Dismissed

FPA-9/BOM/2012 of Narendra kumar C. Shah v/s The Competent Authority, Mumbai

ATFP22 Jun 2017FPA-9/BOM/2012

Case brief

AI extract

What is this about?

The Appellate Tribunal upheld the forfeiture of two properties under SAFEMA. It held the appellants failed to discharge the burden under Section 8 to prove legal source of income due to lack of direct evidence and the treatment of belated Income Tax returns as non est.

What did the court decide?

Impugned order forfeiting the two properties under Section 7 of SAFEMA was upheld and the appeal was dismissed.

FPA-9/BOM/2012 of Narendra kumar C. Shah v/s The… — Pension and Retirement Benefits | ATFP (2017)

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APPELLATE TRIBUNAL FOR FORFEITED PROPERTY NEW DELHI

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Date of decision: 22.06.2017.

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FPA-9/BOM/2012

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Narendrakumar C. Shah

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… Appellant

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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-9/BOM/2012

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The present appeal has been filed against the order dated 18^th January, 2012 of the Competent Authority passed u/s 7 of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 (SAFEMA/the said Act, for short) wherein the following properties:

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(a) Two shops at Ground and First Floor, 2/4338, Vardhman Apartment, Ichcha Mehta Sheri, Sagrampura, Surat. First Floor being a shop in the name and style and M/s. Amar Diamonds and at ground floor in the name and style of M/s. Amar Telecommunication and Xerox shop.

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(b) Shop No.1, namely Amar Telecommunication Trimurti Apartment, Opposite Gujarati School, Piplod, Surat.

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belonging to AP-1 and AP-2 respectively were forfeited to the Central Government free from all encumbrances under Section 4(2), read with Section 7 of the said Act.

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Page 1 of 39

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FPA-9/BOM/2012

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The brief facts of the case as relevant to the present matter are as under: A detention order F.No.673/ 87/97-CUS.VIII dated 18.08.1997 was issued under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act,1974 (hereinafter referred to as COFEPOSA) against Shri Narendra Champaklal Shah (hereinafter referred to as the Affected Person1 or the AP-1) so he fell within the definition of the person as defined under section 2(2)(b) of Smugglers and Foreign Exchange Manipulators ( Forfeiture of Property) Act, 1976 (hereinafter referred to as SAFEMA or the “Act” ), so forfeiture proceedings were initiated against his illegally acquired properties under the provision of the Act. Smt. Vanmalaben Narendrakumar Shah (hereinafter referred to as the Affected Person-2 or the AP-2) is wife of the AP-1, hence covered under the provisions of section 2(2)(c ) of SAFEMA. Shri Amar Narendrakumar Shah (hereinafter referred to as the Affected Person-3 or the AP-3) is the son of AP-1, hence covered under the provisions of section 2(2)(c ) of the Act.

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2.1. A show cause notice u/s. 6(1) of SAFEMA was issued to the affected persons on 29.10.1999 in respect of 12 different properties as stated therein. All the said properties were forfeited vide order dated 07.07.2000 passed by the Competent Authority, Ahemdabad under section 7 of SAFEMA.

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2.2. Being aggrieved by the order u/s 7 dated 07.07.2000 , the affected persons filed appeals before this Tribunal being FPA No.57 and 58/ BOM/2000. Another appeal was filed by one Mr. Atul T. Jhaweri being FPA No.76/BOM/2000 in respect of two of these properties.

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2.3. These appeals were disposed off by this Tribunal vide common order dated 09.06.2010. During the course of the hearing of these appeals, the appellants sought to file certain additional evidence which was allowed on cost. The Competent Authority was asked to file their comments on the additional

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Page 2 of 39

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FPA-9/BOM/2012

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evidence produced. After considering the additional evidences, opening of the sealed property, and on and verifying various registers and cash books etc. detailed comments were submitted by the Competent Authority. In its final order, in respect of two of the properties, the Tribunal observed that the reasons to believe to be recorded by the Competent Authority while issuing the show cause notice under Section 6(1) of the Act that the properties are illegally acquired properties were not recorded which shows non-application of mind on part of the Competent Authority and therefore directed their release. In respect of the remaining five properties, considering that the additional evidence filed and the documents available in the sealed property were not considered by the Competent Authority while passing the orders and the appellant also got no opportunity to argue their case based upon these documents, the case was remanded back to the Competent Authority to pass fresh orders in respect therof after granting further opportunity for personal hearing and on considering the documents and additional evidence filed. The said five properties are as under:

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(1) Two shops at Ground Floor, 2/4388, Vardhman Apartments, Ichha Mehta Sheri, Sargampura, Surat.

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(2) House property at 2, Sharunagar society, Udhna Magdallla Road, Piplod, Surat.

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(3) Bajaj Sunny Scooter bearing Regn No.GJ-5-J-6498.

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(4) Shop No.1 namely Amar Telecommunication, Trimurti Apartments, opp. Gujarati School, Piplod, Surat.

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(5) Bunglow at 1, Sharunagar society, Udhna Magdalla Road, Piplod , Road.

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Out of these properties those at serial no. (1), (2), and (3), are in the name of AP-1 and those at (4), and (5) are in the name of AP-2, the wife of the detenu.

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2.4. In compliance to the order of Hon‟ble Tribunal, after granting of opportunity for personal hearing and on consideration of the documents produced and additional evidence filed, the impugned order dated 19.01.2012 was passed wherein the properties at serial no. 2 and 5 hereinabove viz. House property at No. 2 and property no. 5 as mentioned above i.e. Bunglow at No. 1,

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Page 3 of 39

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FPA-9/BOM/2012

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Sharunagar society, Udhna Magdallla Road, Piplod, Surat were released on ascertaining that the properties were never held by the APs since inception of the society. Further the Bajaj Sunny Scooter, Serial No. 3 was also released on the grounds that the investment made in acquiring the vehicle was very small and the Competent Authority agreed to accept that the small investment might have been made from their petty business income. However property at serial no.1 (in the name of AP-1) and S.No. 4 (in the name of AP-2) were forfeited vide impugned order as the APs could not prove their contention of acquisition of the properties from legal sources of income.

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2.5. Aggrieved by the impugned forfeiture order, the present appeal has been filed by the appellants. 3. In the present appeal, the appellant has taken the following grounds:

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3.1 It is submitted that the Impugned Order of the Competent Authority is patently bad and illegal in as much as it has forfeited the said two properties, (as referred in Para-1 herein above) though there was ample evidence on record to show that the said properties were legally acquired properties. In fact, the Competent Authority has even not followed the Attorney General‟s case in which it has been held that it is not the intention of the Act to forfeit the property unless and until some clear nexus is established in the Show-Cause Notice itself. In the present case, no nexus is disclosed in the show-cause notice nor any nexus is established in the order and in spite of that, the properties have been forfeited. Therefore, there is an error apparent on the face of the record. It is submitted that the reliance placed upon the judgment on Kesar Devi is totally misplaced while forfeiting the properties by holding that no nexus is required to be established. In fact, this is not correct reading of the decision of Kesar Devi. Apart from the same, the said decision of Kesar Devi has now been distinguished and dissented from in Aslam Merchant‟s case. Therefore, even in the case of wife, nexus is required to be established. There is nothing to show that AP-2, the wife was holding the property as Benami of

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Page 4 of 39

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FPA-9/BOM/2012

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the husband. Since there was no evidence at all, these properties could not have been forfeited. In fact, now the matter is covered by the decision of this Hon‟ble Tribunal in the case of Abbas Vohra delivered in FPA No. 27/BOM/1999. In the said decision, the Tribunal has clearly dealt with the case of Kesar Devi and clearly said that the said judgment would not apply in view of the subsequent judgment of the Hon‟ble Supreme Court in the case of Aslam Merchant reported in (2008)10 scale 383. Since the judgment of the Tribunal is binding on the Competent Authority, he could not have taken any other view but he ought to have followed the judgment in Abbas Ali Vohra‟s case and held that the properties are not liable to be forfeited.

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3.2 The order of the Competent Authority suffers from the vice of per incurium in as much as binding decision of the Hon‟ble Supreme Court as well as the Hon‟ble High Court of Gujarat are not followed and on the top of it, they are sought to be distinguished on flimsy grounds.

