Allowed

FPA-37/DLI/2015 of Manpreet Singh Oberoi v/s The Competent Authority, Delhi

ATFP2 Dec 2016FPA-37/DLI/2015

Case brief

AI extract

What is this about?

This appeal challenged a forfeiture order against M/s Oberoi Industries and M/s Oxford Fashion. The Tribunal held the appeal allowed, quashing the order because the Competent Authority failed to record valid satisfaction linking the properties, purchased in 1993, to the alleged fraudulent export activities occurring later.

What did the court decide?

The impugned forfeiture order quashed; attached property released; show-cause notice discharged.

FPA-37/DLI/2015 of Manpreet Singh Oberoi v/s The Competent Authority… — Corruption | ATFP (2016)

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APPELLATE TRIBUNAL

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(Under Section 12 of SAFEMA, 1976 as Amended by Finance Act, 2016)

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Date of Judgment: 2^nd December, 2016

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MP-102/DLI/2016 (E.H.) MP-103/DLI/2016 (Stay)

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FPA-37/DLI/2015

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Manpreet Singh Oberoi … Applicant/Appellant Versus The Competent Authority, Delhi … Respondent

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Advocates/Authorized Representatives who appeared

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For the appellant	: Shri Naveen Malhotra, Advocate
For the respondent	: Shri D.S. Bisht, Joint Commissioner
CORAM
JUSTICE MANMOHAN SINGH	: CHAIRMAN
SHRI G.C. MISHRA	: MEMBER
SHRI B.K. BANSAL	: MEMBER
JUDGMENT
JUSTICE MANMOHAN SINGH	: CHAIRMAN

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MP-103/DLI/2016 (Stay) & FPA-37/DLI/2015

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The appellant Manpreet Singh Oberoi has filed the present appeal under Section 12(4) of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 (hereinafter referred to as the “SAFEMA”) against the impugned forfeiture order passed on 4^th March, 2016 by the Competent Authority, SAFEMA, New Delhi.

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The following properties of the appellant have been ordered to be forfeited:-

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FPA-37/DLI/2015

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Page 1 of 20

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Sr.No.	Description of Properties	Value as shown by the AP	Value property the report	of as valua	the per tion
1.	M/s Oberoi Industries, 2/1B, Anand Parbat Industrial Area, New Rohtak Road, New Delhi	Rs.28,000/-	Rs.12,04	,446	/-
2.	M/s Oxford Fashion, 2/1B, Anand Parbat Industrial Area, New Rohtak Road, New Delhi.

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Brief facts of the matter are that an order of detention vide Order No.673/32/2002-Cus. VIII dated 23^rd October, 2002 was passed against the appellant under Section 3(1) of the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (in short, called as “COFEPOSA) by the Joint Secretary to the Govt. of India, Ministry of Finance, Department of Revenue, New Delhi against the appellant who was detained on 29^th August, 2003 and the said order of detention was confirmed by the Advisory Board vide Confirmation Order F No.673/32/2002-Cum, VIII dated 10^th November, 2003. While passing the said detention order under Section 3(1) of the COFEPOSA, it was observed that on the basis of the specific intelligence gathered by the Directorate of Revenue Intelligence, Delhi Zonal Unit, New Delhi, it transpires that the appellant along with his associates was engaged in the fraudulent export of cheap quality of automotive parts (Fuel Pump, Diaphragm)/Microphones & Readymade Garments under Duty Entitlement Pass-book Scheme-cum-Export Promotion Capital Goods Scheme, DEPB-cum-Drawback scheme and Duty Free Replenishment Certificate-cum-Drawback Scheme in the name of various entities created either in his name or in the names of his relatives/associates.

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It is the case of the respondent that the modus-operandi adopted by the appellant and his associates was to value the consignment

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FPA-37/DLI/2015

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Page 2 of 20

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declared before India Customs at exorbitant prices whereas the same consignment was declared before the Custom Authorities of importing countries at a much lesser price, i.e. about hundred times less than the price declared before the Indian Customs. Even the documents were made by forged signatures. Not only mis-declaration of value was committed but the goods exported were also of a cheaper quality than declared before the authorities. It is stated that the appellant in collusion/connivance with his relatives/associates was indulged in prejudicial activities and had derived income therefrom. The income earned out of the aforementioned activities was not only enjoyed by the appellant but also shared by him with other who was associated with him in the abovementioned fraudulent activities. Therefore the appellant is a person covered under Section 2 (2) (b) of the SAFEMA and accordingly, all the properties acquired out of illegal income by Sh.Manpreet Singh Oberoi either in his name or in the name of his relatives/associates are liable for forfeiture within the meaning of the provisions of SAFEMA.

