IN THE HIGH COURT OF DELHI AT NEW DELHI
SUBJECT : SAFEMA
CIVIL WRIT PETITION NO.4581/1996
Reserved on: 6.9.2007.
Date of decision:14.9.2007.
SHRI GIAN CHAND GARG ..... Petitioner
Through Mr. Herjinder Singh, Sr. Advocate with
Ms. Sikha Tyagi, Advocate
versus
UNION OF INDIA & OTHERS ..... Respondents
Through Ms. Barkha Babbar, Advocate for UOI.
Mr.Justice S. Ravindra Bhat :
1. The writ petitioners in these proceedings under Article 226 of the Constitution are
aggrieved by orders dated 23.3.1978 of the Competent Authority under the Smugglers and Foreign
Exchange Manuplators (Forfeiture of Property) Act, 1976 (hereafter variously called the “Act” and
"SAFEMA") as well as the order of the Appellate Tribunal, dated 26.8.1996 confirming it. The
effect of these impugned orders is forfeiture of house properties and bank deposits to which the
petitioners were entitled to.
2. One Shiv Shankar was detained pursuant an order under the Conservation of Foreign
Exchange & Prevention of Smuggling Activities Act, 1974 (hereafter called “COFEPOSA”) on
7.1.1996. Ms. Shanti Devi was his wife. Soon after, proceedings under the Act were initiated
against them and a notice under Section 6(1) was issued to Shiv Shankar. A copy of the notice was
also enclosed to Smt. Shanti Devi. The notice proposed forfeiture of the following properties :-
“i) Nos. 265, 272, 273, 274, 275., 276 and 279, Bara Bazar, Shahdra, Delhi in the name of Shanti
Devi, Wife.
ii) Deposit of Rs.45,000 in Shiv Trading Co., 1167, Kucha Mahajani, Chandni Chowk, Delhi in
the name of his wife Shanti Devi alongwith interest payable.
Iii) Balance in National Bank of Lahore Ltd., (New State Bank of India) as on 29.01.1977.
iv) House No. 291, Bara Thakur Dwara, Shahdara, Delhi.”
3. Sh. Shiv Shankar, the predecessor-in-interest and the father of the present petitioner resisted
the notice proposing forfeiture. He alleged that the grounds that the move to forfeit the properties
were vague and did not disclose any factors or rationale justifying the proposal for action under
Section 6(1) of the Act. He complained that the notice merely repeated the language of Section 3
without outlining any fact relevant to the case. He requested the competent authority to disclose
the reasons. In addition to this objection it was mentioned that he had started business of Dalali
(Commission Agent) 30 years ago in Chandni Chowk at Saraf Market. He was engaged in
commission agency, in gold and silver ornaments. He also talked about due disclosure about the
sources of his income and sources of the acquisition of properties (mentioned in the notice) and the
bank accounts. In these circumstances he requested that the notice should be dropped. This reply
was followed by subsequent representations dated 8.9.1977, 12.10.1977, 27.10.1977, 10.10.1977
and 27.10.1977.
4. In the representations of 10.10.1977 and 27.10.1977 Shiv Shankar admitted that he had not
keept Books of Accounts and had opened a bank account operated by Smt. Shanti Devi in the
National Bank of Lahore which then became State Bank of India in 1969. He disclosed that details
of the bank accounts were revealed to the Income Tax Officer, before whom a capital account and
balance sheet were filed from 1969 onwards, pursuant to a Spot Assessment Scheme in December,
1972.
5. The representation dated 10.10.1977, inter alia, stated as follows :
“2. That in the year 1966 I took a regular place for working at Nagina Building, Chandni
Chowk, Delhi.
3. That Initially my business was not to that extent so that I should pay tax but it became
tasable for the first time in the Assessesment year 1968 – 1969 for which I filed my income tax
returns voluntarily for the Assessment years 1968-1969 to 1972 to 1973 and till then I am being
assessed to Income Tax regularly.
4. That at the time of appearance before the Income Tax Officer in connection with my
business I produced certificates from the Bullion Merchants Association. As I was doing only
Delali business, I was not keeping any books of accounts. I started a bank account in the name of
my wife. Shrimati Shanti Devi in National Bank of Lahore, Shahdara, Delhi. I produced this bank
pass book before the learned Income Tax Officer and also filed my capital account and balance
start from the assessment year 1968-69 and onwards in December 1972. It has never been disputed
by the learned Income Tax Officer regarding my business activity. I was regularly depositing the
amounts in the said bank pass book of my wife and I used to requrie money I also withdrew from
the said bank account in order to maintain my business.
