1991 (5) TMI 55 - SC - Income Tax

Whether the appellant falls under the category of relatives as defined under section 2(2)(c) of the Act and has illegally acquired property liable to be forfeited to the Central Government under the provisions of the said Act? Held that - The affected person has not proved his regular source of income and thus has not discharged the onus cast on him under the smugglers and Foreign Exchange Maniputaors (Forfeiture of Property) Act. In view of the petition filed before the Commissioner of Income-tax, Gujarat-II, in respect of the claim of business carried on by him and savings therefrom the claim of business is not established and proved. The decision of Commissioner of Income-tax on a different amount of income for a different year further proves that the claim of business conducted, etc., is false and untrue. No enquiries were conducted by the Commissioner of Income-tax as to the genuineness of the petition of the assessee he above conclusions of the Competent Authority are based on positive evidence collected by him on the basis of which he was justified in rejecting the plea of the appellant and treating the property as having been illegally acquired. Subsequent conduct of the appellant in not filing even single return of income for or after the assessment year 1970-71 goes to establish the falsity of his claim regarding the sources of investment in the impugned property. Appeal dismissed.

Summary

Issues:
- Appeal against the order of forfeiture of property under the Smugglers And Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976.
- Allegation of property being illegally acquired within the meaning of the Act.
- Adequate opportunity for explanation and evidence appreciation.
- Consideration of income sources by income-tax authorities.
- Evidentiary value of income-tax authorities' findings.
- Justification of Competent Authority's conclusions on illegal acquisition.

Analysis:
The Supreme Court dealt with an appeal under the Smugglers And Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976, involving the forfeiture of a house property. The appellant, father of a convicted individual, contested the order of forfeiture, claiming inadequate opportunity for explanation and disputing the Competent Authority's conclusion on the property's illegal acquisition. The appellant argued that the income sources were duly considered by income-tax authorities, thus challenging the Competent Authority's findings. The Court examined the Competent Authority's detailed proceedings, including notices issued, responses sought, and evidence presented. The appellant failed to provide satisfactory explanations and evidence regarding the property's acquisition, despite opportunities granted by the Competent Authority.

The Court addressed the issue of the evidentiary value of income-tax authorities' findings in forfeiture proceedings. Referring to previous judgments, the Court emphasized that while the Competent Authority could independently assess investments, the income-tax authorities' decisions were relevant and could not be disregarded lightly. The Court highlighted the Competent Authority's duty to collect evidence beyond income-tax records and make informed decisions based on the available facts. The appellant's argument that income-tax findings should be conclusive was dismissed, emphasizing the Competent Authority's justified actions in examining the appellant's income sources independently.

The Competent Authority's conclusions were based on substantial evidence collected during the proceedings. The Court noted discrepancies in the appellant's claims regarding income sources and property construction timelines. Despite the appellant's contentions, including reliance on income-tax assessments, the Court upheld the Competent Authority's decision of illegal acquisition of the property. The Court found no merit in the appellant's arguments and dismissed the appeal, affirming the Competent Authority's forfeiture order. The judgment underscored the Competent Authority's thorough examination of evidence and the appellant's failure to substantiate his claims adequately, leading to the property's forfeiture.