Appellate Tribunal For Forfeited Property : This appeal under s. 12(4) of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 (hereinafter referred to as the “Act”), had been moved by Fatima Mohamed Amin against the order dt. 24th Oct., 1986, of Miss Usha Savara, Competent Authority, Bombay, made under s. 7 of the Act.

Counsel Appeared

A. J. Rana with Raj Nangrani, for the Petitioner : S. C. Yadav with E. Anantakrishnan, I.O., for the Respondent

D. R. KHANNA, J.:

This appeal under s. 12(4) of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 (hereinafter referred to as the “Act”), had been moved by Fatima Mohamed Amin against the order dt. 24th Oct., 1986, of Miss Usha Savara, Competent Authority, Bombay, made under s. 7 of the Act. Thereby “Rose Villa” property, situated in Panchgani and belonging to the appellant was forfeited. Similar forfeiture was ordered of one-tenth share of the appellant in “Syed Villa”, Reynolds Road, Agripada, Bombay-8. At the same time, it was observed that since the unexplained investment 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 13th Sept., 1968, 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 s. 2(2)(c) of the Act. Reasons for doing so as envisaged by s. 6 of the Act were recorded on 29th Oct., 1976. They related to 7 per cent Gold Bonds, 1980, of the value of Rs. 72,270, balance in account No. 502 in the United Commercial Bank and one-tenth share in “Syed Villa” Reynolds Road, Bombay. No action was taken on the first two properties while the third was proceeded against. The basis made was that Syed Ahmed Hussain Bawamiya had been detained under the COFEPOSA Act, vide order dt. 19th Feb., 1975, of the Government of Maharashtra. By a detailed order dt. 5th July, 1980, the Competent Authority found that the appellant’s total investment in one- tenth share in “Syed Villa” amounted to Rs. 1,79,493 out of which she was able to explain the source for Rs. 98,854 only. The rest which was less than one half was held unexplained and, as such, though the appellant’s share in the property was held liable to forfeiture, an option was provided to her to pay a fine equal to one and one-fifth times the value of the unproved part under s. 9 of the Act.

It may also be mentioned that parallel proceedings against the appellant were also initiated with regard to her property “Rose Villa” at Panchgani which she had acquired for Rs. 60,000 on 5th July, 1976. Reasons for commencing forfeiture proceedings which were termed as additional reasons were recorded by the Competent Authority on 29th April, 1980, and there was a mention in them of the former proceedings already taken. The basis made for these proceedings was enlarged and it was stated that three of the sons had been detained under the COFEPOSA Act by the Government of Maharashtra in 1975-76, and further that Syed Murtaza Hussain Bawamiya had also been convicted under the Customs Act involving 2,210 tolas of gold as aforesaid. Though the person involved in both these proceedings was the appellant alone, they were proceeded with separately. Separate show cause notices were issued. The order with regard to “Syed Villa” was passed on 5th July, 1980, as aforesaid, while with regard to “Rose Villa” it was made on 12th Aug., 1980. In this latter order, it was found that Rs. 10,000 only out of the total investment of Rs. 60,000 stood explained, while the remaining Rs. 50,000 constituting the two loans of Rs. 25,000 each, stated to have been obtained by the appellant from M/s Hemang Bros. on 29th April, 1976, and Mr. Indulal P. Maniar on 3rd May, 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 Tribunal then, by an order dt. 20th Oct., 1981, quashed the forfeiture 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 s. 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 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 High Court, but the Competent Authority had, while making the order, recorded the additional reason of Murtaza Hussain Bawamiya having been convicted under the customs case as aforesaid.

The Competent Authority thereafter recorded fresh reasons on 3rd Dec., 1984, under s. 6 of the Act with regard to the appellant’s share in “Syed Villa” and made the conviction of Sved Murtaza Hussain Bawamiya under the Customs Act as the basis for commencing proceedings. Show cause notice was issued which was contested by the appellant by filing two replies on 24th May, 1982, and 17th June, 1982. The Competent Authority thereafter carried out investigation with regard to both the properties and by the consolidated impugned order dt. 24th Oct., 1986, directed forfeiture, subject to the right of the appellant to save “Syed Villa” from forfeiture on payment of fine under s. 9 of the Act as aforesaid.