5. That in addition to my membership in the Bullion Merchant Association Registration,
Chandni Chowk, Delh, it is submitted that I know most of the shopkeepers doing business of
Bullion and gold and silver ornaments at Chandni Chowk, Delhi and I would like to produce some
of those persons as may witnessess to verify the fact that I am doing dalali business. That the copy
of the statements of accounts, capital account, balance sheet, assessment orders in the Income Tax
are enclosed herewith for your recorded purposes.”
6. By an order dated 23.3.1978, the competent authority directed forfeiture of the properties
mentioned in the notice. This was on the basis of its reasoning that they constituted illegally
acquired property within the meaning of Section 3 of the Act. The findings of the competent
authority are reproduced below :
“11. Regarding house bearing Nos. 265,266,272,273,274,275. 276 and 279 Bara Bazar,
Shahdara, Delhi Shiv Shankar stated that he has purchased the house in the name of his wife for
Rs.13,000 in May 1969. It was also explained that the house was a single unit though it had
different municipal numbers. In addition, his wife Shanti Devi claims to have also purchased hous
property No. 291, Bara Thakur Dwara, Shahdara, Delhi for Rs.6,000/- from her onw funds. During
the course of proceedings before me no specific explanation was given with regard to the source of
investement in these house properties, at Bara Thakur Dwara, Shahdara. Even in the reply dated
8.9.1977, to the show cause notice under sec. 6(1), Shiv Shankar did not specify the sourde of
investment in the house property at Shahdrar, In her reply dated 10.09.1977 Shanti Devi only
referred to the activiites and sources of income of her husband, inter alia, contending that the notice
issued by me is illegal. In the letter dated 27.10.1977, Shanti Devi again stated that the property
was purchased by her husband for Rs.13,000/-. The only explanation given was that the said
propeprty has been disclosed in the income tax returns of her husband and its income offered for
tzxation. In addition, it was stated that she acquired silver ornaments from time to time after her
marriage. The said silver ornaments and other silver were sold for a sum of Rs.6151.82/-, and the
said sum was utilised to purchased house property No.291. The explanation cannot be accepted as
the acquisition of the silver ornaments and coins has not been proved.
12. In his letter dated 27.10.1977, Shiv Shankar stated that he undertook repairs to house
No.279 in which he is residing and spent Rs.15,000 on its renovation. It was stated that a sum of
Rs.8,000/- was debited by Shiv Shankar in his capital account for repairs, and Rs.7,000 was given
by his son, Gian Chand.
13. Regarding House Nos. 265,266,272,273,274,275, 276, and 279, it was again reiterated by
Shiv Shankar in his letter dated 27.10.1977 that the said house was purchased for Rs.13,000/- in
May 1969/- and the same has been declared in his income tax returns. The source of money for the
purchase of house has been attributed to savings from dalali business. In support of his contention
of carrying on dalali business, he has filed some certificates from the Bullion Merchants
Association, Delhi and also from Pt. Ram Niwas Devendar Pershad, Saraf, Chandni Chowk, Delhi.
However, these crtificates do not give specific information about his income from brokerage or the
transactions on which he erarned such brokerage.
His income tax assessments were completed on the basis of income declared by him without
investigating whether brokerage business was in fact done. The initial capital of Rs.20,000/- with
which he claims to have started the dalali business has not been proved. Accordingly, the House
bearing Nos. 265, 266, 272, 273, 274, 275, 276 and 279, Bara Bazar, Shahdara Delhi constitute an
illegally acquired property within the meaning of sec. 3 (1) © (iii)/(iv) of the SAFEMA and as such
stands forfeited to the Central Govoernment free from encumbrances.
14. Regarding House propeprty No. 291, Bara Thakur Dwara, Shahdara, Delhi, the only
explanation given by Shanti Devi and her husband is that, this house was purchased for Rs.6,000/-
on 22.10.1974 by diposing of silver ornaments and coins for a sum of Rs.6151.82/-. Through he
filed copies of sale vouchers and Dharam Kanta receipts but the source of acquisition of the
ornaments has not been proved. Accordingly, this house also constitute illegally acquired property
under sec. 3(1) © (iii) of the SAFEMA and stand forfeited to the Central Government free from
encumbrances.
