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FPA-7/BOM/2012 of Bhartiben Indulal Soni v/s The Competent Authority, Mumbai

ATFP19 Apr 2017FPA-7/BOM/2012

Case brief

AI extract

What is this about?

The Appellate Tribunal set aside the Competent Authority's order of forfeiture of a property belonging to the Appellant. The Tribunal found that the Appellant had acquired the property from legal sources by raising genuine loans from various individuals, which were repaid with interest from her own legal income.

What did the court decide?

The impugned order of the Competent Authority dated 19th February, 2011 treating the property at 58, Sardar Patel Colony, Stadium Road, Ahmedabad as illegally acquired property and ordering its forfei

FPA-7/BOM/2012 of Bhartiben Indulal Soni v/s The Competent Authority, Mumbai — ATFP (2017) — LawSathi Research

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APPELLATE TRIBUNAL FOR FORFEITED PROPERTY NEW DELHI

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Date of decision: 19.04.2017

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MP-65/BOM/2014 (Adl Evi.) &

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FPA-7/BOM/2012

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Bhartiben Indulal Soni

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… Appellant/Applicant

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Versus

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The Competent Authority, Mumbai

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Respondent

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Advocates/Authorized Representatives who appeared

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For the appellant	: Shri Aseem L. Thakkar, Chartered Accountant
For the respondent	: Shri Siddhartha Majumdar, I.O.
CORAM
JUSTICE MANMOHAN SINGH	: CHAIRMAN
SHRI KAUSHAL SRIVASTAVA	: MEMBER
SHRI ANAND KISHORE	: MEMBER

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JUDGMENT

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FPA-7/BOM/2012

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The facts of the case are that as Shri Indulal Shivlal Soni (husband of the Appellant) was detained under the provisions of Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 vide order F.No. 673/84/97-Cus. VIII dated 26.8.1997, he fell within the definition of the person as defined under Section 2(2)(b) of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 (hereinafter referred to as the SAFEMA or the Act). Smt. Bharatiben Indulal Soni being the wife of Shri Indulal Soni fell within the definition of “relative” as defined under Section 2(2)(c) of the Act, therefore, provisions of the Act were made applicable to them. A Show Cause Notice was issued to them on 17.02.1999 alongwith an annexure giving the detailed reasons to believe and they were asked to indicate within 35 days from the service

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of the notice, the sources of income earning, assets out of which or by FPA-7/BOM/2012 Page 1 of 13

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means of which they had acquired the properties as listed therein, the evidence on which they would like to rely and other relevant information. They were further asked to show cause as to why the properties listed therein should not be declared as illegally acquired property and forfeited to Central Government, free from all encumbrances. Thereafter, following the principles of natural justice vide order No. 12/SAFEMA/AHD/2002 dated 26.7.2002 all the properties were forfeited to Central Government, free from all encumbrances.

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Aggrieved against the aforesaid order appeals were filed by APs before the Appellate Tribunal for Forfeited Property, who vide order dated 31.05.2011 remanded the case back to the Competent Authority. APs were directed to produce the documents before the Competent Authority within 2 months from the date of receiving the order and they were also asked not to seek any further adjournment when the case is posted for personal hearing, however, on merits the Hon‟ble Tribunal has not expressed any opinion.

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On receipt of the order of the Hon‟ble Tribunal, the department waited to receive the documents as per the direction of the Hon‟ble Tribunal, but no such documents were received even after 5 months from the date of the order. Thereafter, a personal hearing opportunity was given to them on 24.10.2011 but no one appeared nor any request for adjournment was received. The second personal hearing opportunity was given to them on 11.11.2011 but it was preponed to 4.11.2011 at the request of their representative. On the appointed day their representative Mr. Aseem L. Thakkar, Chartered Accountant appeared and argued that all the properties were purchased from their own legal sources of income earned from gold majuri work and loans taken from their friends and relatives which were returned back at a later date. In support of their FPA-7/BOM/2012 Page 2 of 13