11. Feeling aggrieved, Fatima Mohamed Amin has moved the present appeal before us.

12. Mr. Rana, learndd counsel for the appellant, has at the outset contended that so far as the appellant’s share in Syed Villa is concerned, the same could not be made the subject-matter of the impugned order of the Competent Authority. This property, it is pqinted out, was proceeded against on the basis that Syed Ahmed Hussain Bawainiya had been detained under the COFEPOSA and the appellant, being his mother, was holding this property on his behalf, and was, therefore, liable to forfeiture. Now that those forfeiture proceedings stand knocked down with the quashing of the detention order of Syed Ahmed Hussain Bawamiya, it was unwarranted for the Competent Authority to have started afresh, assuming that this property was held by her on behalf of Murtaza Hussain Bawamiya who had been convicted under the Customs Act. This shifting of the entire basis, it has been urged, should not be permitted, and factually also it was tantamount to virtually taking a contradictory stand. Recourse to the doctrine of res judicata has been taken to plead that once the property was taken to be of Syed Ahmed Hussain Bawamiya and the order of forfeiture reversed on the technical ground that the prerequisite for commencement of these proceedings no longer subsisted with the quashing of his detention order, fresh proceedings imputing the property to belong to Syed Murtaza Hussain Bawamiya cannot lie in 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. Sec. 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 s. 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 Parliament has no power to make laws and the source of which cannot be proved. Further, when the wide definition’ of “person” under s. 2(2) of the Act permits proceedings to be initiated against a large number of relations and associates of smugglers and foreign exchange manipulators, it is done with a view to pursue the properties in the hands of those relations and associates in whose names the smugglers and foreign exchange manipulators may have acquired properties.

13. It has also been pointed out that the two orders of the Tribunal made on the same day, viz., 20th Oct., 1981, rather go to show that the two properties were treated differently on the basis of the notices which had been issued under s. 6 of the Act. At that time, the Tribunal was aware of the conviction under the Customs Act of Syed Murtaza Hussain Bawamiya. However, since this conviction was not the basis for commencement of proceedings for forfeiture of the Syed Villa property, the proceedings qua this property were entirely quashed. As against this, Rose Villa property was allowed to be proceeded against because in the notice issued under s. 6 of the Act, reference had been made to the conviction under the Customs Act.

14. In support, reliance had been placed upon a number of decisions. Pritam Singh vs. State of Punjab, AIR 1956 SC 415, was referred to, in which case the effect of a verdict of acquittal under the Arms Act was treated as a finding that the prosecution had failed to establish the possession of certain revolver by the accused as alleged. The fact having been found against the prosecution, it could not again be sought to be proved against the accused in the subsequent proceedings under a charge of murder. The former decision was held to operate as res judicata in criminal trial so far as the latter case was concerned.

15. Manipur Administration vs. Thockchom Bira Singh, AIR 1965 SC 87, has next been cited in support of the contention that the rule of issue estoppel in a criminal trial is that where an issue has been tried by a competent Court on a former occasion and a finding has been reached in favour of the accused, such a finding would constitute an estoppel or res judicata against the prosecution, not as a bar to the trial and conviction of the accused for a different or distinct offence, but as precluding the reception of evidence to disturb that finding of fact when the accused is tried subsequently even for a different offence which might be permitted by the terms of s. 403(2) of the CrPC. 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 vs. 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 under the COFEPOSA Act, it was only for providing the initial basis for commencement of the proceedings and thereafter the whole gamut shifted to the source of acquisition in the hands of the appellant. Since the present appellant happened to be his mother, recourse against her was found permissible under the law. That basis for proceeding against her existed not only because of the detention of this son, but also of the other sons, and further on account of the conviction under the Customs Act of Syed Murtaza Hussain Bawamiya. Although those detentions now stand quashed, the conviction still subsists, and that by itself provides enough basis for proceeding against the appellant. Any omission by the Competent Authority at that stage to make mention of the conviction also would not vitiate the pursuit (for forfeiture) of illegally acquired properties. It was the basic character of acquisition of this property by her and the source thereof which was relevant in the previous proceedings and is the crucial query in the present one. The ground for proceeding against her because of the conviction of her son exists and has not been set aside. As such the assumptions, if any, taken earlier, in no way negative the assumptions now treating that the property could as well be the illgotten assets of Syed Murtaza Hussain Bawamiya.

