THE INCOME TAX OFFICER, CIRCLE I (2), KUMBAKONAM & ANR. vs. V. MOHAN & ANR.

CIVIL APPEAL No. 8592/2010Supreme Court[2021] 12 S.C.R. 15214 December 2021Bench: 2 JudgesAuthor: A.M. KHANWILKAR, SANJIV KHANNA SUPREME COURT REPORTS43 pages
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What were the facts?

The appeals concerned the forfeiture of property under the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976. The Competent Authority initiated forfeiture proceedings against the respondents, who were relatives of a convict, V.P. Selvarajan. The High Court had set aside the action against the respondents, holding it vitiated for lack of a primary notice to the convict. The judgment notes that the convict, V.P. Selvarajan, had expired before the issuance of the forfeiture notices on January 19, 1994. The properties in dispute were in the names of and held by the respondents, and the heirs of the deceased convict did not claim any entitlement to these properties.

What did the Supreme Court hold?

The Supreme Court held that Section 6(1) of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976, does not mandate the issuance of a primary notice to a convict when forfeiture proceedings are initiated against a relative of the convict, provided the property is held by the relative and the relative is a person to whom the Act applies. The Court reasoned that the purpose of Section 6(1) is to notify the person holding the tainted property and likely to be affected by the forfeiture, which is the person in possession and recorded ownership. If the property is held by the relative, they are the one who must discharge the burden of proof under Section 8, not the convict. The Court also noted that in this specific case, the convict had expired before the notices were issued, and the heirs of the convict did not claim any right to the properties. Therefore, the High Court's order vitiating the proceedings for lack of notice to the convict was set aside. The appeals were allowed, and the writ petitions were remitted back to the High Court for fresh consideration on all other issues.

What were the issues?

1. Whether Section 6(1) of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976, mandates the issuance of a primary notice to a convict when forfeiture proceedings are initiated against a relative of that convict, and if non-service vitiates the proceedings against the relative. Assessee's Contention: The High Court's decision that the action against the respondents was vitiated for lack of notice to the convict was accepted by the respondents (relatives). Revenue's Contention: The revenue (Competent Authority) argued that Section 6(1) does not mandate a primary notice to the convict when the property is held by a relative, and therefore, non-service does not vitiate the proceedings against the relative. They relied on the interpretation of Section 6(1) and Section 2(2) of the Act.

Which sections of the Income-tax Act were involved?

Section 6(1),Section 6(2),Section 2(2),Section 8,Section 3(1)(c)

AI-generated summary — verify with the full judgment below

A B C D E F G H 152 SUPREME COURT REPORTS [2021] 12 S.C.R. [2021] 12 S.C.R. 152 152 THE INCOME TAX OFFICER, CIRCLE I (2), KUMBAKONAM & ANR. v. V. MOHAN & ANR. (Civil Appeal Nos. 8592-8593 of 2010) DECEMBER 14, 2021 [A. M. KHANWILKAR AND SANJIV KHANNA, JJ.] Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976: ss. 6(1), (2), 2(2) – Notice of forfeiture – Illegally acquired property – Claim of the Competent Authority that the property to be forfeited is that of the convict and ostensibly held by the relatives of the convict – Issuance of primary notice u/ s. 6(1) upon such convict with copy thereof to his relatives u/s. 6(2) – Requirement of – Held: Section 6(1) 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 – 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 – Person immediately and directly to be affected is the person who is the recorded owner of the property and in possession thereof himself or through some other pe

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