Income Tax Officer v. V.Mohan

Case snapshot

Sections / provisions: Section 6(1) of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act 1976; SAFEMA

Questions before the Court / Tribunal

• Section 6(1) of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 nowhere provides that it is “mandatory” to serve the convict or detenu with a primary notice under that provision whilst initiating action against the relative of the convict. Indubitably, if the illegally acquired property is held by a person in his name and is also in possession thereof, being the relative of the convict and who is also a person to whom the Act applies, there is no need to issue notice to the convict or detenu much less primary notice as held by the High Court in the impugned judgment. For, Section 6(1) posits that notice must be given to the person who is holding the tainted property and is likely to be affected by the proposed forfeiture of the property. The person immediately and directly to be affected is the person who is the recorded owner of the property and in…
• Which factual, statutory and procedural conditions controlled the requested relief?
• How did the forum apply the governing provisions to the evidence and procedural history recorded in this case?

Material facts and procedural background

REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NOS. 85928593 OF 2010 THE INCOME TAX OFFICER, CIRCLE I (2), KUMBAKONAM & ANR. …APPELLANTS VERSUS V. MOHAN & ANR. …RESPONDENTS J U D G M E N T A.M. KHANWILKAR, J. 1. The conundrum in these appeals is: when the Competent Authority claims that the subject property (to be forfeited) is that of the convict (V.P. Selvarajan) and ostensibly held by the relatives of the convict (respondents herein), whether it is mandatory to serve a primary notice under Section 6(1) of the 1976 Act upon such convict with copy thereof to his relatives under Section 6(2) of the  under the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 (for short, “1976 Act”)

1976 Act, and nonservice of such primary notice upon the convict would vitiate the entire proceedings initiated only against his relatives? 2. The High Court of Judicature at Madras  vide impugned judgment held that Section 6 of the 1976 Act leaves no room for doubt that the primary notice must be served on the convict, wherein the convict is required to indicate the sources of his income, earnings or assets, out of which or by means of which he had acquired the properties sought to be forfeited; and nonservice of such notice upon the convict would vitiate the action initiated against his relatives, even if the forfeited properties are ostensibly held by or in the name of the relatives. The High Court rejected the argument of the appellants herein (Competent Authority) that only the person in whose name the property is held is required to be called upon to offer explanation regarding the sources of his income, earnings or assets, out of which or by means of which he had acquired such property including the evidence on which he  f or short, “Madras High Court”  i n Writ Petition Nos. 1149 & 1150 of 2001 decided on 24.3.2008 reported in 2008 SCC OnLine Mad 244

would rely and other relevant information and particulars. If the property in question is ostensibly held by the relatives in his name or through any other person on his behalf, the convict or detenu is not expected to nor can offer any explanation in that regard. The High Court also rejected the argument of the appellants herein that no prejudice is likely to be caused to the noticees (respondents herein) being the relatives of the convict, who had held the forfeited properties in their name. The High Court opined that the action against the respondents initiated by the Competent Authority was vitiated for lack of notice to the convict and it was, thus, pleased to set aside the entire action initiated against the respondents by the Competent Authority. 3. A contra view has been taken by at least two other High Courts. The first is of the High Court of Kerala in Sajitha & Ors. vs. Competent Authority & Ors.  wherein after analysing the relevant provisions, it held as follows: “11. Section 2(c) refers to every person who is a relative of a person referred to in clause (a) or clause (b). Section 2(e) refers to any holder of any property which was at  2005 SCC OnLine Ker 101

any time previously held by a person referred to in clause (a) or clause (b). When we read Section 6(1) and 6 (2) along with Section 2 (2)(e) it is evident that notice contemplated under Section 6(2) is to any other person if the property does not stand in the name of the detenu. So far as this case is concerned, property stands in the name of wife and brothers. Admittedly notices have been issued to them as contemplated under Section 6(1). We are of the view, non issue of notice to the detenu will not vitiate the proceedings as against their relatives. 12. Petitioners also have raised a contention that more than six years have elapsed and the proceedings have not been initiated within a reasonable period.

No time limit has been prescribed under the Act . The Apex Court in Attorney General for India v. Amratlal Prajivandas has dealt with the scope and ambit of the Act which requires no reiteration. However we may refer to the recent decision of the apex court in Kesar Devi v. Union of India . The apex court while dealing with Section 2(2)(c) of the Act has categorically held that the burden of proving that such property is not illegally acquired property will be upon the person to whom notice has been issued . On facts petitioners could not establish that the properties were legally acquired. Competent authority and the Tribunal concurrently found so and this court in writ jurisdiction will not be justified in a taking a different view in the absence of any contra evidence.