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3.3 The Competent Authority has made it impossible by giving reasoning that the Income-tax documents and the assessment orders cannot be relied upon since they cannot be considered under the SAFEMA Act. With respect, this reasoning is erroneous in as much as no affected person will be able to prove that the property without having reference to the Income-tax documents. The Income-tax documents were in fact accepted by the Income Tax Department and assessments have been made pursuant to the same. Therefore, the said documents could not have been ignored on the ground that the Income-tax documents cannot be relied upon. Even the reasoning given by the Competent Authority that some Income-tax returns are filed, it cannot be relied upon with respect this is not correct. It is permissible under the Incometax law and even the Income-tax Authorities have accepted the same. Therefore, once it is established that the properties sought to be forfeited were shown in the Income-tax returns, then it can never be said that they are

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Page 5 of 39

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FPA-9/BOM/2012

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illegally acquired properties. Even otherwise, even assuming without admitting that there is such any legal acquisition, it is illegal property of the affected person, but it has nothing to do with the activity of the affected person. At least, in the case of AP-2 wife, this principle would apply. Since there is no nexus established as required under the Aslam Merchant‟s case, and various decisions of the Hon‟ble Supreme Courty including the decision in the case of Mithu Bava, the judgment rendered by the Competent Authority is patently bad and illegal.

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3.4 That the interpretation of the Competent Authority put in the Constitutional Bench judgment in the Attorney General‟s case is completely misplaced. In fact, only paragraph 33 is quoted. While in paragraph 44 of the said judgment, it is clearly held that nexus has to be established. Therefore, the department has to prove nexus between the legally acquired property and illegal earning of AP-1. Even the case of Aslam Merchant has gone to the extent of holding that even if in the show-cause notice, no nexus is established, then the proceedings cannot be tried on merits. Therefore, the decision on merits of the Competent Authority ordering forfeiture of the properties is patently bad and illegal. In fact, in the show-cause notice, no nexus is established as required as per the decision of Aslam Merchant.

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3.5 The Competent Authority has wrongly held that the ratio of the decision of Kesar Devi is still available to the department. With respect, this is not correct. The decision of Kesar Devi is specifically dissented from in Aslam Merchant‟s case and, therefore now, it has been held by the Tribunal in Abbas Vohra‟s case that Aslam Merchant‟s case would prevail and the artificial distinction sought to be drawn by the Competent Authority regarding the three Judges judgment and the two Judges judgment of the Hon‟ble Supreme Court is completely bad and illegal. The Competent Authority has no authority FPA-9/BOM/2012 Page 6 of 39

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Page 6 of 39

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whatsoever to discuss the said two judgments and to come to the conclusion which judgment would be binding when the Tribunal itself has held that Kesar Devi‟s judgment has been dissented from. In fact, the observations made in the Aslam Merchant‟s case would apply at all in this case.

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3.6 It is submitted that the evidence led to prove that the properties were legally acquired properties was rejected on totally flimsy grounds, namely, that in the earlier case, some properties were released, the present properties cannot be released and they have to be forfeited. With respect, this reasoning is erroneous when ample evidence was led by the appellants to prove that the properties are legally acquired properties and even the amounts were paid by cheque. Therefore, there was no reason to discard the same. The Income-tax returns have been wrongly dissected to suite the purpose of the Competent Authority. It is wrongly held that in proceedings under SAFEMA, income shown in the Income-tax returns cannot be accepted as legal one. This is contrary to the judgment of the Tribunal in the case of Vohra Abbas Ali which is binding on the Competent Authority in which it has been in terms held that Income-tax returns cannot be discarded on such flimsy grounds. It is wrong to hold the AP-1 was engaged only in petty business and, therefore, he could not have acquired these properties. It was submitted that the impugned order was based on the presumption that the deposit made in the Bank was out of illgotten income of AP-1 without there being any basis for the same. In fact, the Competent Authority had decided to forfeit the properties and, therefore, the reasoning given in the order is all manipulated to suit the purpose and somehow or the other, to forfeit the property. It has no rational basis or nexus. The impugned judgment is self-defeating.

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3.7 In the above view of the matter, it was prayed that the impugned order of the Competent Authority be quashed and set aside.

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Page 7 of 39

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FPA-9/BOM/2012

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In its reply to the grounds of appeal, it is submitted on behalf of the respondent that before passing the impugned order forfeiting the said to properties, the Competent Authority considered and discussed all the submissions and evidences submitted by the APs in support of their contention, however the evidences were not at all sufficient to prove that the subject to properties were acquired from their legal source of income. With regard to the appellant‟s contentions on the basis of the Attorney General‟s case in which it has been held that it is not the intention of the act to forfeit the property unless and until some clear nexus is established in the show cause notice itself, it was submitted that the Competent Authority recorded reason in show cause notice itself wherein illegal activity of the detenue was explained and also the income tax returns filed by the appellant were discussed in the show cause notice, therefore the contention is baseless. Further reliance placed on the judgment of Kesardevi cannot be denied as the judgment is so far not over-ruled. Further the impugned properties held by the AP-2 were acquired from the illegal moneys of detenu, to prove otherwise the appellants need to discharge their onus of burden of proof as required u/s 8 of SAFEMA, however the appellant grossly failed to do so. The AP-2 filed return of income for the A.Y. 1994-95, 1995-96, 1996-97, 1997-98 and 1998-99 on a single date i.e. 08.10.1998, the filing of return of income for five assessment year on a single date is nothing else but an after-thought just to evade the proceedings of SAFEMA, because all these returns of income were filed after the detention order issued i.e. 18.08.1997. Hence the aforesaid facts clarify that the AP-2 had no legal source of income to acquire the impugned properties.

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4.1. With regard the appellants contention that judgment in the case of Kesardevi has been overruled by the judgment in the case of Aslam Merchant, the said submission is legally not correct because the case of Kesardevi was decided by the two member bench of the Hon‟ble Supreme Court and on the same issue there was another two member bench decision of the Hon‟ble

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FPA-9/BOM/2012

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Page 8 of 39

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Supreme Court in the case of Aslam Mohmed vs. Union of India, hence the contention raised by the appellant that the judgment of Kesardevi has been overruled by the judgment of Aslam Merchant is a matter of consideration whether the two member bench of the Hon‟ble Supreme Court has the power/ authority to overrule the judgment of another two member bench of the same court, so that latest judgment can be accepted as superseding judgment and the law of land. In this regard a reference can be made to the judgment dated 30.09.1985 in Union of India vs. Godfrey Philips India Ltd. decided by the three

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member bench of Hon‟ble Supreme Court, held that

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“ 12. …..We find it difficult to understand how a Bench of two judges in Jeetram case (1980) 3 SCR 689 could possibly over turn or disagree with what was said by another Bench of two judges in Motilal Sugar Mulls case. If Bench of two judges in Jeetram case found themselves unable to agree with the law laid down in Motilal Sugar Mills case they could have referred Jeetram case to a larger Bench but we don’t think it was right on their part to express disagreement with the annunciation of law by the coordinate bench of the same court in Motilal Sugar Mills…”

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Hence the contention raised by the appellant was required to be rejected especially in view that the case was remanded by the Hon‟ble Tribunal to the Competent Authority for fresh adjudication on the basis of evidences submitted by the appellant, however the appellant failed to discharge the burden of proof u/s. 8 of the Act, hence impugned properties were forfeited in accordance with law.

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4.2. It was submitted that while passing the order u/s 7 the Competent Authority also relied upon and referred to the decision in the case of Attorney General, which was also referred in the decision of Kesardevi, hence the impugned order was passed not only in accordance with law but also as per the law settled by the Hon‟ble Apex Court.

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4.3. The order of the Competent Authority was passed in accordance with law based upon facts and evidences submitted by the appellants, and in terms of the order out of the five properties remanded by the Hon‟ble Tribunal to

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FPA-9/BOM/2012

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Page 9 of 39

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adjudicate afresh, three are released by the Competent Authority on the basis of evidences produced before him. Further the Competent Authority also discussed in his order as to how the Act is applicable to the appellant and as they failed to discharge the onus of burden of proof as required u/s 8 of the Act, the impugned two properties were forfeited. Hence, the contention raised that the order of Competent Authority suffers from the vice of per incurium is not correct hence deserves to be rejected.

