S. Ravindra Bhat, J.
1. The writ petitioners in these proceedings under Article 226 of the Constitution are aggrieved by orders dated 23.3.1978 of the Competent Authority under the Smugglers and Foreign Exchange Manuplators (Forfeiture of Property) Act, 1976 (hereafter variously called the 'Act' and "SAFEMA") as well as the order of the Appellate Tribunal, dated 26.8.1996 confirming it. The effect of these impugned orders is forfeiture of house properties and bank deposits to which the petitioners were entitled to.
2. One Shiv Shankar was detained pursuant an order under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (hereafter called 'COFEPOSA') on 7.1.1996. Ms. Shanti Devi was his wife. Soon after, proceedings under the Act were initiated against them and a notice under Section 6(1) was issued to Shiv Shankar. A copy of the notice was also enclosed to Smt. Shanti Devi. The notice proposed forfeiture of the following properties:
i) Nos. 265, 272, 273, 274, 275., 276 and 279, Bara Bazar, Shahdra, Delhi in the name of Shanti Devi, Wife.
ii) Deposit of Rs. 45,000 in Shiv Trading Co., 1167, Kucha Mahajani, Chandni Chowk, Delhi in the name of his wife Shanti Devi Along with interest payable.
iii) Balance in National Bank of Lahore Ltd., (New State Bank of India) as on 29.01.1977.
iv) House No. 291, Bara Thakur Dwara, Shahdara, Delhi.
3. Sh. Shiv Shankar, the predecessor-in-interest and the father of the present petitioner resisted the notice proposing forfeiture. He alleged that the grounds that the move to forfeit the properties were vague and did not disclose any factors or rationale justifying the proposal for action under Section 6(1) of the Act. He complained that the notice merely repeated the language of Section 3 without outlining any fact relevant to the case. He requested the competent authority to disclose the reasons. In addition to this objection it was mentioned that he had started business of Dalali (Commission Agent) 30 years ago in Chandni Chowk at Saraf Market. He was engaged in commission agency, in gold and silver ornaments. He also talked about due disclosure about the sources of his income and sources of the acquisition of properties (mentioned in the notice) and the bank accounts. In these circumstances he requested that the notice should be dropped. This reply was followed by subsequent representations dated 8.9.1977, 12.10.1977, 27.10.1977, 10.10.1977 and 27.10.1977.
4. In the representations of 10.10.1977 and 27.10.1977 Shiv Shankar admitted that he had not keept Books of Accounts and had opened a bank account operated by Smt. Shanti Devi in the National Bank of Lahore which then became State Bank of India in 1969. He disclosed that details of the bank accounts were revealed to the Income Tax Officer, before whom a capital account and balance sheet were filed from 1969 onwards, pursuant to a Spot Assessment Scheme in December, 1972.
5. The representation dated 10.10.1977, inter alia, stated as follows:
2. That in the year 1966 I took a regular place for working at Nagina Building, Chandni Chowk, Delhi.
3. That Initially my business was not to that extent so that I should pay tax but it became tasable for the first time in the Assessesment year 1968? 1969 for which I filed my income tax returns voluntarily for the Assessment years 1968-1969 to 1972 to 1973 and till then I am being assessed to Income Tax regularly.
4. That at the time of appearance before the Income Tax Officer in connection with my business I produced certificates from the Bullion Merchants Association. As I was doing only Delali business, I was not keeping any books of accounts. I started a bank account in the name of my wife. Shrimati Shanti Devi in National Bank of Lahore, Shahdara, Delhi. I produced this bank pass book before the learned Income Tax Officer and also filed my capital account and balance start from the assessment year 1968-69 and onwards in December 1972. It has never been disputed by the learned Income Tax Officer regarding my business activity. I was regularly depositing the amounts in the said bank pass book of my wife and I used to requrie money I also withdrew from the said bank account in order to maintain my business.
5. That in addition to my membership in the Bullion Merchant Association Registration, Chandni Chowk, Delh, it is submitted that I know most of the shopkeepers doing business of Bullion and gold and silver ornaments at Chandni Chowk, Delhi and I would like to produce some of those persons as may witnesses to verify the fact that I am doing dalali business. That the copy of the statements of accounts, capital account, balance sheet, assessment orders in the Income Tax are enclosed herewith for your recorded purposes.