Appellant / petitioner / assessee submissions

24. It is urged that this Court may lean in favour of closure of the proceedings inasmuch as even the appellants succeed, the parties may have to be relegated to the High Court for consideration of all other aspects raised by the respondents in the writ petitions and not dealt with by the High Court being of the view that initiation of the action against the respondents without primary notice to the convict vitiated the entire proceedings. As a matter of fact, the High Court in paragraph 21 of the impugned judgment had left it open to the Authorities to initiate fresh proceedings in accordance with law, which the appellants have not chosen to initiate despite the fact that there was no interim stay given by this Court in that regard. 25. We have heard Mr. Aman Lekhi, learned Additional Solicitor General of India, Mr. A.K. Srivastava, learned senior counsel for the appellants and Mr. Atul Shankar Vinod, learned counsel for the respondents. 26. Before we proceed to examine the different viewpoints in reference to the provisions of the 1976 Act, it is essential to notice

Revenue / respondent submissions

was questioned by the competent authority. Nevertheless, this Court upheld the action initiated against the relative (wife) of the detenu as the properties were held by her. It is submitted that the impugned judgment be set aside and the contra view taken by the High Court of Kerala and Calcutta High Court be affirmed. 18. Per contra, learned counsel for the respondents has supported the view taken by the Madras High Court in the impugned judgment and would urge that the appellants had all throughout proceeded against the respondents on the assumption that the respondents are only ostensible owners and the properties in question, in fact, belonged to the convict. Further, the respondents were holding the subject properties on behalf of the convict. In that context, the Madras High Court examined the purport of Section 6 and the interplay of two subsections therein to conclude that primary notice to the convict was a mandatory requirement, in such a fact situation. Now, in the present appeals, the appellants have taken a completely different position, namely, that the respondents are, in fact, the recorded owners of the

Court / Tribunal analysis and reasoning

We therefore find no infirmity in the orders passed by the competent authority. The writ petition lacks merits and the same would stand dismissed.” (emphasis supplied)  (1994) 5 SCC 54 : AIR 1994 SC 2179  ( 2003) 7 SCC 427

The second decision is of the Calcutta High Court in The Competent Authority & Administrator & Anr. vs. Manilal Jalal & Anr. . Even in this case, notice was issued only to the wife of the detenu and not to the detenu. The question was specifically dealt with by the Calcutta High Court after analysing the relevant provisions in the following words: “….. A bare perusal of Section 2 of the Act would show that the Act not only applies to the detenu but also to the relations and/or associates of such detenu. Nowhere the said provision of law mandates that a proceeding against a relative of a detenu can be initiated only if such detenu is proceeded against under SAFEMA. Such right to proceed against the relative/associate is independent of any action taken against the detenu under SAFEMA. It is wholly fallacious to argue that the detenu must be proceeded against under SAFEMA as a condition precedent for any action against a relative of such detenu. The properties and/or assets which were sought to be forfeited were standing in the name of Sarbani Devi Jalan herself and therefore respondent authorities rightly issued a notice under Section 6 of the Act upon her as “person affected” for the purpose of initiating a proceeding of forfeiture of such property. There is nothing in the law that the property standing in the name of a relation of a detenu which is sought to be proceeded against must require a notice to be issued upon the detenu  2013 SCC OnLine Cal 12911

also. To infer such a requirement when the same is not provided in law would amount to rewriting the statutory provision which is unwarranted . This submission of the appellants being unfounded must therefore fail. …..” (emphasis supplied) 4. In view of the above, these appeals not only involve question regarding interpretation of Section 6 read with other provisions of the 1976 Act, but also call upon us to expound the stated question authoritatively and resolve the conflicting view taken by different High Courts. 5. Reverting to the facts of the present case, one V.P. Selvarajan (convict) — brotherinlaw of respondent No.2 and paternal uncle of respondent No.1, was convicted for an offence punishable under the Customs Act, 1962  on 23.11.1969. As a result of his conviction, he came within the ambit of the expression “person” or “such person” occurring in the 1976 Act — Section 2 in particular. Respondents being the relatives of the convict in terms of Section 2(2) read with Explanation 2 also came within the ambit of  f or short, “1962 Act”