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4.4 With regard to the contentions raised by the appellant that the Competent Authority reasoned that income tax documents and the assessment orders cannot be relied upon since they cannot be considered under the SAFEMA is wholly misconceived because the appellant did not mention the facts in his appeal that they filed their returns of income from 1994-95 to 1998-99 on a single date i.e. after the issuance of detention order dated 18.08.1997 against the AP-1. The matter why the returns of income submitted by the appellants, though discussed in the order u/s 7 were denied by the Competent Authority to accept as an evidence of legal source of income, on account of the detailed reasons as mentioned therein. In this regard, following facts are enumerated for kind consideration of the Hon‟ble Tribunal :

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2 shops at Vardhman Apartment, Sagrampura, Surat were purchased in 1993 for consideration of Rs.1,12,000/- (paid by AP-1) and Rs.88,000/- (paid by AP-2).

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Shop at Trimurti Apartment, Surat was purchased for Rs.1,00,000/- in 1994 (paid by AP-2).

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The AP-1 was detained under the provisions of COFEPOSA vide order dated 18.08.1997 .

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The AP-1 filed the return of income for A.Y.1994-95, 1995-96, 1996-97 and 1997-98 on 23.09.1997 .

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Page 10 of 39

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FPA-9/BOM/2012

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The AP-2 filed a return of income for A.Y.1994-95, 1995-96, 1996-97, 199798 and 1998-99 on 08.10.1998 .

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A show cause notice u/s 6 of SAFEMA was issued on 29.10.1999 .

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From the above facts which are not in dispute, it is clear that the AP-1 and the AP-2 filed their return of income for five years together on one date in each case both of which are after issuance of detention order passed against the AP-1, hence it is reasonably presumed that filing previous five years returns is nothing but an after though to evade the proceedings under SAFEMA. However any documents submitted before any other department / authority can be treated valid by this department only when such documents are treated valid by the department where it was originally filed, in this case the return of income from A.Y.1994-95 to 1998-99 were filed by the AP-1 on 23.09.1997 and by AP-2 on 08.10.1998 . The properties were purchased during the year 1993 and 1994 hence the income tax return for A.Y. 1994-95 , 1995-96 are relevant which were both filed after the due date of filing of return and therefore treated as Non est return, thus governed by the section 139(4) of the Income tax Act which provides that “Returns filed in the following circumstances are held to be Non est (literally meaning “it is not ; absent

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; wanting”), which could be ignored by the officer :-

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Return made not in the prescribed form, or not signed and verified as required by the prescribed form.

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Return signed not by the assessee but by a general agent not specifically empowered.

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A return filed after the lapse of limitation period mentioned in section 139(4)( b). [ see, CIT v. S. Raman Chettiar, (1965) 55 ITR 630 (SC); K.S. Firm v. CIT,( 1965) 55 ITR 29 (Mad); S. Santosha Nadar v. ASSESSING OFFICER, (1961) 42 ITR 715 (Mad); CIT v. Bhagwandas Amersey, (1963) 50 ITR 239 (Bom); Venkatamma v. ASSESSING OFFICER, (1964) 51 ITR 336 (Mys); CIT v. L.A.Patel, (1966) 60 ITR 685

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FPA-9/BOM/2012

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(Guj); Smt. Parbatidevi v. CIT, (1970) 75 ITR 625 (All); Auto & Metal Engineers v. Union of India, (1978) 111 ITR 161 (Punj); CIT v. Smt. Minabati Agarwalla, (1971) 79 ITR 278 (Cal); CIT v. Bissessar Lal Gupta, (1976) 105 ITR 684 (Cal)].

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A return showing an approximate income without indicating the announcing period and omitting important particulars required to be furnished.

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A return filed after the completion of the assessment.

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A mere letter informing the officer that there is no taxable income.

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A return filed before an officer who had no jurisdiction, terrAssessing Officerrial or otherwise, over the assessee .

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An unverified return.

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A return submitted without payment of tax due which is statutorily required to be paid before submitting the return.

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An unsigned return can be treated as invalid one.

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A return without signature and verification of the assessee is to be treated to be an invalid return.

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With effect from 1^st April, 1989 , section 139(4) enables any person who has not furnished a return __

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__ Within time allowed to him under section 139(1), or

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__ Within time allowed to him under a notice issued under section 142(1), to furnish the return for any previous year at any time __

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__ before the expiry of__

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__ (for and from assessment year 1989-90) one year

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__(for assessment year 1988-89 or any earlier assessment year) two years

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from the end of the relevant assessment year or

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__ before the completion of the assessment, whichever is earlier.

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Therefore a voluntary return under section 139(4) for assessment year 1994-95

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can be furnished upto 31^st March, 1996 and for assessment year 1995-96 can

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FPA-9/BOM/2012

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be furnished upto 31^st March, 1997. In this case return of income for assessment year 1994-95 and 1995-96 which are relevant assessment years with regard to acquisition of impugned properties were filed on 23.09.1997 and 08.10.1998 by the AP-1 and AP-2 respectively, which were filed after the lapse of limitation period provided under section 139 (4) of the Act, hence will be treated as Non-est returns.

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The return of income filed by the APs were Non est as per the Income Tax Act and were invalid returns even before the Income Tax Department, as the return of income filed by the APs were invalid before the Income Tax Department , the same can not be treated as valid documents and valid piece of evidence by the Competent Authority, therefore, the Competent Authority rightly rejected the Income Tax Returns as evidence of legal source of income of the APs and forfeited the impugned properties as the APs grossly failed to discharge the onus of burden of proof as required under section 8 of the Act.

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4.5 It was submitted that The Competent Authority discussed the observation made by the Hon‟ble Supreme Court of India in Aslam Merchant‟s case and found that the case of appellant was not at all covered by the said judgment of Aslam Merchant, It is not at all correct that the Competent Authority ever said that the Aslam Merchant‟s case is not tenable, but the Competent Authority only said that the case is not covered by the case of Aslam Merchant, the Competent Authority recorded reasons in the notice itself and had sufficient evidences like Income tax returns etc to reason to believe that the properties were acquired from illegal monies of the detenue, hence the case is not at all covered by the case of Aslam Merchant as averred by the Appellant.

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FPA-9/BOM/2012

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4.6 The Competent Authority already discussed the issue in his order, however this order was passed as the case was partially remanded by the Hon‟ble Tribunal to the Competent Authority for fresh adjudication, The Hon‟ble Tribunal released few properties and rest were remanded for fresh adjudication. Before issuance of notice u/s 6 the Competent Authority had all the relevant material for reasons to believe that the impugned properties were acquired from illegal monies of the detenue, the AP-1 and AP-2 filed return of income for relevant assessment years much after the due date of filing of such returns and specifically after issuance of detention order against the AP-1. The APs had to discharge their burder of proof as required under sec. 8 of the Act, which they completely failed to discharge with regard to the impugned properties; hence the impugned properties were rightly forfeited.

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4.7 Merely furnishing mode of payment do not prove that the properties were acquired from legal source of income, the Appellants acquired the properties in the year 1993 and 1994, they had no proof with them that the funds to acquire the properties were from their legal source of income, they filed return of income for the relevant assessment years i.e. AY 1994-95 and AY 1995-96 much after the lapse of limitation period hence the same were Non est returns even before the Income tax department. The return of Income were filed by the APs after issuance of detention order against the AP-1, hence it can be reasonably presumed that the returns were filed just to evade the SAFEMA proceedings.

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4.8 In the light of the above it was prayed, the Hon‟ble Tribunal may be pleased to dismiss the appeal.

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Vide the letter dated 14.02.2013, the appellant filed the rejoinder to the reply submitted by the respondent and made submissions mainly with regard

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FPA-9/BOM/2012

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to acceptability of the Income tax returns for the assessment years 1994-95 to 1998-99 which were not filed within the permitted time but filed at a belated stage.

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The respondent filed further submissions dated 19.04.2013 in reply to the contentions made by the appellant in the rejoinder. Apart from the aspect of the acceptability of the income tax returns filed belatedly, question was also raised about the authenticity of the additional evidence filed by the appellant after receiving the documents at the time of cleaning of the sealed premises after the floods in Surat city in 2006. It was averred that in the form of additional evidences, the APs submitted following details vide their letter dated 11.10.2010 before the Competent Authority.