6. By an order dated 23.3.1978, the competent authority directed forfeiture of the properties mentioned in the notice. This was on the basis of its reasoning that they constituted illegally acquired property within the meaning of Section 3 of the Act. The findings of the competent authority are reproduced below:
11. Regarding house bearing Nos. 265, 266, 272, 273, 274, 275, 276 and 279 Bara Bazar, Shahdara, Delhi Shiv Shankar stated that he has purchased the house in the name of his wife for Rs. 13,000 in May 1969. It was also explained that the house was a single unit though it had different municipal numbers. In addition, his wife Shanti Devi claims to have also purchased hous property No. 291, Bara Thakur Dwara, Shahdara, Delhi for Rs. 6,000/- from her onw funds. During the course of proceedings before me no specific explanation was given with regard to the source of investement in these house properties, at Bara Thakur Dwara, Shahdara. Even in the reply dated 8.9.1977, to the show cause notice under Section 6(1), Shiv Shankar did not specify the sourde of investment in the house property at Shahdrar, In her reply dated 10.09.1977 Shanti Devi only referred to the activiites and sources of income of her husband, inter alia, contending that the notice issued by me is illegal. In the letter dated 27.10.1977, Shanti Devi again stated that the property was purchased by her husband for Rs. 13,000/-. The only explanation given was that the said propeprty has been disclosed in the income tax returns of her husband and its income offered for taxation. In addition, it was stated that she acquired silver ornaments from time to time after her marriage. The said silver ornaments and other silver were sold for a sum of Rs. 6151.82/-, and the said sum was utilised to purchased house property No. 291. The explanation cannot be accepted as the acquisition of the silver ornaments and coins has not been proved.
12. In his letter dated 27.10.1977, Shiv Shankar stated that he undertook repairs to house No. 279 in which he is residing and spent Rs. 15,000 on its renovation. It was stated that a sum of Rs. 8,000/- was debited by Shiv Shankar in his capital account for repairs, and Rs. 7,000 was given by his son, Gian Chand.
13. Regarding House Nos. 265, 266, 272, 273, 274, 275, 276, and 279, it was again reiterated by Shiv Shankar in his letter dated 27.10.1977 that the said house was purchased for Rs. 13,000/- in May 1969/- and the same has been declared in his income tax returns. The source of money for the purchase of house has been attributed to savings from dalali business. In support of his contention of carrying on dalali business, he has filed some certificates from the Bullion Merchants Association, Delhi and also from Pt. Ram Niwas Devendar Pershad, Saraf, Chandni Chowk, Delhi. However, these crtificates do not give specific information about his income from brokerage or the transactions on which he erarned such brokerage. His income tax assessments were completed on the basis of income declared by him without investigating whether brokerage business was in fact done. The initial capital of Rs. 20,000/- with which he claims to have started the dalali business has not been proved. Accordingly, the House bearing Nos. 265, 266, 272, 273, 274, 275, 276 and 279, Bara Bazar, Shahdara Delhi constitute an illegally acquired property within the meaning of Section 3(1)(iii)/(iv) of the SAFEMA and as such stands forfeited to the Central Govoernment free from encumbrances.
14. Regarding House propeprty No. 291, Bara Thakur Dwara, Shahdara, Delhi, the only explanation given by Shanti Devi and her husband is that, this house was purchased for Rs. 6,000/- on 22.10.1974 by diposing of silver ornaments and coins for a sum of Rs. 6151.82/-. Through he filed copies of sale vouchers and Dharam Kanta receipts but the source of acquisition of the ornaments has not been proved. Accordingly, this house also constitute illegally acquired property under Section 3(1)(iii) of the SAFEMA and stand forfeited to the Central Government free from encumbrances.