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Accordingly, show-cause notice dated 29^th March, 2005 under Section 6(1) of the SAFEMA was issued to the appellant asking him to explain the sources of income/sources out of which the right, title and interest in the properties mentioned in the schedule of properties have been acquired and as to why such properties should not be declared as illegally acquired properties and forfeited to the Central Government under the provisions of SAFEMA.

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In reply to the show-cause notice, the appellant filed an affidavit dated 25^th March, 2006, deposing that he had purchased the property situated at 2/1-B, Anand Parbat Industrial Area, New Rohtak Road, New Delhi from Sh. O.P. Narula son of Sh. Diwan Chand Narula, resident of 6/38, Joshi Road, Karol Bagh, New Delhi, on 26^th March, 1993 for a total

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FPA-37/DLI/2015

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Page 3 of 20

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consideration of Rs.28,000/-. He was 19 years old at the time of purchase of the said property. It is stated by him that his mother Smt.Amarjeet Kaur Oberoi was working in the Ministry of Defence, Government of India, since 1962 and later on she was promoted to the rank of Senior Computer Operator and she retired on 7^th August, 2001 as Data Programming Assistant. The salary of his mother at the time of her retirement was Rs.6,725/- and in 1993, it was around Rs.4,000/- to Rs.5,000/-. He further deposed in the affidavit that his mother gave him Rs.15,000/- for the purchase of the abovementioned property out of her savings which she had made since 1962.

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It is also stated in the said affidavit that his father was running a plastic factory since 1982 in the name of Diplomat Plastic Industries and he gave him Rs.8,000/- out of his own savings for the purchase of the abovementioned property. The remaining amount of Rs.5,000/- was paid by the appellant for the purchase of the abovementioned property out of his own savings which he had made out of the pocket money which his parents used to give to him and the appellant also used to do certain jobs in his holidays and he saved money out of his earnings. He was also helping his father in his business. The said property was acquired legally by him and thus, the same is not liable to be forfeited by the Central Government. It is further stated by the appellant that he was staying with his mother and sister at the residential premises situated at F-72, Ground Floor, Mansarovar Garden, New Delhi.

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On the similar lines, the mother Smt.Amarjeet Kaur has also filed her affidavit, stating that her son Manpreet Singh Oberoi had purchased the above said property from Sh. O.P.Narula. She was working in the Ministry of Defence since 1962. Later, she was promoted to the rank of Senior Computer Operator and she retired on 7^th August, 2001 as Data Programming Assistant. Her salary at that time was Rs.6725/- and in

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FPA-37/DLI/2015

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Page 4 of 20

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1993 it was around Rs.4000/- to Rs.5000/-. She gave Rs.15,000/- to the appellant for the purchase of the abovementioned property out of her savings which she had made since 1962. She has also confirmed that she is staying with her son and daughter at the residential premises as stated by the appellant.

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In support of the contentions raised by the appellant in his affidavit, copies of various documents were also filed which are as under:-

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(i) Copies of the affidavits dated 25^th March, 2006 sworn in by Smt.Amerjeet Kaur mother of the appellant regarding submission and sources of investment in purchase of property bearing No.2/1B, Anand Parbat Industrial Area, New Rohtak Road, New Delhi.

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(ii) Copy of receipt dated 26^th March, 1993 for Rs.28,000/- for payment of the aforesaid property.

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(iii) Copy of unregistered General Power of Attorney (GPA) executed between Sh. O.P. Narula and Sh.Manpreet Singh Oberoi in respect of the above said property.

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(iv) Copy of unregistered sale agreement made on 26^th March, 1993 between Sh. O.P.Narula and the appellant.

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(v) Copy of affidavit (on a plain paper) sworn in by Sh. O.P. Narula regarding sale and transfer of property in question.

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(vi) Copy of pensioner‟s identity card of Smt.Amerjeet Kaur.

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On merit, the case of the appellant that the said two firms were not in existance at the releveant period of alleged crime in the year 20002001. It is stated that at the time of purchasing the property he was only helping the business of his father in a plastic factory at the same

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FPA-37/DLI/2015

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address. The Oxford Fashion and Oberoi Industries were owned by the appellant but the business in the said firms were being carried out by Shri Tejwant Singh who was controlling these two firms in the year 2000 when the same were established. The appellant although was the proprietor but was not aware and had no role in the day-to-day activities and export operatoin of these two firms from the period November, 2000 to May, 2001. Shri Tejwant Singh was arrested on 6^th November, 2001 and was graned bail on 7^th January, 2002.