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contention some documents were placed on record showing that they were engaged in gold majuri work, and the copies of balance sheets said to have filed with income tax return. The Competent Authority went through the submissions made by the learned Chartered Accountant as well as the documents placed on record and decided the case as under;

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The Hon‟ble Tribunal had given them specific direction to produce the relied upon documents within 2 months from the date of receipt of a copy of the order, but they failed to comply with the specific direction and produced the documents after 5 months from the date of the order. The second specific direction of the Tribunal was not to seek further adjournment but here again they failed to comply with the order and sought adjournments. It is, therefore, seen that all the directions of the Hon‟ble Tribunal were openly disregarded and disrespected hence the documentary evidence produced by them after 2 months from the date of order, cannot be taken on record.

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Before proceeding further it is necessary to state that Shri Indulal Shivlal Soni was a hardcore foreign exchange manipulator and smuggler who was detained under the provisions of Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 vide order F.No. 673/84/97-Cus. VIII dated 26.8.1997 and released on 3.9.1998. During the course of search of his residence, foreign currency equivalent to Rs. 45,24,000/- and Indian currency worth of Rs. 12,50,000/- were recovered and many incriminatory documents showing the illegal hawala transaction were recovered. Immediately after his release he was again apprehended in an unauthorized transaction of foreign exchange by the Gujarat police and foreign exchange worth USD 11,970/- was recovered from his possession.

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FPA-7/BOM/2012

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Page 3 of 13

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Accordingly, Show Cause Notice in February, 1999 had been issued and the case had been finally adjudicated in July, 2002. During the course of first personal hearing which took place after 3 years from the date of issue of Show Cause Notice, AP‟s main contention, instead of defending the case on merits, was that they had filed special civil application before the Hon‟ble High Court of Gujarat challenging the detention order. However their civil application was dismissed on subsequent date, and they were directed to appear before the Competent Authority.

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Inquires revealed that among various immovable and movable properties, the property in question i.e. Bunglow at 58, Sardar Patel Colony, Stadium Road, Ahmedabad, found to be in the name of the Appellant it was the submission of the learned Chartered Accountant that it was purchased on 19.10.1987 for Rs. 3,00,000/- from Chanchalben Maneklal Patel and in support of their contention they placed on record the copy of the sale deed executed on 19^th October, 1987. It was further contended that the consideration amount of Rs. 9,000/- was paid in cash on 12.10.1987 after taking a loan from Shakrabhai Keshavbhai Patel, Rs. 52,000/- was paid vide cheque No. 109741 dated 13.10.1987 after taking a loan from Nimchand Babulal Soni, Rs. 25,000/- was paid by cheque No. 109931 dated 14.10.1987 after taking a loan from Prayesh S. Mandaliya and Rs. 29,000/- was paid on 14.10.1987 by cheque bearing no. 109961. Similarly Rs. 37,000/-, Rs. 32,000/-, Rs. 29,000/-, Rs. 56,000/- and Rs. 42,000/- were also paid by cheques on 14.10.1987 after taking the loan from various persons. From the above submission it is seen that the entire consideration amount of Rs. 2,91,000/- was paid through cheques on 13.10.1987 and 14.10.1987 except the initial amount of Rs. 9,000/which was paid in cash on 12.10.1987 but the fact remains that the entire

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FPA-7/BOM/2012

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Page 4 of 13

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consideration amount was paid after raising the loan from various persons.

