2007 (2) TMI 729 - AT - FEMA

Tribunal Upholds Penalty: Insufficient Evidence on Gift Origin, Directs Appellant to Pay Within 7 Days or Face Recovery.

Veena Jain Versus Directorate of Enforcement

Veena Jain Versus Directorate of Enforcement - TMI Issues Involved:1. Validity of the impugned order based on the statement of a third party.2. Evidence of payment to or for the credit of a non-resident person.3. Burden of proof regarding the origin and outflow of love and affection for gifting.4. Applicability of circumstantial evidence and presumption under the Indian Evidence Act.5. Reasonableness of the penalty imposed.Issue-Wise Detailed Analysis:1. Validity of the Impugned Order Based on the Statement of a Third Party:The appellant argued that the impugned order was based merely on the statement of a third party, S.J. Anand, who did not specifically name any payment by the appellant but described the general mode of receipt of gift cheques. The appellant contended that the statement was retracted and there was no evidence connecting the appellant with the payment to Mrs. Anjali Verma. The respondent countered that the statement of a co-noticee can be acceptable as good evidence when recorded under section 40 of the FER Act, 1973, and cited the judgment in Naresh J. Sukhwani v. Union of India to support this argument.2. Evidence of Payment to or for the Credit of a Non-Resident Person:The appellant claimed that there was no evidence of payment to or for the credit of the non-resident person from whose account the purported gift cheque was taken. The tribunal noted that despite the appellant's claim of a long association with the non-resident person, there was no substantial evidence to prove this relationship. The tribunal emphasized that the burden of proving the origin and outflow of love and affection for gifting any valuable property lies with the appellant under section 122 of the Property Act and section 25 of the Contract Act, 1972.3. Burden of Proof Regarding the Origin and Outflow of Love and Affection for Gifting:The tribunal highlighted that the fact of love and affection between the non-resident person and the appellant is within the special knowledge of the appellant, who must prove this fact under section 106 of the Indian Evidence Act, 1872. The tribunal observed that common human conduct does not permit gifting large sums of money to an unknown person or even to someone with a claimed childhood association, leading to an adverse presumption against the appellant.4. Applicability of Circumstantial Evidence and Presumption Under the Indian Evidence Act:The tribunal referred to the judgment in Trimukh Maroti Kirkan v. State of Maharashtra, where the Supreme Court held that circumstantial evidence could be sufficient to establish guilt. The tribunal emphasized that the prosecution is not required to prove its case with mathematical precision but must establish a degree of probability that a prudent person may believe in the existence of the fact in issue. The tribunal also cited the principle from State of West Bengal v. Mir Mohammad Omar, where the burden of proof can shift to the accused to explain facts within their special knowledge.5. Reasonableness of the Penalty Imposed:The tribunal concluded that the appellant failed to provide a sufficient explanation for the gift of Rs. 10 lakhs, and the adjudication order could not be faulted. The tribunal found that the penalty amount was reasonable and correct, as it did not exceed the amount involved in the contravention. The tribunal dismissed the appeal, affirming and sustaining the adjudication order, and directed the appellant to deposit the remaining penalty amount within seven days.Conclusion:The appeal was dismissed on all grounds, with the tribunal affirming the adjudication order and the penalty imposed. The appellant was directed to deposit the remaining penalty amount within the specified period, failing which the Enforcement Directorate could recover the same in accordance with the law.