Allowed

Nainaben Raichura v. Competent Authority Safema/Ndps

Gujarat HC29 Jun 2018SCA/17135/2011

Case brief

AI extract

What is this about?

Petition challenging forfeiture of properties under SAFEMA and the COFEPOSA detention order underlying it. The detenu had been acquitted in the smuggling case; the properties stood in the names of his widow and HUF and were purchased through loans disclosed in income tax returns. The High Court quashed the forfeiture order and the Appellate Tribunal's judgment.

What did the court decide?

Petition allowed; the order dated 13.05.2008 of the Competent Authority and the judgment dated 25.08.2011 of the Appellate Tribunal for Forfeited Property quashed and set aside.

Nainaben Raichura Vs Competent Authority Safema/Ndps — Writ and Judicial Review | Gujarat HC (2018)

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C/SCA/17135/2011 CAV JUDGMENT

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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

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R/SPECIAL CIVIL APPLICATION NO. 17135 of 2011

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FOR APPROVAL AND SIGNATURE:

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HONOURABLE MR.JUSTICE S.G. SHAH

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1 Whether Reporters of Local Papers may be allowed to Yes
see the judgment ?
2 To be referred to the Reporter or not ? Yes
3 Whether their Lordships wish to see the fair copy of the No
judgment ?
4 Whether this case involves a substantial question of law No
as to the interpretation of the Constitution of India or any
order made thereunder ?

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NAINABEN RAICHURA

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Versus

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COMPETENT AUTHORITY SAFEMA/NDPS

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Appearance:

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MR DILIP L KANOJIYA(3691) for the PETITIONER(s) No. 1,2,3 MR DEVANG VYAS(2794) for the RESPONDENT(s) No. 2 MR HARSHEEL D SHUKLA(6158) for the RESPONDENT(s) No. 2 RULE SERVED BY DS(65) for the RESPONDENT(s) No. 1,3

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CORAM: HONOURABLE MR.JUSTICE S.G. SHAH

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Date : 29/06/2018

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CAV JUDGMENT

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Heard learned advocate Mr. S. Sanjanwala with learned

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advocate Mr. Dilip L. Kanojiya for the petitioners whereas,

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learned advocate Mr. Harsheel D. Shukla for respondent no. 1, 2, 3 and learned advocate Mr..................for respondent

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no.4 State. Perused the record.

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"The petitioner has prayed for following relief :

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"(a) YOUR LORDSHIPS may be pleased to issue a writ of certiorari and/or any other appropriate writ, order or direction quashing and setting aside the judgment and order dated 25.08.2011 passed by the Appellate Tribunal for forfeited property, New Delhi in FPA No. 20/BOM/2008 as well as the order dated 13.05.2008 passed by the Competent Authority.

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(b) YOUR LORDSHIPS may be pleased to issue a writ of certiorari and/or any other appropriate writ, order or direction quashing and setting aside the order of detention dated 18.12.1985 passed against the detenue- Mansukhlal Gordhandas Raichura and it may be further declared that since the order of detention itself is bad and illegal, SAFEMA proceedings based upon such an order of detention are vitiated and, therefore, the order of forfeiture under Section 7 of SAFEMA as well as the order of the Tribunal may be quashed and set aside;

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(c) Pending admission and final hearing of this petition, YOUR LORDSHIPS may be pleased to restrain the respondents from taking possession of the forfeited properties;

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(d) YOUR LORDSHIPS may be pleased to grant such other and further reliefs as the Hon'ble Court may deem fit in the facts and circumstances of the case.

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The sum and the substance of the petitioners case is summarized as under.

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2.1. Mansukhlal Gordhandas Raichura was detained under the Conservation Of Foreign Exchange And Prevention Of Smuggling Activities Act, 1974 (COFEPOSA) by order dated 18.12.1985, copy of such order is at Annexure-A.

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2.2. Perusal of such detention order makes it clear that except disclosing that Government is satisfied that with a view to preventing said M. G. Raichura from abetting the smuggling of goods, the Government has directed to detain him under section 5, of COFEPOSA , in exercise of their powers under section 3(1) of the COFEPOSA .

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2.3. Thereby there is no disclosure about any activity of M.G.Raichura, which can be considered as a smuggling activity, in such detention order dated 18.12.1985. However, on the same day Home Department of the State Government has served the grounds of detention to him, copy of which is produced at Annexure-B. In such grounds of detention which is also dated 18.12.1985, in as many as 32 pages, it is alleged that on 10/01/1985 the customs staff of customs division M.P. Porbandar saw one truck coming from the godown of Jetty when they were patrolling the area. However, when they

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signaled the aforesaid truck to stop, the driver did not respond and proceeded ahead, therefore, customs staff had chased the truck and forced to stop it which is bearing registration no. GTF-3767. While interrogating the persons found from the truck namely Bhanubhai Pragjibhai Rughani the driver and Mangal Govind Jebar, helper, it is the case of the customs department that both of them had identified photographs of several persons including detenue M.G.Raichura and confirmed that he has referred the name of such persons in his statement dated 11.09.1985. The grounds of detention is that 34 packages of contraband goods have been recovered. There is no direct evidence to confirm that detenue M.G.Raichura is involved in smuggling activity except the statement of driver and helper on truck from which alleged smuggled goods in the form of synthetic fabrics of foreign origin and electronic goods were found and seized. The another piece of evidence disclosed in such grounds for detention is in form of statement dated 13.09.1985, of detenue himself alleging that in such statement the detenue had inter-alia disclosed that he was also associated in the lending of smuggled goods in his go-down at Porbandar Jetty. However, in fact it is categorically disclosed in such grounds for detention that in fact detenue has denied to have his

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involvement in any such lending of goods in his Jetty when it is categorically recorded in such order that he replied in negative. He also refused to identify the persons who were found with smuggled goods at Porbandar namely Govind Kara Toprania alias Govind TT, Kalio Bali, Kanji Fuli, Ram Bhai, Mano, Madhio Kharvo, Chagan Khopdi and Rasik Thanki contending that he was at Rajkot. However, it is recorded in his statement by the department that he was involved in smuggling case of Talat Haji Hussain in the year 1975 and that he was detained under COFEPOSA at that time. However, he denied his presence at godown, Jetty of Porbandar and submitting that he was at Rajkot and though Bhanu Pragji and Mangal Govind had identified him, he stated that he does not know Bhanu Pragji and Mangal Govind. He also refused to identify Daud Ibrahim Shaikh.

