TaxTMI 
TaxTMI 
1995 (6) TMI 185
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.... L. Francis : 1. Right, title and interest in the property of 1 acre and 8 cents of land with building in Survey Nos. 144/3 and 144/4 in Edathurithi Amson Village, Trichur District, valued at Rs. 50,000. 2. Amount of Rs. 10,000 advanced to Shri V. A. Mohamed (brother). 3. Chit amount due from Messrs. Elite Bankers, Tripayar, Kerala. 4. Right, title and interest in the insurance policies for which deductions were claimed in the income-tax returns for the years from 1970-71 to 1975-76. The appellant furnished his reply/explanation to the show-cause notice dated October 11, 1979, by letter dated May 16, 1980, which was, as reproduced in the impugned order under section 7 of the Act, to the following effect : 1. The land in question was purchased by him from his brother, Shri V. A. Mohammed, for a total consideration of Rs. 11,800. The building on the land was constructed by him. For this, he had sold his right in the property of land in Survey No. 97/1 in Edathurithi Village jointly owned by him and his brother for a consideration of Rs. 8,000. The source is his business income ; 2. He had advanced an amount of Rs. 10,000 to his brother which was adjusted towards a l....
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.... the land he held jointly with his aforesaid brother. The Competent Authority, after considering the explanations and replies as also documentary evidence furnished from time to time and also information gathered by his own investigation, and submissions put forward by the appellant at the time of hearing through his representative, came to the conclusion that the source of payments as per the appellant, for all the properties, excepting the construction of the house had come out of the income from the partnership in Moly Fabrics and that since the investment in the said partnership had not been explained as having been made from known sources of income or savings, the income drawn from the said partnership business had also to be treated as an investment not lawfully explained, and since the initial investment in the business assumes the colour of illegally earned income, drawals from the said business would also acquire the character of illegal income, including the retirement goodwill of Rs. 10,000. He further held the source of investment in the life insurance policies or subscription towards chit fund had also not been explained and as such, the amount due to him on account....
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....ere was a letter from the appellant's mother to corroborate about the cash loan of Rs. 4,000. These letters furnished a prima facie material to substantiate the appellant's plea as to the source of investment in the new business. It was incumbent upon the Competent Authority to call these persons for examination, in order to satisfy himself as to whether they were speaking the truth or not, and as to their source of funds when they had given in writing about having advanced money to the appellant. We were further informed during the hearing by the Deputy Director, Mrs. Bhaskaran, that there was some indication in the records of the Competent Authority, which she had with her, to show that investigations were carried out as to whether the appellant had been doing any insurance agency business, as pleaded by him, and there was confirmation of this fact although the extent or quantum of his income from the said insurance agency business was not known. The fact remains that individuals, named by the appellant, as sources who had provided him funds had come forward to give in writing as far back as on March 6, 1981, and March 7, 1981, including the appellant's mother, Smt. R. K. Aish....
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....property and the detenu or convict, or it was shown that the sources of funds for the acquisition of the said property which were being subjected to forfeiture proceedings, had flown from such detenu or convict. This proposition has been very well elucidated by the Supreme Court in the case of Attorney-General for India v. Amratlal Prajivandas [1995] 83 Comp Cas 804 ; AIR 1994 SC 2179. In the face of this unequivocal exposition of law, there is certainly an error in approach and failure to appreciate the correct position, on the part of the Competent Authority, as in our view on the facts of this case, as noticed in the foregoing discussion, the appellant's investment in "Moly Fabrics", could not be treated to be emanating from the illegal activities of the detenu, E. L. Francis, as the relationship with him, vis-a-vis the appellant, came into existence only with the formation of the partnership in the year, 1969. Mrs. Bhaskaran sought to justify the view which has been taken by the Competent Authority, by pleading that the law before the Supreme Court judgment was not so clear and that this requirement of "nexus" has been highlighted only now and that the principles or guidelin....
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.... that the appellant had been proceeded against only on account of being an "associate", by virtue of the definition given in section 2(2)(d) of the Act. Now, taking up the properties individually that are the subject-matter of forfeiture, it is to be noted that in so far as house property at Survey No. 1 is concerned, the payment was met partly out of income from the partnership firm and partly by adjustment of the value of the appellant's share of property jointly owned by him with his brother from whom he had purchased the plot in question. We have already held that per se, without any further evidence, the income from the partnership firm could not be treated as tainted money so as to make the investment therefrom liable to forfeiture. The purchase of the plot jointly with the brother earlier is said to have been in the year 1963, for a sum of Rs. 8,000 when the detenu, E. L. Francis, was nowhere in sight, and as such there could be no connection with him qua the investment, from whatever sources made by the appellant in the purchase of that plot of land jointly with his brother, being Survey No. 97/1, in the year 1963, and hence, could not be held to be illegally acquired pr....