellant No. l, took
over the gold; that the seizure of gold was made under a reasonable
belief that the provisions of the Act had been contravened; that the F
recovery was made from more than one cupboard and appellant No.
2 produced the keys with which the secret locker in the cavity on top
of the cupboards in the western bedroom was opened; that section 66
of the Act was a self-contained Code and therefore, it was not necessary
to refer to the provisions of the Income Tax Act, 1961; that possession
ipso facto, was an offence under the Act and appellants were found to G
be in possession of huge gold bars of primary gold and gold articles;
that the acquittal in prosecution proceedings cannot affect the
concurrent findings of fact reached by the adjudication authorities
both being separate and independent; that the presumption of culpable
mental state under section 988 of the Act had no relevance to the H
946
SUPREME COURT REPORTS [2004] SUPP. 2 S.C.R.
A proceedings for confiscation and penalty; and that the appellants were
not entitled to immunity as prior to their declaration under VDS,
proceedings for confiscation had been initiated.
B
Allowing the appeal, the Court
HELD : 1. The seizure of the gold on 30.8.1974 was lawful and
in accordance with Section 66 of the Gold (Control) Act, 1968.
However, in the absence cf any evidence of recovery of primary gold
from the western bedroom and the telephone room and in the absence
C of any material to show that the appellants had knowledge of the said
gold hidden in the ornamental top of the cupboard in the eastern
bedroom, the contravention of the provisions of the 1968 Act is not
established against the appellants and consequently the orders of
confiscation and penalty are not sustainable and are set aside. With
D regard to the gold which is disposed of, appellants are directed to be
paid the sale price with 6% interest p.a. from the date of disposal till
payment and the gold which is not disposed of, is to be returned to the
appellants. (980-E-F; 981-A-B(
2. I. Under the Gold (Control) Act, possession of primary gold was
E made an offence under section 85(1 )(ii) read with section 8(1 ). The said
Act provided for a special machinery for confiscation of unauthorised
gold under section 71(1) and for trial of the person concerned under
section 85(1 ). The word "possession" in all the above provisions is to
be read as conscious possession. Under section 71(1), any gold in
F respect of which there existed contravention was liable to be confiscated.
Where it was established to the satisfac:tion of the Authorised Officer,
that the owner had no knowledge of the act or omission on the part
of the holder, which made it liable to confiscation then it could not be
confiscated. Therefore, reading sections 8(1), 71(1) including the
G proviso, 85(1) with section 98B, it is clear that possession ipso facto was
prohibited. It was an overt act which was made an offence not only
for prosecution under section 85(1) but also in the matter of confiscation
under section 71 (I). Since possession was an offence, knowledge of
possession of the unauthorised article w~1s an essential ingredient of the
H said offence. Where a statute forbids an act, doing of that act itself
'
G.U. AHUJA V. U.0.1.
947
supplies mens rea. In such a case, the prosecution need only to prove A
commission of the prohibited act and it is for the person concerned to
bring himself within the statutory defence, as provided for in the
proviso to section 71(1). 1967-C-GI
lnder Sain v. State of Punjab, 119731 2 sec 372, relied on.
B
2.2. The evidence on record shows that the officers who took part
in the raid were officers from Income Tax Department. They saw the
collection of gold and not the place from which the gold was recovered.
There was no exact record to show from where the items of gold were C
found. Each witness gave different versions. Their versions are selfcontradictory and conflicting with each other. All these contradictions
have taken place: b·ecause there was no contemporaneous record to
prove recovery and that the Panchnama prepared was faulty as it did
not indicate the place from which the gold was recovered. Therefore,
recovery of three gold bars from the telephone room and western D
bedroom was not proved. Further, from the evidence it also stood
established that the ornamental top of the cupboard in the eastern
bedroom could not be opened. The screws were rusted and old and had
to be cut. Appellants did not have the keys to open the said vault as
such the improvised keys had to be prepared by the locksmith. The E
entire primary gold, except the idols, was found at this place. In the
proceedings against appellants with regard to seizure of gold bars
having foreign markings one of the witnesses deposed that the entire
primary gold was recovered from one cupboard and also the first order
of the Authorized Officer is to the same effect. Therefore, the appellants F
were not in conscious possession of primary gold and they were entitled
to the benefit of the proviso to section 71(1). 1970-D-E; 971-B-G)
2.3. According to Section 988 of the Gold (Control) Act, 1968
wherever mens rea, in the sense of knowledge of the wrongfulness, was G
a necessary ingredient of an offence under the Act, the Court shall
presume its existence. However, such presumption is rebuttable. The
explanation to sub-section (I) of section 98B provides for an inclusive
definition of culpable mental state which included knowledge of the
wrongfulness of an act or omission prohibited by the statute. Under
section 98B(2), the accused is required to prove beyond reasonable H
948
SUPREME COURT REPORTS [2004] SUPP. 2 S.C.R.