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2.4. In addition to above details the customs

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department has recorded statement of several persons disclosing that detenue M.G.Raichura was involved in such smuggling activity with details of smuggled goods etc. However, the fact remains that there is no prime evidence what so ever to confirm that detenue M.G.Raichura was directly involved in any such activity which can be termed as

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smuggling activity.

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2.5 Pursuant to detention of M.G.Raichura, the respondents have, by their order dated 24.10.2011 passed an order under section 19(1) and 19(2) of the Smugglers And Foreign Exchange Manipulators (Forfeiture of Property Act 1976) (in short SAFEMA) forfeiting following properties of the detenue.

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Details of properties:

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i) Flat no. 1002, 10th Floor, Crescent - B, Opp. Race Course, Rajkot. ii) Right, tile and interest in Shop No.2, Ground Floor, Crescent-B, Opp. Race Course, Rajkot. iii) Shop No.3, Ground Floor, Crescent-B, Opp. Race Course, Rajkot. iv) Flat No.8, Golden Arrow Co-op Housing Society Ltd., Opp. Golden Tobacco, S.V.Road, Vile Parle (W), Mumbai.

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2.6. Copy of such order is at Annexure-D. However,

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since all such properties are not solely owned by the detenue, copy of such order was served upon present petitioner also being relative of the detenue and to the Karta of Jignesh Mansukhlal Raichura, HUF. Thereby, it is evident from the activities of the respondents that the day when they have passed the impugned order to forfeit the property under reference, at-least they were very much aware that such

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properties were not solely owned by the detenue alone in his personal capacity independently without any further rights and interest of any other person including present petitioners.

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Therefore, present petitioners have preferred this petition challenging the order of detention and also order of forfeiting the properties under reference. Petitioner no.1 is practically detenue M.G.Raichura, petitioner no.2 and 3 are his relatives, who are served with notice of forfeiture as aforesaid. The petitioners have initially challenged such order before the appellate tribunal for forfeiting properties at New Delhi but when appellate authority has also failed to appreciate the submissions of the petitioners and thereby dismissed the appeal by its order dated 25.08.2011, in appeal no. FPA-20/BOM/2008, petitioners have prayed to quash and set aside the impugned order of detention so also order of forfeiting their property under SAFEMA and judgment and order of appellate tribunal on the following grounds:

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3.1. Order of the tribunal runs countered to the decision in the case of Vora Abbas Ali being Special Civil Application no.13355 of 2019 , wherein, similar reasoning by tribunal has not been approved by this Court.

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3.2. Tribunal has failed to appreciate the judgment in the

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case of Attorney General of India and Ors V/s Amratlal Prajivandas and Ors reported in 1994(5) SCC 54 , wherein, it is specifically held that provision of SAFEMA is not meant to forfeit properties of the relatives which otherwise does not belong to the detenue, when it was not purchased from the funds of the detenue and that the nexus to the funds of the detenue and the property being forfeited has to be established to show that it is benami property of the detenue.

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3.3. Tribunal has also failed to appreciate the judgment in the case of Fatima Mohammad Amin V/s Union of India reported in 2003 (7) SCC 436 so also judgment in the case of Aslam Mohammad Merchant V/s Competent Authority reported in 2008 (14) SCC 186, Wherein, also it has been clearly held that nexus has to be established and that burden to prove the nexus is on the department only and the burden to disprove nexus would shift on the affected person under section 8 of the SAFEMA, only if department discharged such burden to prove the nexus.

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3.4. The detention order as mentioned in the petition is bad and illegal for the following grounds:-

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(i) That the detention order has been based on non-existent grounds.

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(ii) In the grounds of detention, it is a solitary incident dated 10-11.09.1985.

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(iii)Now, the detenue has been acquitted by the competent Criminal Court, therefore, the ground for detention becomes non-existent for the alleged charges of smuggling.

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(iv) That the detention has not been informed about the right to make representation to the Detaining Authority which is contrary to the decisions of the Hon'ble Supreme Court in the case of Kamleshkumar Ishwarlal, reported in 1995(4) SCC 51.

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(v) That the copy of the bail application and the order of the bail are not furnished to the detenue. This point is also covered by various decisions of the Hon'ble Supreme Court that there is unreasonable delay in passing the order of detention.

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(vi) That the Panchnamas are not put before the Detaining Authority. On all these grounds, the detention order is bad and illegal.

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(vii) It is submitted that the order has been passed by the State Government and the State Government has not filed any affidavit contraventing the submissions made in the grounds of detenue or producing any document to show that the factual statements made in the petition are not correct. Therefore, since the order of detention is bad, the SAFEMA proceedings are required to be dropped.

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3.5. The tribunal has wrongly held that property must

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be purchased through ones own money and not by loan thorough the close relatives has been established by how the loan was taken and from whom. Thereby, it is submitted that

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when property is purchased by taking a loan, such source cannot be considered as illegal source.

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3.6. The tribunal has failed to appreciate the different period of accounting year being followed at relevant time and by the petitioners by recording that though the property was acquired in the year 1984-85, the same was recorded in the accounting year 1987-88. It is undisputed fact that till 1998, it was perfectly legal to have accounting year starting from August and definition of previous year was amended only by way of Finance Amendment Act 1990, therefore, if a transaction of loan was recorded in accounting year 1986-87, it cannot be said that petitioners have fabricated the evidence of loan. The respondents have failed to appreciate the correct position of income tax law and definition of previous year prior to Finance Amendment Act 1990.

