Burden of proof for alleged foreign exchange gift receipts upheld; limited immunity did not defeat penalty under exchange law.

Where alleged gift cheques from an NRE account were asserted to explain foreign exchange receipts, the burden lay on the appellants to prove the donor's relationship, the source, and the genuineness of the transactions because those facts were within their special knowledge. Applying burden of proof, adverse inference, and surrounding-circumstances principles, the tribunal found the explanation not credible and upheld contravention of section 9(1)(a) and section 9(1)(d) of the Foreign Exchange Regulation Act, 1973. It also held that the 1991 immunity scheme was limited in scope and did not bar penal action under the foreign exchange law on the facts found.

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Issues: (i) Whether the appellants had satisfactorily explained the source and genuineness of the alleged gift cheques received from an NRE account so as to avoid contravention of section 9(1)(a) and section 9(1)(d) of the Foreign Exchange Regulation Act, 1973; (ii) whether the immunity under the Remittances of Foreign Exchange and Investment in Foreign Exchange Bonds (Immunity and Exemption) Act, 1991 protected the receipts from penal action under the Foreign Exchange Regulation Act, 1973.

Issue (i): Whether the appellants had satisfactorily explained the source and genuineness of the alleged gift cheques received from an NRE account so as to avoid contravention of section 9(1)(a) and section 9(1)(d) of the Foreign Exchange Regulation Act, 1973.

Analysis: The appellants did not establish the alleged close relationship or intimacy with the donor, nor did they explain the circumstances in which large sums were allegedly gifted. The Tribunal applied the principles of burden of proof, special knowledge, and adverse inference, holding that facts peculiarly within the appellants' knowledge had to be proved by them. It also relied on presumptions arising from common human conduct and the surrounding circumstances, concluding that the explanation offered was not credible and that the adjudication findings were supported by the record.

Conclusion: The issue was decided against the appellants. The contravention of section 9(1)(a) and section 9(1)(d) of the Foreign Exchange Regulation Act, 1973 was upheld.

Issue (ii): Whether the immunity under the Remittances of Foreign Exchange and Investment in Foreign Exchange Bonds (Immunity and Exemption) Act, 1991 protected the receipts from penal action under the Foreign Exchange Regulation Act, 1973.

Analysis: The immunity scheme was held to be limited to receipt of foreign exchange within its contemplated scope and did not exclude the operation of the penal provisions of the Foreign Exchange Regulation Act, 1973 on the facts found. The Tribunal treated the appellants' reliance on the immunity statute as misconceived and found no legal basis to nullify the impugned penalty order.

Conclusion: The issue was decided against the appellants. The immunity statute did not bar the impugned penalty under the Foreign Exchange Regulation Act, 1973.

Final Conclusion: The penalty order was sustained and the appeals failed on merits.

Ratio Decidendi: Where the facts giving rise to a claimed gift or similar transaction lie specially within the knowledge of the person asserting it, that person must satisfactorily prove them, and failure to do so permits an adverse inference and sustains penal consequences under the foreign exchange law notwithstanding reliance on a limited immunity provision.

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