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“In Respect of AP-1

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(1) Month-wise regular income and expenditure statements from FY 1977-78 to FY 1999-2000 (see page no. 60 to 83 of paper book)

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(2) Year wise summary of total income (See Page N. 84 of paper book)

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(3) year wise summary from Diamond Majuri Business and Trading Business (See page No. 85 to 107 of paper book)

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In respect of AP-2

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(1) Copy of note of inspection in respect of license under shop and establishment Act from Surat Municipal Corporation (See Page No. 108 to 111 of paper book)

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(2) Copies of acknowledgment of returns of income filed alongwith copies of computation of income for the AY 1994-95 to 1998-1999 (See page no. 112 to 121 of paper book.)

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(3) Month-wise income and expenditure statements for the FY 1980-81 to 1997-98 (see page no. 111 to 138 of paper book.)

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FPA-9/BOM/2012

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6.1 To appreciate the submission, the chronological event of the case was enumerated as under :-

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a) ) 2 shops at Vardhman Apartment, Sagrampura, Surat were purchased in 1993 for consideration of Rs.1,12,000/- (held by AP-1) and Rs.88,000/- (held by AP-2).

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b) Shop at Trimurti Apartment, Surat was purchased for Rs.1,00,000/- in

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1994 .

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c) The AP-1 was detained under the provisions of COFEPOSA vide order dated

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18.08.1997 .

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d) The AP-1 filed the return of income on 23.09.1997 for A.Y.1994-95, 1995-

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96, 1996-97 and 1997-98.

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e) The AP-2 filed a return of income on 08.10.1998 for A.Y.1994-95, 1995-96, 1996-97, 1997-98 and 1998-99.

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f) A show cause notice u/s 6 of SAFEMA was issued on 29.10.1999 .

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g) Forfeiture order dated 07/07/2000 was passed.

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h) Appeal being FPA No. 57 & 58 /BOM/2000 was filed and stay granted on conditions.

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i) Ossession of impugned property were taken by the Competent Authority as the appellant failed to comply with the condition of stay. Possession taken on

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23.03.2004.

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j) Sealed premises opened to clean , due to flood in Surat and to handover the records lying in the premises to the appellant on 26/08/2006.

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During the course of cleaning the property record/books of accounts pertaining to period 1992-1993 to 1999-2000 mainly cashbook, Xerox bills, phone registers etc were found which was inventorised and handed over to the appellant.

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6.1.1 From the aforesaid details, it is clear that the premises was under the possession of the appellant till 2004 and the books of accounts which were handed over to the appellant found in the sealed premises were not before

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1992-1993, hence whatever details of income before the financial year 19921993 were submitted as additional evidence were not at all extracted from the documents received from the sealed premises.

¶147

6.2 It was further submitted that the appellant is habitual of fabricating the documents and books of accounts which is evident from the affidavit filed by his brother-in-law Mr. Kantilal Chagganlal Shah in whose name he bought a property to escape the SAFEMA proceedings. The property bought in the name of Brother in Law was ultimately forfeited under section 7, against that the brother in law filed an appeal being FPA No. 8/BOM2008 before this Hon. Tribunal and submitted books of accounts to show his legal source of income, on that basis the Tribunal remanded the case to the Competent Authority to adjudicate afresh, nevertheless the brother in law Shri Kantilal Chhaganlal submitted an affidavit wherein he denied the ownership of that property and also stated that whatsoever books of account submitted in his case were prepared by the appellant and were fabricated books of accounts, the aforesaid affidavit is enclosed herewith as Annex-A. From the aforesaid facts it is clear that the details regarding income of AP-1 and AP-2 prior to 1992-93 were nothing but fabricated by the APs so as to generate the legal source of income to make the legitimate acquisition of impugned properties.

¶148

6.3 The Appellant averred that they received gift of Rs.300,000/- on 17.02.1993 and Rs.380,000/- on 18.03.1993 from Mr. Narottam J Patel an NRI, However, as per settled law a gift can be received from a relative though Mr. Narottam Patel gifted that a huge sum without any consideration. It is pertinent to note that the legal income of Mr. Narottambhai Patel who gifted such a huge sum to the appellants need to be verified which the appellant failed to discharge. Since the AP-1 was involved in hawala trading and laundering of foreign exchange during this period. So it is clear that the so

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called gift was nothing else but a part of the laundered money coming back to him as gift, therefore, cannot be held as legal income.

¶152

6.4 The appellant has claimed that she earned a huge sum of Rs.90,28,912/being Diamond Job Work from the period 11.09.1980 to 03.03.1988 tuning to approx. Rs.100,000 per month. The detailed information is stated in page 46 of the paper book for the above period which was not available with the appellant during the course of forfeiture proceedings and during the proceedings before the Hon. Tribunal till the handing over of books found in sealed premises. As demonstrated above, the books of account pertains to the appellant for period 1992-1993 to 1999-2000 only as inventorized and handed over under panchnama. Though the business income shown by the AP is for the period 11.09.1980 to 03.03.1988 which is clearly based on the fabricated books of accounts. As per the summary provided by the appellant on page no. 46 of paperbook, it can be estimated that the appellant had huge income of approximately Rs.12,00,000 per annum. Such a big income was definitely a subject to Income Tax and Compulsory Audit. If such a return of income showing huge income was filed during that period, it would definitely be a subject of scrutiny by income tax department. The appellant, especially when having summarized such a minute information, must definitely be in possession of income tax return, audit report, challan of advance tax, self assessment tax, assessment order etc…which they have failed to produce even before the Hon. Tribunal to prove their claim.

¶153

6.5 In view of the foregoing facts and circumstances of the case, it was submitted that the Hon‟ble Tribunal should to dismiss the appeal.

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In reply, a further affidavit dated 15.05.2013 was filed by the appellants. It was inter-alia submitted that under the scheme of Income-tax Act, the due date of filing of return of income is as under:

¶157

Assessment	Due date for filing	Date of filing of	Date of filing of
Year	of return u/s 139(4)	return by A.P.1	return by A.P.2
1994-1995	31/03/1996	23/09/1997	08/10/1998
1995-1996	31/03/1997	23/09/1997	08/10/1998
1996-1997	31/03/1998	23/09/1997	08/10/1998
1997-1998	31/03/1999	23/09/1997	08/10/1998

¶158

7.1 There is no dispute regarding filing of belated return as above, but the limited argument is that in the event of notice issued u/s 148, the assessing officer well be used information and declaration enclosed with the return of income against the assessee as a valuable evidence and barring the assessee to argue that the return is belated one and is non-est and cannot be used against the assessee. Hence the information and disclosure made in the return of income by the A.P.1 & A.P.2 are valuable evidence. Merely, filing of belated return does not alter the type of income and source and does not change the character of income and source of income.

¶159

The Learned Competent Authority has not quoted the finding of the judgment in full in the case of V.A. KAMAT BROS, & OTHERS V/s. ASSESSING OFFICER the remaining finding is as under:

¶160

The facts on record need to be viewed in this background. The return filed by the assessee under mistaken advise is on 09^th January, 1998 and even if it is ignored and not accepted as his return, the said disclosure could have been very well used by the AO while passing the order under s. 147 r/w s. 143(3).

¶161

7.2 The photography of wet books, bills and vouchers was also taken of rented property at Chogan Sheri, Sagrampura.” Moreover A.P.1 has submitted

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in his submission dated 02/01/2009 “therefore I have prepared the data for explaining the investment made in forfeited property on the basis of materials available with me and on the basis of current bank account no. 5956 and saving bank account no. 17914 of Bank of Baroda.” And A.P.2 has also submitted in this submission dated 02/01/2009 “therefore I have prepared the data for explaining the investment made in forfeited property on the basis of materials available with me and on the basis of saving bank account no. 46435 of Bank of Baroda and saving bank account no. S/4 of Bank of India”. The said photograph of the books bills and vouchers was put on record. Therefore avertment made in reply to the rejoinder is without going through the submission on record.

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7.3 Regarding the allegation the appellant is habitual of fabricating the books of accounts. It was submitted that the allegation is made without going through the submission date 02/01/2009, 03/12/2009, 21/12/2009 and 24/02/2010 wherein A.P.2 submitted the copy of license under Bombay Shop and Establishing Act, 1948 and the copy of sale tax registration, copy of bill of Xerox Machine, copy of bill of Sewing Machine, copy of bill of V.C.R. and A.P.1 submitted the copy of license under Bombay Shop and Establishment Act, 1948, copy of sale tax assessment order and copy of bill of Fax and Xerox Machine. The said evidences are on record. Further A.P. has stated in his submission dated 24/02/2010 “With reference to the above please refer our submission dated 02/01/2009, 03/12/2009 and 21/12/2009. The cash book along with statement of account of various parties with whom diamond business is done and other material has been produced and verified”. The facts itself stated that the A.P. has prepared the books on the basis of core material such as bank account, statement of account of various parties, bills and vouchers.