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3.7. The properties were bonafidely transferred even before the issuance of show cause notice, more particularly when alleged incident is of 1985, whereas, some properties were purchased in the year 1984 and some of them were purchased in the year-1981. Therefore, there was no nexus of such property with the allege activity of smuggling or earnings from such activity by the detenue. In any case when detenue has been acquitted from the charges of smuggling by

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the Criminal Court, there is no nexus of smuggling activity with the properties under reference, and thereby purchased of such property cannot be considered as illegal.

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3.8. The petitioners have disclosed their source of income for purchasing the properties under reference but appellate authority has failed to appreciate such factual details.

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3.9. That no fresh notice was issued from AP-2 and AP-3 and no reasons were recorded for confirming the nexus.

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The respondent authorities have resisted the petition by filing affidavit in reply dated 28.06.2012. The sum and substance of the pleading and submissions by the respondent are as under:

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8.1. During the pendency of show cause notice detenue M.G.Raichura expired on 15.04.1990, and therefore, further proceedings were completed against his widow Smt. Nainaben Raichura. The petitioners have not only failed to prove that properties under reference were purchased from any legal source of income but also mislead the authority as well as the tribunal by wrongfully claiming ownership of such properties which were otherwise owned by original detenue, submitting that it was purchased by Nainaben Raichura for

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and on behalf of HUF.

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8.2. Petitioners have not disclosed all the facts about the case, more particularly outcome of SCA no. 250 of 1985 , wherein this Hon'ble Court has by its judgment and order dated 13.10.1986, held that original detenue has not pressed the detention order and he does not invite consideration on merits regarding other grounds raised in the petition and he does not press the same, therefore, now present petitioners being legal heirs of the detenue cannot agitate the same issue. The respondent have however, admitted that petitioners have submitted copy of such order dated 13.10.1986 before the tribunal. The respondents are relying upon following passage from such judgment.

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"In the afore circumstances, the learned counsel for the petitioner has submitted that as the remaining period of the detention is short, he does not invite consideration on merits regarding other grounds raised in the petition and he does not press the same.

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In that view of the matter, the petition partly succeeds. The aforesaid declaration is hereby set aside. The petitioner be released on the expiry of the mid-night of 22.12.1986, if he is not

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required to be detained pursuant to any other legal and valid order. Rule, is therefore, made absolute to the aforesaid extent."

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8.3. The respondents have thus submitted that though SCA no. 250 of 1985 was partly allowed, declaration under section 9 of COFEPOSA only was set aside and not the original order of detention. For the purpose respondents are relying upon the decision in the case of Attorney General of India and Ors V/s Amratlal Pranjivandas reported in AIR 1994 SC 2179 quoting a line from such judgment which reads thus,

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" A person who did not challenge, (either by himself or through his next friend) the order of detention or challenged it but failed cannot be allowed to challenge the order of detention when action is taken against him under SAFEMA. "

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8.4. Petitioners have produced the fabricated documents showing that properties proposed be forfeited were owed by HUF. It is submitted that department is primarily and essentially concern about legal source of income and not the mode of payment by which property was acquired and not with the discloser of such property in income tax return.

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8.5. It is further submitted that loan is a loan and not an aid, since it is required to be returned back. It is submitted that petitioners have failed to produce any evidence to show that loan amount has been returned back from their legal source of income.

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8.6. The income tax returns were submitted after the issuance of show cause notice. Thereby, as per section 21 of the SAFEMA, finding by income tax department shall not be conclusive evidence under SAFEMA , therefore, even if in income tax return it was disclosed that properties were purchased by loan facility, such evidence is not conclusive evidence and the petitioners are required to produce the independent evidence in the proceeding under SAFEMA.

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8.7. It is further submitted that, so far as non issuance of regular notice under section 6 is concern, when ATFP (Appellate Tribunal for Forfeited Property) has, in its order dated 18.11.2002 held that competent authority had reason to believe that the properties mentioned in show cause notice are illegally acquired properties, now such issue cannot be raised again, when the petitioner has not challenged such conclusion by filing appeal or petition before this Court.

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8.8. There is no provision to review the judgment of tribunal and therefore, the filing of review petition or its

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pendency cannot be considered. Such issue was not raised before the ATFP. Income tax Act does not recognize the starting of the accounting year from August to July.

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8.9. Transactions take place in 1984-85, were required to be shown in the assessment year 1985-86 and repayment if any were made in the year 1985-86 should have been shown in the accounting year 1986-87.

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8.10. Income tax return were filed only on 13.11.1987 that is after due date of filing return being 30.06.1986 and that to after issuance of show cause notice.

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8.11. Judgment in the case of Aslam Mohammad Merchant V/s Competent Authority reported in 2008 (14)SCC 132, is not applicable in the present case because that case was decided under NDPS Act, whereas in the present case, which falls under SAFEMA, definition of illegally acquired property is totally different, which is properly discussed and considered by ATFP.

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8.12. Property purchased by other petitioners than detenue were actually purchased by the money provided by the detenue, which was later on shown in the income tax return of HUF just to escape from the SAFEMA proceedings.

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8.13. Mere showing some amount in income tax return does not make it a legal income because aim and object of both the acts are totally different. For the purpose respondents are relying upon the purpose for which SAFEMA was enacted.

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8.14. Evidence and documents submitted with the petition also proves that properties were purchased by the detenue and then pass on to petitioner no.3 the HUF and that though properties were funded by detenue, later on it was shown as funded by his HUF by filing belated return of income in the case of HUF after service of show cause notice.

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8.15. To make the acquisition of property as legal acquisition, the petitioners borrowed loan from the different individuals and repaid the loan within one year without having any substantial source of income.