It has next been urged that when there was no adjudication on merits and the proceedings got quashed on the technical ground of the detention having been quashed, it could not be held that the matter had been heard and finally decided and as such there was no question of operation of res judicata. There need not be a direct nexus between the smuggler and the person holding the property and the facts and circumstances of the acquisition need not be established by the Competent Authority. The onus is rather on the affected person to show through what source the acquisition was made and if he fails to do so, the property is liable to forfeiture irrespective of the non- establishment of nexus between the smugglers and/or foreign exchange manipulators. Two decisions of the Tribunal under the Act have been referred to. The first one was FPA No. 67/1978-79—Gangadevi S. Salanki vs. Competent Authority, Bombay, decided on 7th June, 1979. The learned Bench of the Tribunal, after referring to sub-cl. (iii) of s. 3(1 )(c) of the 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 acquiredproperties. 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. . . .”

20. The second decision referred to is FPA No. 17/BOM/85—Syed Mohd. Iqbal Bawamiya vs. Competent Authority, Bombay, decided on 25th Sept., 1985. The facts of that case were exactly similar to the one now before us. The appellant there was another son of the present appellant. Forfeiture proceedings against him were commenced under the Act on the basis of his brother, Syed Ahmed Hussain Bawamiya, having been detained under the COFEPOSA Act. Some of his properties were, as a result, forfeited by the Competent Authority. Later, when the detention order of the brother under the COFEPOSA Act was quashed by the Bombay High Court, the Tribunal allowed the appeal against the forfeiture order and quashed the same on the ground that the very basis for commencing proceedings under the Act had been eliminated. Subsequently, the Competent Authority issued a fresh notice under s. 6 of the Act making the conviction of Syed Murtaza Hussain Bawamiya under the Customs Act as the basis and forfeited certain properties. The matter then came up before the Tribunal and it was sought to be urged that the previous decision of the Tribunal quashing the forfeiture order operated as res judicata and an estoppel and, therefore, no new order of forfeiture under the Act could be made. The learned Bench of the Tribunal rejected this by observing as under: “…… There was thus no occasion for the Tribunal to consider whether mentioning of certain grounds in the order which did not find a place in the reasons, would support the very initiation of the proceedings. It is part of the law governing the doctrine of res judicata that once an appeal is filed, the decision loses its character of finality and what was once res judicata becomes res sub judice. The judgment of the appellate Court will operate as res judicata only in regard to matters that had been adjudicated upon by that Court or findings of the lower Court that have been adopted by the appellate Court. In the case of the appellant, the Tribunal confined itself to the limited question of the validity of the issue of notice under s. 6(1) on the basis of the reasons recorded and set aside the order of the Competent Authority. The Tribunal did not adjudicate on the question whether the conviction of the appellant’s brother, Shri Syed Murtaza Hussain Bawamiya, which fact did 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 s. 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 s. 7(1) of the Act, must accordingly fail ……..”

21. The present Bench of the Tribunal had occasion also to make some observations on the propriety of this nexus concept, in the decision in Mira Rani Mazumdar vs. Competent Authority (1987) 166 ITR 230 (ATFP). It was observed as under : “It is, therefore, obvious that the central theme which intertwines the provisions of the Act has essentially reference to smuggling activities and foreign exchange manipulations. In the process of forfeiture of property, therefore, this basic underlying object cannot be ignored. Of course, s. 3(1) (c), while defining any illegally acquired property, envisages that any income or earnings or assets derived or obtained from or attributable to any activity prohibited by or under any law for the time being in force relating to any matter in respect of which Parliament has power to make laws, can be forfeited. Such ill-gotten acquisition need not have arisen after the commencement of this Act but could be traced to a period earlier also. Clause 3, however, is broadly worded to bring within its ambit any property acquired by income or assets the source of which cannot be proved and which cannot be attributable to any act over which Parliament has no power to make laws. It is a moot question whether this clause engulfs within its scope acquisitions of properties which are not corelatable to smuggling activities or foreign exchange manipulations in case the source is unexplained as understood within the concepts known to the income-tax or wealth-tax laws. Those laws of their own are independent and selfcontained, and make ample provisions for levy of taxes and penalties, and launching of criminal prosecutions. Under them, the undisclosed income need not have their base in smuggling and foreign exchange manipulations, and may in fact be the result of legitimate activities, but on which taxes are not paid. …”