A doubt that he did not possess the requisite mental state. In the instant
case, appellants rebutted the statutory presumption of the culpable
mental state placed on them by section 988 beyond reasonable doubt
that they had no knowledge of the gold hidden in the ornamental top
of the cupboard in the eastern bedroom. Hence, it would be unjust,
B unfair and oppressive to allow the decision of the Authorised Officer
in confiscation proceedings to stand ai:ainst acquittal by the competent
criminal court, which acquittal was confirmed by the High Court and
by this Court. 1966-C-E; 968-H; 969-A-BI
c
lnder Sain v. State of Punjab, 119731 2 SCC 372, referred to.
3. A combined reading of sections 8(1), 71(1) and 85 of the 1968
Act made it clear that the legislature intended to provide for two
separate proceedings before two different forums and there is no
conflict of jurisdiction between the Authorised Officer acting under
D section 71(1) to direct confiscation on being satisfied that an offence
has been committed and the Magistrate making an order on conviction
of an accused under section 85(1) and that mere acquittal in the trial
before the Magistrate, in every case, cannot result in setting aside ipso
facto, of the orders of the confiscation of seized articles passed by the
E competent authority under the Act. The confiscation proceedings were
separate and distinct from prosecuti1on proceedings under the Act.
However, that difference did not entitle the Authorised Officer to
proceed arbitrarily in making an order for confiscation. 1969-C-FI
F
Capt. M. Paul Anthony v. Bharat Gold Mines Ltd., 119991 3 SCC
679 and Div!. Forest Officer v. G. V Sudhakar Rao, 11985] 4 SCC 573,
relied on.
Pasupuleti Venkateswarlu v. The Motor & General Traders, 119751
1 SCC 70; Rajesh D. Darbar v. Narasingrao Krishna.Ji Kulkarni & Ors.,
G 120031 7 sec 219; Ram Chandra Singh v. Savit1·i Devi & Ors .. (20031
8 SCC 319 and Tukaram G. Gaokar v. R.N Shukla, AIR (1968) SC 1050,
referred to.
4.1. The Gold (Control) Act, 1968 is a self contained Act. Section
H 66 confers power on the Gold Control Officer to seize any gold if he
G.U. AHUJA v. U.0.1.
949
had reason to believe that in respect ofSuch gold, any provision of the A
Act had been contravened. Section 66 does not place any limitation as
to the person from whose possession the goods liable to confiscation
could be seized. Under section 64(b), the Gold Control Officer is
empowered to call upon "any person" to produce any document or
thing relevant to his enquiry into contravention of the provisions of the B
Act. The words "any person" includes all revenue officers of the
Government. This is borne out by section 105 under which all officers
of the Government engaged in collection or prevention of evasion of
revenue were required to assist the Gold Control Officer in execution
of the provisions of the 1968 Act. [973-G-H[
Gian Chand v. State of Punjab, AIR (1962) SC 496, distinguished.