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A perusal of the order of Competent Authority dated 19^th December, 2011 shows that necessary investigations revealed that the Appellant was merely a house wife and had procured a loan of Rs. 3 lakhs within a period of 3 days out of which Rs. 2,91,000/- had been raised on a single day. Mentioning further that the Appellant could only give the names of the persons from whom the loan was taken and that as per income tax returns filed by her for the assessment year 1983-1984 and 1984-85 her total income were Rs. 11,260/- and Rs. 15,466/- out of which Rs. 4,725/and Rs. 6,975/- were said to have earned out of tuition income and remaining as interest on the amount given on loan to various persons. In the assessment year 1985-86 and 1986-87 her total income as per the returns were Rs. 14,402/- and Rs. 12,085/- respectively. Her main source of income was interest received from the investments made in F.D., saving bank account and NSC etc.

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The Competent Authority negated the submissions and held that the said investments had been made by her out of the ill-gotten or illegal income of her husband and held to be illegally acquired property.

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SUBMISSIONS OF THE APPELLANT

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Aggrieved by the above said decision of the Competent Authority, the Appellant has come in appeal before us. A perusal of grounds of appeal filed by the Appellant shows that he has vehemently submitted that the Competent Authority had not taken into consideration the evidences furnished in the form of copy of accounts, contra accounts, copy of return of income filed by the appellant as well as other parties from whom the funds were borrowed and repaid in subsequent years, copy of FPA-7/BOM/2012 Page 5 of 13

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purchase deeds etc. and had come to a conclusion by raising doubts and suspicions and without brining any material on record in support of the findings given by the Competent Authority.

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In the present appeal, the Appellant vide written submissions dated 28^th January, 2013 has explained the source of investments and evidence thereof as under:-

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Amount, mode & date of payment	Source of investment	Evidence submitted
Rs. 9000/- Cash, 12.10.1987	The appellant has received loan of Rs. 9,000/- from Shakrabhai Keshavbhai Patel which has been returned on 31.03.1988 with interest of Rs. 765/-	Copy of the relevant page of the cash/bank book is placed on pg. 2 to 5 of the paper book. The same has been repaid and the copy of account has been placed on pg. 8 & 25 of the paper book.
Rs. 52,000/-, Cheque no. 109741 dated 13.10.1987	The amount has been paid from the balance available in the bank account. The loan has been received from Nimchand Babulal Soni HUF. The loan has been repaid on 26.08.1988 with interest.	Copy of the relevant page of the cash/bank book is placed on pg. 2 to 5 of the paper book. Copy of the accounts, computation of income, acknowledgement of the return of income etc. are placed on Pg. 64 to 66 & copy of A/cs at Pg. 6,9 & Cotra accounts at Pg. No. 12 & 13, 68,69 of the paper book.
Rs. 25,000/-, Cheque no. 109931 dated 14.10.1987	The amount has been paid from the balance available in the bank account. The loan has been received from Prayesh S. Mandaliya. The loan has been repaid on 28.10.1988 with interest.	Copy of the relevant page of the cash/bank book is placed on pg. 2 to 5 of the paper book. Copy of the accounts, computation of income, etc. are placed on pg. 38 to 41 of the paper book.
FPA-7/BOM/2012 Rs. 29,000/- Cheque no. 109961 dated14.10.1987	The amount has been paid from the balanceavailablein	Page 6 of 13 Copy of the relevant page of the cash/bank book is placed onpg.