¶42

After considering the said documents and affidavits, the Competent Authority has come to the conclusion that the appellant has failed to discharge the burden of proof as required under Section 8 of SAFEMA despite of being given sufficient opportunities to do so. Therefore, the subject properties, i.e. (1) M/s Oberoi Industries, 2/1B, Anand Parbat Industrial Area, New Rohtak Road, New Delhi and (2) M/s Oxford Fashion, 2/1B, Anand Parbat Industrial Area, New Rohtak Road, New Delhi were ordered to be forfeited to the Central Government free from all encumbrances in terms of provisions of Section 7 (1) & (3) of SAFEMA. There were also findings that photocopies of the documents with regard to the property in question which was purchased in 1993 were unregistered/ unauthenticated documents. These documents were typed on plain papers with the names and signatures of the seller and purchaser. Therefore, the evidentiary value of the said documents is not sufficient to establish the fact that the property was purchased in the year 1993. The law requires that any sale-purchase agreement of immovable property has to be registered with the concerned revenue authorities, which has not been done in this case. The GPA submitted in this case is neither notarized nor registered as required by law. No evidence has been produced by the appellant that he was 19 years old when the said property was purchased. Therefore, the appellant has not

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shown any sufficient proof about the source of investment in the property.

¶46

The said impugned order was passed on 4^th March, 2016. The same was challenged by the appellant, inter-alia, on the grounds that the Competent Authority has recorded vague and invalid “Reasons to Believe” dated 29^th March, 2005 without any relevant tangible material and issued illegal Forfeiture Notice under Section 6(1) of the SAFEMA dated 29^th March, 2005 and the said order is in gross violation of principles of natural justice without any option under Section 9 to the appellant to pay the fine in lieu of forfeiture.

¶47

It is settled law and is also requirement of the provisions that the Competent Authority is required to show that there was sufficient material to form an opinion that the property under attachment was purchased or acquired under the proceeds of crime. Though burden of proving that the properties possessed by the accused person was not proceed of crime and the same were untainted properties, would be upon him. But the provisional attachment-order must record satisfaction about the reason to believe that the property in question in possession of the appellant was outcome of the proceeds of crime. In the absence thereof, it may result in frustrated proceedings.

¶48

It is argued on behalf of the appellant that the property in question was purchased in 1993. The Companies were incorporated in the year 2000 as per IEC Code. There cannot be any nexus that the property in question was purchased from ill gotten money and there is nothing mentioned in the reason to belief how the property in question is connected with the facts mentioned in reason to belief. The same does not generate honest and reasonable belief based on reasonable grounds, therefore, the so-called “Reasons to Believe” deserves to be quashed.

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FPA-37/DLI/2015

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Various judgments are referred by the appellant in the grounds IV to IX of the grounds of appeal.

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During the course of arguments, the learned counsel for the respondent has not disputed that the order of detention was passed against the appellant on 23^rd October, 2002 under Section 3(1) of COFEPOSA. He was also detained on 29^th August, 2003 and was in custody for about one year. It was also not disputed by the learned counsel for the respondent that the attachment properties were allegedly purchased on 26^th March, 1993 and there is also no contrary evidence on behalf of the respondent on record to prove that the said properties were not purchased in 1993. Learned counsel for the respondent on the last date, i.e. 26^th September, 2016 has made his submissions that the purported documents produced by the appellant were not the genuine documents and the same do not contain the notary stamp which is required under the law. In view of the said arguments, the appellant was directed to produce the original documents on the next date, i.e. 7^th November, 2016 for perusal.

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The original documents were produced by the appellant before us. The said documents, i.e. Receipt, General Power of Attorney, Sale Agreement and Affidavit were duly attested by the Notary on 26^th March, 1993. The agreement to sell appears to be signed by two witnesses. We have also examined the back page of the stamp papers which contain the date 26^th March, 1993. The photograph of Mr. O.P. Narula, who has sold the property to the appellant, is also pasted on the General Power of Attorney which is duly attested by the Notary Public. Similarly, the Agreement to Sell is apparently witnessed by the father of the appellant and the same was executed by Mr. O.P. Narula, seller and the appellant. Mr. O.P. Narula, seller has also executed an affidavit which is attested by the Notary Public, confirming that he has sold and transferred his

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property measuring 12‟ x 36‟ on ground floor and one room and open terrace on first floor built of land measuring 48 Sq. Yards to Manpreet Singh son of Sh. Amarjit Singh Oberoi and he has received the full consideration from the said purchaser. He also deposed that he has also executed the General Power of Attorney, Agreement to Sell, Will and a Receipt in favour of the appellant and he would not revoke or cancel any of the said documents.