15. Shiv Shankar became a partner in the firm Shiv Trading Co., 1167, Kucha Mahajni, Chandni Chowk, Delhi with effect from 01.07.1974. He deposited a sum of Rs. 45,000 in this frim in the name of his wife Shanit Devi. In his letter dated 11.3.1975 addressed to the Income-tax Officer, Distt-I (1), New Delhi (a copy of which was filed before me Along with letter dated 10.10.1977), he stated that the amount was deposited by withdrawals from the bank as well as out of the cash in hand available with him on 31.03.1974. In support of his contention, he relied upon his personal balance sheet filed before the Income tax Officer for the assessment year 1974-1975 wherein his capital as on 31.3.1974 was shonw as Rs. 48,469. He claimed that Rs. 45,000/- was withdrawn after 31.3.1974 and deposited in the firm Shiv Trading Co. This capital emanates from the initial sum of Rs. 20,000/- stated to have been invested at the time of start of business in 1966. As discussed above, there is no proof of evidence about the source of this initial investment except for a self-serving statement claiming income from dalali. Since the in itial investment ha salready been held to be illegally acquired property, deposit of Rs. 45,000/- made by Shiv Shankar In Shiv Trading Co., in the name of his wife Shanti Devi alongiwth interest payable by the firm also constitute illegally acquired property within the meaning of Section 3(1)(c)(iii)/(iv) of the SAFEMA.
16. Regarding bank account in National Bank of Lahore Ltd., (now State Bank of India), Shahdara, Delhi, Shiv Shankar stated in his reply dated 10.10.1977 that he started the bank account in the name of his wife Shanti Devi with an initial deposit of Rs. 22,000/- in assessement year 1969-70. The source of this initial deposit has not been explained and proved. The credit balance in the said account as on 29th June, 1977 (date of issue of notice under Section 6(1) of the SAFEMA) is therefore held to be illegally acquired property and as such stand forfeited to the Central Government free from encubrances.
17. No acction under the SAFEMA is considered necessary in respect of LIP No. 6326274.
18. No action in respect of Shiv Shankar's share in the firm Shiv Trading Company is considered necessary as he ceased to be a partner w.e.f. 30.06.1975 vide Dissolution Deed dated 03.07.1975.
19. To sum up the following properties are held to be illegally acquired properties and stand forfeited to the Central Government free from all encumbrances:
i) House Nos. 265, 266, 272, 273, 274, 275, 276 and 279, Bara Bazar, Shahdara, Delhi in the name of Shanti Devi, wife.
ii) Deposit of Rs. 45,000/- in Shiv Trading Co., 1167, Kucha Mahajani, Chandni Chowk, Delhi in the name of his wife Shanti Devi along with interest payable.
iii) Balance in National Bank of Lahore Ltd., (Now State Bank of India) as on 29.01.1977.
iv) House No. 291, Bara Thakur Dwara, Shahdara, Delhi.
20. A copy of this order will i8ssue to Shanti Devi. Given under my hand and seal this 23rd day of March 1978.
7. Shiv Shankar preferred an appeal under Section 12 of the Act to the Appellate Tribunal constituted under the Act. The grounds of appeal included a complaint of violation of principles of natural justice and alleged denial of fair hearing. It was specifically contended that apart from the notice, the materials constituting "reasons to believe" that Shivshankar had engaged in illegal activities were never disclosed to him. It was further submitted that reasons, were not based on rationale or had no relevant bearing and in any case were extraneous for the purposes of the Act. It was also, inter alia, contended that in order to meet with the serious charge of illegal activity, entailing forfeiture of the property, the concerned person must know the case he has to meet and should have been afforded the opportunity to refute or defend the charges. According to the appellant none of these were followed. The Appellate Authority was, therefore, moved for setting aside the order of the competent authority.
8. Close on the heels of the competent authoritie's order, the Income Tax Officer of the concerned Ward appears to have issued an order under Section 143(3) reopening assessments for several years. This order was appealed against by the present petitioner on 21.12.1979. On 20.10.1981 the Appellate Assistant Commissioner, Income Tax allowed his appeals. While doing so the Appellate Assistant Commissioner noticed that the ITO reopened the assessment upon information received that the petitioner was indulging in alleged smuggling activities. In the course of and investigation, one Kailash Chand was detained. It was alleged that the gold was recovered from the person Sh. Kailash Chand; he alleged that it belonged to Shiv Shankar. On this, is action under the Gold Control Act and the Customs Act were sought to be initiated. By and order dated 16.5.1980 the Central Board of Excise and Customs, New Delhi after considering all the materials concluded that there was nothing to support or corroborate the version of Kailash Chand about the role of others in the alleged smuggling activities. It accordingly allowed the appeals against the action proposed to be taken for violation of the provisions under the Customs and Gold Control Act as far as they, including the appellant Shiv Shankar were concerned. After noticing all these facts, the Asst Commissioner, Income Tax set aside the order of the ITO seeking to reopen the assessments under Section 143(3) read with 147 of the Indian Income Tax Act.