22. Further, it was observed as under : “Apart from the said placement of the burden of proof on the person affected, s. 2 renders the scope of the Act far wider and operates to cover cases of relatives, associates and confidants. Their definitions have been wide-embracing, covering all near relations of the person affected and of his or her spouse. Partners and even persons residing in the residential premises of such persons or managing their affairs and accounts are as well not left immune. This is also explainable as not unoften clandestine holding of properties in other persons’ names by smugglers and foreign exchange manipulators has widely come to prevail. Naturally, therefore, the properties have to be traced and pursued in their hands. The subterfuge and camouflage enacted in this regard have to be lifted and the ill-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.”

23. 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 vs. Competent Authority, Bombay, whether a subsequent notice under s. 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 deliberations to the entire matter, we are not inclined to take a view different from what was taken by the said learned Bench of the Tribunal. The detention under the COFEPOSA Act of Syed Ahmed Hussain, no doubt, provided the basis initially for starting forfeiture proceedings against the present appellant. She was subjected to them as she happened to be the detenu’s close relation. She was, therefore, required to explain the source of acquisition of the two properties. The ground of detention, however, later disappeared, but the conviction part still subsists.

24. There is next little scope for doubt that this enactment has been brought on the statute book to provide for forfeiture of illegally acquired properties of smugglers and foreign exchange manipulators. This forfeiture can be effected irrespective of whether the properties are held by the smuggler/foreign exchange manipulator himself or by him in the name of his relations, associates, etc., as detailed in s. 2(2) of the Act. The property can be pursued in their hands as well. At the same time, it must also be taken note of that the scope of this enactment cannot be misconstrued or enlarged as if it is a parallel enactment for forfeiture of properties of income-tax or wealth-tax evaders. Their cases are adequately dealt with by the concerned independent Acts. There are ample provisions in them for taxing such evasions, levying penalties and launching prosecutions. Those laws are already playing their roles. It has, therefore, to be recognised that the present enactment basically deals with another class of socio- economic offenders which have not been provided for in the other two enactments. Thus, the prerequisite for proceeding under this Act is violation of the Customs and/or Foreign Exchange Regulation Acts and detention under the COFEPOSA Act which too has a bearing on foreign exchange violations. Income-tax and wealth-tax violations are not covered by this statute. It is correct that s. 3(1)(c), while defining “illegally acquired property”, considerably enlarges its scope in cl. 3 when it includes within its ambit any property acquired by means of any income or assets, the source of which cannot be proved, and which is not attributable to any act over which Parliament has no power to. make laws. This clause can be stretched to include income-tax and wealth-tax evasions also. 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 vs. Competent Authority (supra), mentioned the desirability of the nexus. Sec. 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 s. 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 benami in the name of a relation, associate or others. The prerequisite is relevant for the purpose of providing a base for commencement of the forfeiture proceedings only. Once they have been set into motion and the prerequisite continues to subsist, the onus of proving the source of acquisition in whosesoever name the property is held, rests on him. If he is not able to establish the same by the rule of preponderance of probability, the property is liable to forfeiture. There has to be no clear cut finding at the final stage of the nexus or the property in reality belonging to the smuggler and foreign exchange manipulator. This is precisely what has happened in the present case. The detention of Syed Ahmed Hussain only provided the prerequisite or base for commencement of forfeiture proceedings. There was no finding that the two properties held by the present appellant in fact belonged to her. At the most, it could be said that an assumption was drawn in this regard. His detention was later on quashed and the proceedings, therefore, fell through. However, now when the conviction of Murtaza Hussain under the Customs Act has been taken note of and recognised, the basis for commencement of the proceedings under the Act clearly exists and the assumption with regard to properties can as much be drawn of a nexus qua him. No positive finding here again about this has to be given. In case the present appellant fails to discharge the onus and establish the source of acquisition of these properties, and she being such a close relation of the convict, she can surely be proceeded against and forfeiture directed. We, therefore, do not see any bar to the commencement of the present proceedings.