Vasantlal Ranchhoddas Patel v. Union of India, 68 BLR 223,
referred to.
c
D
4.2. On 30.8.1965, CBDT had issued a Circular to all
Commissioners of Income Tax and Wealth Tax stating that where gold
was seized in a search/raid by Income Tax Authorities, necessary
information should be given to the Gold Control Officer. This Circular
was binding on all subordinate Income Tax Authorities, in terms of E
section 119 of the Income Tax Act, 1961. This circular has to be read
in the light of sections 64(b) and 105 of the Gold (Control) Act under
which it is clear that the officer was empowered to call upon the Income
Tax Officer to produce the seized gold before him for takin!! action
under the Gold (Control) Act. [974-A-C, E, F[
F
4.3. The object behind section 132 of the Income Tax Act is to
ascertain the source '.of income with which the assessee acquires an
undisclosed asset. The purpose of seizure under section 132(5) of the
Income Tax Act is not to punish the assessee but to assess his tax
liability. Section 132 of the Income Tax Act confers powers on Income G
Tax Authorities to realize the income tax dues of the assessee from his
·assets. After realizing the dues, the balance value is returned to the
assessee. Consequently, search under section 132(1) is made a
precondition to seizure under section 132(5) as it stood at the material
time. On the other hand, when gold was seized from the possession of H
950
SUPREME COURT REPORTS [2004] SUPP. 2 S.C.R.
A the person concerned, possession ipso facto ,was made an offence under
the said 1968 Act, which not only pro\'ided for prosecution for
possessing gold on the appointed date but also provided for confiscation
under section 74(1) of the 1968 Act. The power of seizure under section
132(5) of the Income Tax Act was limited to the assets found as a result
B of the search, whereas the power under section 66 of the 1968 Act was
omnibus. It was not restricted by any preconditions. In the
circumstances, the scheme of section 132(5) of the Income Tax !ct, as
it stood at the relevant time, was different from the scheme of the 1968
Act. 1976-H; 977-A-Cj
c
Commissioner of Income Tax , .. Tarsem Kumar, 119861 3 SCC 489,
distinguished.
4.4. In the instant case, the officers of Income-tax department
seized gold on 28.8.1974 and the Gold Control Officer took over the
D seized gold on 30.8.1974. When he went to take over the said gold, he
had knowledge of the huge quantity of gold seized by the Income Tax
Department was illegally possessed by the appellants, which by itself
was a contravention of the 1968 Act. Some of the gold bars had
markings and even stamp of purity 'embossed on them. These writings
E also provided reason to believe that the provisions of the Act had been
contravened. The circumstances were so eloquent that they themselves
presented "reason to believe" by the seizing officer that the provisions
of 1968 Act had been contravened. Therefore, there was no illegality
in seizure of primary gold by the Gold Control Officer from the
F Income Tax Department. 1976-A-C; 977-FJ
Collector of Customs. Madras •v. Nathella Sampathu Chetf)1, AIR
(1962) SC 316 and Narandas M Kapadia v. Union of India & Ors., (1977)
Crl. L. J. 1303, referred to.
G
5. Under the Voluntary Disclosure of Income and Wealth
Ordinance, 1975, a declarant was entitled to claim immunity from
penalty, confiscation and prosecution under Gold (Control) Act, if
before making the declaration the gold was not seized and no proceeding
was pending in respect of that gold before any authority under that
H Act. In the instant case, gold was seized on 30.8.1974 in accordance
.,
G.U. AHUJA v. u.o.r. [KAPADIA, J.]
951
with the provisions of the 1968 Act, proceedings were initiated vide A
show-cause notice dated 20.9.1974 whereas the Ordinance came to be
promulgated on 18.10.1975 and appellant No. 1 filed his declaration
on 27.12.1975 after the said seizure. Since proceedings were pending
at the time of filing of the declaration, the appellants were not entitled
to claim immunity. [979-D-H; 980-A-B]
B
u~
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2335 of
1996.
From the Judgment and Order dated 5.1.94 of the Bombay High Court
in A. No. 19 of 1992 in W.P. No. 2406 of 1982.
C
C.A. Sundaram, Shridhar Y. Chitale, S.V. Pikale, Girish Pikale and
Abhijat P. Medh for the Appellants.
N.K. Bajpai, S.R. Bhat, Ms. Binu Tamta, B.V. Bairam Das and V.K. D
Verma for the Respondents
The Judgment of the Court was delivered by
KAPADIA, J. : This appeal by special leave is directed against the
judgment and order of the Division Bench of the Bombay High Court dated E
5.1.1994 passed in Appeal No. 19of1992, by which the Division Bench
allowed the appeal preferred by the respondents, thereby setting aside the
judgment and order passed by the learned Single Judge dated 11.9.1990
in Writ Petition No. 2406 of 1982 and consequently confirming the order
of the Adjudicating Authorities confiscating the primary gold, weighing F
37,398.300 gms. and valued at Rs. 18.70 lacs, under section 71(1) of the
Gold (Control) Act, 1968 (hereinafter referred to for the sake of brevity
as "the 1968 Act") with imposition of penalties on each of the appellants
herein under section 74 of the said Act.