15. Shiv Shankar became a partner in the firm Shiv Trading Co., 1167, Kucha Mahajni,
Chandni Chowk, Delhi with effect from 01.07.1974. He deposited a sum of Rs.45,000 in this frim
in the name of his wife Shanit Devi. In his letter dated 11.3.1975 addressed to the Income-tax
Officer, Distt-I (1), New Delhi ( a copy of which was filed before me alongwith letter dated
10.10.1977) , he stated that the amount was deposited by withdrawals from the bank as well as out
of the cash in hand available with him on 31.03.1974. In support of his contention, he relied upon
his personal balance sheet filed before the Income tax Officer for the assessment year 1974-1975
wherein his capital as on 31.3.1974 was shonw as Rs.48,469. He claimed that Rs.45,000/- was
withdrawn after 31.3.1974 and deposited in the firm Shiv Trading Co. This capital emanates from
the initial sum of Rs.20,000/- stated to have been invested at the time of start of business in 1966.
As discussed above, there is no proof of evidence about the source of this initial investment except
for a self-serving statement claiming income from dalali. Since the in itial investment ha salready
been held to be illegally acquired property, deposit of Rs.45,000/- made by Shiv Shankar In Shiv
Trading Co., in the name of his wife Shanti Devi alongiwth interest payable by the firm also
constitute illegally acquired property within the meaning of Sec. 3(1) (c) (iii)/(iv) of the SAFEMA.
16. Regarding bank account in National Bank of Lahore Ltd., (now State Bank of India),
Shahdara, Delhi, Shiv Shankar stated in his reply dated 10.10.1977 that he started the bank account
in the name of his wife Shanti Devi with an initial deposit of Rs.22,000/- in assessement year 1969-
70. The source of this initial deposit has not been explained and proved. The credit balance in the
said account as on 29th June, 1977 (date of issue of notice under sec. 6 (1) of the SAFEMA) is
therefore held to be illegally acquired property and as such stand forfeited to the Central
Government free from encubrances.
17. No acction under the SAFEMA is considered necessary in respect of LIP No. 6326274.
18. No action in respect of Shiv Shankar's share in the firm Shiv Trading Company is
considered necessary as he ceased to be a partner w.e.f. 30.06.1975 vide Dissolution Deed dated
03.07.1975.
19, To sum up the following properties are held to be illegally acquired properties and stand
forfeited to the Central Government free from all encumbrances:
i) House Nos. 265,266,272, 273,274,275, 276 and 279, Bara Bazar, Shahdara, Delhi in the name of
Shanti Devi, wife.
ii) Deposit of Rs.45,000/- in Shiv Trading Co., 1167, Kucha Mahajani, Chandni Chowk, Delhi in
the name of his wife Shanti Devi along with interest payable.
iii) Balance in National Bank of Lahore Ltd., (Now State Bank of India) as on 29.01.1977.
iv) House No. 291, Bara Thakur Dwara, Shahdara, Delhi.
20. A copy of this order will i8ssue to Shanti Devi.
Given under my hand and seal this 23rd day of March 1978.”
7. Shiv Shankar preferred an appeal under Section 12 of the Act to the Appellate Tribunal
constituted under the Act. The grounds of appeal included a complaint of violation of principles of
natural justice and alleged denial of fair hearing. It was specifically contended that apart from the
notice, the materials constituting "reasons to believe" that Shivshankar had engaged in illegal
activities were never disclosed to him. It was further submitted that reasons,were not based on
rationale or had no relevant bearing and in any case were extraneous for the purposes of the Act. It
was also, inter alia, contended that in order to meet with the serious charge of illegal activity,
entailing forfeiture of the property, the concerned person must know the case he has to meet and
should have been afforded the opportunity to refute or defend the charges. According to the
appellant none of these were followed. The Appellate Authority was, therefore, moved for setting
aside the order of the competent authority.