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Page 6 of 13

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	the The recei Urvib Mand has 31.07 inter	bank loan ved en aliya. been .1989 est.	acco has The repaid	unt. been from G. loan on with	2 to 5 of the paper book. Copy of the accounts, computation of income, etc. are placed on pg. 42 to 45 of the paper book.
Rs. 37,000/-, Cheque no. 109941 dated 14.10.1987	The been balan the The recei Mina Mand has 24.05 inter	amo paid ce av bank loan ved ben aliya. been .1989 est.	unt from ailabl acco has The repaid	has the e in unt. been from G. loan on with	Copy of the relevant page of the cash/bank book is placed on pg. 2 to 5 of the paper book. Copy of the accounts, computation of income, etc. are placed on pg. 46 to 49 of the paper book.
Rs. 32,000/- Cheque no. 109951 dated 14.10.1987	The been balan the The recei Kaml Mand has 28.10	amo paid ce av bank loan ved esh aliya. been .1987	unt from ailabl acco has The repaid	has the e in unt. been from G. loan on with	Copy of the relevant page of the cash/bank book is placed on pg. 2 to 5 of the paper book. Copy of the accounts, computation of income, etc. are placed on pg. 50 to 53 of the paper book.
	inter	est.
Rs. 29,000/- Cheque no. 110041 dated 14.10.1987	The been balan the The recei J. M loan on 0 inter	amo paid ce av bank loan ved fro andal has b 1.08.1 est.	unt from ailabl acco has m Su iya. een re 989	has the e in unt. been resh The paid with	Copy of the relevant page of the cash/bank book is placed on pg. 2 to 5 of the paper book. Copy of account is placed on pg. 8 of the paper book. The repayment has been made on 01.08.1989 and copy of account has been placed on pg 11 of the paperbook.
Rs. 56,000/- Cheque no. 109971 dated 14.10.1987	The been balan the The recei Anjan Mand has 24.05 inter	amo paid ce av bank loan ved aben aliya. been .1989 est.	unt from ailabl acco has The repaid	has the e in unt. been from S. loan on with	Copy of the relevant page of the cash/bank book is placed on pg. 2 to 5 of the paper book. Copy of account is placed on pg. 6 of the paper book. The repayment has been made on 24.05.1989 and copy of account has been placed on pg 10 of the paperbook.
Rs. 42,000/- Cheque no. 109921 dated14.10.1987	The been balan	amo paid ceav	unt from ailabl	has the ein	Copy of the relevant page of the cash/bank book is placed onpg.

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FPA-7/BOM/2012

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Page 7 of 13

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the bank account. The loan has been	2 to 5 of the paper book. Copy of the
received from	accounts, at pg. 6 &
Jignaben G.	10 of PB and
Mandaliya. The loan	computation of
has been repaid on	income, etc. are
15.09.1989,	placed on pg. 58 to 63
11.10.1989,	of the paper book.
17.10.1994 &
15.11.1994 with interest.

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In Support of the above contention, the Appellant has placed on record affidavits of Shri Shakrabhai Keshavbhai Patel, Shri Nimchand Babulal Soni, Shri Prayesh S. Mandaliya, Smt. Urviben G. Mandaliya, Smt. Minaben G. Mandaliya, Shri Kamlesh G. Mandaliya, Shri Suresh J. Mandaliya, Smt. Anjanaben S. Mandaliya and Smt. Jignaben G. Mandaliya stating therein that they had loaned an amount of Rs. 9,000/in respect of Shri Shakrabhai Keshavbhai Patel, Rs. 52,000/- in respect of Shri Nimchand Babulal Soni, Rs. 25,000/- in respect of Shri Prayesh S. Mandaliya, Rs. 29,000/- in respect of Smt. Urviben G. Mandaliya, Smt. Minaben G. Mandaliya, Rs. 37,000/- in respect of Smt. Minaben G. Mandaliya, Rs. 32,000/- in respect of Shri Kamlesh G. Mandaliya, Rs. 29,000/- in respect of Shri Suresh J. Mandaliya, Rs. 56,000/- in respect of Smt. Anjanaben S. Mandaliya and Rs. 42,000/- in respect of Smt. Jignaben G. Mandaliya. The amount of said loans had been repaid by the Appellant vide cheques.

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Copies of profit and loss amount as well as balance sheets for the relevant years of the respective parties have also been filed in support of the above contention.