9. Concurrent with the action of the Income Tax Authorities, a criminal complaint too had been filed against the petitioner and various others, alleging that they had committed offences under Section 135 of the Customs Act, 1962 and provisions of the Gold Control Act, 1968. Charges were framed on 5.8.1982. The petitioner was sought to be implicated on a statement by two main accused namely, Saroj Bala and Bal Kishan in the course of their confessional statements. The petitioner approached the learned Additional Sessions Judge under Section 397, being aggrieved by the order on charges. After considering the entire record the learned Sessions Judge concluded that there was nothing relevant including the allegations by the co-accused, justifying, the implication of Shiv Shankar; the charges were therefore set aside.
10. The above events transpired during pendency of the appeal before Tribunal constituted under the Act. During the pendency of those proceedings Shri Shiv Shankar and Smt. Shanti Devi died, they were succeeded to by the present petitioner who had moved an application for substitution. The impugned order proceeded to consider the materials available on the file of the competent authority. It also analysed the findings. Apparently the statement of 'reasons to believe' existing on the file though not disclosed to the petitioner, were available with the appellate authority. They were made known during the course of the hearing.
11. After setting out the facts the appellate tribunal concurred with a view that Shiv Shankar and Smt. Shanti Devi had not sufficiently explained the legitimacy of the acquisition of the properties in question. In view of that finding, it affirmed the order of the competent authority. It was also held as follows:
8. It may also be pointed out that the appellant's counsel has made a grievance of the fact that all the evidemce/information which the Comeptent Authority had in his possession should have been confronted to the appellant and in the absence of this having been done, principles of natural justice had been violated. It is sufficient to point out that the Competent Authority is not under my legal liability to disclose the information received by him from various sources based on which a notice under Section 6(1) of the SAFEMA was issued to the appellant. The legal responsibility cast on the Competent Authority for recording the reasons is to safeguard the interests of the persons against whom such proceedings are initiated and it is meant to ensure that the Competent Authority has valid reasons recorded in writing before any notice under Section 6(1) of SAFEMA if issued to any party. This is the reason why there is no statutory requirement under the SAFEMA to sup0ply a copy of the reasons recorded to the appellant by the Competent Authority at the time of initiation or comletion of proceedings against the appellant. It is not necessary for the appellant to know before hand the basis of the Competent Authority's belief that such a notice needed to be issued. The action of the Competent Authority could only be challenged if such reasons had not been recorded in writing before the issue of notice by the Competent Authority tot he appellant. The appellant in any case had been given a copy of the reasons to believe at the time of hearing of appeal.
12. The petitioner's grievance is that the findings of the competent authority and the Tribunal are unsustainable. It is contended on his behalf by Mr. Harjinder Singh, learned senior counsel that without disclosing the reasons as to why such stringent legislation could be invoked, the respondents could not have concluded, on the basis of the materials that the properties forfeited were acquired through illegal, smuggling or similar activities. It was contended that no 'reasons to believe' constituting the basis of the opinion formed for action, recorded on the file of the respondents were ever disclosed by the competent authority, but, were for the first time, filed before the Tribunal. This resulted in grave prejudice to Shiv Shankar. Counsel contented that the competent authority relied upon income tax returns for the years 1968-69 to 1972-72. The reasons recorded by the authorities as the rationale for forfeiture, were different. In these circumstances, the petitioner ought to have been shown such reasons before the order was issued.
13. Learned senior Counsel contended that the properties in question were acquired long back and without any justifiable reason to link such acquisition with any illegal activity, provisions of the Act could not have been invoked. In failing to see this aspect the competent authority as well as the tribunal committed an error of law. In support of this submission learned Counsel relied upon a judgment reported as Chatar Singh Nagra v. Competent Authority 186 (1990) ITR 83.
