TaxTMI 
TaxTMI 
1987 (9) TMI 413
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....tment in the latter property was less than one half of the amount actually invested, the appellant was entitled to the option to pay in lieu of forfeiture, a fine equal to one and one-fifth times the value of the unproved part, viz., a fine of Rs. 96,767. The background of the facts is that the appellant is the mother of Syed Ahmed Hussain Bawamiya, Syed Arif Bawamiya and Syed Murtaza Hussain Bawamiya. Each of these three persons was detained under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act (hereinafter referred to as " COFEPOSA Act ") by separate orders of the Government of Maharashtra, made in 1975-76. These were, however, subsequently quashed by the Bombay High Court sometime in 1981. Syed Murtaza Hussain Bawamiya was further convicted on September 13, 19681 under the Customs Act for an offence involving 2,210 tolas of gold of the value of Rs. 3,27,050. He was sentenced to six months rigorous imprisonment and a fine of Rs. 5,000 or in default to further rigorous imprisonment for three months. The Competent Authority, therefore, treated the appellant as a person falling within the category mentioned in section 2(2)(c) of the Act. Reasons fo....
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....Maniar on May 3, 1976, remained unproved. This property was, therefore, forfeited. The appellant filed two separate appeals against these orders. In the meanwhile, the Bombay High Court quashed the detention orders of the appellant's three sons in separate cases some time in 1981. The Appellate Tribunal then, by an order dated October 20, 198), quashed the f orf eiture order with regard to the appellant's share in " syed Villa " without going into its merits after observing that with the revocation of the detention order of Syed Ahmed Hussain Bawamiya, the indictment of the appellant, as an " affected person " within the meaning of section 2(2)(c) of the Act no longer held good. The plea of the appellant that the very foundation on which the edifice against the appellant was raised had tumbled and disappeared was accepted and it was held that the action should no more survive. By another order of the same date, the Appellate Tribunal remanded the other appeal with regard to " Rose Villa " for further investigation by the Competent Authority and decision afresh. It was taken note of that the detention orders of the three sons of the appellant had been quashed by the....
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.... law. In this regard, reference has been made to the preamble of the Act which provides for feiture of illegally acquired properties of smugglers and foreign exchange manipulators. It is their properties which are envisaged to be forfeited under this Act and this must prevail while interpreting and understanding the implications of its different provisions. Section 6 of the Act, while next requiring the issue of notice of forfeiture for commencing proceedings also, in an explicit manner, postulates that where there are reasons to believe that any property is illegally acquired by the person either by himself or through any other person on his behalf beyond his known source of income, earnings or assets, the proceedings can be commenced (emphasis * provided). The term " illegally acquired property " has been defined under section 3(1)(c) of the Act as to mean " any property acquired wholly or partly out of or by means of any income, earnings and assets attributable to any activity prohibited by law relating to which Parliament has power to make laws or in contravention of such laws or not attributable to any act or thing done in respect of any matter in relation to which Parliame....
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....b that finding of fact when the accused is tried subsequently even for a different offence which might be permitted by the terms of section 403(2) of the Code of Criminal Procedure. The rule is not the same as the plea of double jeopardy or autrefois acquit. The rule relates only to the admissibility of evidence which is designed to upset a finding of fact recorded by a competent court in a previous trial. In MohanIal Goenha v. Benoy Krishna Mukherjee, AIR 1953 SC 65, it was held that even an erroneous decision on a question of law operates as res judicata between the parties to it. The correctness or otherwise of the judicial decision has no bearing upon the question whether or not it operates as res judicata. From the side of the Competent Authority, Mr. Yadav has pointed out that there was no specific finding in the earlier proceedings that this property belonged to Syed Ahmed Hussain Bawamiya nor were the parties required to lead evidence in this direction. The socio-economic legislation embodied in the Act, it has been pleaded, has not to be that narrowly interpreted. In case in the earlier proceedings reference was made to the detention of Syed Ahmed Hussain Bawamiya un....
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.... Act, which defines " illegally acquired property ", and includes within its ambit any property acquired by means of any income, earnings or assets which cannot be proved or attributable to any act or thing done in respect of any matter in relation to which Parliament has no power to make laws, observed as under : " ...... It is under this provision that the properties of the appellant have been held to be illegally acquired properties. The provision does not require the Competent Authority to find a connection or nexus between the acquisition of property by the affected person and the income or assets of the detenu. Under this provision, if the affected person is unable to prove the source of the income, etc., out of which the property has been acquired, the property would be illegally acquired property unless the affected person shows that it is covered by the second part of this provision. There appears to be no warrant for the contention that the Competent Authority must show some connection between the property and the detenu. . . . " The second decision referred to is FPA No. 17/BOM/85-Syed Mohd. Iqbal Bawamiy....