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FPA-7/BOM/2012

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Page 8 of 13

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SUBMISSIONS OF THE RESPONDENT

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The above contention of the Appellant is sought to be rebutted by the Respondent and in the submissions dated 12^th December, 2014 it was contended that the Appellant has failed to prove the source of funds for aforesaid persons from whom the Appellant claims to have taken loan especially when 5 persons offering loan are minor. Moreover, it is also very surprising that how the cheque of co-op bank (Cheque No. 68921 of Manekchok Coop Bank Ltd.) was cleared on the same day of deposit i.e. 14.10.1987 specially with Bank of Baroda, Gandhinagar (Outstation) for acquiring demand draft No. A793667 in absence of any computerization and core banking during 1987. Moreover, the serial nos. of cheque of all minors from whom the loan was stated to be taken 109921, 109931, 109941, 109951, 109961 & 109971 with a difference of 10 digits between cheque issued by different minors remains unproved. The Appellant has not furnished proof of bank statement neither of his account nor the parties from whom the loan is said to be taken. Further, the Appellant has not furnished any copy of return of income of the aforesaid persons from whom the loan was taken. The statement of total income submitted in paperbook at page no. 38 to 63 reveals following information:-

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a) Prayesh Sureshchandra Mandalia (Minor)

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AY 1988-89	AY 89-90
Other Income Rs. 16,775	Bank Int.	Rs. 23.15
	Other Int. Other Income	Rs. 5000.00 Rs. 12,500.00
Signed by Gunvantbhai	Signed by Gunvan	tbhai

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b) Urvi Gunvantrai Mandalia (Minor)

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AY 1988-89	AY 89-90
Other Income Rs. 10,500	Bank Int.	Rs. 18.55
	Other Int.	Rs.10308.00

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FPA-7/BOM/2012

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Page 9 of 13

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	Other Income Rs.5700.00
Signed by Gunvantbhai	Signed by Gunvantbhai

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c) Meena Gunvantrai Mandalia (Minor)

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AY 1988-89	AY 89-90
Other Income Rs. 12,350	Bank Int. Rs. 43.40
	Other Int. Rs.14064.00
	Other Income Rs. 2535.00
Signed by Gunvantbhai	Signed by Gunvantbhai

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d) Kamlesh Gunvantrai Mandalia (Minor)

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AY 1988-89	AY 89-90
Other Income Rs. 16,590	Bank Int. Rs. 62.60 Other Int. Rs.3000.00 Other Income Rs.15500.00
Signed by Gunvantbhai	Signed by Gunvantbhai

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e) Ansuyaben J. Mandalia (Minor)

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AY 1988-89	AY 89-90
Other Income Rs. 12,700	Bank Int. Rs. 21.00
	Other Int. Rs.14272.00
	Other Income Rs.3000.00
Signed by Gunvantbhai	Signed by Gunvantbhai

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f) Jigna Gunvantrai Mandalia (Minor)

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AY 1988-89	AY 89-90
Other Income Rs. 15,740	Bank Int. Rs. 38.35
	Other Int. Rs.0.00 Other Income Rs.15020.00
Signed by Gunvantbhai	Signed by Gunvantbhai

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From the above information submitted by the Appellant it clearly appears that the account statements are prepared in identical nature for

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FPA-7/BOM/2012

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Page 10 of 13

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generating capital and lending entries for masking illegal income of the Appellant.

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Mentioning further that the Appellant had introduced bogus loans to meet the capital requirement and utilizing the ill-gotten money of her husband for acquiring the said property, the Respondent pleaded that the Appeal of the Appellant be dismissed.

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We have considered the rival contentions and the pleas made by both sides and also gone through the documentary evidence produced by the appellant in support of their case. It is observed that in the impugned order, the contention of the appellant for having acquired the subject property from legal sources has not been accepted by the Competent Authority mainly on two grounds, namely that the appellant was not having any independent legal sources of income and that the payment for the property was made entirely by raising loans from different individuals which were not accepted as genuine.