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7.3.1 Hence allegation made as habitual of fabricating the books of account are vague and has no basis. The Competent Authority has never said in his order dated 09/06/2010, 18/01/2012 and also in comment submitted before the Hon‟ble Appellate Tribunal of Forfeited Property that the evidence, material and books of account put before me are fabricated. In fact the Competent Authority has released some of the property forfeited considering the evidence, material and books of account put before him.

¶169

As far as the Kantilal Chhaganlal Shah case is concern, the notice was issued u/s 6(1) on 27/05/2004 and the case was adjudicated by order dated 03/12/2007. The said order was disposed off in appeal by way of remand. During the readjudication, the said Kantilal Chhaganlal Shah has filed submission on 27/07/2009 and order was passed u/s 7 of the Act on 03/10/2011. The Learned Competent Authority has stated in page no. 18 of the order “The inspector of this department visited were A.P.2 i.e. Kantilal Shah is residing and found that A.P.2 was hospitalized with serious illness but his son Mr. Dhaneshkumar Kantilal Shah filed an affidavit stating that the aforesaid flat was purchased by A.P.1 in the name of A.P.2 and entire consideration amount was also paid by him (A.P.1). While selling the flat, no sale consideration amount was given to them. From the above affidavit it is established beyond doubt that A.P.1 had purchased the said flat out of his illgotten money in name of his brother, hence it is held to be illegal acquired property”. Now coming to the affidavit filed by Kantilal Chhaganlal Shah on 04/01/2012 wherein Kantilal Chhaganlal Shah stated I have cancer illnesss since last 6 year and the investment in flat at malbar hill made by my brotherin-law etc…

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7.3.2 Looking to the case of Kantilal Chhaganlal Shah the facts of the case are as under

¶171

Notice was issued u/s 6(1) on 27/05/2004 .

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First order was passed on 03/12/2007 .

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Kantilal Chhaganlal Shah has filed submission on 27/07/2009 .

¶176

Second order was passed on 03/10/2011 .

¶177

During the adjudication process Kantilal Chhaganlal Shah was never deposed and narrated any facts what is stated by Dhaneshkumar Kantilal Shah in his affidavit.

¶178

The affidavit was filed by the Dineshkumar Kantilal Shah was long after submission dated 27/07/2009 filed by Kantilal Chhaganlal Shah and the affidavit was not mentioned in order dated 03/10/2011. The affidavit was filed by the Dhaneshkumar Kantilal Shah only after the visit of inspector of the department. The facts itself state that the affidavit was not filed voluntarily and Kantilal Chhaganlal Shah has filed an affidavit only after the order was passed u/s 7 on 03/10/2011.

¶179

Surprisingly Kantilal Chhaganlal Shah has filed an affidavit on 04/01/2012 before the Competent Authority just before order u/s 7 of the Act passed on 18/01/2012 in the case of the appellant. The facts itself state the affidavit filed by the Kantilal Chhaganlal Shah under pressure and without of status of mind as he himself stated in affidavit that I am serious cancer patient since last 6 years and Dhaneshkumar Kantilal Shah also stated in his affidavit that my father is serious and not in sound mind. The both affidavit was filed to sabotage the case of the appellant and the allegation made by the Competent Authority is contrary to the facts and circumstances of the case.

¶180

7.4 The A.P. 1 has filed the details of diamond job work from 25/04/1988 to 28/09/1990 tune of Rs. 6,06,00,922/- and A.P.2 has filed the details of diamond jobwork from 11/09/1980 to 03/03/1988 tune of Rs. 90,28,912/which are on the basis of bank transaction and on the basis of statement of account of concerned parties with whom transaction had been made. The details and evidence in this respect was in the house premises at Chogan

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Sheri, Sagrampura and some details and evidence was in business premises at Vardhman Apartment, Ichha Mehta ni Sheri, Sagrampura. The seal was opened of ground floor Vardhman Apartment and details were handed over to the A.P. The photographs of wet books, vouchers, bills, statement of account, etc. kept in both premises were filed during the proceeding before the Competent Authority and the same are on record. Thus, allegation of fabricated books of account are vague and without going through facts and material available on record. Further the Competent Authority stated that there can be huge income of Rs. 12,00,000/- per annum as per summery provided by A.P. on page no. 25 to 27 and page no. 46 of the paper book. In this statement of Competent Authority itself proved that A.P. have sufficient income than what they have invested.

¶184

The appellant has also filed written submissions vide the letter dated 22/04/2017, the main points of which are as follows:

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8.1 Section 6(1) makes in mandatory on the part of the Competent Authority to consider the following points before issuing a formal notice to the AP:

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i. the value of the property acquired by the AP,

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ii. his known sources of income, earning or assets; and

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iii. any other information or material available to it as a result of action taken u/s 18 or otherwise.

¶189

8.2. The perquisites for the recording of the reasons that illegally acquired properties ostensibly standing in the name of the person to whom the Act applies are the following:

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a. Profiling of all the properties standing in the name of the AP, b. Analyse the return of income for the entire period whether the known sources of income explain the acquisition of the property. For that purpose the power available u/s 18 can be exercised,

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c. The competent authority source normally make a list of the persons who are relatives or associates of the AP and also obtain

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details of the properties belonging to them vis-à-vis the known sources of income.

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8.3 It is a trite and settled position of law that the property sought to be forfeited must be one which has direct nexus with the income derived by contravention of any provisions of the Act. The Competent Authority must show that there is direct link or nexus between the illegally earned income and property sought to be forfeited and in absence of the same the condition precedent for initiating proceedings would not exist and the entire proceedings are vitiated. The perusal of the notice u/s 6 does not reveal the conducting of any inquiry before its issuance nor any inquiry was conducted u/s 18 of the Act. The CA has referred to inquiries and investigation report of the Enforcement Directorate which is only restricted to the identification of the properties. Infact, the covering of all properties as intimated by the ED in the notice issued u/s 6 even though the same does not belong to AP or his relatives discloses non application of mind on the part of the CA. Though the burden of proving that the property specified in the notice served u/s 6 is not illegally acquired is on the AP as per provisions of section 8 of the Act, however before that burden is cast on the CA and he has to arrive at a conclusion by stating reason that he reason to believe that property is out of illegal sources and such reasons should be in writing. In fact, the perusal of the reasons does not reveal any material available and placed before the CA before the issuance of the notice. Merely because SAFEMA applies without considering the returned income and other details filed the properties in question have come to be forfeited even though they do not belong to the AP and his family members. Reliance was placed on the following judgment pronouncement of the Hon‟ble Mumbai High dated 27.02.2012 in support of their contention: Ranchhodbhai Bhagwanabha v Unknown , CWP No.984 of 2000.

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In the said judgment, the Hon‟ble High Court has referred to various decisions in support of the above proposition which are listed in para 14 of the said judgment.

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8.4 With regard to the issue that various properties have been released in the earlier order, and therefore the same income cannot be utilized for explaining the source of investment of all the properties it is worthwhile to note the reasons for release by the Hon‟ble ATFP.

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Sr. No.	Description of property	Reasons for release by the Hon’ble ATFP on the basis of the report of the Ld.CA
1	Maruti Fronti Car bearing Reg. No.GJ-5-C-9542	No purpose would be served by forfeiting the order and at this stage there was no objection if it is released as earned from legal income.
2	House property	2/4036, Sagrampura, Chogan Sheri, Surat, it was accepted that the APs were only tenants in the said property which was
		owned by the trust. The property in question was also in the custody of the trust, since
		1998 they were no longer staying in the aforesaid rented property and therefore there was no ground to forfeit the tenancy right of the AP.
3	STD/PCO, Shop no. L-33, Sargam Shopping Centre, Surat	The property in question has been sold on 17.02.1999 before issuance of notice dated 29.10.1999.
4	Balance in saving account no.17914 with Bank of	The balance in the account was a meager amount and AP had
	Baroda, Sagrampura	sufficient legal sources from
	Branch, Surat.	where this amount could have been easily earned.
5	Bajaj Sunny Scooter bearing	The amount so paid can be

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	Regn. No.GJ-5-J-6579.	treated as paid from legal source. Since the business activities were conducted by the APs.
6	Balance in the current A/c No.5956 with Bank of Baroda, Bhagatalao, Branch, Surat in the name of M/s. Amar Diamonds.	There is no record available of the amounts lying in the account and therefore had not objections of releasing.
7	Balance in Saving Account	There was no record available
	with Bank of Baroda, Bhagatalao, Branch, Surat.	with them of the amount lying in the account and hence had no objections if released.