The undisputed facts are as follows :
The appellants are the son and widow respectively of one Udhavadas
Ahuja. Udhavdas had married twice -
first to the mother of appellant no.
I who died on 19.2.1950 and next to appellant no. 2 on 1.7.1950. Appellant
G
no. 1 was born on 16.2.1950. Udhav's grandll'other Bhojibai died on H
952
SUPREME COURT REPORTS [2004) SUPP. 2 S.C.R.
A 4.7.1951. On August 28, 1974, the Income Tax Commissioner issued an
authorization under section 132 of the Income Tax Act, 1961 authorizing
search and seizure at Gopi Kunj, situate at Shivaji Park, Bombay, being
the residential premises of appellant no. 1. Pursuant to the authorization,
R.D. Mahadeshwar, Asstt. Director of Inspection, Income-tax department
B conducted the search and recovered primary gold and other gold items,
more particularly described in the panchnama (at page 95 of Volume-II).
At the time of search, appellant no. 1 was present. The primary gold and
the gold items collectively weighed 37,398.300 gms. valued at Rs. 18.70
lacs as on August 30, 1974. Thereafter, the Income Tax Authorities
C intimated the Gold Control Officer appointed under st:ction 4 of the 1968
Act. On August 30, 1974, the said officer attended the Income Tax Office
and in the presence of appellant no. 1, who was the Karta of Kewal Ram
Ahuja, Hindu Undivided Family, took over the custody of the said gold
from the Income-tax department. The Gold Control Officer also prepared
the above panchnama. On 20.9.1974, the Gold Control Officer, Bombay
D served a s~ow-cause notice on the appellants calling upon them to explain
why the said primary gold should not be confiscated under section 71(1)
of the 1968 Act and also why penalty should not be imposed on each of
the appellants under section 74 of that Act. The show-cause notice inter
a/ia alleged contravention of section 8(1) read with section 8(6) and section
E 16(1) read with section 16(5) inasmuch as the appellants had in their
possession primary gold which they failed to dispose of within six months
from 1.3.1967 as provided for in rule 126H (l)(B) of the Defence of India
Rules. By the said show-cause notice, it was further alleged that the
appellants had failed to file the declaration in respect of gold articles, other
F than the gold bars which constituted contravention of section 16(1) read
with section 16(5) of the said Act. The appellants claimed during the
investigation that the seizure was illegal; that taking over of the gold from
Income tax Authorities did not amount to seizure in fact or in law. They
contended that there was no contravention of the provisions of the Act as
they were not in conscious possession of the said gold recovered from their
G residence. The appellants claimed that entire gold was recovered from a
secret cavity/vault inside the dome of one cupboard in the eastern bedroom
and that they were not aware of the s<ecret cavity or the contents thereof.
The appellants also claimed that they were not in possession of the keys
of the secret vault. In the meantime, on 18.10.1975, Voluntary Disclosure
H of Income and Wealth Ordinance 1975 was promulgated. It was replaced
(
•
<
G.U. AHUJA v. U.0.1. [KAPADIA, J.]
953
by Act No. Vlll in 1976. On 27.12.1975, appellant no. I as Karta filed a A
'
declaration under said Voluntary Disclosure Scheme. To complete the
chronology of the events, the Collector of Customs (Preventive), Bombay
(hereinafter referred to for the sake of brevity as "Authorized Officer")
ordered confiscation of the gold bars, gold coins and sovereigns under the
provisions of section 71 (I) read with section 8( I) of the 1968 Act. B
However, the appellants were given an option to redeem the gold coins and
sovereigns weighing 7 ,719.90 gms. on payment of fine of Rs. 1.5 lacs in
lieu of confiscation. By the said order, the Authorized Officer imposed
penalty of Rs. ! lac on each of the appellants. This order of the Authorized
Officer held that the entire gold was seized from one cupboard in the c
eastern bedroom. The order passed by the Authorized Officer on 26.6.1976
was, however, set aside by the Gold Control Administrator in appeal
(hereinafter referred to for the sake of brevity as "the Appellate Authority").
