Appellate Tribunal For Forfeited Property : The appellant questioned the validity of the order passed by the Competent Authority, Calcutta, under ss. 7(1) and 7(3) of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976, dt. 25th Aug., 1988

P. R. RAO (MEMBER) :

In the appeal before us, Mohd, Golam Rasul Mia, the appellant questioned the validity of the order passed by the Competent Authority, Calcutta, under ss. 7(1) and 7(3) of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976, dt. 25th Aug., 1988, on the ground of inordinate delay in initiating action under s. 6(1) of the said Act for forfeiture of his property alleged to have been acquired illegally. The order of the Competent Authority is also questioned on other grounds.

An order of detention was made against the appellant under the COFEPOSA Act on 22nd July, 1975. Admittedly, the order of detention made under the COFEPOSA Act, had not been revoked on the report of an Advisory Board, or before the expiry of time for its review or had not been set aside by a Court of competent jurisdiction. The appellant was, accordingly, regarded as a person within the meaning of s. 2 of the SAFEM (FOP) Act, 1976. Notice under s. 6(1) of the SAFEM(FOP) Act, 1976, was issued on 23rd Dec., 1987, and served on the appellant on 8th Jan., 1988. After issue of a notice under s. 6(1) of the said Act and giving an opportunity to the appellant of being heard, the Competent Authority passed the impugned order on 25th Aug., 1988. Before the Competent Authority, in response to the notice under s. 6(1), the appellant urged that the proposal to forfeit his property was vitiated by the inordinate delay between the date of the detention order or even the date of release order and the date of notice under s. 6(1). This plea of the appellant was rejected by the Competent Authority thought it was not specifically met by him in his order. Before us, the appellant appearing through his learned representative, Shri N. C. Das, once again urged that the order of the Competent Authority be declared to have been made without jurisdiction as it was made after a lapse of more than ten years after the order of detention.

We have carefully considered the submissions of the appellant’s learned representative in regard to the aspect of limitation. Firstly, it is claimed that, in the absence of any time limit for initiation of proceedings for forfeiture of property under the SAFEM (FOP) Act, 1976, the long delay in passing the order by itself would render the order as having been made without jurisdiction. Secondly, it is argued that the long delay without any justification therefor would invalidate the order passed by the Competent Authority.

The first argument of learned counsel appearing on behalf of the appellant has to be rejected in the light of the decision of the Supreme Court in Gurbaksh Singh (SB). vs. Union of India (1976) 2 SCC 181, wherein it was held that, in the absence of any time limit for passing a sales-tax assessment order, long delay in completing it would not render it to be an order without jurisdiction. This decision of the Supreme Court was referred to in a recent decision of the same Court in Bharat Steel Tubes Ltd. vs. State of Haryana (1988) 3 SCC 478. It may also be mentioned here that, in the case of Indian Aluminium Cables Ltd. (1977) 1 SCC 120, the Supreme Court had to deal with a case where the relevant statute had required the completion of the assessment within a reasonable time. The Court indicated that the argument of learned counsel for the assessee in that case, that an assessment had to be completed within a reasonable time for an order to be sustainable, was not acceptable as a sound one. Thus, a mere delay, even if it be unreasonably long, would not render the order unsustainable in law. If the long delay could be explained or justified, the order would be quite valid.

As regards the second argument of the appellant’s learned counsel, we made enquiries of Shri S. R. Chaudhuri, Deputy Director, appearing on behalf of the Competent Authority, to find if the delay had any justification. He was unable to point to any. The records were perused by us and we found that the reasons for the belief that the properties of the appellant were illegally acquired were recorded only on 23rd Dec., 1987, on which date the notice under s. 6(1) was issued by the Competent Authority. The records further showed that the ITO, B-Ward, Dhudri, had reported in May, 1980, about the properties owned by the appellant including the stock held by the appellant in his grocery shop the intimated the fact that the appellant was not an income-tax assessee. More than seven years elapsed before the initiation of proceedings under the SAFEM (FOP) Act, 1976, by issuing a notice under s. 6(1). In this interregum of seven years, absolutely nothing was done by the Competent Authority. When this was pointed out to Shir S. R. Chaudhuri, appearing for the Competent Authority, he argued that, in the absence of any time limit prescribed by the SAFEM (FOP) Act, 1976, for issuance of a notice under s. 6(1), it has to be presumed that Parliament intended that there should be no time limit for issuance of the notice under s. 6(1) and the proceedings could not be declared to have been initiated without jurisdiction or the order passed by the Competent Authority could not be regarded as invalid even if the delay for initiating the proceedings was unreasonable or without any justification. This argument of Shri Chaudhuri, however, does not accord with the decisions of various High Courts and the Supreme Court which had occasion to consider the effect of delay in completion of proceedings for which completion where was no time limit prescribed in the relevant statute. These decisions were rendered in relation to the IT Act and the ST Acts of certain States. Though there is no direct decision on the question before us, we find that the ratio laid down in these cases would be applicable to the issue under consideration by us. The cases are discussed below : (i) In K. P. Narayanappa Setty & Co. vs. CIT (1975) 100 ITR 17 (AP), the question of validity of an order of penalty made under s. 28(1)(c) of the Indian IT Act, 1922, was considered. The Indian IT Act, 1922, did not prescribe any time limit for passing of a penalty order under s. 28(1). In the particular case considered by the High Court of Andhra Pradesh, the relevant assessment order for 1946-47 became final on 24th July, 1954. But there was no order levying penalty till 1st July, 1963. On the facts and circumstances of the case, the High Court held that though there was no time limit prescribed for the passing of the penalty order, the delay in passing the order was without justification and hence penalty was not exigible.