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As regards the question of the appellant not having any independent source of income, we find that the appellant has furnished copies of the Income Tax Returns filed by her for the period Assessment Year (AY) 1983-84 onwards up to AY 1992-93 along with the Profit and Loss Accounts and Balance Sheets for the respective periods. These are placed at page no. 82-153 of the paper book filed by the appellant. Pertinently the ITRs along with the supporting documents were filed in due time. It is contended that while in the earlier years, the appellant was deriving income from tuition and interest, from AY 1988-89 onwards she was having independent gold/silver Majuri income and interest income. These contentions are borne out from the above mentioned documentary evidence filed by the appellant which was also before the lower authority. The subject property was acquired by the appellant in October, 1987 i.e. AY 1988-89. As the Income Tax Returns, Profit & Loss Account and Balance Sheet of the appellant for the year 1983-84 FPA-7/BOM/2012 Page 11 of 13

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onwards and the Ledger Accounts of the appellant for the related period bear out the contentions of the appellant, the finding of the Competent Authority that during the period prior to the acquisition of the subject property, the appellant was not having any independent source of income and that she was entirely dependent on the husband‟s income is not sustainable.

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As regards the genuineness or otherwise of the loans amounting to approximately Rs. 3 lakhs raised by the appellant in October, 1987 and which are said to her loans used for making the payment towards the acquisition of the subject property, various documentary evidences by way of balance sheets and profit and loss accounts of the appellant for the relevant period and her ledger accounts as well as the cash book for the month of October, 1987 in which month the subject property was acquired have been filed. All these documents support the contention of the appellant of having received the subject loans from the different persons concerned and having made the payment for acquisition of the subject property there from and also for having repaid the same, along with the interest subsequently. Separately, affidavits from the concerned persons from whom the loans were taken have been filed alongwith their statement of total income and capital account of the respective periods which also support the giving of the loans by such persons to the appellant and receiving back the same alongwith the interest in succeeding years. Further, during the course of these proceedings, the concerned persons were also examined by the respondent and all these persons have confirmed the said transaction between them and the appellant. The following extract from the respondent‟s reply dated 20^th February, 2017 is referred to in this respect

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“However, as per the conclusion of hearing on 08/08/2016 the respondent called upon all the money lenders in person and recorded their statement regarding the loan lent by them to the appellant and also for verification of their affidavit confirming the transaction between them and

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FPA-7/BOM/2012 Page 12 of 13

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the AP. The lenders affirmed their statement that they had lent the money to the AP which has been returned by the AP on the date as mentioned in their affidavit, they further stated that they do not have any bank statements of their account from which they had issued the cheques to the AP as the relevant bank is closed 15 years ago and they did not preserve any documents in respect of bank account.”

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Thus the giving of the said loans to the Appellant and receiving the same along with interest thereafter, apart from having been certified by the concerned lenders by way of affidavits, have also been confirmed by them in their respective statements recorded by the respondent.

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Taking into consideration the various documentary evidence as discussed above, we are satisfied that the appellant had received the subject loans from different persons as declared which was utilized for payment for the subject property and that the loans alongwith the interest thereon had been returned in succeedings year by the appellant out of her own legal sources. Consequently, we are of the view that the impugned order of the Competent Authority dated 19^th February, 2011 treating the property at 58, Sardar Patel Colony, Stadium Road, Ahmedabad as illegally acquired property in terms of section 3(1)(C) of the SAFEMA and ordering its forfeiture to the Central Government free from all encumbrances cannot be sustained. The impugned order dated 19^th February, 2011 is therefore set aside.

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No order as to cost.

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(Justice Manmohan Singh) Chairman

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(Kaushal Srivastava) Member

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(Anand Kishore)

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Member

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New Delhi, 19^th April, 2017

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„AS‟

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FPA-7/BOM/2012

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Page 13 of 13

FPA-7/BOM/2012 of Bhartiben Indulal Soni v/s The Competent Authority, Mumbai

Case brief

What is this about?

What did the court decide?

FPA-7/BOM/2012 of Bhartiben Indulal Soni v/s The Competent Authority, Mumbai

Case brief

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What did the court decide?

What the court decided

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