14. Learned senior Counsel contended that late Shiv Shankar had been detained under provisions of COFEPOSA in 1977, during the internal emergency declared at that time. That action triggered the entire move to forfeit his properties. All the authorities proceeded to blindly invoke provisions of Act without applying their minds as to whether there were any justifiable reasons to believe that they were illegally acquired properties under Section 3(c) of the Act. Learned Counsel contended that due to Section 21 findings under other laws were not conclusive; yet their relevance was undeniable. Therefore, the competent authority and later the Tribunal could not have completely ignored the relevance of the orders of the ITO.
15. Learned Counsel submitted that the presumption raised under Section 8, in the event of service of notice under Section 6 did not mean that the person concerned had to satisfy the authorities beyond reasonable doubt about the legitimacy of sources of income on the basis of which propoerties were acquired; having regard to the consequences the threshold of proof was one of prudence i.e. preponderance of probabilities. In the facts of the case having regard to the long and continued business of the petitioner; a likelihood of savings over a sustained period of two decades; his having declared the income in 1972 for that assessment year and previous years and subsequently filing returns, were all relevant facts. These as well as the orders of the ITO, constituted relevant materials' although the competent authority was not bound by the orders of the Income Tax Authorities, it could not exclude, their consideration.
16. Learned Counsel relied upon the judgment of the Supreme Court reported as Fatima Mohamed Amin v. Union of India and P.P. Abdulla and Anr. v. The Competent Authorityand Ors. and submitted that contents of the notice nowhere disclosed sufficient reasons warranting the impugned action against the petitioner. Learned Counsel contended that beyond recording that the competent authority had relevant material with him which constituted reasons to believe that the properties described in the Schedule to the notice were held by Sh. Shiv Shankar or on his behalf, were illegally acquired, no facts or reasons were ever disclosed. Therefore, the basis of the action, which resulted in stringent and penal consequences was unfair and without disclosure of any, much less, valid reasons. Learned Counsel contended that subsequent events such as the order of the Appellate Assistant Commissioner, Income Tax dated 20.10.1981, the order of the Central Board of Excise and Customs dated 16.5.1980 and the order of the Additional Sessions Judge, passed in 1982 absolving the petitioner of the charges of having contravened the provisions of Gold Control Act and the Customs Act, constituted vital developments that ought to have taken into consideration by the Appellate Authority. These materials were placed before it as part of the paper book of the appeal. Learned Counsel relied upon on the same and submitted that the appellate tribunal misdirected itself in not even attracting much less dealing with them.
17. It is contended by Ms. Barkha Babbar, placing reliance on the counter affidavit and the materials on record that the petitioner Shiv Shankar did not discharge the burden placed under Section 8. Learned Counsel relied upon the opinion of the Competent Authority and submitted that the nature of the business carried on by him did not require any capital investment. It was submitted that in this background, the re-opening of assessment on the basis of information by the Customs Preventive staff, that he was involved in gold smuggling and that dalali was only a smoke screening, was relevant. It was contended that the undoubtedly Appellate Assistant Commissioner set aside the re-assessment on the basis of the opinion by the Central Board of Central Excise; yet these were independently evaluated by the respondent authorities who concluded that Shiv Shankar had not discharged the onus under Section 8 or proved that the two properties were acquired out of legal sources. It was contended that Smt. Shanti Devi's explanation of having acquired the second property by selling silver ornaments too was dubious and unacceptable.
18. Learned Counsel contended that although the action seems stringent, the objective of the enactment could not be forgotten. It is a part of the larger scheme to prevent smuggling and act as a deterrent to those thriving from such illegal activities. The Court should defer to the conclusions arrived by the authorities, particularly in view of Section 14 which enacts a bar against jurisdiction. Learned Counsel contended that having regard to the assessment of the Tribunal which is headed by a High Court Judge ordinarily writ jurisdiction by civil courts should not re-examine factual findings. The Court should judicially review the orders of the tribunal in rare and exceptional circumstances where the orders discloses perversity or apparent illegality. In this case both pre-conditions did not exit. The petition has to be therefore rejected.
19. Learned Counsel contended that the mere fact that Income Tax Authorities accepted petitioner's explanation and dropped the move for reopening assessments, did not bind the competent authority, by virtue of Section 21.