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....d not figure in the reasons recorded by the Competent Authority, supported the assumption of jurisdiction by the Competent Authority. We accordingly hold that the principle of res judicata or constructive res judicata does not apply to the facts of the appellant's case and the Competent Authority was not precluded from assuming judisdiction and issuing a fresh notice under section 6(1) on the ground that the appellant is the brother of Shri Syed Murtaza Hussain Bawamiya who had been convicted under the Customs Act. The arguments advanced by counsel for the appellant that the present proceedings had not been validly initiated and the Competent Authority was precluded from passing a fresh order under section 7(1) of the Act, must accordingly fail ........ The present Bench of the Appellate Tribunal had occasion also to make some observations on the propriety of this nexus concept, in the decision in Mira Rani Mazumdar v. Competent Authority [1987] 166 ITR 230 (ATFP). It was observed as under (p. 234): " It is, therefore, obvious that the central theme which intertwines the provisions of the....
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....-gotten assets forfeited. This principle is no doubt salutary. However, at the same time, one has to act with caution and circumspection so that the relations, partners or associates who may have otherwise nothing to do with smuggling or foreign exchange manipulations or properties connected therewith, may be, even ignorant of the activities of the detenu, are not unnecessarily harassed and penalised. Some semblance of nexus may be desirable. " With all this background, we have given our due consideration to the pleas raised and the circumstances of the case. As taken note of as above, this Tribunal had the occasion to consider, in exactly similar circumstances, in FPA No. 17/BOM/85-Syed Mohd. lqbal Bawamiya v. Competent Authority, Bombay, whether a subsequent notice under section 6 of the Act making another reason as the basis for commencement of forfeiture proceedings can be issued, when the earlier proceedings had been quashed because of the striking down of the detention under the COFEPOSA Act. It has been categorically answered in the affirmative and the pleas of res judicata and estoppel were rejected. The issue is, therefore, no longer res integra. Having given our utmost....
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....o. However, keeping in view that there are already existing independent enactments for dealing with such matters and further that the scope and the object of the present Act pertains to customs and foreign exchange irregularities, this provision of law cannot be divorced from that objective. it has, therefore, not been without relevance and purpose that we have in the case of Mira Rani Mazumdar v. Competent Authority [1987] 166 ITR 230, mentioned the desirability of the nexus. Section 6 of the Act also speaks of notice to any person to whom this Act applies with regard to properties held by himself or through any other person on his behalf. Thus, it is his property which is pursued in the hands of the relations, associates and others. While recognising all this and also not being oblivious that the prerequisite for commencement of the proceedings under the Act is the existence of any of the four circumstances mentioned in section 2(2)(a), we are firmly of the opinion that the Competent Authority under the Act has not to and need not positively establish that the property actually was acquired with money flowing from smugglers and foreign exchange manipulators or held benam....
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....en harassment of the affected person. Adverting, therefore, to the merits of the acquisition of the two properties, it may be mentioned that " Rose Villa " property at Panchgani was acquired by the appellant on May 7, 1976, for a consideration of Rs. 60,000. Of this amount Rs. 1 0,000 were obtained by the appellant from M/s. Syed Kasamah and others. This was accepted by the Competent Authority. There were next two amounts of Rs. 25,000 each, which the appellant claimed, had been obtained from Indulal P. Maniar and M/s. Hemang Bros. None of them was accepted by the Competent Authority. The former was examined but he denied that he had given any such loan to the appellant. The appellant was required to produce the party from whom the money was obtained or lead any other evidence in this regard. She, however, failed to do so. Even the broker through whom the money was obtained was not produced nor his address furnished. With this state of evidence, no serious attempt was made by the appellant's counsel to persuade us to reverse the disallowance of this amount by the learned Competent Authority. We affirm the same. The other amount of Rs. 25,000 was claimed to have been obtai....
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....a fake one, and the money was of the appellant the source of which she was unable to establish. The forfeiture of the property is, therefore, confirmed. It is a moot question whether to the extent the source has been found to be legitimate and genuine, viz., Rs. 10,000 should be payable to the appellant on taking over possession of the property consequent upon its forfeiture ? It can be said that there is no specific Provision in the Act requiring such payment. However, there also seems no prohibition either. Thus there can be a case where 49%, of the source of investment may be found explained while 510% remains unexplained and on that score the property may be liable to forfeiture. In a vice versa case, the Legislature envisages non-forfeiture subject to the payment of fine as provided under section 9(1). Can, on the same rationale and equity, it be said that the legitimate earnings and money of a defaulting person should be left immune from forfeiture irrespective of his having got them amalgamated with the unexplained money, provided they are ascertainable and separable ? The Government should not perhaps grudge the payment of the legitimate amount especially when its worth ....
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....ellant's contention is that she had been declaring her interest income from Gold Bonds from 1965 onwards in her income- tax returns. The savings from household expenses were a small part only. It has also been pointed out that a petition under section 271(4A) of the Income-tax Act was moved by the appellant in April, 1974, in which it was stated that she had contributed an amount of Rs. 50,000 in the acquisition in July, 1972, of a share in the plot of property " Syed Villa ", and out of the same, Rs. 32,450 formed interest on Gold Bonds. The balance was claimed to be savings as a housewife in the course of 30 years and presents received from relations. About the latter she stated that she had no evidence and as such surrendered Rs. 18,000 for taxation. The Commissioner of Income-tax before whom the petition was moved, after considering the entire circumstances, came to the view that Rs. 26,000 only out of the said declared amount of Rs. 50,000 were acceptable as being legitimately lying with her. The rest was held as unexplained and taxed. Although the Competent Authority under the Act is entitled to look independently on the genuineness of any investment or asset and need not....