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17. Section 3(1) (c) of the Act defines:

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(c) “illegally acquired property”, in relation to any person to whom this Act applies, means,-

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(i) any property acquired by such person, whether before or after the commencement of this Act, wholly or partly out of or by means of any income, 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; or

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(ii) any property acquired by such person, whether before or after the commencement of this Act, wholly or partly out of or by means of any income, earnings or assets in respect of which any such law has been contravened; or

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(iii) any property acquired by such person, whether before or after the commencement of this Act, wholly or partly out of or by means of any income, earnings or assets the source of which cannot be proved and which cannot be shown to be attributable to any act or thing done in respect of any matter in relation to which Parliament has no power to make laws; or

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(iv) any property acquired by such person, whether before or after commencement of this Act, for a consideration, or by any means, wholly or partly traceable to any property referred to in sub-clauses (i) to (iii) or the income or earnings from such property; and includes-

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(A) any property held by such person which would have been, in relation to any previous holder thereof, illegally acquired property under this clause if such previous holder had not ceased to hold it, unless such person or any other person who held the property at any time after such previous holder or, where there are two or more such previous holders, the last of such previous holders is or was a transferee in good faith for adequate consideration;

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(B) any property acquired by such person, whether before or after the commencement of this Act, for a consideration, or by any means, wholly or partly

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FPA-37/DLI/2015

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traceable to any property falling under item (A), or the income or earnings therefrom;

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In the impugned order, after recording the facts, the following findings are arrived in paras 1 & 2 and the same are reproduced here as under:-

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“ i). On this, my finding is that the photocopy of the sale agreement, GPA and purchase receipt submitted by the AP to prove that the property in question was purchased in 1993 are unregistered/unauthenticated documents. These documents are typed on plain paper with the names and signatures of the seller and purchaser. The evidentiary value of the documents is not sufficient to establish the fact that the property was purchased in the year 1993. The law requires that any sell-purchase agreement of the immovable property has to be registered with the concerned revenue authorities which has not been done in this case. Moreover, the GPA submitted in this case is neither notarized nor registered as required by law.

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ii No evidence of the claim of the AP that he was 19 years old when this property was purchased has been produced during proceedings in this case. Hence, the arguments in this regard are not sufficient to explain the source of investment in the said property.

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2. In the affidavit dated 25.03.2006 filed by AP’s mother on 27.03.2016, she has argued that she was working in Ministry of Defence, Government of India, since 1962 and that she has given Rs. 15,000/- from her savings to her son Shri Manpreet Singh Oberoi (AP) to acquire the property scheduled to the Show Cause Notice.

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But this argument by Smt. Amarjeet Kaur Oberoi is not tenable as no documentary evidence has been produced by the AP’s mother to substantiate her claim except the photocopy of her photo I-Card evidencing the fact that she is a government pensioner. In the absence of documentary evidence, mere affidavit shall not have sufficient evidentiary value to explain the source of investment in the property.

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In the facts and circumstances of the case, the AP has failed to discharge the burden of proof as required u/s 8 of SAFEM(FOP) Act, 1976 despite of being given sufficient opportunities to do so. Hence, the subject properties i.e. (1) M/s. Oberoi Industries 2/1B Anand Parbat Industrial Area, New Rohtak Road, New Delhi and (2) M/s. Oxford Fashion 2/1B Anand Parbat Industrial Area, New Rohtak Road, New Delhi are hereby forfeited to the Central Government free from all encumbrances in terms of provisions of section 7(1) & (3) of SAFEM(FOP) Act, 1976.”

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After passing the impugned order dated 4^th March, 2016, the

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notice dated 16^th March, 2016 was issued under Section 19(1) of the Act

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to surrender and deliver the possession of the said property; the valuation of which, as per the respondent, according to the report, is Rs.12,04,446/-,

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The SAFEMA and NDPS Acts, no doubt, contain draconian provisions. The burden of proof is placed on the accused. The procedure laid down under the said Acts being stringent in nature has to be applied strictly. The presumption of innocence is a human right which cannot be overlooked once the accused discharges his initial burden by showing that the property is acquired legally. Once it is satisfied, the burden of proof would shift to the Competent Authority to establish that the property is illegally acquired which has a direct nexus with the crime and the same is to be forfeited. It must be identified that the property was derived from or used in an illicit manner. The proper application of mind has to be applied by the Competent Authority before the notice is issued.

