Genuine gift claims under foreign exchange law failed where surrounding facts supported a compensatory transfer and upheld penalty.

Receipt of substantial sums through cheques from NRE accounts, supported by gift deeds executed in India, was treated as a compensatory transaction rather than genuine gifts because the alleged non-resident donors were not present in India, were unrelated to the recipient, and no credible explanation was given for the transfers. Applying principles on voluntary and retracted statements, circumstantial evidence, burden of proof, human conduct, and adverse inference from facts within special knowledge, the Tribunal upheld the finding of contravention of foreign exchange law. It also found no basis to regard the penalty as harsh or disproportionate, and sustained the penalty.

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Issues: (i) Whether receipt of substantial amounts through cheques issued from NRE accounts, supported by gift deeds executed in India when the alleged non-resident donors were not present in India and were unconnected with the recipient, established contravention of foreign exchange law; (ii) Whether the penalty imposed was excessive or unwarranted.

Issue (i): Whether receipt of substantial amounts through cheques issued from NRE accounts, supported by gift deeds executed in India when the alleged non-resident donors were not present in India and were unconnected with the recipient, established contravention of foreign exchange law.

Analysis: The surrounding circumstances showed that the alleged donors were not in India on the dates of execution, were unrelated to the appellant and his son, and no credible explanation was offered for the gift of substantial sums without consideration. The Tribunal applied the principles governing voluntary and retracted statements, circumstantial evidence, burden of proof, presumption arising from human conduct, and the rule that facts especially within the knowledge of a party may attract an adverse inference. On that basis, the claim of genuine gifts was rejected and the transaction was treated as compensatory payment in contravention of the statutory prohibition.

Conclusion: The contravention was established and the finding of violation was upheld, against the appellant.

Issue (ii): Whether the penalty imposed was excessive or unwarranted.

Analysis: The Tribunal compared the quantum of penalty with the nature of the proved contravention and found no basis to treat it as harsh or disproportionate.

Conclusion: The penalty was not found excessive and was sustained, against the appellant.

Final Conclusion: The appeal failed on merits and the impugned order sustaining the penalty was left undisturbed.

Ratio Decidendi: Where the alleged gifts from non-resident sources are unsupported by a credible explanation and the surrounding circumstances are inconsistent with ordinary human conduct, the authority may infer a compensatory transaction and uphold contravention on the basis of circumstantial evidence and adverse inference from facts within the party's special knowledge.

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