By order dated 21. l l. ! 977, the Appellate Authority remanded the case for
de novo adjudication by accepting the contention of the appellants herein
that the order passed by the Authorized Officer on 26.6.1976 was in breach D
of principles of natural justice. On remand, the Authorized Officer once
again came to the conclusion, after considering the evidence on record that
the gold seized was in conscious possession of the appellants. However,
this time, the Authorized Officer held that the gold seized was recovered
from cupboard in the eastern bedroom, from the cupboard in the western E
bedroom and from the cupboard in the telephone room. He, therefore,
concluded that the appellants were in conscious possession of the seized
gold. The Authorized Officer, therefore, held that there was contravention
of section 8( I) read with section 8(6) as far as primary gold was concerned
and since the appellants failed to file declaration with regard to other gold F
items, there was contravention of section 16(1) read with section 16(5) of
1968 Act. Therefore, by his order dated 14/28.2.1980, the Authorized
I'
Officer directed absolute confiscation of the primary gold, gold sovereigns,
gold coins and other gold items. He also imposed a personal penalty of
Rs. I lac each on the two appellants. Being aggrieved by the said order,
G
the appellants herein carried the matter in appeal once again to the Gold
Control Administrator, New Delhi, being Appeal No. 91 of 1981. It was
contended before the Appellate Authority that the entire gold was recovered
from one place i.e. from a secret vault inside the dome of the cupboard
in the eastern bedroom. The appellants relied upon the statements of two
•
panchas. However, the Appellate Authority vide order dated 5.11.1981 H
954
SUPREME COURT REPORTS (2004] SUPP. 2 S.C.R.
A found that the statements made by the officers from the Income-tax
department thai: gold was recovered from different places were truthful.
The Appellate Authority rejected the testimony of locksmith and the
panchas. On the state of these findings. the Appellate Authority held that
the appellants \\ere in conscious possession of the said gold. The order
B passed by the Authorized Of1icer confiscating the said gold was upheld.
However. the Appellate Authority ordered redemption of gold idols found
in the pooja room on payment of fine of Rs. 5000. The Appellate Authority
also reduced the personal penalty of Rs. I lac imposed on each of the
appellants to Rs. 50000 each. Being aggrieved, the appellants herein
preferred Revision application to respondent no. I \\hi ch was dismissed
C on 10.7.1982. At this stage, it may be mentioned that by order dated
5.6.1976, the Crold Control Officer found that appellants· declaration undP.r
Voluntary Disclosure Scheme unacceptable as according to him the
declaration was filed by appellant no. I as Karta after commencement of
proceedings under the 1968 Act. Being aggrieved by the dismissal of
D revision application filed by the appellants, Writ Petition No. 2406 of 1982
was filed in the Bombay High Court for a declaration that the said gold
was unlawfully seized and, therefore, the appellants were entitled to
immunity from proceedings for prosecution. confiscation and penalty. The
appellants also sought return of the said gold. The said writ petition was
E filed on 18.10.1982. In the meantime, the appellants who were charged for
offences under section 85( I )(ii) read with section 8( I) of the 1968 Act were
acquitted by the Addi. Chief Metropolitan Magistrate. Bombay on 24.3.1983.
The Criminal Appeal No. 443of1983 filed by the Gold Control Authorities
against the order of acquittal was dismissed by the Bombay High Coun
F on 8/9.3.1991. By judgment and order dated 11.9.1990, the learned Single
Judge held in Writ Petition No. 2406 of 1982, mentioned herein above that
the appellants were innocent possessors of the said gold. Accordingly, the
Trial Judge quashed the orders of penalty and confiscation passed by the
Gold Control Authorities. Being aggrieved, the department herein, filed
Letters Patent Appeal No. 19 of J 992 before the Division Bench of the
G Bombay, High Cou11. By impugned judgment dated 5.1.1994, the Division
Bench allowed the L.P.A. No. 19 of 1992 on the ground that the appellants
were in conscious possession of the gold as it was found in several
cupboards in the eastern bedroom, western bedroom and the telephone
room. The Division Bench held that the findings of the criminal court were
H not relevant for the purposes of adjudicating confiscation under section
<
.•
G.U. AHUJA v. U.0.1. [KAPADIA, J.]