¶80

It is a settled law that “reason to believe” and “recording of reasons” must be premised on the materials produced before him. Such materials have to be gathered during the investigation carried out and in failure to do so by the Competent Authority, it cannot initiate a proceeding. A roving enquiry cannot be allowed as per the Act as properties sought to be forfeited must have a direct nexus with the properties illegally acquired.

¶81

In the case of Aslam Mohammad Merchant v. Competent

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Authority and Others , (2008) 14 Supreme Court Cases 186, the Hon‟ble Supreme Court in para 23 has held that the relevant provisions of the SAFEMA and NDPS Acts are in pari materia.

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The Hon‟ble Supreme Court has referred the decision of a case of decided by the Constitution Bench of the said Court in Attorney Gerneral of India V/s. Amratlal Prajivandas, (1994) 5 SCC, wherein the validity of

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provisions of SAFEMA were opined. After considering the said judgment the Hon‟ble Supreme Court in para 43 to 46 has referred as under: -

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“43. A Constitution Bench of this Court in Attorney General for India v. Amratlal Prajivandas , (1994) 5 SCC 54 while considering the validity of the provisions of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976, opined:-

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“44. …The relatives and associates are brought in only for the purpose of ensuring that the illegally acquired properties of the convict or detenu, acquired or kept in their names, do not escape the net of the Act. It is a well-known fact that persons indulging in illegal activities screen the properties acquired from such illegal activity in the names of their relatives and associates. Sometimes they transfer such properties to them, may be, with an intent to transfer the ownership and title. In fact, it is immaterial how such relative or associate holds the properties of convict/detenu – whether as a benami or as a mere name-lender or as a bona fide transferee for value or in any other manner. He cannot claim those properties and must surrender them to the State under the Act. Since he is a relative or associate, as defined by the Act, he cannot put forward any defence once it is proved that that property was acquired by the detenu – whether in his own name or in the name of his relatives and associates…”

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Holding that such provisions had been enacted to counteract several devices that may be adopted by the persons concerned, it was stated:-

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“45. ….By way of illustration, take a case where a convict/detenu purchases a property in the name of his relative or associate – it does not matter whether he intends such a person to be a mere name lender or whether he really intends that such person shall be the real owner and/or possessor thereof – or gifts away or otherwise transfers his properties in favour of any of his relatives or associates, or purports to sell them to any of his relatives or associates – in all such cases, all the said transactions will be ignored and the properties forfeited unless the convict/detenu or his relative/associate, as the case may be, establishes that such property or properties are not “illegally acquired properties” within the meaning of Section 3(c). In this view of the matter, there is no basis for the apprehension that the independently acquired properties of such relatives and associates will also be forfeited even if they are in no way connected with the convict/detenu. So far as the holders (not being relatives and associates) mentioned in Section 2(2)(e) are concerned, they are dealt with on a separate footing. If such person proves that he is a transferee in good faith for consideration, his property – even though purchased from a convict/detenu – is not liable to be forfeited. It is equally necessary to reiterate

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that the burden of establishing that the properties mentioned in the show-cause notice issued under Section 6, and which are held on that date by a relative or an associate of the convict/detenu, are not the illegally acquired properties of the convict/detenu, lies upon such relative/associate. He must establish that the said property has not been acquired with the monies or assets provided by the detenu/convict or that they in fact did not or do not belong to such detenu/convict.”

¶94

The relevant portion of the summary of the said judgment reads as under:

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“(4) The definition of “illegally acquired properties” in clause (c) of Section 3 of SAFEMA is not invalid or ineffective.

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(5) The application of SAFEMA to the relatives and associates [in clauses (c) and (d) of Section 2(2)] is equally valid and effective inasmuch as the purpose and object of bringing such persons within the net of SAFEMA is to reach the properties of the detenu or convict, as the case may be, wherever they are, howsoever they are held and by whomsoever they are held. They are not conceived with a view to forfeit the independent properties of such relatives and associates as explained in this judgment. The position of „holders‟ dealt with by clause (e) of Section 2(2) is different as explained in the body of the judgment.”