At the same time, we must observe that the Competent Authority ought to have at the first stage itself taken note of all the facts and circumstances which could provide a basis for proceedings under the Act. If there are more than one reason, they should be incorporated in the notice under s. 6 and the order under s. 7. Proper vigilance in this regard should be maintained. There is no point in adopting one of the reasons only and ignoring others, as a stage can come where the former may be knocked out. Subsequent commencement of the proceedings on the basis of other reasons not only prolongs the matters but also results in veritable multiplicity of proceedings, nay, even 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 7th May, 1976, for a consideration of Rs. 60,000. Of this amount Rs. 10,000 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 obtained by the appellant from M/s Hemang Bros. One H. J. Khokar who had acted as broker in this loan transaction was examined and he confirmed having so acted but added that K. G. Vohra, Prop., M/s Hemang Bros., had expired a year earlier. His son Hemang was, therefore, called to throw light on the matter and examined. He, however, showed his ignorance on the affairs of his father and even did not know if he was an income-tax assessee. He produced a photo copy of the bank account of M/s Hemang Bros. which showed that a cheque for Rs. 25,000 had been given to the appellant and cleared on 29th April, 1974. This was a shortterm loan and the amount was received back by his father within a short period. He also added that his father had received certain amount as interest from her but could not tell the amount thereof. One receipt for Rs. 750 was signed by him towards interest at the instance of his father. A careful perusal of the said bank account shows a clear pattern of deposits of various amounts from time to time, mostly in cash, and then the payments thereof within a day or shortly thereafter by cheques. This was a pointer to what mode name-lenders generally adopt when they have no cash or money available with them. Rather the persons seeking loans make their own money available to such name-lenders and then a semblance of genuineness is sought to be created by the passing on of the loan amounts by cheques. Enquiries from the IT Department revealed that M/s Hemang Bros. were not assessed to income-tax. The amount of the loan was thus not reflected in any of the returns. The entire amount of Rs. 25,000 was deposited in cash in the bank account of his concern about a week before the clearance of the cheque which was issued to the appellant. A receipt purported to have been issued by M/s Hemang Bros. to the appellant dt. 22nd Dec., 1976, has been produced to show that this amount of Rs. 25,000 was returned by a cheque on Memon Co-op. Bank Ltd. This does not appear to be correct as the written submissions dt. 14th Aug., 1979, made by the appellant’s Chartered Accountants, M/s Desai & Desai, go to show that the account in that bank was opened only on 1st Nov., 1977. With this state of evidence on record, we are unable to differ from the learned Competent Authority in holding that the so called loan transaction from M/s Hemang Bros., was 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 per cent, of the source of investment may be found explained while 51 per cent 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 s. 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 may be later quite small, nay, insignificant, considering the overall value of the property at the time of forfeiture. The analogy of justifying forfeiture of the vehicle, which may have been legitimately purchased, and in which contraband, opium or illicit liquor are carried, may not be very helpful inasmuch as the forfeiture there does not result from the ownership itself but the user and involvement of the vehicle in the commission of the crime.

However, I am restraining myself from expressing any opinion on the reimbursement of the legitimate amount of investment in property to the affected person since none of the parties before us has raised this plea at the Bar. The decision in this regard may be of far-reaching consequence in the operation of the Act and in a large number of appeals that may come up for hearing before the Tribunal. It would be, therefore, in the fitness of things, that no firm opinion is expressed on this controversy till the matter is raised specifically in some appeal and opportunity allowed to both the sides to advance arguments and substantiate their cases. I am, therefore, not inclined in the circumstances of the case to direct arty reimbursement.