20. It is apparent from the above narrative that Shiv Shankar was issued with notice under Section 6 on 29.6.1977 asking him to show cause why the properties in question should not be forfeited. Beyond mention that the competent authority had reasons to believe that properties, defined in Section 3 of the Act, were illegally acquired no other material was forthcoming, or disclosed to him. It is an undisputed fact that petitioner had filed returns in 1972, collectively for five previous years. In these returns he disclosed the profit and loss as well as the turnover for assessment years 1965-66 onwards. He claimed that as a result of accruals from business, the properties being House Nos. 265-266, 272-276 and 279 Bara Bazar Shahadrara were acquired. Although there are several separate property numbers, it is undisputed that these are common premises. House Property No. 279 Bara Thakur Dwara was acquired by Smt. Shanti Devi for Rs. 6,000/-. The Income Tax Authorities accepted the returns on the basis of a spot assessment scheme.
21. The petitioner admittedly was not shown the record/nothings which led to action under Section 6 and constitutued 'reasons' which led the competent authority to believe that he acquired the assets illegally. That document, dated 29.6.1977 was disclosed for the first time to the Appellate Authority. After reciting the Income Tax return by Shiv Shankar of that year and the order of detention dated 7.1.1976, the competent authority noted as follows:
5. In a statement before the Income tax Inspector on 21.3.1977, Shiv Shankar stated that he has an ancestral house properpty No. 482, Bara Thakur Dwara, Shahdara, Delhi. The property as referred to above namely Nos. 265, 266, 272, 273, 274, 275, 276 and 279 is purchased in the name of his wife for Rs. 13,000/- in May, 1969. In addition, he also stated that his wife Shanti Devi pruchased house propeprty No. 291, Bara Thakur Dwara, Shahdara, Delhi for Rs. 6,000/- from her own funds. Shiv Shankar was not in a position to explain the source of initial investement in dalali business, if any. Further, the income from dalali business is not capable of verification from his income-tax record. Similarly there is no documentary evidence to prove the source of acquisition of the properties purchased by him or his wife, including deposit of Rs. 45,000 except for his own statement dated 21.4.1977, an extract there from is reproduced below:
The purchase of house property and deposit of Rs. 45,000/- in the name of my wife is from my dalali income-tax returns.
As earlier observed, there is no proof of dalali income. In my opinion the source of investment in the propeprties and deposit of Rs. 45,000/- in Shiv Trading Co., constitute illegally acquired properties within the meaning of Section 3(1)(iii) of the SAFEMA.
6. Further, in following cash deposits have been noticed in the bank account of Shiv Shankar in National Bank of Lahore Ltd., Shahdara, Delhi:
1. January, 1969 9,171
4 ' ' ' 5,000
6 ' ' ' 4,000
15 February, 1972 6,000
7. A persual of the balance sheet of Shiv Trading Co. as on 30.06.1975 shows cash credits as below:
Mrs. Chandravati 10,018.35
Ms. Shanti Devi 45,000.00
Mrs. Rajrani Gupta 12,558.20
Mr. Mohanlal 20,000.00
8. The genuiness of these deposits have not proved before the income tax authroties.
9. In view of above, I have therefore, reason to believe that the undermentioned propeprties held by Shiv Shankar are illegally acquired properties within the meaning of Section 3(1)? of the Smugglers and Foreign Exchange Manipulators (Forfeiture of property) Act, 1976 and a ntoice under Section 6(1) of the Act should be issued to him to indicate the sources of his income, earnings or assets, out of which or by means of which he acquired these properties, the evidence on which he relies and other relelvant information and particulars, and to show cause why these properties should not be declared to be illegally acquired properties and forfeited to the Central Government under the SAFEMA.
(i) House Nos. 265, 266, 272, 273, 274, 275, 276 and 279 Bara Bazar Shahdara Delhi in the name of Shanti Devi.
(ii) Deposit of Rs. 45,000 in Shiv Trading Co. 1167, Kucha Mahajani, Chandni Chowk, Delhi in the name of Shanti Devi.
(iii) Bank account? National Ba nk of Lahore Ltd., Shahdara, Delhi.
(iv) Shara in Shiv Trading Co.
(v) LIP No. 6326274.