8. Close on the heels of the competent authoritie's order, the Income Tax Officer of the
concerned Ward appears to have issued an order under Section 143(3) reopening assessments for
several years. This order was appealed against by the present petitioner on 21.12.1979. On
20.10.1981 the Appellate Assistant Commissioner, Income Tax allowed his appeals. While doing
so the Appellate Assistant Commissioner noticed that the ITO reopened the assessment upon
information received that the petitioner was indulging in alleged smuggling activities. In the course
of and investigation, one Kailash Chand was detained. It was alleged that the gold was recovered
from the person Sh. Kailash Chand; he alleged that it belonged to Shiv Shankar. On this, is action
under the Gold Control Act and the Customs Act were sought to be initiated. By and order dated
16.5.1980 the Central Board of Excise and Customs, New Delhi after considering all the materials
concluded that there was nothing to support or corroborate the version of Kailash Chand about the
role of others in the alleged smuggling activities. It accordingly allowed the appeals against the
action proposed to be taken for violation of the provisions under the Customs and Gold Control Act
as far as they, including the appellant Shiv Shankar were concerned. After noticing all these facts,
the Asst Commissioner, Income Tax set aside the order of the ITO seeking to reopen the
assessments under Section 143(3) read with 147 of the Indian Income Tax Act.
9. Concurrent with the action of the Income Tax Authorities, a criminal complaint too had
been filed against the petitioner and various others, alleging that they had committed offences
under Section 135 of the Customs Act, 1962 and provisions of the Gold Control Act, 1968.
Charges were framed on 5.8.1982. The petitioner was sought to be implicated on a statement by
two main accused namely, Saroj Bala and Bal Kishan in the course of their confessional statements.
The petitioner approached the learned Additional Sessions Judge under Section 397, being
aggrieved by the order on charges. After considering the entire record the learned Sessions Judge
concluded that there was nothing relevant including the allegations by the co-accused, justifying,
the implication of Shiv Shankar; the charges were therefore set aside.
10. The above events transpired during pendency of the appeal before Tribunal constituted
under the Act. During the pendency of those proceedings Shri Shiv Shankar and Smt. Shanti Devi
died, they were succeeded to by the present petitioner who had moved an application for
substitution. The impugned order proceeded to consider the materials available on the file of the
competent authority. It also analysed the findings. Apparently the statement of “reasons to
believe” existing on the file though not disclosed to the petitioner, were available with the appellate
authority. They were made known during the course of the hearing.
11. After setting out the facts the appellate tribunal concurred with a view that Shiv Shankar
and Smt. Shanti Devi had not sufficiently explained the legitimacy of the acquisition of the
properties in question. In view of that finding, it affirmed the order of the competent authority. It
was also held as follows :
“8. It may also be pointed out that the appellant's counsel has made a grievance of the fact that
all the evidemce/information which the Comeptent Authority had in his possession should have
been confronted to the appellant and in the absence of this having been done, principles of natural
justice had been violated. It is sufficient to point out that the Competent Authority is not under my
legal liability to disclose the information received by him from various sources based on which a
notice under section 6 (1) of the SAFEMA was issued to the appellant. The legal responsibility cast
on the Competent Authority for recording the reasons is to safeguard the interests of the persons
against whom such proceedings are initiated and it is meant to ensure that the Competent Authority
has valid reasons recorded in writing before any notice under section 6(1) of SAFEMA if issued to
any party. This is the reason why there is no statutory requirement under the SAFEMA to sup0ply a
copy of the reasons recorded to the appellant by the Competent Authority at the time of initiation or
comletion of proceedings against the appellant. It is not necessary for the appellant to know before
hand the basis of the Competent Authority's belief that such a notice needed to be issued. The
action of the Competent Authority could only be challenged if such reasons had not been recorded
in writing before the issue of notice by the Competent Authority tot he appellant. The appellant in
any case had been given a copy of the reasons to believe at the time of hearing of appeal. “
12. The petitioner’s grievance is that the findings of the competent authority and the Tribunal
are unsustainable. It is contended on his behalf by Mr. Harjinder Singh, learned senior counsel that
without disclosing the reasons as to why such stringent legislation could be invoked, the
respondents could not have concluded, on the basis of the materials that the properties forfeited
were acquired through illegal, smuggling or similar activities. It was contended that no “reasons to
believe”constituting the basis of the opinion formed for action, recorded on the file of the
respondents were ever disclosed by the competent authority, but, were for the first time, filed
before the Tribunal. This resulted in grave prejudice to Shiv Shankar. Counsel contented that the
competent authority relied upon income tax returns for the years 1968-69 to 1972-72. The reasons
recorded by the authorities as the rationale for forfeiture, were different. In these circumstances,
the petitioner ought to have been shown such reasons before the order was issued.
13. Learned senior counsel contended that the properties in question were acquired long back
and without any justifiable reason to link such acquisition with any illegal activity, provisions of
the Act could not have been invoked.In failing to see this aspect the competent authority as well as
the tribunal committed an error of law. In support of this submission learned counsel relied upon a
judgment reported as Chatar Singh Nagra Vs. Competent Authority 186(1990) ITR 83.