The next property is the appellant’s one-tenth share in flat No. 5-A, Syed Villa, Bombay. That share had cost the appellant Rs. 1,79,493 and the same had been paid in instalments at different stages from 1972 to 1977. Out of the same, the genuineness of the source of Rs. 98,854 was accepted by the learned Competent Authority, and this is, therefore, not open to review before us. Since this amount exceeded 50 per cent of the cost of acquisition of this property, the benefit of s. 9 of the Act was given to the appellant and she was made entitled to save forfeiture on payment of a fine equal to one and one-fifth times the value of the unproved part. The fine thereof comes to Rs. 96,767.

The unproved amount consisted of several items. The first was of Rs. 23,750 paid on 30th July, 1972. The appellant had claimed that this represented the accumulated interest on National Defence Gold Bonds and savings from household expenses. That the appellant was possessed of Gold Bonds has not been disputed. However, it was not accepted that she was accumulating interest and other savings from household expenses, and keeping such large amount at home, while admittedly she had a bank account. The appellant’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 s. 271(4A) of the IT 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 CIT 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 be bound by any finality that may be attached to the acceptance of a settlement petition under s. 271(4A) of the IT Act, still, a decision given by the CIT remains relevant for the present Act and cannot be lightly ignored. This is more so when the CIT had the occasion to adjudicate on the matter much nearer to the time when the investment happened to be made. That was some time in 1974. It would be, therefore, hazardous for us to come to a different opinion now after about 15 years of the investment. We are, therefore, inclined to accept this investment as coming from an explained source.

37. The next amount of Rs. 30,000 was paid by the appellant from her bank account. The case set up has been that a consortium of eight persons including the appellant who were all family members, won a jackpot of Rs. 3,91,677 in horse-racing on 1st Jan., 1973, and the share of the appellant came to Rs. 47,730. This was received by her by a cheque from the Western India Turf Club Ltd. on 13th Jan., 1973, and credited to her bank account. It was duly declared by her in her income-tax return of the concerned year and after allowance of permissible statutory deduction of Rs. 1,000, the rest was taxed. That tax came to over Rs. 20,000 and was duly paid. Out of that amount of Rs. 47,730, the amount of Rs. 30,000 was paid by the appellant as one of the instalments towards her share in “Syed Villa” on 6th Jan., 1976. The learned Competent Authority, however, disbelieved the story of jackpot and was of the view that this was a mode enacted by the appellant and her relations to legitimise her illgotten money.

Reference in this regard was made to the following observations of the Tribunal in the case of Syed Mohamed Taher Bawamiya, who was one of the co-sharers in jackpot, in FPA No. 16 of 1978-79 : “… We
have perused the entire statement of the appellant and find that it does not inspire confidence.  We are inclined to agree with the findings of the Competent Authority that the sum of Rs. 47,730 was not winnings from the jackpot but was income from some source which the appellant has failed to prove …”

The learned Competent Authority has also observed that the appellant in the present case was required to be produced so that she could be examined on the genuineness 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 cosharers 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 the appellant or any of her family members purchased the same, and then decided to form the consortium of co-sharers so as to distribute the tax effect. It has not been disputed that sometimes such clandestine modes are adopted by unscrupulous persons to convert their black money into white. However, no presumption car be drawn that this happens in all cases. The question to be considered is whether the learned Competent Authority was able to gather any material which could be a pointer to such dubious act in the present case. The Turf Club authorities could have been examined, but this does not appear to have been done. The presumption created by the issue of the chit and the crossed cheque in the appellant’s favour, therefore, cannot be considered as rebutted on mere surmise or conjectural possibility. The appellant received the money by crossed cheques and deposited the same in her bank account. She paid substantial tax of Rs. 20,000 on the same. In her income-tax assessments, the validity of this jackpot was not questioned. In fact, we are told, that in the case of seven co-sharers, the jackpot story was accepted. It was only in the case of one of them that the amount was treated as unexplained and added back as income from undisclosed source. The investment in the property took place almost three years after the winning of the jackpot. The story was, therefore, not created when the money was actually needed for investment.