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8.16. Though payment was made in previous year, it was shown in next financial year after 31st March of previous year and loans were repaid in very short period. Moreover, all the properties were booked through one person Kokilaben Thakkar, and therefore, there is reason to believe that all such documents are fabricated; because some agreement was prepared at a later date. Loan transaction with Kokilaben Thakkar was not explained.

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8.17. Detenue was investing his ill gotten money through Kokilaben Thakkar in some properties which were later on transferred by Kokilaben to Nainaben so as to show valid transaction and in order to justify the payments made to Kokilaben, Nainaben fabricated the documents in income tax return showing that they borrowed the amount as loan from different individuals, without giving their address and their financial capacity which were further, shown as return back within a year without showing their own legal source of income.

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8.18. It is not correct to say that ATFP has failed to rely upon the judgment of Kesar Devi V/s Union of India and others ((2003) 7 SCC 427) .

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8.19. Detention order attains its finality and therefore, now it cannot be challenged in present proceeding.

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8.20. Petitioners have not produced even a single piece of evidence to show his legal income. Even if property is purchased through loan, the loan amount is to be return back from the legal income. However, petitioner has failed to prove both, the loan transaction as well as returning back of loan from legal source of income.

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With such reply respondents have produced on record

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copy of judgment and order dated 13.10.1986 in SCA No. 250 of 1985 , so also agreement of transferring the property and few income tax returns of detenue M.G.Raichura.

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The petitioner has filed affidavit in rejoinder dated 07.02.2013. The petitioner has contended that:

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10.1. It is not true that detenue did not succeed in getting detention order quashed but since the detention period was short there was no adjudication on merits of the detention, it cannot be construed as failure of detenue in getting the detention quashed. However, it is quite clear that order of further detention for one year was certainly quashed, and therefore, present petitioners are entitled to challenge the proceedings under COFEPOSA and SAFEMA in view of ratio laid down in the case of Attorney General of India (supra).

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10.2. There is no malafide intention or fabrication of documents, since sale deed is dated 04.07.1984, which clearly indicates that properties were bonafide transferred before the issuance of show cause notice on 31.12.1986.

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10.3. The petitioners have fully discharged their obligation by disclosing the source of income which is known

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legal source for acquiring forfeited properties and that they were assessed to tax since 1981-82.

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10.4. It is not correct to say that details of lonee were not disclosed since their name, address, income tax no. and their confirmation are on record.

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10.5. Even if findings by income tax department cannot be considered as conclusive proof for the purpose of such proceeding, in absence of any specific evidence to prove it otherwise, a strong inference can be drawn from such documents that source of income was genuine and such finding can certainly be taken into consideration. Thereby, only because of provision of section 21, since it is conceptual, it cannot be said that because of such provision respondents are free to held, without verifying factual details and without justifying the reasons for the conclusion that finding by income tax department is wrong.

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10.6. Infact the review petition is for the purpose of challenging the observation, which is quoted by the respondent in their reply and when such review petition is pending, such observation in previous judgment by ATFP while remanding the order under SAFEMA , cannot be relied upon at this stage. Since, pendency of such review petition

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was brought to the knowledge of learned ATFP and that power to rectify the mistakes apparent on record is inherent in any authority, Section 20 of the SAFEMA on the contrary confirms such powers to the competent authorities to rectify their mistakes.

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10.7. Till the financial year 1990, it was perfectly legal to have accounting year, starting from august also since the definition of previous year was amended only by way of Finance Act 1990, and therefore, respondents have without appreciating the correct position of law erroneously came to the conclusion that petitioners have fabricated the evidence of loan and belatedly submitted income tax return after issuance of show cause notice. Respondents have failed to realize that sale deed was executed well before the show cause notice, wherein transaction was through cheques only and therefore, there is least chance of fabricating any accounts.

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10.8. The factual details recorded herein above makes it clear that a criminal case initiated against detenue M.G.Raichura has resulted into his acquittal. Therefore, charges regarding smuggling of foreign material which is electronic consumer items has not been proved either by the investigation agency or by the department in Judicial

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Proceedings. Such fact has not been contravened by the respondents. Therefore, such acquittal would result into discharging the detenue M.G.Raichura from all the charges leveled against him including allegations regarding smuggling and thereby when order of detention is solely passed upon such activity of smuggling, when smuggling activity itself could not be proved, the detention can not sustain. The competent authority has failed to appreciate such fact that when detenue has been acquitted from the charges of smuggling, and thereby when detention order is solely passed upon such activity only, acquittal would vitiate the proceedings both under COFEPOSA and SAFEMA . It is undisputed fact that M.G.Raichura was detained in pursuance of section 5 of the COFEPOSA and not for any other reasons, therefore, when order of detention could not sustain after acquittal of detenue on main charges of smuggling then any other order passed upon such detention viz order under SAFEMA could not sustain.

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The respondents have failed to appreciate that in fact judgment and order dated 13.10.1985 in Special Criminal Application No.250 of 1985 is not on merits of the order of detention and it does not decide in any manner what so ever

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that the detention order dated 18.12.1985 is just and proper. It is clear from reading of such judgment and order, copy of which is at page no. 157 to 159, that on the contrary extension of order of detention beyond the period of 22.12.1985 was quashed and set aside by the Division Bench of this High Court as back as on 13.10.1986 and when, further period by extension of detention order has been quashed and set aside by the Court, the consideration on merits regarding other grounds raised in the petition was not pressed for, however, the petition was partly allowed by the setting aside the declaration to extent the detention of M.G.Raichura. Therefore, when detention order was not considered on its merits, it can not be said that Court has confirmed the order of detention. It is quite clear that petitioner has not invited the consideration on merits on that day since his detention was came to an end. However, when law permits to challenge the order of detention while challenging the order under SAFEMA , petitioners are right in challenging the order of detention and when passed any such order of detention was not adjudicated on its own merits, there is no question of resjudicata. Even otherwise it is settled legal position that irrespective of activities by the detenue against his order of detention, the affected persons under SAFEMA can also

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challenge the order of detention. Therefore, if order of detention could not survive and as aforesaid when order of detention was not adjudicated on its own merits and when such order could not survive after acquittal of M.G.Raichura from charges for smuggling, petitioners are right in challenging the order of detention on all the grounds and based upon such position, it can certainly be held that order of detention is not proper which results into setting aside the order of detention as well as orders under SAFEMA Act against petitioners.