Section 2(2). The spouse of the brother of the convict as well as the son of the brother of the convict are plainly covered within the expression “relative” as clarified in Explanation 2 of Section 2 of the 1976 Act and for which reason, the Act applies to the respondents as well. Emphasis is placed on the expression “held” occurring in Section 6 of the 1976 Act in particular which in terms of definition in P. Ramanatha Aiyar’s The Major Law Lexicon  would cover (i) those entitled to possession of property; and (ii) those in possession thereof. 14. It is urged that respondents were admittedly holding the properties in their name and thus, they were entitled to possession of such property and in fact they were in physical possession thereof. Therefore, they alone were expected to offer explanation and discharge the burden of proving that the properties are their legally acquired properties. They were, in fact, the persons directly affected by the proposed action of forfeiture and, hence, notice under Section 6 was required to be issued to the respondents alone. There is no mandate in Section 6 that a primary notice be  4th Edition, Vol. 3 at pages 305051

subject properties and, therefore, no notice is required to be given to the convict. 19. The respondents have invited our attention to the definition of “persons” and Explanation 2 in Section 2 of the 1976 Act. It is also urged that the properties referred to in the impugned notices issued to the respondents were not made subject matter of notice under Section 6 issued to the convict on 2.2.1980. In other words, no notice had ever been given to the convict in respect of properties referred to in the impugned notices issued to the respondents as being his illegally acquired properties held through other person on his behalf. 20. As a matter of fact, it is urged by the respondents that Section 6(1) posits that when a notice is issued to a relative, it is imperative upon the Department to allege and establish a nexus between the properties of the relative sought to be forfeited and the convict or detenu. In that, the forfeited properties must be traceable to the illegal sources of income, earnings or assets of the convict or detenu. The personal properties of relative or associate of the

Bitter medicine is not bad medicine . In law it is not possible to say that the definition is arbitrary or is couched in unreasonably wide terms. Further, in view of clear and unambiguous language employed in clause ( c) of Section 3, it is not possible or permissible to resort to the device of reading down. The said device is usually resorted to save a provision from being declared unconstitutional, incompetent and ultra vires. We are, therefore, of the opinion that neither the constitutional validity of the said definition can be

Operative decision and relief

65. The expression “such other person” in Section 6(2) is, thus, referable to a person falling in class “through any other person on his behalf”. That is the person to whom the Act applies, as noted in the opening part of Section 6(1) of the Act. In such a case, the convict or detenu is not expected to nor can be called upon to discharge the burden of proof under Section 8. Accordingly, we may lean in favour of the view taken by the High Court of Kerala and Calcutta High Court reproduced above, for independent reasons delineated hitherto. The view taken by the Madras High Court in the impugned judgment, therefore, does not commend to us and is reversed. 66. The parties had invited our attention to other judgments of this Court. However, those judgments have not dealt with the question that arise for consideration in the present appeals. 67. Having said this, we need to set aside the impugned judgment and relegate the parties before the High Court by restoring the writ petitions to the file to its original number for being heard afresh on all other issues and contentions as may be available to both sides

including the argument that there is an inordinate, undue and unexplained delay in initiating the action against the respondents (writ petitioners) and as a result of which it would be iniquitous to call upon the respondents to offer explanation by reopening the adjudication of the entire proceedings. We do not wish to dilate on any other plea in these appeals. Further, we may not be understood to have expressed any opinion either way on any other contention available to the parties. We say so because even the impugned judgment makes it amply clear that the writ petitions filed by the respondents were being allowed on the sole ground that the action against the respondents sans primary notice to the convict is vitiated. That view having been reversed, the matter needs to go back before the High Court for consideration of all other aspects on its own merits. 68. During the course of the hearing, an issue arose whether the convict, i.e., V.P. Selvarajan had expired before the issuance of notice under Section 6 on 19 th January 1994. The counsel, at the time of argument, were not aware of the factual position. However, in the written submissions, the appellant and the respondents

have accepted that the convict V.P. Selvarajan had expired before impugned notices under Section 6 dated 19 th January 1994 were issued. 69. Be that as it may, in the present case, the properties in question and subject matter of notice under Section 6 are in the name of and held by the two respondents. No entitlement or right has been claimed in these properties by the heirs of the deceased convict V. P. Selvarajan. If the properties were in the name of the deceased detenu or convict, then different considerations may have applied. In the context of the present case as the convict V.P. Selvarajan had expired before the issuance of notice under Section 6 on 19 th January 1994, therefore, the need and requirement to serve notice on him would not arise. 70. Accordingly, these appeals succeed. The common impugned judgment and order dated 24.3.2008 passed by the Madras High Court in Writ Petition Nos.1149 and 1150 of 2001 is set aside. Instead, the writ petitions are restored to the file to its original number for being considered afresh on its own merits in

accordance with law on all other issues and contentions available to both sides except the question answered in this judgment. Thus, all other contentions available to both parties are left open. We request the High Court to expeditiously dispose of the remanded writ petitions. No order as to costs. Pending applications, if any, stand disposed of. ..……………………………J. (A.M. Khanwilkar) ………………………………J. (Sanjiv Khanna) New Delhi; December 14, 2021.