10. A copy of notice under Section 6(1) should also go to Shanit Devi being the present holder of the property and deposit of Rs. 45,000 in Shiv Trading Co.
22. The determination of the competent authority that the premises being house No Nos. 265, 266, 272, 273, 274, 275, 276 and 279, Bara Bazar, Shahdara Delhi were illegally acquired property, was on the basis of rejection of the petitioner's explanation that he had Rs. 13,000/- in May 1969 and the same was declared in his income tax returns. It concluded that the source of money for the purchase of house was attributed to savings from dalali business, for supporting which he had filed some certificates from the Bullion Merchants Association, Delhi and also from Pt. Ram Niwas Devendar Pershad, Saraf, Chandni Chowk, Delhi. They were rejected that as they did not give specific information about his income from brokerage or the transactions on which he erarned such brokerage. Shiv Shankar's income tax assessments were completed on the basis of income declared by him. These orders were rejected as having been issued without investigating whether brokerage business was in fact undertaken. Accordingly, the property was held to to be an illegally acquired property within the meaning of Section 3(1)(c)(iii)/(iv) of the Act.
23. Section 6(1) of the Act enacts that if, having regard to the value of the properties held by any person to whom the Act applies, either by himself or through any other person on his behalf, his known sources of income, earnings or assets, etc., and any other information or material available to it as a result of action taken under Section 18 or otherwise, the Competent Authority, after recording reasons to believe in writing that all or any of them are illegally acquired properties may serve a notice upon such person calling upon him to indicate the source of his income, earnings or assets, out of which or by means of which the property had been acquired, etc. This provision envisons proper application of mind and meaningful subjective satisfaction of the Competent Authority as to existence of "reasons to believe". Those should be recorded in writing; they should also be to the effect that the property sought to be proceeded against is illegally acquired. Such opinion formation i.e. "reasons to believe", should be considered by the authority not only about the disproportionate nature of the assets of the person concerned, (in relation to known sources of income), but also other information or material available as a result of action taken under Section 18 or otherwise. Section 18 empowers the Competent Authority to cause an inquiry or investigation, regarding any person, place, property, etc. For this an officer of the Income-tax Department can be asked to carrry out such exercise or survey. This should naturally precede the opinion formation, i.e. "the reasons to believe" as well as precede the issuance of notice under Section 6(1). The facts disclose that no such inquiry preceded the notice. This investigation under Section 18 is a salutory principle, because it is now well settled that the more stringent the procedure and consequences, the threshhold of safeguards have to be higher. This would prevent ill conceived and casual issuance of notices, and avoidable hardship to citizens. Thus, in Prakash Kumar v. State of Gujarat (2) SCC 409, the Supreme Court underscored the need to ensure strict interpretation of the enactment, where penalties or sanctions are provided, in the following terms:
The more stringent the law, the less is the discretion of the Court. Stringent laws are made for the purpose of achieving those objectives. This being the intentment of the legislature, the duty of the Court is to see that the intention of the legislature is not frustrated. If there is any doubt or ambiguity, the rule of purposive construction should be taken to recourse to, to achieve the objectives.
Investigation under Section 18, therefore should ordinarily precede the issuance of notice under Section 6(1).
24. The "reasons to believe" before the issue of notice under Section 6(1) of the SAFEMA were recorded in the present cases by the Competent Authority on 29-6-1977. It recorded that the appellants were assessed to income-tax; yet the source of income of Shiv Shankar could not be established properly. It discounted the findings and assessments accepted about 6 years before the notice. There is no whisper that any enquiry or investigation under Section 18 of the Act preceded the notice, or that the Income-tax Department had enquired as to whether Shiv Shankar and his wife actually were such assesseds. It is significant that investigation agencies have been created under the Competent Authorities, but there is nothing to disclose that any inspector or other official was deputed to the Income-tax Department for Department for enquiring in this regard or that the appellants were contacted for ascertaining whether they had prima facie any explanation for their assets. Instead, on a priori assumptions in the so-called "reasons to believe" recorded by the Competent Authority that the assessed did not have a legitimate source of income, notice was straightaway issued.