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8.5 The Hon‟ble Tribunal had made an observation that with regards the items no. 6 & 7, there was no application of mind on the part of the Ld. CA. while passing order. Therefore, it is worthwhile to note that the properties in question have come to be released not because any benevolence on the part of the Ld. CA but either the property in question was not belonging to the AP or there no categorical information with regards the same which clearly discloses lack of application of mind on the part of the Ld.CA.

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8.6 As regards the properties described as 2 shops at Ground and First Floor, 2/4338, Vardhman Apartment, Ichha Mehta Sheri, Sargrampura, Surat is owned by AP-1. With regard to the purchase of the said property, it was submitted that Rs.3000/- was paid on 31.03.1993 in cash & Rs.1,12,000/was paid by cheque on 01.06.1993 towards the consideration of the aforesaid property by AP-1. Rs.20,000/-, 50,000/- and 52,000/- were deposited in the Bank of Baroda account on 19.05.1993, 20.05.1993 and 27.05.1993 respectively which was cash accumulated from the business such as Xerox income, STD/PCO and accountancy fees etc. from which the cheque of Rs.1,12,000/- was issued. AP-2 had further paid Rs.88,000/- towards the aforesaid property. The Ld. CA has questioned the amount of Rs.1,12,000/being cash deposited within 9 days out of the income earned from business from Xerox, STD/PCO and accountancy fees etc. With regards the investment of Rs.88,000/- by AP-2, the Ld. C.A. has stated that no evidence has been placed on record to show that such business of diamond trading was under taken and neither any return of income for the aforesaid property was filed.

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The return of income was also filed for the year 1994-95 where the income declared was Rs.33,500/-. He has also contended that merely filing the return of income by itself would not indicate the legal source of income of any person unless some legal business is shown in the proceedings under SAFEMA. Accordingly, it has been inferred that Rs.88,000/- is the ill-gotten income of AP-1 routed through AP-2 in order to give it legal color.

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8.7 The Ld. C.A. has accepted that AP-1 was engaged in some petty businesses from where some income was generated. However, many properties have come to be released on the basis of the report of his report and the same facts and figures cannot be employed in respect of all the properties. (Refer pg.10 of the order)

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8.8 From the above discussion it would be very clear that the Ld. C.A. has questioned:

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(1) the source of income of the appellant,

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(2) the quantum of legal income earned by the AP,

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(3) the source of cash deposit in the bank accounts,

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(4) non-acceptance of the return of income filed by the AP since the same

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was after issue of the detention order.

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8.9 To explain the source of income earned by the AP, attention is invited to page 3 of the of the Paper Book (PB-2) filed by the appellant containing pages 1 to 36 wherein details of investment for the purchase of property at M-1, Vardhman Apartment have been furnished. The source of investment and other details of payments had been furnished on page 8 of PB-2. The copy of the cash book has also been placed on page 9 to 24 of PB-2 which explains the source of cash deposits in the bank accounts. Copy of the cash books have been placed for the period commencing on 01.12.1991 onwards. Attention is invited in particular to page 17 of PB-2 wherein cash payments of Rs.3,000/for the purchase of aforesaid property has been mentioned. It can be observed that the AP-1 had an opening cash on hand of Rs.1,45,243/-. The perusal of the cash book would also reveal the incurring of various expenses such as travelling, electricity, postage and telegraph, cash deposit in the bank accounts, income tax payments, majuri payments paid for diamond trading etc.

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8.10 AP-1 had made further payment of Rs.1,12,000/- on 03.06.1993. The details have been placed on page 20 of PB-2. It is worthwhile to note that the

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amount in question has been paid by cheque on 03.06.1993. The available cash on hand was Rs.1,08,627/- (refer page 18 of PB-2) . The appellant had also withdrawn from the bank amounting to Rs.53,500/- on 28.04.1993 ( refer page 18 of PB-2). Apart from that diamond majuri income STD/PCO income/ accountancy fees was also received in cash. Similarly, in the month of May apart from the available cash on hand, miscellaneous majuri income, STD/PCO, accountancy fees etc had been received and out of this accumulated cash on hand the amounts in question have been deposited in the bank account which in turn have been utilized for the issuance of the cheque of Rs.1,12,000/-. Therefore, the source of cash deposited in the bank account from where subsequent cheque of Rs.1,12,000/- has been issued is also from the available cash on hand which includes withdrawals made from the bank account apart from the various other incomes which have duly been offered to tax. The appellant had purchased a Xerox machine from Modi Xerox amounting to Rs.1,52,201/-. The details of payments with regards the purchase of Xerox machine is also contained on page 17 of PB-2. Therefore, to question the income arising from Xerox business on the part of the Ld. CA would not be justifiable. The AP has placed the complete summary of the diamond business transaction on page 25 to 27 of the PB-2. The AP had conducted transactions in diamonds to the extent of Rs.6.06 crores during this period. This fact has also been brought to the notice of Ld. CA.

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8.11 It was further submittted that for the above referred property AP-2 i.e. Late Vanmalaben N. Shah had made an investment of Rs.88,000/-, the details of which are as under:

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Date	Amount		Cash/Cheque
11.08.1992	38,000/-	Cheque no.	4362 drawn from Bank of
		Baroda A/c.	no. 46435.
21.11.1992	50,000/-	Cheque no.	4363 drawn from Bank of
		Baroda A/c.	no. 46435.

¶223

8.12 The source of investment has been explained on page 29 of PB-2. The relevant details have also been furnished on page 33 of Paper book-2. The amount of Rs.38,000/- has been paid on 11.08.1992 (Refer pg.35 of PB-2). The AP-2 has deposited Rs.20,000/- on 30.04.1992 out of available cash on hand. Similarly, on 10.08.1992 and 11.08.1992 further Rs.20,000/- and

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30,000/- have been deposited out of available cash on hand of Rs.304061/-. Therefore, the payment has been made from the bank account out of the available cash on hand which comprised of income from diamond majuri and tailoring income whose return of income have also been furnished.

¶227

As regards Rs.50,000/- the same has been paid on 21.11.1992 (Refer pg.36 of PB-2). The AP has received gift of 1,50,000/- from Mahesh Shah on that very date. Apart from available cash on hand of Rs.2,87,648/- on that date an amount of Rs.70,000/- and Rs.1,90,000/- has been deposited on 13.11.1992 and 17.11.1992. The copy of the cash has also been placed on page 34 to 46 of the PB-2.

¶228

8.13 As regards property being Shop-no.1, Trimurti Apartment amounting to Rs.1,00,000/-, the details of payment made by late Vanmalaben N. Shah (AP2) are as under:

¶229

Date	Amount		Cash/Cheque
18.02.1994	15,000/-	Cash (page 2)	no. 39 of the Paper Book-
15.02.1995	20,000/-	Cash (page 2)	no. 41 of the Paper Book-
01.04.1995	35,000/-	Cash (page	no. 42of the Paper Book-2)
14.05.1995	15,000/-	Cash (page 2)	no. 43 of the Paper Book-
25.06.1995	10,000/-	Cash (page 2)	no. 44 of the Paper Book-
12.08.1995	5,000/-	Cash (page 2)	no. 45 of the Paper Book-

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8.14 Referring to the written submissions filed by the APs on 02.01.2009 and 11.10.2010 before the Competent Authority, it was contended that various documents have been furnished under the Gujarat Sales Tax Act which confirm the existence of the firm doing the business of Diamond Majuri. Sales Tax Registration Certificate in respect of Diamond Business was also furnished. License under the Shop and Establishment Act from Surat Municipal Corporation vide no. S/2/3329 dated 06.09.1984 had been filed. The AP had also contended that return of income for A.Y.1993-94 to 1997-98 had been furnished and filed before the Income Tax Department before

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issuance of notice u/s 6(1) of the Act. The details of the return of income and taxes paid have also been mentioned on page 5 of the order passed u/s 7 of the Act. Financial statements indicating turnover from diamond business from 09.01.1978 to 17.07.1992 had been furnished which indicated sales turnover of Rs.6.06 crores. It was contended that the income earned from business was invested in properties. The applicant had also furnished evidences of income earned through STD/PCO and accountancy fees in the various submissions dated 02.01.2009, 25.06.2009, 03.12.2009, 21.12.2009 and 24.02.2010.