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....neness of the jackpot story, but she failed to make appearance on the ground that she was an illiterate pardanashin lady. It was wondered whether such a person was at all capable of winning a jackpot which required a lot of versatile expertise in horse-racing. In any case, the Competent Authority issued a commission and appointed a lady officer to examine the appellant at her residence. However, the appellant avoided on one pretext or the other with the result that she could not be examined. In the circumstances, the amount of Rs. 30,000 was treated as unexplained. After giving our utmost consideration to the circumstances of the case, we find that so far as the possession of chit of the Turf Club, the winning of the jackpot and the giving of separate crossed cheques by the club to the co-sharers of the jackpot, there is no dispute. These facts in fact existed. The normal presumption is that what is apparent has to he taken as real. It is for the party alleging otherwise, namely, that the appellant had enacted a facade, to establish the same. It has, therefore, to be considered whether the chit by which the jackpot was won was in reality, the property of someone else from whom t....
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....issue of the crossed cheque by the Turf Club could be treated as rebutted. It is this factor which has made us give our prolonged deliberations to the whole matter. We can take it that she did not know much about horse-racing and, therefore, was hesitant to make appearance. At the same time, we have also noted above that this was a family consortium which appeared to have been created to provide taxation relief. The income-tax authorities, however, have not chosen to probe into the propriety of this disbursement. That expertise in horse-racing might have been of one of the members of the consortium and, therefore, the ignorance of the present appellant cannot be treated as a strong adverse factor against her. It could as well have been a mere stroke of luck. In the totality of the circumstances, we are of the opinion that the other circumstances, namely, the presumption of apparent being real, disclosure of this amount in the income-tax returns and paying tax thereon, the income-tax authorities accepting the jackpot version in the case of this appellant and there being a time gap of three years between the jackpot and the present investment, are too overwhelming, and cannot be igno....
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....isburse the income in different hands for tax purposes, but also made Rs. 50,000 available to the appellant as advance from Kazi Mohamed Amin Abdul Rehman. The Competent Authority was, therefore, justified in lifting this veil and looking at the realities. The acquisition of Oomrigar building by Syed Bros. is no less peculiar. It was said to have been acquired in 1970-71 for a total sum of Rs. 1,92,820. Each of the five partners contributed Rs. 38,564. In order to show that they had these amounts available with them, each of them moved a petition under section 271(4A) of the Income-tax Act before the Commissioner showing different amounts being available with them and sought that they should be disbursed for purposes of assessment in different years. It was sought to be shown that one of the partners had income from commission agency business and the two ladies had income from stitching and embroidery. The other two also showed different sources. The Commissioner was, however, satisfied with regard to savings of Rs. 25,000 only in the hands of Syed Kasimali Bawamiya from commission agency business. The source of no other partner was accepted and their amounts taxed as coming ....
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....,52,602. Thus the amount of Rs. 26,891 only remains unexplained. The discrepancy that appears to have occurred was because certain amount was later returned to the appellant from her original investment in this property. The appellant can, therefore, save the forfeiture of her share in this property by paying a fine of Rs. 26,891 plus one-fifth, i.e., Rs. 5,378, the total being Rs. 32.269 under section 9 of the Act. We thus uphold the order of forfeiture of one-fourth share of the appellant in " Syed Villa " property as well. Since the source of Rs. 26,891 alone in the same has been found to be unexplained, and this is less than one-half of the investment in the property, the appellant is given the option under section 9 to pay a fine equal to one and one-fifth times the value of such part. The same would come to Rs. 32,269. This be paid within one month of the receipt of this order. If, however, it is not paid, the appellant's share in the property would stand forfeited. The appeal is partly allowed. S. P. PANDE & M. A. TWIGG, (Members). With regard to the observations in para 34 that an amount of Rs. 10,000 be paid by the Government on taking over possession of ap....
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....ent of objects and reasons for enactment of SAFEMFOPA, the Finance Minister observed as follows " Smuggling activities and foreign exchange manipulations are having a deleterious effect on the national economy. Persons engaged in such malpractices have been augmenting their ill-gotten gains by violation of laws relating to income-tax, wealth-tax or of other laws. In many cases, such persons have been holding properties acquired through ill-gotten gains in the names of their relatives, associates and confidants. This accumulation of ill-gotten wealth gives increasing power, influence and sources to those who carry on such clandestine activities and even tend to confer social status and prestige which is quite contrary to the healthy socio-cultural norms. These activities pose a serious threat to the economy and the security of the nation. In conjunction with various other steps taken by the Government in recent months for cleansing the social fabric and resuscitating the national economy, it became necessary to assume powers to deprive such persons of their illegally acquired properties so ....