¶97

A similar question again came up before a Three Judges‟ Bench of this Court in Fatima Mohd. Amin (Smt.) (Dead) Through LRs. v. Union of India and Another , (2003) 7 SCC 436, wherein relying upon Amratlal Prajivandas (supra), it was held:

¶98

“7. ……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.

¶99

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).

¶100

As the condition precedent for initiation of the proceedings under SAFEMA did not exist, the 28 impugned orders of forfeiture cannot be sustained. In that view of the matter, the appeals deserve to be allowed. The order under challenge is set aside.”

¶101

Our attention, however, has been drawn to a decision of a two Judge Bench of this Court in Kesar Devi (Smt.) v. Union of India and Others , (2003) 7 SCC 427 wherein Fatima Mohd. Amin (supra) was distinguished by a Bench of this Court, inter alia, opining that no nexus or link between the money of the debt and property sought to be

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forfeited is required to be established under the Scheme of the Act, stating:

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“10…The condition precedent for issuing a notice by the competent authority under Section 6(1) is that he should have reason to believe that all or any of such properties are illegally acquired properties and the reasons for such belief have to be recorded in writing. The language of the section does not show that there is any requirement of mentioning any link or nexus between the convict or detenu and the property ostensibly standing in the name of the person to whom the notice has been issued…”

¶106

x x x x

¶107

“13. We are, therefore, clearly of the opinion that under the scheme of the Act, there is no requirement on the part of the competent authority to mention or establish any nexus or link between the money of the convict or detenu and the property sought to be forfeited. In fact, if such a condition is imposed, the very purpose of enacting SAFEMA would be frustrated, as in many cases it would be almost impossible to show that the property was purchased or acquired from the money provided by the convict or detenu. In the present case, the appellant is the wife of the detenu and she has failed to establish that she had any income of her own to acquire the three properties. In such circumstances, no other inference was possible except that it was done so with the money provided by her husband.”

¶108

We, with utmost respect to the learned Judges express our inability to agree to the said observations. The necessity of establishing link or nexus in our opinion is writ large on the face of the statutory provision as would appear from the definition of „illegally acquired property‟ as also that of „property‟. The purport and object for which the Act was enacted point out to the same effect.

¶109

46. Fatima Mohd. Amin (supra) was followed by a Bench of the

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Hon‟ble Supreme Court in P.P. Abdulla v. Competent Authority, (2007) 2 SCC 510, wherein it was observed:

¶111

“7. Learned counsel submitted that it has been expressly stated in Section 6(1) that the reason to believe of the competent authority must be recorded in writing. In the counter-affidavit it has also been stated in para 8 that the reasons in the notice under Section 6(1) were recorded in writing. In our opinion this is not sufficient. Whenever the statute requires reasons to be recorded in writing, then in our opinion it is incumbent on the respondents to produce the said reasons before the court so that the same can be scrutinized in order to verify whether they are relevant and germane or not. This can be done either by annexing the copy of the reasons along with the counter-affidavit or by

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quoting the reasons somewhere in the counter-affidavit. Alternatively, if the notice itself contains the reason of belief, that notice can be annexed to the counter-affidavit or quoted in it. However, all that has not been done in this case.

¶115

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.”

¶116

It was also observed:-

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“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.”

¶118

Under the heading of “Reason to believe”, the Hon‟ble Supreme

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Court in the said judgment of Aslam Mohammad Merchant (supra) in

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paras 50-52 has dealt with the said issue. The said paras are reproduced here as under:-

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“50. This brings us to the next question as to what does the term “reason to believe” mean. We may in this behalf notice some precedents operating in the field.

¶122

In the context of the provisions of Section 147 of the Income Tax Act, this Court in Phool Chand Bajrang Lal Vs. ITO , (1993) 203 ITR 456 held:-

¶123

“From a combined review of the judgments of this court, it follows that an Income-tax Officer acquires jurisdiction to reopen an assessment under section 147(a) read with section 148 of the Income-tax Act, 1961, only if on the basis of specific, reliable and relevant information coming to his possession subsequently, he has reasons, which he must record, to believe that, by reason of omission or failure on the part of the assessee to make a true and full disclosure of all material facts necessary for his assessment during the concluded assessment proceedings, any part of his income, profits or gains chargeable to income-tax has escaped assessment. He may start reassessment proceedings either because some fresh facts had come to light which were not previously disclosed or some information with regard to the facts previously disclosed comes into his possession which tends to expose the untruthfulness of those facts. In such situations, it is not a case of mere change of opinion or the drawing of a different inference from the same facts as were earlier available but acting on fresh information. Since the belief is that of the Incometax Officer, the sufficiency of reasons for forming this belief is not for the court to judge but it is open to an

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assessee to establish that there in fact existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and nonspecific information. To that limited extent, the court may look into the conclusion arrived at by the Income-tax Officer and examine whether there was any material available on the record from which the requisite belief could be formed by the Income-tax Officer and further whether that material had any rational connection or a live link for the formation of the requisite belief.”