Ratio and legal principle

The narrow proposition associated with Income Tax Officer v. V.Mohan concerns section 6(1) of the smugglers and foreign exchange manipulators (forfeiture of property) act, 1976 nowhere provides that it is “mandatory” to serve the convict or detenu with a primary notice under that provision whilst initiating action against the relative of the convict. indubitably, if the illegally acquired property is held by a person in his name and is also in possession thereof, being the relative of the convict and who is also a person to whom the act applies, there is no need to issue notice to the convict or detenu much less primary notice as held by the high court in the impugned judgment. for, section 6(1) posits that notice must be given to the person who is holding the tainted property and is likely to be affected by the proposed forfeiture of the property. the person immediately and directly to be affected is the person who is the recorded owner of the property and in… The proposition cannot be separated from the judgment’s facts, the governing statutory version, the forum’s jurisdiction, and the exact relief recorded in Civil Appeal Nos. 8592-8593 of 2010.

For working-paper purposes, the decision should be cited only after matching the material facts and reading the passages under the judgment-grounded record above. The editorial outcome label “Quashed / set aside” is a navigation aid; it does not replace the operative order or explain every issue in a multi-issue case.

Why this judgment matters

This decision is relevant when a file raises the same central question identified in the source headnote: Section 6(1) of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 nowhere provides that it is “mandatory” to serve the convict or detenu with a primary notice under that provision whilst initiating action against the relative of the convict. Indubitably, if the illegally acquired property is held by a person in his name and is also in possession thereof, being the relative of the convict and who is also a person to whom the Act applies, there is no need to issue notice to the convict or detenu much less primary notice as held by the High Court in the impugned judgment. For, Section 6(1) posits that notice must be given to the person who is holding the tainted property and is likely to be affected by the proposed forfeiture of the property. The person immediately and directly to be affected is the person who is the recorded owner of the property and in… Its practical value lies in the way the Supreme Court of India connected the governing provisions—Section 6(1) of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act 1976; SAFEMA—to the procedural posture and evidence before it.

The authority level is Supreme Court. That affects persuasive or binding weight, but authority level alone is never enough. Territorial jurisdiction, statutory period, the identity of the challenged order, and later appellate treatment must all be checked before the case is used in advice, a submission, or litigation strategy.

Practitioner action points

• Begin with the complete judgment and mark the paragraphs supporting the exact proposition relied upon.
• Match the statutory version of Section 6(1) of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act 1976; SAFEMA and the decision date 2021-12-14; do not assume the current text is identical.
• Compare the notice, assessment, appeal or other procedural sequence with the chronology recorded in this case.
• Verify the stated later-history status and any review, appeal, SLP, curative or rectification proceedings before citation.
• Record why the client’s evidence is materially similar, and also record any fact capable of distinguishing the result.

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Detailed reliance and distinction analysis

Identity check. Confirm that the cited cause title is Income Tax Officer v. V.Mohan, the proceeding is Civil Appeal Nos. 8592-8593 of 2010, and the decision is dated 2021-12-14. These fields are taken from the judgment record and should appear exactly in the citation note.

Bench check. The judgment identifies the coram as A.M. Khanwilkar, J. (authoring judge identified in judgment). A later order by another bench, a larger bench, or a higher forum may alter the weight or interpretation of the proposition.

Provision check. The source associates the dispute with Section 6(1) of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act 1976; SAFEMA. The practitioner should place the historical statutory text next to the current text and identify every amendment, proviso, explanation, rule or notification that could change the analysis.

Fact check. The source issue is not a free-standing abstract rule. It arises from the concrete record summarized above. A reliable application note should list the common facts, the different facts, and whether each difference affects jurisdiction, admissibility, limitation, burden, computation or relief.

Remedy check. The recorded result is Quashed / set aside. Where a matter is remanded, set aside, partly allowed, or disposed with directions, the exact operative language is more important than a binary winner/loser label.

History check. The current closure state is REVIEW_CURATIVE_DOCKET_CHECK_PENDING. If that state is pending, the page does not assert that no later case exists. It means the check remains open and must be completed at the point of professional reliance.

Section / provision impact

• Section 6(1) of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act 1976 — apply the exact version considered in the judgment.
• SAFEMA — apply the exact version considered in the judgment.

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