(ii) A similar question regarding the validity of penalty orders passed by the ITO in May, 1967, for the asst. yrs. 1949-50, 1950-51 and 1951-52, for which the relevant assessments were completed on 30th Nov., 1951, came up for the consideration of the Bombay High Court in Chimanram Motilal (P) Ltd. vs. CIT. (1982) 31 CTR (Bom) : (1983) 140 ITR 809 (Bom). The assessee pursued appeals against the assessment orders. The ITO had issued fresh show-cause notices for levy of penalty in 1961 and even after the receipt of the assessee’s explanation in 1961. penalty orders were passed only in May, 1967. The penalty orders were assailed before the Tribunal on the ground of inordinate delay without any justification. The Tribunal, while holding that the delay from 1961 to 1967 was without justification, came to the conclusion that the magnitude of the delay was not much as to justify the cancellation of the penalty orders. The High Court concurred with this finding and upheld the validity of the penalty orders. In so doing, however, the High Court made the following observations (headnote) : “No limitation is prescribed for either initiating or completing the penalty proceedings under the Indian IT Act, 1922. Therefore, even proceedings which have been taken after a delay which may spread over a certain number of years could not be said to be bad on the ground of want of jurisdiction. However, because of the absence of any limitation, penalty proceedings cannot be taken after any length of time. Delayed proceedings may amount to abuse of power. The questions which, therefore, will have to be decided when the penalty proceedings are challenged on the ground of inordinate delay are, firstly, whether the delay is inordinate, and, secondly, whether there is any explanation by the Revenue for the inordinate delay. Both these questions are essentially questions of fact to be determined by the authority, which is entitled to consider the relevant circumstances.” (iii) The question of validity of a penalty order under the Kerala Agrl. IT Act, 1950, on the ground of long delay came up for consideration of the Kerala High Court in Krishna Bhatta vs. Agricultural ITO (1981) 23 CTR (Ker) 142 : (1981) 132 ITR 21 (Ker). The decision of the Kerala High Court with which the Bombay High Court concurred in Chimanram Motilal (P) Ltd.’s case (supra), lays down some important propositions which are contained in the following observations of the High Court (headnote of 132 ITR 21) : “Proceedings enforceable against a party should not continue to the enforceable for all time. In a case where the may be sufficient reason for the delay such as attempts by the party to protract and the authority has been vigilant all through, the mere lapse of a number of years may not be very material. It would not be possible to lay down any rule as to the number of years within which proceedings should be taken at the risk of loss of the right to take such proceedings, as that would depend upon circumstances which resulted in the delay. At the same time, irrespective of the conduct of the authority seeking to enforce or exercise its powers. if the statute does not lay down a time limit within which such exercise should be made, it cannot be exercised at any time. If it could be found, on the facts and circumstances of the case, that there is unreasonable delay in initiating proceedings for the imposition of penalty, such proceedings would be bad in law. The long delay by itself may prima facie be unreasonable but if, in such a case, there is an explanation for the delay, that explanation has to be considered. But if there be no explanation at all and the authority acts under the impression that, in the absence of a period of limitation in the Act, it is open to it to exercise its power after any number of years, that would be an unsustainable approach. If, in such a case, the Court finds that such exercise has been beyond reasonable time and there is no scope for an examination of the explanation, the action would be bad.” (iv) In CIT vs. Harinagar Sugar Mills Ltd. (1988) 74 CTR (Bom) 10 : (1989) 176 ITR 289 (Bom), the Bombay High Court had to consider the question whether, on the facts and circumstances of the case, the Tribunal was right in allowing the assessee’s appeal on the ground that the delay in reopening the excess profits tax assessments had not been property explained in spite of the fact that there was no time limit for initiation of the action provided under the EPT Act, 1940. The High Court held that even where no limit was prescribed for taking recourse to a statutory provision, delay or rather inordinate delay may be an aspect which the Court can consider for quashing the proceedings. (v) In Bharat Steel Tubes Ltd. vs. State of Haryana (1988) 3 SCC 478, the Supreme Court had to consider the question of validity of sales tax assessments under the Haryana and Punjab ST Acts which were sought to be made long after the filing of the relevant quarterly returns. Though the Supreme Court dismissed the writ petitions filed by the assessees, it made very significant observations on the question of limitation arising out of inordinate delay in completing the assessment proceedings. The observations of the Court are : “Before we part with the case, we would like to indicate that assessment of tax should be completed with expedition. It involves the Revenue to the State. In the case of a registered dealer who collects sales-tax on behalf of the State, there is no justification for him to withhold the payment of tax so collected. If a timely assessment is completed, the dues of the State can be conveniently ascertained and collected. Delay in completion of assessment often creates problems. The assessee would be required to keep up all the evidence in support of his transactions. Where evidence is necessary, with the lapse of time, there is scope for its being lost. Oral evidence as and when required to be produced by the assessing authority may not be available if a long period intervenes between the transactions and the consideration of the matter by the assessing authority. Long delay thus is not in the interest of either the assessee or the State.”