It is correct that jackpots are not readily won. They require deep study into the class of horses which take part in the racing and other niceties of the game. It is not shown that the appellant had been earlier or thereafter taking part in similar horse-racing, though there is no evidence to the contrary either. At the same time, it has to be noted that when the jackpot was shared by eight persons, all need not have been experts. It was a family group and any one of them might have bet rightly, and then thought it wise to associate others in order to disburse the money for tax relief. One major circumstance which, however, goes against the appellant is that she failed to make appearance before the Competent Authority when she was called upon to do so. She also did not get herself examined by the CIT so appointed. Her examination could have revealed how much she knew of racing and whether the presumption created by the 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 IT 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 IT 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 ignored nor treated as obliterated. We are, therefore, inclined to accept the legitimacy of the source of Rs. 30,000. It is held accordingly.

The Competent Authority has next referred to five investments of Rs. 10,000 each made by the appellant in the months of August and September, 1977, towards this property. This amount was said to have been obtained from the appellant’s husband, Kazi Mohd. Amin Abdul Rehman, who had in turn drawn the same from the firm “Amin & Bawamiya”. This firm was formed in April, 1971, of three partners who were the appellant’s husband and two sons. The investment of Kazi Mohd. Amin Abdul Rehman in the same was Rs. 500 only. This firm had taken on lease from another firm, Syed Bros. (formed on 12th Dec., 1970), the building known as “Oomrigar building”, under a deed dt. 20th July, 1971, at an annual rent of Rs. 5,484. M/s Amin & Bawamiya, in turn, gave part of that leasehold “Oomrigar building” to the United Commercial Bank on lease and licence basis for a period of 10 years under a deed dt. 26th Aug. 26, 1971, on a monthly compensation of Rs. 5,000. That bank next advanced a loan of Rs. 4,11,620 to “M/s Amin & Bawamiya” on 9th Sept. , 1971, and as a security, M/s Syed Bros. who were the owners of the Oornrigar building deposited the title deeds with the bank intending to create an equitable mortgage. Out of that money, M/s Amin & Bawamiya advanced loans to M/s Kasimali & others who were constructing
“Syed Villa” on an interest rate of 12 per cent per annum.

In this manner, it was claimed that M/s Amin & Bawamiya were in receipt of not only rent/compensation from the said bank but also interest from M/s Syed Kasimali & others. The account of Syed Kasimali in M/s Amin & Bawamiya in the year 1977 reflected over Rs. 50,000 which he then gave to the present appellant as loan which was in turn invested by her in the building in dispute.

The firm, Syed Bros., itself was constituted in December, 1970, of five partners, three of whom were the sons of the appellant and the other two, the wives of the other two sons. This was thus a closely knit family concern and so was the firm, Amin & Bawamiya. M/s Syed Kasimali and others, the builders of the building “Syed Villa” was also constituted of close relations. In this manner, a subtle arrangement was effected amongst the family members which not only enabled them to disburse 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 s. 271(4A) of the IT Act before the CIT 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 CIT 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 from unexplained sources.

We are satisfied that the case of savings from stitching and embroidery was a made up story and the CIT and the learned Competent Authority seemed justified in not placing any reliance on the same. What followed thereafter was a rigmarole affair of one set of relations passing on the property to the other set and later obtaining a loan from bank and then passing it on to others. Thus Kazi Mohd. Amin Abdul Rehman with an investment of Rs. 500 was said to be in a position to advance a loan of Rs. 50,000 to the appellant. Sec. 3(1)(c), while defining “illegally acquired property”, provides in sub-cl. (iv) that any property acquired by any means wholly or partly traceable to any property referable to sub-cls. (i) to (iii) or the income or earnings from such property also acquires the character of illegally acquired property. The implications of sub-cls. (i) to (iii) have already been discussed above. It, therefore, follows that with the original source of investment being illegal, anything subsequently acquired through the instrumentality or income of that property acquires the same character.

In our considered opinion, the nature of this Rs. 50,000 cannot but be held as “illegally acquired property” under cl. (iv) of s. 3(1)(c). The source of investment of the partners of Syed Bros. in Oomrigar Building has been extremely doubtful, and for the limited query that is before us in this appeal about the legitimacy of Rs. 50,000, we have nothing to hold that the conclusion arrived at by the learned Competent Authority was unjustified and, therefore, should be interfered with.