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8.15 As regards the properties held by AP-2, it was also contended that the Ld. Competent Authority had not established any direct or indirect nexus with the income derived by way of contravention of any provisions of the Act or any property acquired there from and therefore the decision of the Hon‟ble Supreme Court in the case of Aslam Merchant was duly applicable.

¶235

8.16 Though the registration had been made under the Shop and Establishment Act from Surat Municipal Corporation in respect of Diamond and Cutting, Polishing and trading Work, and the same was lost, however note in respect of the inspection conducted on 28.03.1994 had been furnished.

¶236

The above information furnished would clearly demonstrate that the properties in question were purchased out of known and legal sources and therefore the same should be released.

¶237

During the hearing of the appeal, the learned representative of the appellant has mainly reiterated the arguments as mentioned in the written submission which have already been reproduced above.

¶238

9.1 In response to the arguments on behalf of the appellant, the Ld. Inspecting Officer appearing on behalf of the respondent submitted that A.P.1 had filed the Income Tax Returns for the AY 1994-95 to 1997-98 only on 23.09.1997 while in the case of AP-2, the returns for the AY 1994-95 to 199899 were filed only on 08.10.1998, both of which are after the detention of the A.P.1. on 18.08.1997. It was submitted that the returns having been filed belatedly and without the Assessing Officer issuing any notice u/s. 142(1)

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cannot be said to be a valid return of income in the eyes of law. No legal cognizance can be taken of such a return of income and the Assessing Officer has rightly treated the so called return as non-est . When a return of income has been treated as non-est, the same does not carry any evidential value because in the eyes of law, such a return does not exist at all.

¶242

9.2 During the hearing, the respondent also raised doubts about the authenticity of the additional evidence filed by the appellant. It was submitted that the subject premises forfeited under the related order were under the possession of the appellant till 2004 when the possession of the same was taken over by the respondent. Thereafter, the said premises was opened in 2006 for cleaning purposes which was after the floods in Surat City and at the time of cleaning of the premises, the property record/books of accounts etc. found in the premises which were for the period 1992-93 to 1999-2000 mainly cashbook, Xerox bills and the phone registers, etc. were inventorized and handed over to appellant. No Cash Book, records etc pertaining to the period before 1992-93 were found in the sealed premises and no such documents were handed over to the appellant. Hence, whatever details of income before the financial year 1992-93 were given in the additional evidence, these were not at all extracted from the documents received from the said premises.

¶243

9.2.1 Reference in this regard was made to Para 8 of the reply dated 10.04.2013 filed by the respondent during these proceedings. It has, inter-alia , been stated in the said reply that the books of accounts and documents submitted by the appellant as additional evidence said to have been handed over by the respondent on opening of the sealed premises in 2006 in pursuance of the Tribunal‟s order were based on fabricated documents and could not be relied upon. This was for the reason that in the said additional evidence, the business income of Late Smt. Vanmalaben Narendrakumar Shah, AP-2 from

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Diamond Job Work for the period 11.09.1980 to 03.03.1988 was shown as amounting to a huge sum of Rs. 90,28,912/- which was clearly based on fabricated books of accounts as accounts prior to 1992-93 were not at all handed over by the respondent to the appellant on opening of the premises in pursuance of the Tribunal‟s orders in 2006.

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9.2.2 To a specific query of the Bench to the Learned Representative appearing on behalf of the appellant to clarify the above contention made on behalf of the respondent, no satisfactory reply/explanation was forthcoming from him.

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We have considered the rival contentions and also gone through the pleadings filed by both the sides and the various documents on record. The first point that has been argued on behalf of the appellant is that the proceedings in the matter were not in accordance with the provisions of the SAFEMA as the Competent Authority, while issuing the notice under Section 6(1) of the Act, had failed to allege, on the basis of relevant material, that the properties sought to be forfeited under the provisions of SAFEMA had a nexus with the money generated by the illegal activities of AP-1. The appellant has referred to the judgment of the Hon‟ble Bombay High Court in the case of Ranchodhbhai Bhagwanbhai Tandel vs. the Competent Authority, Mumbai , in CRP No. 984/2000 dated 27.02.2012. This judgment, in para 14 thereof refers to various judgments of the Hon‟ble Supreme Court on the issue, the main of which are those in the case of Attorney General for India Vs. Amratlal Prajivandas, (1994) 5 SCC 54, Fatima Mohd. Amin Vs Union of India (2003)7 SCC 436, P.P. Abdulla v/s Competent Authority , (2007) 2 SCC 510 and Aslam Mohammad Merchant v. Competent Authority, WP-984 of 2000 . It is observed that it is a settled position of law as held in the above mentioned judgments of the Hon‟ble Supreme Court that though the burden of establishing that the property specified in the notice served under section 6 of SAFEMA is not

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illegally acquired or in other words, that these have been acquired from legal sources of income, is on the affected person in view of section 8 of the Act; however, before that burden is cast on the affected person, the Competent Authority, while issuing the show cause notice under section 6 of the Act has to arrive at a conclusion by stating the reasons which he has to believe that the property is illegally acquired and such reasons are to be recorded in writing. It is therefore, first required to be seen whether the show cause notice issued in the case fulfils this primary requirement.

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10.1 On going through the show cause notice issued in the case under Section 6 of the Act, vide the letter dated 29.10.1999, it is observed that it gives in detail the role played by AP-1 in the remittance of a large amount of Foreign Exchange amounting to approximately Rs. 128.84 crores out of India from early 1992 to March 1996 against approximately 500 transactions relating to import of rough diamonds. It was alleged that AP-1 was the sole proprietor of firm M/s Amar Diamond and was acting as a local contact man of five different concerns namely M/s Mahavir Diamonds, M/s Bright Dimond, M/s Nakordias Diamonds, M/s Manan Exports and M/s Shantinath Enterprises from whose current accounts with Bank of Baroda, Bhagatlao Branch, Surat the said remittances were made and he was also looking after all the operations/transactions relating to these accounts. It was also found that the current account generally funded by cash; that the consignment had been dispatched from six seller through on clearing and forwarding agent in Honkong and all the buyers had one clearing/forwarding agent in Bombay. The investigation showed that the said five firms belongd to one Sh. Harishbhai Bhavsar and that at his instance in 1992, AP-1 has introduced opening of the current account of the two of the said five firms namely Ms Mahavir Daimond and M/s Bright Diamonds; that Sh. Harishbhai Bhavsar use to send Indian currency cash through angadias and different persons to AP-1 which he used

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to deposit in either of those accounts as per Shri Bhavsar‟s instructions; that Shri Bhavsar prepared bogus documents for import of diamonds through these concerns and send the same to AP-1 for submission to the bank against these documents for remittance of foreign exchange out of India. It is also admitted by AP-1 that he was getting service charges at approximately Rs. 500 per bogus import document. Based on the role of AP-1 in the referred illegal remittance of Foreign Exchange amounting to approximately Rs.128.84 crores out of India from early 1992 to March 1996, a detention order under COFEPOSA, 1974 was issued against AP-1 vide the order dated 18.08.1997.

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10.2 During the investigations in the above matter conducted by the office of the Competent Authority, while AP-1 submitted copies of the income tax returns for the Assessment Year 1994-95 to 1997-98, he did not give any documentary evidence regarding the purchase of movable and immovable properties. On the basis of inquiry conducted an investigation report received from the Enforcement Directorate Mumbai, it was revealed that AP-1 to AP-3 were holding certain properties of AP-1 in their own names or in the name of his relatives. It was alleged that the said properties held by AP-1 in his own name and / or benami names of his relatives and associates had nexus with the illegal money generated out of the said illegal activities of the AP-1/detenu. Based on the investigations and result as above, the Competent Authority formed reasons to believe that the said properties had been acquired out of illegal income generated by AP-1 from the above said un-lawful activities of AP1/detenu.