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(See also ITO v. Lakshmani Mewal Das , (1976) 103 ITR 437).

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In CIT v. Rajesh Jhaveri Stock Brokers Pvt. Ltd. , 2007 (8) SCALE 396, interpreting the term „reason to believe‟ as used under Section 247 (a) of the Income Tax Act, 1961, it was opined:

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“To confer jurisdiction under Section 247(a) two conditions were required to be satisfied firstly the AO must have reason to believe that income profits or gains chargeable to income tax have escaped assessment, and secondly he must also have reason to believe that such escapement has occurred by reason of either (i) omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year. Both these conditions were conditions precedent to be satisfied before the AO could have jurisdiction to issue notice under Section 148 read with Section 147(a). But under the substituted Section 147 existence of only the first condition suffices. In other words, if the assessing officer for whatever reason has reason to believe that income has escaped assessment, it confers jurisdiction to reopen the assessment.”

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In concluding paras 61 & 62, the Hon‟ble Supreme Court has held as under:-

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“61. The provisions of the Act must be interpreted in a manner so that its constitutionality is upheld. The validity of the provisions might have received constitutional protection, but when stringent laws become applicable as a result whereof some persons are to be deprived of his/her right in a property, scrupulous compliance of the statutory requirements is imperative.

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For the reasons aforementioned, the impugned judgments cannot be sustained. They are set aside accordingly. The appeals are allowed. However, it would be open to the respondents to initiate fresh proceeding (s) in accordance with law, if they are so advised. In the facts and circumstances of the case, we make no order as to costs.”

¶133

In view of the said finding, the Supreme Court in the facts of Aslam

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Mohd. Merchant has distinguished the case of Attorney General for Inida

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FPA-37/DLI/2015

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V/s. Amratlal Prajivandas (Supra). We have to examine as to the present case in the light of the decision rendered in the case referred to covers or not.

¶138

The contents of the “Reasons to Believe” in the present case recorded for issuance of show-cause notice under Section 6(1) of the SAFEMA are read as under:-

¶139

“ Reasons to believe recorded for issue of Show Cause Notice U/s 6(1) of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 in the case of Shri Manpreet Singh Oberoi, 1B Block 64, Sector-11, DIZ Area, Gole Market, New Delhi and 2/1 Anand Parbat Industrial Area, New Rohtak Road, New Delhi.

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Shri Manpreet Singh Oberoi @ Sonu S/o Late Shri Amarjeet Singh Oberoi, 1b Block, 64, Sector 11, Diz Area, Gole Market, New Delhi and 2/1b Anand Parbat Industrial Area, New Rohtak Road, New Delhi, is a person against whom an order of detention vide F.No. 673/32/2002-Cus. VIII dated 23^rd August, 2002 was passed u/s 3 (1) of the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (hereinafter referred to as COFEPOSA) by Ms. Nisha Malhotra, Joint Secretary to the Govt. of India, Ministry of Finance, Department of Revenue, New Delhi. Shri Manpreet Singh Oberoi who was declraed a proclaimed offender by the learned ACMM on 19.10.02 was detained on 29.9.03 and the order of detention was confirmed on the advice of the Advisory Board vide confirmation order F.No. 673/32/2002-Cus. VIII dated 10.11.2003.The detention order passed in this case has not been set aside by any Court of Competent Jurisdiction till date. Shri Manpreet Singh Oberoi is, therefore, a person covered u/s 2 (2) (b) of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 (hereinafter referred to as SAFEM (FOP) Act, 1976. Accordingly, all properties acquired out of illegal income by Shri Manpreet Singh either in his name or in the names of his relative/associates are liable to the forfeiture within the meaning of the provisions of SAFEM (FOP) Act, 1976. Consequently, Shri Manpreeet Singh would hereinafter be referred to as the “Affected Person” and in short “A.P.”