955
71(1) of the said Act. consequently, the Division Bench confirmed the A
orders passed by the Gold Control Authorities. Hence, the appellants have
filed this appeal by way of special leave. Lastly, it may be mentioned that
by order dated 7.4.1994, this Court dismissed Special Leave Petition
(Criminal) filed by the Assistant Collector of Customs, Bombay against the
Judgment of the Bombay High CoUli confirming the acquittal of the B
appellants by the learned Magistrate.
Mr. C.A. Sundaram, learned senior counsel appearing on behalf of
the appellants submitted that the Gold Control Authorities took over the
gold from Income-tax department in contravention of section 132(5) of the
Income Tax Act and consequently, there was no seizure in law and, C
therefore, the appellants were entitled to claim immunity under Voluntary
Disclosure Scheme. In this connection, it was urged that in fact there was
no seizure as the Gold Control Officer merely took over the gold from
Income-tax depa1iment and to get over this lacunae, respondent no. 2
herein seeks to contend that gold was returned to the appellants by the D
Income-tax authorities and it was thereafter seized from the appellants by
Gold Control Officer appointed under section 4 of the Act. In this
connection, reliance was placed on the panchnama dated 30.8.1974 (Vol.
II page 95) to show that the gold was seized by the Gold Control Officer
from Income-tax depa1iment. It was submitted that such seizure was also E
contrary to section 132(5) of the Income Tax Act. In this connection,
reliance was placed on the judgment of this Comi in the case of
Commissioner of Income Tax V. Tarsem Kumar reported in [1986] 3 sec
489.
Learned senior counsel for the appellants next contended that though
under the 1968 Act any primary gold held in contravention of section 8( I)
was liable to be confiscated under section 71 (1 ), the proviso thereto
protected such gold from confiscation for contravention of the provisions
F
of the Act in the absence of knowledge or connivance on the part of the
owner in such contravention. In view of the said proviso, it was submitted G
that there l'las no absolute bar to the possess~n of the primary gold under
the 1968 Act. In this connection, it was urged that mere possession of
primary gold was an offence under sections 71(1) and 85(1) of the Act;
that, therefore, the word "possession" in sections 8(1 ), 71 (I) and 85(1)
referred to conscious possession.
H
956
SUPREME COURT REPORTS [2004] SUPP. 2 S.C.R.
A
Learned counsel for the appellants next contended that the appellants
were prosecuted by the Gold Control Authorities for offences under section
85( I)( ii) read with section 8( I) of the Act in respect of retention of
possession of primary gold; that they were also prosecuted for not filing
declarations under section 16( I) i~, respect of gold coins, sovereigns and
B gold idols; that on the first count the appellants proved beyond reasonable
doubt that they had no knowldege of the primary gold bars, coins and
sovereigns; that consequently, they were acquitted and, therefore, the
appellants were entitled to the benefit of acquittal not only in criminal trial
but also in the matter of confiscation of the said property. It was urged that
in the impugned judgment, the Division Bench of the High Court had erred
C in holding that findings recorded by the criminal coun had no bearing on
adjudication under section 71 (I) and section 74 of the said Act. In this
connection, reliance was placed on the judgment of this Court in the case
of Pasupaleti Venkateswarlu v. The Motor & General Traders reponed in
[1975] 1 SCC 770; Rajesh D. Darbar v. Narasingrao Krishnaji Kulkarni
D & Ors. reported in [2003] 7 SCC 219; Ram Chandra Singh v. Savitri Devi
& Ors. reported in [2003] 8 SCC 319 and Capt. M Paul Anthony v. Bharat
Gold Mines Ltd & Anr. reported in [1999] 3 SCC 679. Learned counsel
for the appellants further contended that the mens rea was a sine qua non
for confiscation of gold under the Act; that the proceedings under the Act
E were quasi criminal in character and consequently, the judgment of the
learned Magistrate acquitting the appellants was binding on the departmental
authorities adjudicating the question of confiscation. In any eve1>t, it was
urged, that the learned Single Judge in the writ petition had discussed the
entire evidence and had come to the conclusion that the appellants were
F not in conscious possession of the gold; that the said gold was found only
at one place, namely, in the cavity on the cupboard in the eastern bed room
of the flat; that the locksmith had to prepare a key to open the locker in
the cavity in which the gold was found, that the screws were rusted and
they had to be cut to open the top which showed that the appellants were
not in conscious possession of the- said goJd. It was submitted that the above
G facts were not considered by respondents no. 2 and 3 herein and, therefore,
their orders suffered from errors apparent on the face of the record and
consequently, the learned Single Judge of the High Court was right in
exercising the power of judicial review. That the Division Bench had erred
in ignoring the findings of the learned Single Judge. Lastly, learned counsel
H for the appellants submitted that in any event, an option of redemption
'
G.U. AHUJA v. U.0.1. [KAPADIA, J.]