A rigmarole process was adopted by the close-knit family members of one group passing on the money and the property to the other and so on, and then obtaining a loan from the bank and also giving on lease/ licence a part of the property to the bank. We, therefore, hold that the source of this money has not been established as legitimate.

The position that has now emerged from the discussion above is that the total investment which the appellant made towards her share in “Syed Villa” was Rs. 1,79,493. Out of this, the sum of Rs. 98,852 was accepted as legitimate by the learned Competent Authority. We have further accepted the two amounts of Rs. 23,750 and Rs. 30,000 as explained. The total of these comes to Rs. 1,52,602. 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 s. 9 of the Act.

49.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 s. 9 to pay a fine equal to one and onefifth 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.

50. 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 appellant’s share in Rose Villa, we regret, we have to differ from the learned Chairman for reasons given in the next para.

2. Proceedings under the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976, are taken for forfeiture of illegally acquired properties. There is no provision in the Act requiring payment by Government of an amount equal to the legitimate funds used in acquiring the property under orders of forfeiture.

“Illegally acquired property” has been defined, inter alia, to include property which has been wholly or partly acquired by means of income, earnings or assets the source of which cannot be proved. Only in cases where the unproved portion is less than 50 per cent, a provision has been made to give the affected person an option to pay a fine equivalent to 120 per cent of the unproved portion. In making this provision, the legislature has already taken into account the extent to which the forfeiture will be mitigated in respect of property acquired with both legal and illegal funds. It is not permissible to alter this basis on equitable or compassionate grounds by ordering the Governmerit to pay to the affected person an amount equal to the proved portion of funds used in acquisition of an illegally acquired property. There is no reported case under the SAFEMFOPA to which we may turn for guidance.

We may, however, notice that the provision under the M. P. Opium Act for compulsory confiscation of property used in transporting opium, i.e., vehicles even of innocent persons, has been upheld as valid and also necessary for prevention of smuggling of opium (Mehtab Singh & Sons vs. M. P., AIR 1965 MP 36) (referred to in Seervai’s Constitutional Law, Vol. 1, p. 587, 3rd edn). This case is under a different enactment and the learned Chairman has rightly observed that the forfeiture under those laws proceeds from the user of the vehicle in committing the crime and not from the ownership as under the present enactment. But such laws still serve to remind us that where the malady sought to be curbed is so heinous and its suppression so desirable, our legal system does riot hesitate to promulgate laws which seek to forfeit properties of associates also who may be otherwise innocent. Suppression of smuggling and foreign exchange manipulations is also an extremely desirable social purpose which requires strict enforcement. In the statement 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 illgotten 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 as to effectively prevent the smuggling and other clandestine operations.”

3. The activities sought to be suppressed by the Act have lately acquired more dangerous proportions and require the enforcement of the law all the more strictly. Considerations of equity are invoked in cases of persons who come with clean hands. But here is a case where properties have been acquired mainly out of unproved funds. Considerations of morality, if importing such considerations can be termed proper in the present context, require that close relatives of smugglers dissuade them from such anti-social and anti-national activities. But if, on the other hand, the relatives choose to play with fire and seek to benefit from the illegal activities of such persons, they should not complain of burnt fingers. We also consider that when a property is acquired with both legitimate and illegitimate funds, the legitimate portion, which was separable prior to investment, no longer remains so after the investment in the property.

4. If the above considerations prevail, the case of illegally acquired properties only a part of which is explained to have come from legal sources and which do not fall within the exception in s. 9(1) of the Act, as in the present case, does not require any softening down of the rigours of forfeiture and by the same token, no amount would be payable by the Government to the appellant on taking over the possession of such forfeited property. Apart from this, we have also to consider the question of competence of this Tribunal to make any directions for reimbursement of the proved portion of the investment in an illegally acquired property. Since these rival points have not been argued at the bar, the learned Chairman has rightly refrained from directing any reimbursement.

Subject to the above remarks, we are in agreement with the rest of the judgment.

[Citation : 169 ITR 737]