The Supreme Court did not categorically say that long delay in completion of assessment would invalidate the assessment. On the other hand, the Court dismissed the writ petitions under consideration taking into account the fact that the assessee filed the quarterly returns and paid the relevant taxes, refund of which could be sought by the assessee in the event the assessments were declared void thereby creating an anomalous situation, viz., the taxes collected by the registered dealers from the customers on behalf of the States would have to be refunded to them.

A perusal of the decisions of the Courts discussed above would, at once, show that they all deal with fiscal statutes where the interests of the Revenue and that of the citizen, the taxpayer, were involved. Taking this aspect into consideration, the Courts appear to have laid down the following propositions : (a) Merely because there is no time limit prescribed for completion of a proceeding, the concerned authority cannot be allowed to complete the proceedings after any length of time.(b) A long delay in completing a proceeding does not automatically render it unsustainable. (c) A long delay which is inordinate or unreasonable may be justified in the particular facts and circumstances of a given case. (d) It is only unjustified and inordinately long delay which may render the concerned proceedings unsustainable, particularly as such a delay would place the citizen in a great disadvantage in the matter of tendering evidence, documentary or oral. (e) What is inordinate delay and whether the delay is unjustified are essentially questions of fact to be decided by the authority before whom they can be raised, e.g., the Tribunal. A delay of two years may be considered too long in some cases and even a delay of ten years may not be so considered in some other cases. If declaring a proceeding invalid because of long and unjustified delay would create an anomalous situation, the Courts may not be prepared to declare the proceedings void. Keeping the above propositions in view, we have examined the case before us. Properties in question were acquired way back in 1973 and 1974. The appellant had been carrying on a petty business in grocery goods and did not have any taxable income. After getting a report from the ITO, B-Ward, Dhubri, in 1980, the Competent Authority took more than seven years to record his reason for forming the belief for issuing a notice under s. 6(1). There was no explanation forthcoming for justifying the delay. The appellant not being obliged to keep any accounts was obviously placed in a difficult position in the matter of tendering evidence regarding the source of acquisition of the properties specified in the notice under s. 6(1). We, therefore, hold that the delay in initiating the proceeding for forfeiture of property in this particular case was inordinately long and without any justification and we, accordingly, hold that the order of the Competent Authority made on 25th Aug., 1988, in pursuance of the proceeding initiated on 23rd Dec., 1987, is not sustainable. The order is, accordingly, set aside.

In view of out setting aside the order of the Competent Authority, we find it unnecessary to consider and decide on other grounds raised by the appellant.

D. R. KHANNA (CHAIRMAN) :

I am in respectful agreement with the order of may learned brother that the delay in initiating proceedings for forfeiture of property in the present case was inordinate and without any justification and as such the proceedings cannot be sustained. Earlier, in F. P. A. Nos 3 and 4 (Cal ) of 1989–Chandan Kumar Saha vs. Competent Authority (1989) 179 ITR 183, this Tribunal, by its order dt. 11th April, 1989, adversely commented upon such delays. The inordinate delay of more than ten years was held to have vitiated the proceedings under the SAFEMA.

This Tribunal had, in Mira Rani Mazumdar’s case (1987) 166 ITR 230, similarly taken note that though no time factor was prescribed with regard to the forfeiture of assets under the SAFEMA, still a reasonable time-limit has to be kept in view and no long-buried graves should be dug out. This would appear appropriate also as human memory limitations to explain the source of acquisitions of the properties long back cannot be ignored.

Under the Narcotic Drugs and Psychotropic Sustenance (Amendment) Act, which has analogous forfeiture provisions of the SAFEMA, s six-year limitation has been prescribed forfeiture of properties. Commencement of proceedings and forfeiture of properties long after their acquisitions is bound to adversely affect and prejudice the person proceeded against. His memory may fade out and the evidence of the acquisition of the asset may also no longer be available. The position becomes more indefensible when the present holders are required to explain the sources of acquisitions made long back by their ancestors. It also adversely reflects on the working of the office of the Competent Authority. As noted by my learned brother, having received the report from the concerned ITO in 1980, for no explainable reason, the Competent Authority did not proceed with the matter and allowed the proceedins to just hang on for over seven years. Such like inaction and delay, apart from dereliction of duty and responsibility enjoined under the Act, unnecessarily raise suspicion.

[Citation :181 ITR 206]