25. The properties were acquired nearly a decade before the notice; Shiv Shankar claimed to have been in business since the Nineteen Fifties. There is quite a bit of probability in these assertions; the amount of Rs. 13,000/- shown as apparent consideration for the house, purchased in 1969 has not been shown as grossly disproportionate in any manner. As such, there is a ring of truth about the explanation; in any case Shiv Shankar, in my opinion discharged the burden of showing that he had sufficient funds to acquire the assets legitimately. The burden of proof here cannot, in the absence of a rule or ruling to the contrary, be assumed to be beyond reasonable doubt; it has to be necessarily based on preponderence of probabilities.
26. In two recent judgments of the Supreme Court, the absolute necessity of recording and disclosing the rationale and "reasons to believe" in the notice under Section 6(1) has been underscored. In Fatima Mohd. Amin v. (supra) the Supreme Court held that:
We do not find any averments to the effect that the property acquired by the appellant is a benami property of her son or the same was illegally acquired from her son.
8. The contents of the said notices, even if taken at their face value do not disclose any reason warranting action against the appellant. No allegation whatsoever has been made to this effect that there exists any link or nexus between the property sought to be forfeited and the illegally acquired money of the detenu(s).
Again, this position was reiterated in P.P. Abdulla (supra), in the following manner:
8. It must be stated that an order of confiscation is a very stringent order and hence a provision for confiscation has to be construed strictly, and the statute must be strictly complied with, otherwise the order becomes illegal.
9. In our opinion, the facts of the case are covered by the decision of this Court in Fatima Mohd. Amin v. Union of India. In the present case the contents of the notice, even if taken on face value, do not disclose any sufficient reason warranting the impugned action against the appellant as, in our opinion, the condition precedent for exercising the power under the Act did not exist. Hence, the impugned orders cannot be sustained.
10. In the present case, in the notice dated 15-3-1988 issued to the appellant under Section 6(1) of the Act (copy of which is annexed as Annexure P-1 to this appeal), it has not been alleged therein that there is any such link or nexus between the property sought to be forfeited and the alleged illegally acquired money of the appellant.
27. In the present case, the notice issued to Shiv Shankar and his wife were mechanical reproductions of the ingredients of Section 6(1); no effort was made to link or show the nexus nexus between the property sought to be forfeited and the alleged illegally acquired money of Shiv Shankar and his wife.
28. When a subjective satisfaction is sought to be arrived at for exercise of power, though the court should not substitute the same with that of its own, it would, in judicial review be justified to discern whether, in arriving at that satisfaction, the authority ignored material facts and circumstances. Whether those facts and materials could have still have enabled him to come to the same conclusion is entirely irrelevant. It is the non-consideration of such material which would render the action of forfeiture, so drastic in consequence, unsustainable in law.
29. There is one more material circumstance which according to this Court, the appellate Tribunal completely overlooked. Though Section 21 enacts that findings in other Acts are not binding, that itself does not render such final orders completely irrelevant. Here, the determination of the ITO was sought to be re-opened on the basis of allegations of smuggling; that later order was set aside by the Assistant Appellate Commissioner of Income Tax. The Central Board of Customs and Excise too, concluded that there was no material to show smuggling or illegal activities; the criminal charges initially framed against Shiv Shankar were quashed in revisional proceedings. All these cumulatively established that there were no materials, in the eyes of law showing that he or his wife had indulged in smuggling - primarily the suspect activity, having regard to the nature of his business. These findings were relevant if not conclusively binding. In utterly ignoring them the competent authority and the tribunal fell into error.
30. The facts of this case show how drastic laws like SAFEMA can be used to badger individuals, often weak in comparison with the might of the State. Three decades have passed by; Shiv Shankar and his wife expired. Yet the stigma cast by the impugned order has visited their heirs. This is an oft recurring situation, so evocatively described by James Jeffrey Roche, in 'The Net of law':
The net of law is spread so wide,
No sinner from its sweep may hide.
Its meshes are so fine and strong.
They take in every child of wrong
O wondrous web of mystery!
Big fish alone escape from thee!
Quoted by the Supreme Court in Tekchand v. Competent Authority 1993 (201) ITR 658 (SC)
31. In view of the above conclusions, the petition is entitled to succeed. The impugned order is accordingly quashed. Rule made absolute in these terms. No costs.