14. Learned senior counsel contended that late Shiv Shankar had been detained under
provisions of COFEPOSA in 1977, during the internal emergency declared at that time. That
action triggered the entire move to forfeit his properties. All the authorities proceeded to blindly
invoke provisions of Act without applying their minds as to whether there were any justifiable
reasons to believe that they were illegally acquired properties under Section 3(c) of the Act.
Learned counsel contended that due to Section 21 findings under other laws were not conclusive;
yet their relevance was undeniable. Therefore, the competent authority and later the Tribunal could
not have completely ignored the relevance of the orders of the ITO.
15. Learned counsel submitted that the presumption raised under Section 8, in the event of
service of notice under Section 6 did not mean that the person concerned had to satisfy the
authorities beyond reasonable doubt about the legitimacy of sources of income on the basis of
which propoerties were acquired; having regard to the consequences the threshold of proof was one
of prudence i.e preponderance of probabilities. In the facts of the case having regard to the long
and continued business of the petitioner; a likelihood of savings over a sustained period of two
decades; his having declared the income in 1972 for that assessment year and previous years and
subsequently filing returns, were all relevant facts. These as well as the orders of the ITO,
constituted relevant materials – although the competent authority was not bound by the orders of
the Income Tax Authorities, it could not exclude, their consideration.
16. Learned counsel relied upon the judgment of the Supreme Court reported as Fatima
Mohamed Amin Vs. Union of India (2003) 7 SCC 436 and P.P. Abdulla & Anr. Vs. The
Competent Authority& Ors. (2007) 2 SCC 510 and submitted that contents of the notice nowhere
disclosed sufficient reasons warranting the impugned action against the petitioner. Learned counsel
contended that beyond recording that the competent authority had relevant material with him which
constituted reasons to believe that the properties described in the Schedule to the notice were held
by Sh. Shiv Shankar or on his behalf, were illegally acquired, no facts or reasons were ever
disclosed. Therefore, the basis of the action, which resulted in stringent and penal consequences
was unfair and without disclosure of any, much less, valid reasons. Learned counsel contended that
subsequent events such as the order of the Appellate Assistant Commissioner, Income Tax dated
20.10.1981, the order of the Central Board of Excise and Customs dated 16.5.1980 and the order of
the Additional Sessions Judge, passed in 1982 absolving the petitioner of the charges of having
contravened the provisions of Gold Control Act and the Customs Act, constituted vital
developments that ought to have taken into consideration by the Appellate Authority. These
materials were placed before it as part of the paper book of the appeal. Learned counsel relied
upon on the same and submitted that the appellate tribunal misdirected itself in not even attracting
much less dealing with them.
17. It is contended by Ms. Barkha Babbar, placing reliance on the counter affidavit and the
materials on record that the petitioner Shiv Shankar did not discharge the burden placed under
Section 8. Learned counsel relied upon the opinion of the Competent Authority and submitted that
the nature of the business carried on by him did not require any capital investment. It was
submitted that in this background, the re-opening of assessment on the basis of information by the
Customs Preventive staff, that he was involved in gold smuggling and that dalali was only a smoke
screening, was relevant. It was contended that the undoubtedly Appellate Assistant Commissioner
set aside the re-assessment on the basis of the opinion by the Central Board of Central Excise; yet
these were independently evaluated by the respondent authorities who concluded that Shiv
Shankar had not discharged the onus under Section 8 or proved that the two properties were
acquired out of legal sources. It was contended that Smt. Shanti Devi’s explanation of having
acquired the second property by selling silver ornaments too was dubious and unacceptable.
18. Learned counsel contended that although the action seems stringent, the objective of the
enactment could not be forgotten. It is a part of the larger scheme to prevent smuggling and act as
a deterrent to those thriving from such illegal activities. The Court should defer to the conclusions
arrived by the authorities, particularly in view of Section 14 which enacts a bar against jurisdiction.
Learned counsel contended that having regard to the assessment of the Tribunal which is headed by
a High Court Judge ordinarily writ jurisdiction by civil courts should not re-examine factual
findings. The Court should judicially review the orders of the tribunal in rare and exceptional
circumstances where the orders discloses perversity or apparent illegality. In this case both preconditions
did not exit. The petition has to be therefore rejected.