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10.3 On consideration of the overall facts and circumstances of the matter, and considering that one of the two subject two properties (namely, two shops at ground floor, Vardman Appt., Surat- belonging to AP-1), was acquired over the period 1992 and 1993 and the second property namely, shop no. 1, Amar

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Tele-communication, Trimurti Appt., Surat- belonging to AP-2) was acquired in 1994 and 1995 which was also the period when AP-1 was engaged in the alleged illegal activity of un-authorised remittance of foreign exchange abroad and no details about the acquisition of the said property were furnished by the effected persons in their submissions during the course of the investigation, we do not find any infirmity in the allegation of the Competent Authority in the show cause notice that there was nexus between the referred properties and the illegal money generated out of the illegal activities of AP-1. The challenge of the appellant to the impugned order on this ground is therefore rejected.

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We next come to the contention whether the appellant has discharged the burden of proving that the subject two properties were acquired out of legal sources of Income as required in terms of the section 8 of the Act.

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The two properties forfeited to the Central Government under section 7 of the Act, by virtue of the order of the Competent Authority dated 14^th January, 2012 and in respect of which the present appeal is filed are as under;

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(a) 2 Shops at Ground Floor and First Floor, 2/4338, Vardhman Apartment, Ichcha Mehta Sheri, Sagrampura, Surat. in the name of Narendrakumar Champaklal Shah-AP-1.

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(b) Shop No.1, namely Amar Telecommunication Trimurti Apartment, Oppostie Gujarati School, Piplod, Surat in the name of Smt.Vanmalaben N. Shah-Ap-2.

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As regards the first property mentioned above namely two shops at Vardhman Appt, Sagrampura, Surat the said property was acquired in the name of AP-1 in 1992 and 1993 at a cost of Rs. 2,03,000/- . The detailed sources from which this amount was paid are mentioned in para 8.6 to 8.11 above. In brief, out of the said amount, an amount of Rs. 1,15,000 was paid by AP-1 comprising of Rs. 3000 paid in cash on 31.03.1993 and Rs. 1,12,000 by way of cheques on 01.06.1993. The remaining Rs 88,000 was paid by AP-2, late Vanmalaben N. Shah, which was by way of cash. In respect of the cheque payment amounting to Rs. 1,12,000 made on 01.06.1993, it is seen that lump

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sum deposits of Rs. 20,000 , 50,000 and 52,000 were made in the said bank account of AP-1 on 19.05.1993, 20.05.1993 and 27.05.1993 respectively which are said to be cash accumulated from business such as Diamond Majuri, Xerox, STD/PCO and Accountancy Fees. As proof of income from the said businesses, the appellant is mainly relying on the Profit and Loss account, Capital account, Cash Book and the Income tax returns filed by the appellant in support of the legal source of such income. Pertinently, no direct evidence of the income from the said businesses is filed. The Competent Authority has not accepted the above said submissions of the appellant and held that from the income generated out of petty business run by the appellants such as PCO/STD, etc. it was not possible to make such large deposits in cash from these sources. It was also observed by the Competent Authority that no such huge deposits were made before or after the above mentioned period. Pertinently, this finding is not challenged by the appellant in the present appeal, either in the written pleadings or in the oral submissions. Further, the income tax returns for the period A.Y 1994-1995 to 1997-98 in the case of AP-1 were filed belatedly only on 23.09.1997 and that too after issue of the detention order dated 18.08.1997 against him.

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12.1 In view of the discussion in the forgoing para, we are inclined to agree with the finding of the Competent Authority that in the absence of original evidence of business income from the sources as claimed and considering the fact that prior to the issue of the cheque for the amount of Rs. 1,12,000 on 01.06.1993, there were large deposits of cash in the said account in the immediate 12 day period prior to the issue of the cheque coupled with the fact that such large deposits were not noticed prior to or after the said period as also the fact that including that for AY 1994-95 when the subject transactions were made, were filed belatedly and after issue of detention order against the detenu, the finding of the Competent Authority that the subject amount

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invested by AP-2 in the subject property cannot be taken as having been made from legal sources of income.

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As regards the amount of Rs. 88,000 paid by AP-2 towards this property (i.e. property at S. No. 1 of para-11 namely two shops at Vradhman Appt.,

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Sagrampura, Surat, the said amount was paid as follows:

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Date	Amount	Cash/Cheque
11.08.1992	38,000/-	Cheque no. 4362 drawn from Bank of Baroda A/c no. 46435.
21.11.1992	50,000/-	Cheque no. 4363 drawn from Bank of Baroda A/c no. 46435.

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It is proposed to discuss the above investment of AP-2 in the property at S.No. 1 (of para 11 above) along with the investment of Rs. 1,00,000/- made by AP-2 to acquire the property at S.No. 2 namely Shop no. 1, Amar Telecommunication, Trimurti Appt., Piplod, Surat. The said payment of Rs. 1,00,000 was entirely made in cash on different dates as follows: Rs. 15,000 on 18.02.1994, Rs. 20,000 on 15.02.1995, Rs. 35,000 on 01.04.1995, Rs. 15,000 on 14.05.1995, Rs. 10,000 on 25.06.1995 and Rs. 5,000 on 12.08.1995.

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Thus, while the payment for property at S.No. 1 was made in 1992 i.e. during AY 1993.94, the payment for property at S.No. 2 were made in 1994 and 1995 during the periods AY 1994-95 and AY 1995-96. In respect of the payment of Rs. 88,0000 made in 1992, there were large deposits of Rs. 20,000 on 30.04.1992, Rs. 20,000 on 10.08.1992 and Rs. 30,000 on 11.08.1992 which are said to be out of income from Diamond Majuri and Tailoring Income. As held by the Competent Authority, the appellant failed to produce any conclusive evidence in respect of Diamond Majuri and Tailoring commission basis. No further material has also been filed before the Tribunal. Further, as mentioned herein above, the first ITR filed by AP-2 was for the period AY 1994FPA-9/BOM/2012 Page 37 of 39

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95 when returns for the five year period AY 1994-95 to AY 1998-99 were filed together on 13.09.1998. It is obvious that the income of the appellant i.e. A.P.2 had not been declared prior to 30.09.1998 and no ITR was filed for the period 1992 when the subject payment was made. Due to these reasons, the said payments cannot be accepted to be out of legal sources of income of AP-2.

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15.1 As regards the payment of Rs. 1,00,000 made on different dates in 1994 and 1995 in respect of property at S. No. 2 the said payments are all made in cash and claimed to be out of her Diamond Majuri and Tailoring commission business. However, as noted in para-15 above, no conclusive evidence in respect of income out of Diamond Majuri and Tailoring commission basis has been placed on record. The income tax returns for AP-2 for the period A.Y 1994-1995 to 1998-99 were filed belatedly on 13.08.1999 and the said return are treated as none-est. Further, a perusal of the acknowledgment filed by the appellant indicates that even PAN/GIR number had not been applied for at Surat and the said returns of income had not been filed in the prescribed period despite the fact that the income eventually declared by the appellant for the Assessment Year 1994-95 to 1997-98 was liable to tax. Due to the combination of these reasons, the said investment by AP-2 can also not be accepted to have been out of legal sources of income.

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We may also add that during the hearing of the appeal on 06.03.2017 the ld. I.O. appearing on behalf of the respondent had raised doubts about the authenticity of the additional evidence produced by the appellant in support of their case. The objections in this regard have been referred in Para 6.4 above. The point specifically made was that while the documents, records etc. that were handed over to the appellant in 2006 after opening of the sealed premises for cleaning and after proper inventory did not contain any record, register etc. prior to 1992-1993. However, the additional evidence filed by the appellant

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thereafter also contained income etc. relating to the earlier period viz. 11.09.1980 to 03.03.1988 which showed huge income of Rs. 90,28,912 which appears to be based on the fabricated books of accounts.

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16.1 To a specific query of the Bench to the Learned Representative appearing on behalf of the appellant to clarify the above contention made on behalf of the respondent, no satisfactory reply/explanation was forthcoming from him. In the circumstances, the doubts raised by the respondent regarding the authenticity of the additional evidence filed by the appellant cannot also be over looked. For the reasons mentioned above all the contentions of the appellant are rejected as the same are devoid any merit.

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After having examined all the material on record and considered the pleas made by both the sides in writing and in oral hearing, we agree with the findings of the Competent Authority that the appellant has not been able to discharge the burden, in terms of section 8 of the Act, to establish that the subject properties have been acquired from legal sources of income.

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