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On the basis of specific intelligence gathered by Directorate of Revenue Intelligence, Delhi Zone Unit, New Delhi, it transpires that the A.P. alongwith his associates was engaged in the fraudulent export of cheap quality of automotive parts (Fuel pump, diaphragn)/Microphones & Readymade Garments under Duty Entitlement Pass-book Scheme-cum-Export Promotion Capital Goods Scheme, DEPBcum-Drawback Scheme and Duty Free Replenishment Certificate-cum-Drawback Scheme in the name of various entities created either in his name or in the names of his relatives/associates. The modus-operandi adopted by the A.P. and his associates was to value the consignments declared before Indian Customs at exorbitant prices whereas the same

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FPA-37/DLI/2015

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consignment was declared before the Custom Authorities of importing countries at a much lesser price i.e. about hundred times less than the price declared before the Indian Customs. Even the documentations were made by forged signatures. Not only mis-declaration of value is committed but the goods exported were of a cheaper quality then declared before the authorities. From the above facts, it is abundantly clear that the A.P. in collusion/connivance with his relatives/associates indulged in prejudicial activities and had derived income therefrom. The income earned out of the aforementioned activities was not only enjoyed by the A.P. but also shared by him with others who were associated with him in the above mentioned fraudulent activities.

¶145

Information regarding properties owned/possessed by the A.P. either in his name or in the names of his relatives/associates has been gathered from records as well as from the report on financial investigation conducted by the seizing agency i.e. Directorate of Revenue Intelligence, New Delhi. It is seen that Shri Tejwant Singh, the A.P., is in possession of and has right, title and interest in the following properties.

¶146

Right, Title and Interest in the:-

¶147

1) M/s Oberoi Industries 2/1B Anand Parbat Industrial Area, New Rohtak Road, New Delhi.

¶148

2) M/s Oxford Fashion 2/1B Anand Parbat Industrial Area, New Rohtak Road, New Delhi.

¶149

In view of the above and the fact that the A.P. has been involved in a well-organized manner in such prejudicial activities and was deriving illegal income, I have reasons to believe that the right, title and interest in the properties mentioned in para ante are illegally properties within the meaning of Sec. 3 (1) (c) of the SAFEM(FOP) Act, 1976 and were acquired by the A.P. out of illegal income. Therefore, reasons to believe are hereby recorded by me in writing within the meaning of Sec. 6 of the Act. ”

¶150

In the notice issued by the Competent Authority while recording

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lacks of reasons in the “Reason to Believe” there is no discussion therein that at the time of passing of the order of detention on 22^nd October, 2002, the firm was incorporated in 2000 which was allegedly involved in the said illegal activities. The property in question was purchased in 1993. The Competent Authority was not able to show that the acquired property is illegal. It is also not discussed and establish in any manner that prior to the date of crime, the appellant, his relatives and associates had any business of automotive parts or carried out any transaction in India or export of any goods prior to 2000 when firms were established. It has come on record that the appellant was helping his father during the year 1993-2000 who was carrying on business of plastic goods. Nothing

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contrary has come on record otherwise. The said specific averment made by the appellant is not rebutting by the respondent except vague denial. Nothing has been discussed nor any valid reason is given that when the firm was incorporated in 2000 as per the Government record (whereby the appellant has filed cogent evidence), how the property purchased in 1993 is illegal being acquired from the proceed of crime. It is immaterial if the Notary stamp is not affixed while attestation of registration of documents. We have examined all the original documents, stamp papers and their backsides which contain the all relevant requisites details of purchasing the stamp paper. If the same are forged as alleged by the learned counsel for the respondent, in the “Reason to believe” it ought to have been verified from the treasury from where the said stamp-papers were puchased. As a matter of fact, the impugned order did not discuss this issue and it has not been established that these documents are forged or fabricated. Merely the presumption is drawn in the impugned order. The facts and legal issues of the present case are similar and squarely can be applied to the case of Aslam Mohd. Merchants (Supra). After reserving the order, later on, the matter was mentioned by the counsel for the respondent seeking permission to investigate the said aspect. He seeks permission to file the application. The said permission could not be granted at this stage, as if so, required, the respondent ought to have done the said exercise at the appropriate time. Thus the said request to file the fresh application was not allowed particularly once the judgment is reserved.

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After examination of the material on record, we are of the considered view that the Authority has not recorded valid satisfaction that the property in possession of the appellant which was provisionally attached was illegal acquired property with in the meaning of Section 3(c) of SAFEMA. Thus, from the circumstances mentioned in the impugned order, attachment and confirmation thereto by the Authority is not sustainable in law.

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FPA-37/DLI/2015

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The impugned order is accordingly quashed. The attached property is released. The show-cause notice is discharged, as it is bad and contrary to the law.

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