19. Learned counsel contended that the mere fact that Income Tax Authorities accepted
petitioner’s explanation and dropped the move for re-opening assessments, did not bind the
competent authority, by virtue of Section 21.
20. It is apparent from the above narrative that Shiv Shankar was issued with notice under
Section 6 on 29.6.1977 asking him to show cause why the properties in question should not be
forfeited. Beyond mention that the competent authority had reasons to believe that properties,
defined in Section 3 of the Act, were illegally acquired no other material was forthcoming, or
disclosed to him. It is an undisputed fact that petitioner had filed returns in 1972, collectively for
five previous years. In these returns he disclosed the profit and loss as well as the turnover for
assessment years 1965-66 onwards. He claimed that as a result of accruals from business, the
properties being House Nos.265-266,272-276 and 279 Bara Bazar Shahadrara were acquired.
Although there are several separate property numbers, it is undisputed that these are common
premises. House Property No.279 Bara Thakur Dwara was acquired by Smt. Shanti Devi for
Rs.6,000/-. The Income Tax Authorities accepted the returns on the basis of a spot assessment
scheme.
21. The petitioner admittedly was not shown the record/notings which led to action under
Section 6 and constitutued “reasons” which led the competent authority to believe that he acquired
the assets illegally. That document, dated 29.6.1977 was disclosed for the first time to the
Appellate Authority. After reciting the Income Tax return by Shiv Shankar of that year and the
order of detention dated 7.1.1976, the competent authority noted as follows :
“5. In a statement before the Income tax Inspector on 21.3.1977, Shiv Shankar stated that he
has an ancestral house properpty No. 482, Bara Thakur Dwara, Shahdara, Delhi. The property as
referred to above namely Nos. 265, 266, 272, 273, 274, 275, 276 and 279 is purchased in the name
of his wife for Rs.13,000/- in May, 1969. In addition, he also stated that his wife Shanti Devi
pruchased house propeprty No.291, Bara Thakur Dwara, Shahdara, Delhi for Rs.6,000/- from her
own funds. Shiv Shankar was not in a position to explain the source of initial investement in dalali
business, if any. Further, the income from dalali business is not capable of verification from his
income-tax record. Similarly there is no documentary evidence to prove the source of acquisition of
the properties purchased by him or his wife, including deposit of Rs.45,000 except for his own
statement dated 21.4.1977, an extract therefrom is reproduced below :-
“The purchase of house property and deposit of Rs.45,000/- in the name of my wife is from my
dalali income-tax returns”.
As earlier observed, there is no proof of dalali income. In my opinion the source of investment in
the propeprties and deposit of Rs.45,000/- in Shiv Trading Co., constitute illegally acquired
properties within the meaning of Sec. 3 (1) © (iii) of the SAFEMA.
6. Further, in following cash deposits have been noticed in the bank account of Shiv Shankar
in National Bank of Lahore Ltd., Shahdara, Delhi :
Rs.
1. January, 1969 9,171
4 ' ' 5,000
6 ' ' 4,000
15 February, 1972 6,000
7. A persual of the balance sheet of Shiv Trading Co. as on 30.06.1975 shows cash credits as
below :
Mrs. Chandravati 10,018.35
Ms. Shanti Devi 45,000.00
Mrs. Rajrani Gupta 12,558.20
Mr. Mohanlal 20,000.00
-------------
87,886.55
8. The genuiness of these deposits have not proved before the income tax authroties.
9. In view of above, I have therefore, reason to believe that the undermentioned propeprties
held by Shiv Shankar are illegally acquired properties within the meaning of sec. 3(1) © of the
Smugglers and Foreign Exchange Manipulators (Forfeiture of property) Act, 1976 and a ntoice
under sec. 6 (1) of the Act should be issued to him to indicate the sources of his income, earnings or
assets, out of which or by means of which he acquired these properties, the evidence on which he
relies and other relelvant information and particulars, and to show cause why these properties
should not be declared to be illegally acquired properties and forfeited to the Central Government
under the SAFEMA.
(i) House Nos. 265,266,272,273,274,275,276 and 279 Bara Bazar Shahdara Delhi in the name
of Shanti Devi.
(ii) Deposit of Rs.45,000 in Shiv Trading Co. 1167, Kucha Mahajani, Chandni Chowk, Delhi in
the name of Shanti Devi.
(iii) Bank account – National Ba nk of Lahore Ltd., Shahdara, Delhi.