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Respondents have failed to appreciate that after death of detenue M.G.Raichura proper notices were not served upon all the legal heirs, which is not mere technicality as considered by the appellate authority but it is mandatory statutory provisions which must be fulfilled because without service of such proper notice upon all affected parties, it can not be said that there had been offered a reasonable opportunity to defend themselves. Therefore, in absence of notice upon the affected party under SAFEMA , the order under SAFEMA would certainly vitiate and that was the reason why the appellate authority has in first round of appeal remanded the matter back to the competent authority to decide it afresh after giving notice to all the legal heirs of

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detenue M.G.Raichura and to decide the issue regarding forfeiting their property afresh after extending a reasonable opportunity to all such legal heirs.

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It is not only surprising but disturbing and goes to the root of the matter that the appellate authority/ statutory authority has observed that service of notice upon affected parties are mere technicality when one of the legal heirs is aware about proceeding and when he has tried to safeguard his rights. It is more surprising to note that such authority has relied upon some observations abruptly based upon a single line of such previous judgment of the appellate authority, though by such previous judgment the appellate authority has remanded the matter back to the competent authority, that is respondent department. It is clear and obvious that any judicial pronouncement while recording the factual details of both the sides, there would be one or two lines which will give an impression that it was recorded as finding in such judgment, though it is practically recording either facts or submission in verbatim only, more particularly when such lines are read solitary and isolated from entire judgment.

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However, the most surprising observations both by the competent authority and the appellate authority in the

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impugned order and judgment is to the effect that loans can not be considered as legal income because it is borrowed money which has to be returned back from legal source of income. In fact such observation needs to be referred to the Reserve Bank of India and the income tax department for its scrutiny that whether loan can be considered as legal income or not. If such observation is approved than any of the activities by anyone based upon loan facility available to them from different banks would result into illegal activities. Though it can be said that there must be proper proof of returning back of such loan, the fact remains that neither accounting system nor present statute can control the personal relations and transactions between human beings, wherein persons are free to lend money to others on several counts including family relations, friendship etc. and it can not be considered as illegal activity. So far as factual details of such loan and payments is concern, it is explained and discussed but in general such observation would certainly result into disturbing the impugned judgment because if such judgment is based upon such observation that loan can not be considered as legal income then such judgment can not be confirmed in any manner.

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It is also disturbing to note that when appellate authority has remanded back the matter for deciding it afresh, no fresh reasons were recorded by the competent authority and notice under section 6(2) of SAFEMA was served at very belated stage and therefore, it would be difficult for the affected parties to prove their case and therefore, though there is no time limit prescribed in the statute to initiate the proceedings under SAFEMA , the fact remains that it must be done in reasonable time and when it was not done in reasonable time then such proceedings would certainly vitiated.

¶163

So far as period of establishing the nexus between the detenue and the property is concerned, even if it is decided in favour of the respondents in first round of appeal, it does not allow the competent authority to consider service of notice as mere legal technicality. It is also surprising to note that in the impugned judgment the appellate authority has observed that the requirement of notice and principles of natural justice are not based on hyper technicalities.

¶164

The respondents and appellate authority has failed to consider the observations by Hon'ble the Supreme Court in the case of Attorney General of India (Supra) , which makes it clear that in case of properties which may even

¶165

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acquire partly from different illegal activity the provisions of section 9 of SAFEMA Act would be attracted.

¶168

The respondents and appellate authorities have failed in appreciating the same judgment while relying upon a general presumption in such judgment regarding not keeping all accounts by person engaged in smuggling. That does not mean that if affected parties have shown the books of accounts it is not to be checked or relied upon. It is also clear and obvious that accounts of relatives of the detenue are supported by income tax returns, and therefore, when there is specific documentary evidence from public record, the decision and judgment by the appellate authority based upon general presumption is not proper. It is also clear and obvious that, as recorded here in above, when it is not proved that detenue was involved in smuggling activity as he had been acquitted by such charges by competent Court, such general presumption would not be applicable in present case, when now detenue can not be termed as a smuggler.

¶169

It is fallacy in the impugned judgment to say that, in view of the findings of the appellate tribunal, which the appellate can not take up several points since such findings

¶170

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has become final and binding upon them, when in-fact issue was remanded back to competent authority for service of notice to affected persons. Thereby, it can not be said that whatever submitted by such affected persons who are served with the notice first time after decade is nothing but formality and to say that the findings of the appellate tribunal in first round of appeal has become final would result into negate the first/ previous judgment in appeal, wherein while allowing the appeal, it was remanded back to competent authority.

¶173

Even if definition of illegally acquired properties may be wide enough in the SAFEMA , the basic fact remains that any property can not be said to be illegally acquired property only because respondent department says so, more particularly when their charges against detenue regarding smuggling could not be proved and affected parties have produced relevant documents to prove that property under reference can not be termed as illegally acquired property. Unfortunately, though the appellate tribunal has observed that independent properties of the relatives can not be forfeited unless the property has the nexus to the illegally acquired property of the convict or the detenue, the competent authority has failed to appreciate the fact that, when M.G.Raichura has been acquitted, he can not be termed

¶174

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as a convict and thereby, even if he was detained his detention is improper and illegal and therefore, all other orders based upon such detention would not survive.

