1990 (12) TMI 50 - HC - Income Tax

Summary

Issues:
Detention under COFEPOSA Act, Competent Authority's notice under section 6(1) of the Act, Forfeiture of properties - immovable and movable.

Detention under COFEPOSA Act:
The appellant was detained under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974, making him an affected person under the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976. The Competent Authority issued a notice under section 6(1) of the Act regarding specific immovable and movable properties.

Forfeiture of Immovable Property (Item No. 1):
The appellant purchased a plot in 1963 and constructed a structure spending Rs. 17,000. Being an income-tax assessee since 1961-62, his income was assessed by the authorities. The appellant was involved in money-lending business and other activities, with assessments made under section 143(3) of the Income-tax Act. The court inferred that the appellant had a legal source of income to acquire the property, overturning the Competent Authority's decision.

Forfeiture of Immovable Property (Item No. 2):
The appellant claimed to have inherited the land where he constructed five shops in 1971 by spending Rs. 8,000. The Competent Authority did not dispute the inheritance claim but questioned the source of funds for construction. Considering the appellant's known legal sources of income and continuous business activities, the court reversed the Competent Authority's decision on this property.

Forfeiture of Movable Property (Item No. 3):
The appellant operated a business including money-lending since 1957, with an initial capital of Rs. 3,000 increasing to Rs. 20,000. The Competent Authority sought details on the source of the initial investment, which the appellant failed to provide. Despite the absence of account books, the appellant had been assessed for income tax since 1961-62. The court held that the appellant's long history as an income-tax assessee and the nature of his business activities supported the conclusion that he had a legal source of income for the investment made in 1957. Consequently, the court overturned the Competent Authority's decision on this movable property.

Conclusion:
The court allowed the appeal, setting aside the Competent Authority's order to forfeit the appellant's properties, based on the analysis and findings regarding each item of property.