(iv) Shara in Shiv Trading Co.
(v) LIP No. 6326274.
10. A copy of notice under sec. 6 (1) should also go to Shanit Devi being the present holder of
the property and deposit of Rs.45,000 in Shiv Trading Co.”
22. The determination of the competent authority that the premises being house No Nos. 265,
266, 272, 273, 274, 275, 276 and 279, Bara Bazar, Shahdara Delhi were illegally acquired property,
was on the basis of rejection of the petitioner’s explanation that he had Rs.13,000/- in May 1969
and the same was declared in his income tax returns. It concluded that the source of money for the
purchase of house was attributed to savings from dalali business, for supporting which he had filed
some certificates from the Bullion Merchants Association, Delhi and also from Pt. Ram Niwas
Devendar Pershad, Saraf, Chandni Chowk, Delhi. They were rejected that as they did not give
specific information about his income from brokerage or the transactions on which he erarned such
brokerage. Shiv Shankar’s income tax assessments were completed on the basis of income declared
by him. These orders were rejected as having been issued without investigating whether brokerage
business was in fact undertaken. Accordingly, the property was held to to be an illegally acquired
property within the meaning of sec. 3 (1)(c) (iii)/(iv) of the Act.
23. Section 6(1) of the Act enacts that if, having regard to the value of the properties held by
any person to whom the Act applies, either by himself or through any other person on his behalf,
his known sources of income, earnings or assets, etc., and any other information or material
available to it as a result of action taken under Section 18 or otherwise, the Competent Authority,
after recording reasons to believe in writing that all or any of them are illegally acquired properties
may serve a notice upon such person calling upon him to indicate the source of his income,
earnings or assets, out of which or by means of which the property had been acquired, etc. This
provision envisons proper application of mind and meaningful subjective satisfaction of the
Competent Authority as to existence of "reasons to believe". Those should be recorded in writing;
they should also be to the effect that the property sought to be proceeded against is illegally
acquired. Such opinion formation i.e "reasons to believe", should be considered by the authority
not only about the disproportionate nature of the assets of the person concerned, (in relation to
known sources of income), but also other information or material available as a result of action
taken under section 18 or otherwise. Section 18 empowers the Competent Authority to cause an
inquiry or investigation, regarding any person, place, property, etc. For this an officer of the
Income-tax Department can be asked to carrry out such exercise or survey. This should naturally
precede the opinion formation, i.e "the reasons to believe" as well as precede the issuance of notice
under section 6(1). The facts disclose that no such inquiry preceded the notice. This investigation
under section 18 is a salutory principle, because it is now well settled that the more stringent the
procedure and consequences, the threshhold of safeguards have to be higher. This would prevent ill
conceived and casual issuance of notices, and avoidable hardship to citizens. Thus, in Prakash
Kumar Vs. State of Gujarat, (2) SCC 409, the Supreme Court underscored the need to ensure strict
interpretation of the enactment, where penalties or sanctions are provided, in the following terms:
“The more stringent the law, the less is the discretion of the Court. Stringent laws are made
for the purpose of achieving those objectives. This being the intentment of the legislature, the duty
of the Court is to see that the intention of the legislature is not frustrated. If there is any doubt or
ambiguity, the rule of purposive construction should be taken to recourse to, to achieve the
objectives.”
Investigation under Section 18, therefore should ordinarily precede the issuance of notice under
Seciton 6(1).
24. The "reasons to believe" before the issue of notice under section 6(1) of the SAFEMA were
recorded in the present cases by the Competent Authority on 29-6-1977. It recorded that the
appellants were assessed to income-tax; yet the source of income of Shiv Shankar could not be
established properly. It discounted the findings and assessments accepted about 6 years before the
notice. There is no whisper that any enquiry or investigation under section 18 of the Act preceded
the notice, or that the Income-tax Department had enquired as to whether Shiv Shankar and his
wife actually were such assessees. It is significant that investigation agencies have been created
under the Competent Authorities, but there is nothing to disclose that any inspector or other official
was deputed to the Income-tax Department for Department for enquiring in this regard or that the
appellants were contacted for ascertaining whether they had prima facie any explanation for their
assets. Instead, on a priori assumptions in the so-called "reasons to believe" recorded by the
Competent Authority that the assessee did not have a legitimate source of income, notice was
straightaway issued.