¶177

When documents submitted before income tax department at relevant time is disclosing certain facts, the appellate authority has erred in considering such facts differently without offering a reasonable opportunity to the petitioners to explain or to prove certain facts.

¶178

Though, petitioners have shown source of fund as loan with proof of such loan from different persons/ firms, authorities and appellate tribunal have failed to appreciate such facts in proper perspective or to call upon the petitioner as well as the concern authority to verify that what is the correct position.

¶179

It is obvious that notice to some of the petitioners were served first time in the year, 2003 only, that is after 18 years of detention and therefore, it would certainly vitiate the proceedings of forfeiting their properties.

¶180

It is surprising to note that after disclosing these submissions by the petitioners before the appellate authority, the appellate authority has in fact reproduced para 15 of the

¶181

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impugned order before it verbatim with observations and findings of the competent authority, that why property in question should be considered as illegally acquired property, without scrutinizing such details from original record and after reproduction of 4 pages simply observed that they are of the opinion that competent authority has considered the matter in detail and that appellants acquired the property in question in the year 1984-85, but the investment in the properties were shown in the income tax return for the assessment year 1987-88, which was filed on 27.07.1989, which shows that, it is clear after though.

¶184

The tribunal has failed to realize that detenue was detained in month of December-1985, and therefore, it was difficult time for the detenue and his family members which may result into filing of income tax returns at belated stage. The tribunal has also failed to realize that different accounting year was permissible before the year 1990, thereby, it was not compulsory to have accounting year from April to March and persons may have different period for accounting year starting from any particular month since, before 1990 even the accounting year was permissible from Diwali to Diwali whereas the English calendar month would be different from October and November since new year as per Hindu Calendar

¶185

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may start at any time of English Calendar and its date could not have to be fixed like Makarsankranti being on 14^th January. Unfortunately, the appellant authority has failed to realise and consider the real situation and situation at that relevant time and completely relied upon situation prevailing on the date of judgment.

¶188

So far as the accounting year of every property and person is concerned, prima-facie it becomes clear that petitioners have produced relevant documents before the competent authority and therefore, if competent authority is not comfortable with such documents then practically they have to call upon the petitioners or such other persons, whose documents are produced before them to verify the correctness and otherwise of all factual details emerging from such documents. But simply coming to a conclusion, without offering reasonable opportunity to the petitioner or without calling such other persons is nothing but arbitrariness of competent authority, which is endorsed and approved by appellate authority and therefore, both the orders needs to be quashed by suitable orders.

¶189

It is evident from impugned order, portion of which is copied by appellate authority in its judgment, that competent

¶190

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authority is in fact aware about situation when it has recorded that, “XXXXXXXXXXXXXXX” cross-examination of each of the lender and ascertaining the relation or association with AP's, and without examining the legal source of income of such lender, the loans can not be accepted as legal source of income. (Page 115 of record gives internal page 119 of impugned judgment dated 25.08.2011 by the ATFP ).

¶193

Thereby, when competent authority and ATFP is aware that there is need of cross-examination of lender who ascertained several things, they should have initiated appropriate proceedings but by making such statement alone without cross-examining any such person, if decision is taken against appellant then such decision needs to be quashed and set aside.

¶194

It is also undisputed fact that though there are several factual details disclosed by the petitioners before competent authority regarding their income and loans received from different persons, competent authority and appellate authority have discarded all such documentary evidence solely on the ground that such loans are taken from family members and by observing that loans can not be considered as legal income. The respondents and appellate authority has failed to realize

¶195

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that detenue has died pending litigation and therefore, non response to any such proceeding by him can not be considered as an evidence against the appellate, more particularly when detenue was under detention for 12 months, but ultimately he was acquitted from all the charges and therefore, mere custody of detenue would not prove his guilt.

¶198

When competent authority has also observed that investigating agency is free to make further investigation about several investment made in various properties concerned or partnership firms and other interest acquired by AP-3, it becomes clear that impugned orders have passed before completing such investigation. Thus there can not be presumption against AP-3 without such investigation. The factual details of all such loan transactions, so also purchase details are clearly disclosed before the competent authority, before the appellate authority and even before this Court. However, at this stage, for the discussion made here in above there is no reason to discuss those details in minute details except to record that there are 6 transactions of properties wherein payment was made by cheque and there are income tax returns to show the income of affected persons as well as persons and firms from whom affected persons have taken

¶199

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loans. The income tax return also shows that income tax department has not accepted the disclosure of income completely but scrutinized the factual details and passed reasoned speaking order for charging more income tax from those persons, therefore, though provisions of SAFEMA confirms that orders of other departments are not binding to them, it can be certainly considered as prima-facie and guiding evidence and there is basic principle of law that, whoever, wants to dispute certain facts is liable to prove it, though general burden is upon the affected parties to prove that they have acquired property from legal source. However, such general burden is certainly considered as performed when prima-facie evidence is placed on record to show that there are accounts to prove the sources of such property and when such accounts confirms that payments for purchasing such property was made by cheques that to from different parties and when those parties have confirmed that they have paid such amount as loan to the purchaser. In view of such transactions through cheque and its disclosure in taxation proceeding certainly results into prima-facie evidence, it can be considered first as completing the general burden by the affected party and therefore, now practically burden shifts upon department to prove that such transactions or

¶202

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documents from income tax department are not proper.

¶205

I have also gone through the written submissions by both the parties which is on record. petitioner have rightly contended in written submission that;

¶206

The basic fallacy while deciding the case on merits by the tribunal is that the Tribunal holds that the property must be purchased through one's own money and not by loan though the source has been established by proving how the loan was taken and from whom. It is too much to say that if the property is purchased by taking a loan, the source is illegal. With respect, this reasoning is totally erroneous.