957
should have been given to the appellants. That, in the present case, no A
reasons have been given by the Collector for not exercising his discretion
in the matter of grarit of redemption. In this connection, reliance was placed
on the judgment of this Court in the case of Hargovind Das & Ors. v.
Collector of Customs & Ors. reported in AIR [1987] SC 1982.
Per contra, Mr. N.K. Bajpai, learned counsel appearing on behalf of
the department contended that the Income-tax authorities had recovered the
said gold from the residence of the appellants during the search on
28.8.1974. That in accordance with a circular issued by the Central Board
B
of Direct Taxes, the Gold Control Officer was informed about the seizure.
That the said officer visited the office of Income-tax department around C
30.8.1974 and in the presence of appellant no. I took over the gold from
the Income-tax department under section 66 of the 1968 Act. In this
connection, reliance was placed on the panchnama dated 30.8.1974. It was
urged that all the statutory authorities rejected the claim that the appellants
were not in conscious possession of the gold on the ground that the D
recovery was made from more than the one cupboard; that appellant no.
2, on being asked, produced the keys with which the secret locker in the
cavity on top of the cupboards in the western bedroom was opened; that
the said keys were recovered from the cupboard in the western bedroom
and, therefore, the appellants were in conscious possession of the said gold, E
which rightly confiscated under section 71(1) of the Act.
Learned counsel for the respondent further submitted that section 66
of the Act empowered the gold Control Officer to seize primary gold in
respect of which he had reason to believe that any provision of the Act F
had been contravened. That in this case, the seizure of gold was made under
a panchnama in presence of appellant no. I in the reasonable belief that
the provisions of the Act had been contravened . In this connection,
reliance was placed on the copy' of the panchnama (at page 95, volume1!), which bears the signature of appellant no. I. Further, a circular had been
issued on 30.8.1965 by CBDT addressed to all Commissioners of Income G
Tax & Wealth Tax stating that when the gold is seized in a search by
Income-tax authorities, necessary information should be given to the Gold
Control Officer. It was submitted that the circular issued by the CBDT was
binding on the subordinate authorities. Therefore, it was urged that there
~
was no illegality in making the seizure. It was further submitted that the H
958
SUPREME COURT REPORTS (2004] SUPP. 2 S.C.R.
A judgment of this Cou11 in Tarsem Kumur 's case (supra) was not applicable
as it was given prior to insertion of section l 32A in the Income Tax Act.
It was urged that section 66 of the said Act was a self contained Code and
it was, therefore, not necessary to rder to the provisions of the Income Tax
Act, 196 I.
B
Learned counsel for the respondent next submitted that mens rea was
not a necessary ingredient of sub-section {l) of section 71. That possession,
ipso fucto, was an offence under the Act. That the appellants were found
to be in possession of huge gold bars of primary gold contrary to section
C 8( I). They were also found in possession of undeclared gold articles in
contravention of section 16. In such a case, it was submitted that the claim
of the appellants that they were not in conscious possession of the primary
gold as their defence was unbelievable. Learned counsel further submitted
that in view of sections 8(1), 71(1) and 85(1), an absolute liability was
imposed and, therefore. there was no merit in the argument advanced on
D behalf of the appellants that the gold was not liable to be confiscated till
conscious possession therefore stood proved.