25. The properties were acquired nearly a decade before the notice; Shiv Shankar claimed to
have been in business since the Nineteen Fifties. There is quite a bit of probability in these
assertions; the amount of Rs. 13,000/- shown as apparent consideration for the house, purchased in
1969 has not been shown as grossly disproportionate in any manner. As such, there is a ring of truth
about the explanation; in any case Shiv Shankar, in my opinion discharged the burden of showing
that he had sufficient funds to acquire the assets legitimately. The burden of proof here cannot, in
the absence of a rule or ruling to the contrary, be assumed to be beyond reasonable doubt; it has to
be necessarily based on preponderence of probabilities.
26. In two recent judgments of the Supreme Court, the absolute necessity of recording and
disclosing the rationale and "reasons to believe" in the notice under Section 6(1) has been
underscored. In Fatima Mohd. Amin v. (supra) the Supreme Court held that:
"We do not find any averments to the effect that the property acquired by the appellant is a benami
property of her son or the same was illegally acquired from her son.
8. The contents of the said notices, even if taken at their face value do not disclose any reason
warranting action against the appellant. No allegation whatsoever has been made to this effect that
there exists any link or nexus between the property sought to be forfeited and the illegally acquired
money of the detenu(s)."
Again, this position was reiterated in P.P. Abdulla (supra), in the following manner :
"8. It must be stated that an order of confiscation is a very stringent order and hence a provision for
confiscation has to be construed strictly, and the statute must be strictly complied with, otherwise
the order becomes illegal.
9. In our opinion, the facts of the case are covered by the decision of this Court in Fatima Mohd.
Amin v. Union of India1. In the present case the contents of the notice, even if taken on face value,
do not disclose any sufficient reason warranting the impugned action against the appellant as, in our
opinion, the condition precedent for exercising the power under the Act did not exist. Hence, the
impugned orders cannot be sustained.
10. In the present case, in the notice dated 15-3-1988 issued to the appellant under Section 6(1) of
the Act (copy of which is annexed as Annexure P-1 to this appeal), it has not been alleged therein
that there is any such link or nexus between the property sought to be forfeited and the alleged
illegally acquired money of the appellant."
27. In the present case, the notice issued to Shiv Shankar and his wife were mechanical
reproductions of the ingredients of Section 6(1); no effort was made to link or show the nexus
nexus between the property sought to be forfeited and the alleged illegally acquired money of Shiv
Shankar and his wife.
28. When a subjective satisfaction is sought to be arrived at for exercise of power, though the
court should not substitute the same with that of its own, it would, in judicial review be justified to
discern whether, in arriving at that satisfaction, the authority ignored material facts and
circumstances. Whether those facts and materials could have still have enabled him to come to the
same conclusion is entirely irrelevant. It is the non-consideration of such material which would
render the action of forfeiture, so drastic in consequence, unsustainable in law.
29. There is one more material circumstance which according to this court, the appellate
Tribunal completely overlooked. Though Section 21 enacts that findings in other Acts are not
binding, that itself does not render such final orders completely irrelevant. Here, the determination
of the ITO was sought to be re-opened on the basis of allegations of smuggling; that later order was
set aside by the Assistant Appellate Commissioner of Income Tax. The Central Board of Customs
and Excise too, concluded that there was no material to show smuggling or illegal activities; the
criminal charges initially framed against Shiv Shankar were quashed in revisional proceedings. All
these cumulatively established that there were no materials, in the eyes of law showing that he or
his wife had indulged in smuggling - primarily the suspect activity, having regard to the nature of
his business. These findings were relevant if not conclusively binding. In utterly ignoring them the
competent authority and the tribunal fell into error.
30. The facts of this case show how drastic laws like SAFEMA can be used to badger
individuals, often weak in comparison with the might of the State. Three decades have passed by;
Shiv Shankar and his wife expired. Yet the stigma cast by the impugned order has visited their
heirs. This is an oft recurring situation, so evocatively described by James Jeffrey Roche, in "The
Net of law' :
"The net of law is spread so wide,
No sinner from its sweep may hide.
Its meshes are so fine and strong.
They take in every child of wrong
O wondrous web of mystery !"
Big fish alone escape from thee !"
(Quoted by the Supreme Court in Tekchand -vs- Competent Authority 1993 (201) ITR 658 (SC)
31. In view of the above conclusions, the petition is entitled to succeed. The impugned order is
accordingly quashed. Rule made absolute in these terms. No costs.
Sd./-
S. RAVINDRA BHAT,J
14th September, 2007