¶207

The other basic fallacy in the reasoning by the Tribunal is that the Tribunal has committed an error apparent on the face of the record when the property is forfeited merely on the wrong belief that the transaction for acquiring the property was taken in the year 1984-85. However, the same was recorded in A.Y. 1987-88 but in doing so, the respondent has completely failed to acknowledge that the AP had followed accounting year that starts from August. Till Financial Year 1990, it was perfectly legal to have accounting year starting from August. The definition of Previous Year was amended only by way of Finance Act of 1990. Therefore, the

¶208

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transaction of loan was recorded in the A.Y. 1986-87. The respondent without appreciating the correct position of law, erroneously came to the conclusion that petitioners herein have fabricated the evidence of loan. The respondent ought to have appreciated the correct position of Income Tax Law and definition of Previous Year prior to Finance Amendment Act, 1990. Thus, the impugned order is misconceived and based on wrong facts and ignorance of Income Tax Laws and that all allegation are baseless on facts. That sale deed is dated 04.07.1984 which clearly indicates that the properties were bona fide transferred before the issuance of show cause notice. It is submitted that strong inference can be drawn that the source of income was legal from Income Tax returns.

¶211

Even on merits, it has to be appreciated that incident is dated 10-11.09.1985. The property is purchased in the year 1984 and even some properties have been purchased in the year 1981. Therefore, there was nothing to connect the purchase of the said property with the illegal activities of the detenue.

¶212

No reasons were recorded qua the affected persons after the order of remand. Therefore, the order

¶213

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forfeiting property is patently bad and illegal.

¶216

For proving that they are legally acquired properties, ample evidence was produced before the Competent Authority and paper books were also supplied on record which clearly proves that the said properties are not illegally acquired properties of the detenue and not held as Benami by the petitioner. The properties belong to the petitioner. Therefore, it is covered by the decision in the case of Attorney General (Supra) . Assuming without admitting that even if they are illegally acquired properties, they can not be forfeited because there is nothing to connect the acquisition of the said properties with the activities of the detenue and no nexus is established. The Competent Authority has completely ignored all these documents.

¶217

The petitioner is also relying upon judgment and order dated 31.03.2016 in Special Civil Application No.13355 of 2009 . Wherein, this Court has dismissed the petition of the department, when department has tried to submit that nexus is implicit and is not required to be established in such proceeding, Paragraph 8 onwards of such judgment is relevant. Though Letters Patent Appeal No. 1218 of 2017 has been preferred by the department against such judgment,

¶218

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the judgment has not been stayed, and therefore, it still holds the field.

¶221

Petitioner has also submitted; with reference to different properties, explaining the factual details; that respondents have shut their eyes on following facts.

¶222

1. Naynaben Assessed to tax since 1981-82.

¶223

2. Transactions of property is in the year 1981 that too from her known sources of Income as it was declared in I.T. return much before alleged notice dated 31.12.1986.

¶224

3. There is no substance in allegation that there is fabrication of evidences by the petitioner, When I.T. return for said period was filed on 12.01.1984 much before notice dated 31.12.1985 and order u/s 143 (3) of the IT Act was passed on 27.03.1984 much before 31.12.1985 (Please see page 125 Asst order for A.Y. 8384 and copy of return of income for A.Y. 83-84 on page 120) and none of the transaction was in cash but it was only through Banking Channel. Thus allegations are baseless and there is non application of mind and ignorance of income tax Act.

¶225

4. All the copy of Accounts of Lonee, their confirmation, details of repayment that too from her known sources of

¶226

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income is already produced before the respondents, copies of which are on record. Petitioner is having income since the year 1980-81. All partnership firms are assessed to tax. None of the Lonee was examined. All are assessed to tax.

¶229

5. Notice u/s 6(2) is without recording reasons which shows that there is no nexus or link to detenue's illegal activity at all.

¶230

6. There is evidence that HUF was assess to tax since A.Y. 84-85 and order also passed u/s 143(3) of IT Act on 22.11.1984 that is much before notice u/s 6 dated 31.12.1986. Further said investment are not in cash but through bank.

¶231

7. It is settled legal position that HUF property can be purchase in the name of any member of the HUF. No one can manipulate record of IT department wherein in the Balance Sheet of HUF said property is appearing as assets of HUF which confirm by the previous authority in reasons recorded.

¶232

8. Relevant investment by the relevant person were also shown in their returns in the relevant accounting year corresponding to A.Y. Of which return of income were filed.

¶233

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9. Before passing order of forfeiture u/s 7 dated 24.06.1998 Respondent has not called for any person and examine them, who has filed their accounts and confirmation regarding respective transaction of borrowing and repayment etc. nor he has appreciated the facts that there is no satisfaction recorded in the reasons recorded sheet that said properties are not owned by Naynaben and HUF but owned by the detenue and there is no mention of any satisfaction, bases on any evidences he has gone through and arrived at bonafide belief that there is any link or nexus to the said properties.

¶236

10. The petitioners are right in submitting that infact petitioner has on 24^th June, 2003 submitted a reply to notice disclosing all the details, and therefore, it can not be said that detenue has not defended the impugned orders. The petitioners have rightly referred section 3 of the Income Tax Act 1961 which defined,”Previous year wherein, it is Provided that, in the case of a business or profession newly set up, or a source of income newly coming into existence, in the said financial year, the previous year shall be the period beginning with the date of setting up of the business or profession or, as the

¶237

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case may be, the date on which the source of income newly comes into existence and ending with the said financial year”.

¶240

Therefore, till the amendment in income tax act regarding confirmation of equal financial year for every tax payer from April to March, different financial year was permitted and therefore, it can not be said that petitioners have committed any illegality in submitting their income tax return on particular date only on arbitrary presumption by department that too without calling upon either the petitioner or the income tax department that why such different accounting year was considered.

