1998 (6) TMI 539 - AT - FEMA

Issues Involved:
1. Application of mind by the competent authority.
2. Definition and scope of "illegally acquired property."
3. Burden of proof under SAFEMA.
4. Validity of proceedings under section 2(2)(c) of SAFEMA.
5. Delay in initiating proceedings.
6. Evidentiary value of income-tax assessments.
7. Legitimacy of the capital account and subsequent investments.

Issue-wise Detailed Analysis:

1. Application of Mind by the Competent Authority:
The appellant contended that there was no application of mind by the competent authority before issuing the notice under section 6(1) of SAFEMA. The competent authority initially recorded that the appellant was detained under COFEPOSA, which was incorrect. However, this mistake was rectified in the reasons recorded on March 15, 1995, where it was clearly mentioned that the appellant is the brother of the detenu, Abdul Azeez, thus attracting the provisions of section 2(2)(c) of SAFEMA. The Tribunal found the reasons recorded by the competent authority to be relevant and thus dismissed this contention.

2. Definition and Scope of "Illegally Acquired Property":
The Tribunal referred to the Supreme Court judgment in Attorney-General for India v. Amratlal Prajivandas, which upheld the wide definition of "illegally acquired properties" under section 3(1)(c) of SAFEMA. This definition includes properties acquired before and after the Act, through any illegal activity prohibited by any law that Parliament has the power to make. The Tribunal emphasized that the definition is not limited to violations of the laws mentioned in section 2 but includes all illegal activities.

3. Burden of Proof Under SAFEMA:
Under section 8 of SAFEMA, the burden of proving that any property specified in the notice is not illegally acquired lies on the affected person. The Tribunal cited the Supreme Court's observation that the burden of proof is placed on the person concerned due to the difficulty in distinguishing between properties acquired through different illegal activities. The appellant failed to discharge this burden, as he could not explain the sources of his initial capital or subsequent investments.

4. Validity of Proceedings Under Section 2(2)(c) of SAFEMA:
The appellant argued that the proceedings under section 2(2)(c) were illegal. However, the Tribunal noted that the appellant being the brother of the detenu was sufficient to attract the application of section 2(2)(c). The Tribunal dismissed the appellant's contention regarding the difference in addresses, as there was no dispute about the identity of the detenu, Abdul Azeez.

5. Delay in Initiating Proceedings:
The appellant claimed that there was an undue delay in commencing the proceedings, which should vitiate the forfeiture order. The Tribunal observed that no limitation period is prescribed for initiating proceedings under SAFEMA. The investigations commenced after the detenu's detention in 1977, and the notice was issued in 1988. The Tribunal found no undue delay and dismissed this contention.

6. Evidentiary Value of Income-Tax Assessments:
The Tribunal acknowledged that income-tax assessments have evidentiary value and should be considered while deciding forfeiture cases. However, the appellant failed to provide sufficient evidence to explain the sources of his initial capital and subsequent investments. The Tribunal noted that the competent authority had accepted part of the investments as bona fide but found that the appellant could not prove the legitimacy of the initial capital account.

7. Legitimacy of the Capital Account and Subsequent Investments:
The competent authority found that the appellant's initial capital account of Rs. 49,989, shown as of March 31, 1972, remained unexplained. Consequently, all properties acquired through this capital were deemed tainted. The Tribunal upheld this finding, noting that the appellant could not discharge the burden of proving that the properties were acquired through legitimate means. The Tribunal confirmed the forfeiture of the properties, except for petty cash amounts, and allowed the appellant to approach the competent authority for the option of paying a fine in lieu of forfeiture for house properties.

Conclusion:
The appeal was partly allowed, setting aside the forfeiture of minor cash amounts, but confirming the forfeiture of other properties. The appellant was given the option to pay a fine in lieu of forfeiture for house properties. The Tribunal's decision was based on the appellant's failure to discharge the burden of proof and the wide definition of "illegally acquired properties" under SAFEMA.

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