¶241

The petitioner has submitted that, during the course of hearing before the C.A., a bunch of papers with details has been filed, [Copies are at pages 143 to 230 paper book 1(2)] which are copies of the accounts of the person from whom money borrowed as well as their confirmatory letter along with their Income tax details etc. It is worth noting that all the transaction were through banking so the question of after thought does not arise. Further, it is worth noting that payment of Rs. 2,90,000 was made on 24.02.1984 for shop no. 3 and payment of Rs. 1,51,937.50 on 04.07.1984 in respect of

¶242

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shop no. 2 as per books of accounts of HUF. Copy of account of shop no. 2 and 3 are on page no. 162 of paper book 1(2). Thus, it is clear that it was much before notice u/s 6(1) of SAFEMA dated 31.12.1986. Thus, there is no question of afterthought etc. as alleged in the reply of respondent.

¶245

HUF is having its sources of Income from different partnership firms viz. M/s Narmada Transport (2) M/s Cash and Carry (3) M/s Vikas Corporation (4) Gujarat Cement Transport co. (5) Vardhman transport co and (6) M/s Gujarat cement transport co. no.2. It is clear that property being shop no. 2 and 3 is owned by Mansukh Gordhandas Raichura HUF who is assessed to income tax since long and used to maintain books of accounts. Purchase details of such properties are as per balance sheet filed on the record with details of borrowed amount which is through bank transaction and its repayment etc. are again through bank and investment in the said property is in the year 1984 much before notice u/s 6(1) which dated 31.12.1986. Thus there is no room for mischievous statement or that of after thought etc.

¶246

Thus, it is clear that there is no material brought on record that there is any link or nexus or link to the detenue of having any illegal activity of detenue. Thus, first of all HUF

¶247

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has discharged its duty by producing ample material on record regarding their ownership and sources of payment which is from the known sources of income. Than the onus is on the Competent Authority to rebut the said evidence, which has not done so far, but the C.A. travelling with the wrong premises infers wrong inference and come to the wrong conclusion which is entirely based on the assumption and presumption. It is clear that one cannot invoke section 6(2) unless there is any material and on the basis of which reasons are recorded that property having trace has nexus and link to the detenu's illegal activity. In respect of the properties under consideration nothing has been brought on record and none of the person who has file their confirmatory letter along with the details of payment etc. has been cross examined.

¶250

In view of the above, it is clear that property belongs to HUF and its acquisition from its known sources of income which includes borrowing, details of which is filed on record viz. their name, address, cheques or draft nos their Income tax no. etc. For most of the properties non of the transactions were in cash but it was only through bank account.

¶251

I have also gone through written submissions by all the respondents, wherein after disclosing factual details,

¶252

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chronology and factual details of properties a demand was made to substantiate the impugned order on following grounds:

¶255

(a) There was a valid detention order against the AP-1, which was challenged along with the declaration, the declaration was set aside by the Hon'ble Court but the detention order was not quashed and the petition partly succeeded, the order of Hon'ble Court did not grant any liberty to challenge the detention order again, neither the AP1 challenged the order of single bench before any higher forum, hence validity of detention order attained its finality and now relatives of the detenue cannot challenge the validity of detention when it is made the base of SAFEMA proceedings.

¶256

(b) The properties were purchased either by the detenue or by the money provided by the detenue, hence the reason recorded by the Respondent authority were rightly upheld by the Hon'ble Tribunal.

¶257

(c) The detenue (Individual) showed the impugned properties held by the HUF by filing belated return of income just to evade the SAFEMA proceeding.

¶258

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(d) The person affected could not prove the source of repayment of borrowed loan, the property cannot become legally ac quired property without showing legal mode of payment, but it becomes legally acquired property when the AP has legal source of income to acquire the property or to pay back the loan which were used to acquire the property, which they have failed to prove.

¶261

In view of the facts and above circumstances, now it becomes clear that:

¶262

40.1 Detenue has been acquitted from the charges of smuggling and therefore, it can not be said that his detention order was proper because when charges on which his detention was based could not be proved, detention order becomes null and void.

¶263

40.2 When extension of detention was quashed by summary order, considering the fact that period of detention was over on that day, it can not be said that detenue has not challenged the order of detention.

¶264

40.3 It is settled legal position that affected party under SAFEMA can also challenge the order of detention, therefore, it can not be said that detention order was never challenged.

¶265

40.4 There is inordinate delay in calling the affected parties and there by they were denied reasonable opportunity

¶266

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to prove their case.

¶269

40.5 Service of statutory notice upon affected party is not mere technicality and when Appellate Authority has remanded the issue back to the Competent Authority, the Competent Authority has to offer reasonable opportunity to such affected party after service of notice and as to assign reasons for decision against affected party.

¶270

40.6 It can never be said that availing loan facility is not legal source of income.

¶271

40.7 There is ignorance on the part of Competent Authority so far as provisions of Income Tax Act is concern, more particularly regarding definition of “previous year” at the relevant time.

¶272

40.8 There is ample prima-facie evidence on record to confirm that sale transactions for the properties were prior to order under SAFEMA and that to through cheques and all such transactions were disclosed in Income Tax Return, therefore, it can not be said that it is after thought.

¶273

40.9 The Competent Authority has failed to investigate the issue properly as observed by first judgment of Appellate Authority and failed to cross check and verify from lonees, whose details were very much disclosed to the Competent Authority.

¶274

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40.10 Therefore, it can certainly be said that the impugned orders are arbitrary improper and without following statutory provisions, thereby needs to be quashed and set aside.

¶277

41. In view of what is discussed here in above and in view of the above facts circumstances and discussion since there is material irregularity, which results into illegality, into impugned order and judgment, they cannot sustain in the eyes of law, therefore, those impugned order and judgment needs to be quashed and set aside by allowing, the petition, as prayed for in paragraph 15 (a)(b)(c).

¶278

(S.G. SHAH, J)

¶279

URIL

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Nainaben Raichura v. Competent Authority Safema/Ndps

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Nainaben Raichura v. Competent Authority Safema/Ndps

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