TaxTMI 
TaxTMI 
2009 (11) TMI 568
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.... summon issued reads as follows :- "WHEREAS your attendance is required in connection with the proceedings under the Foreign Exchange Management Act, 1999, in your case, you are hereby required to personally attend before me at the above address, on the 23rd day of January 2009 at 11.00 A.M. to give evidence and to provide documents specified under the Schedule and not to depart until you receive my permission to do so. SCHEDULE 1. Your passport; 2. Your bank pass book with up to date entries; 3. Details of your immovable properties with documents. Without prejudice to the provisions of any other law for the time being in force, if you intentionally omit to attend and give evidence or produce the books of account or documents, a penalty, which shall not be less than Five Hundred Rupees, but which may extend to Ten Thousand Rupees may be imposed upon you under Section 272A(1) of the Income Tax Act, 1961." 4. The learned Senior Counsel attacked the issuance of the summons on the ground that the Enforcement Directorate, which has the power to issue summons under Section 37, can do so, only if it is satisfied that the purpose has relevance to the issue in whi....
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.... relating to foreign investments and foreign trade for closer interaction with the world economy. At that stage, the Central Government decided that a further review of the Foreign Exchange Regulation Act would be undertaken in the light of subsequent developments and experience in relation to foreign trade and investment. It was subsequently felt that a better course would be to repeal the existing Foreign Exchange Regulation Act and enact a new legislation. Reserve Bank of India was accordingly asked to undertake fresh exercise and suggest a new legislation. A Task Force constituted for this purpose, submitted its report in 1994 recommending substantial changes in the existing Act. Significant developments have taken place since 1993 such as substantial increase in our foreign exchange reserves, growth in foreign trade, rationalisation of tariffs, current account convertibility, liberalisation of Indian Investments abroad, increased access to external commercial borrowings by Indian corporates and participation of foreign institutional investors in our stock markets. Keeping in view the changed environment, the Central Government has decided to introduce the Foreign Exchange Ma....
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....ry, production of evidence, etc. - (1) The Assessing Officer, Deputy Commissioner (Appeals), Joint Commissioner, Commissioner (Appeals) and Chief Commissioner or Commissioner shall, for the purposes of this Act, have the same powers as are vested in a court under the Code of Civil Procedure, 1908 (5 of 1908) when trying a suit in respect of the following matters, namely :- (a) discovery and inspection; (b) enforcing the attendance of any person, including any officer of a banking company and examining him on oath; (c) compelling the production of books of account and other documents; and (d) issuing commissions. (1A) If the Director General or Director or Joint Director or Assistant Director or Deputy Director or the authorised officer referred to in sub-section (1) of Section 132 before he takes action under clauses (i) to (v) of that sub-section, has reason to suspect that any income has been concealed, or is likely to be concealed, by any person or class of persons, within his jurisdiction, then, for the purposes of making any enquiry or investigation relating thereto,....
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..... A.J. Rana and Others reported in (1972) 1 SCC 240. The said judgment arose in the context of interpreting Section 19(2) of the Foreign Exchange Regulation Act, 1947. Under Section 19(2), it is stated that where the Central Government or the Reserve Bank considers it necessary or expedient to obtain and examine any information, book or other document in the possession of any person or which in the opinion of the Central Government or the Reserve Bank, it is possible for such person to obtain and furnish, the Central Government, or, as the case may be, the Reserve Bank may, by order in writing, require any such person (whose name shall be specified in the order), to furnish or to obtain and furnish, to the Central Government or the Reserve Bank or any person specified in the order with such information, book or other document. 13. While interpreting Section 19(2) of FERA, in paragraph 14 of Barium Chemicals case (cited supra), it was observed as follows :- "14. The words 'considers it necessary' postulate that the authority concerned has thought over the matter deliberately and with care and it has been found necessary as a result of such thinking to pass the order. The....
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.... this context, the learned Senior Counsel submitted that the summons has been issued not in conformity with the FEMA and there is no basis for calling for such information. It is also submitted that the Calcutta High Court vide its judgment in New Central Jute Mills Co. Ltd. v. Dwijendralal Brahmachari and Others reported in 1973 Vol. 90 I.T.R. 467 dealt with the scope of Section 131 of the Income Tax Act. Applying the Barium Chemicals case while interpreting the said section, it was observed as follows :- "It is true that the language of the two sections is different but under both the sections it is necessary to apply the mind to determine the question of relevancy of the documents. Under section 131 of the Income Tax Act, 1961, the officers mentioned therein have no larger power than a civil court trying a suit, under the Code of Civil Procedure, and the powers to direct production, discovery and inspection of documents are controlled by Section 30 of the Civil Procedure Code and Order 11 of the Code. But the civil court cannot direct production of any document unless it considers that the said documents are relevant. In this case it is difficult to accept the position that the....
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....purposes of the Act" be not expressly stated. Secondly, it appears to us that the statutory power cannot be exercised without application of mind as urged by Mr. R.C. Deb appearing on behalf of the respondent. If such powers are granted then such powers would be so naked that the section itself would become ultra vires. Application of mind must be in regard to the question of relevancy of the documents to the lis involved in the matter before the Income-tax Officer. A Civil Court cannot order discovery, production or inspection of documents until it is of the opinion that such documents are relevant for the purpose of the issues involved in the suit pending before it. Similarly, it seems to us that the officers mentioned in section 131 of the Income-tax Act have been vested with powers to make the orders as mentioned therein provided they are satisfied that the orders made would be relevant for the purpose of deciding the case pending before them. If we hold otherwise, we would be holding that Section 131(1) has conferred naked and arbitrary powers upon such officers which would make the section itself liable to be struck down. It appears from the terms requiring the production of....
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....here is great latitude allowed to the ITO in the collection of materials and he does not act as a court at that stage. There are no two parties before him, and the procedure in the adversary system of proceedings cannot be applied to him. However, the ITO, before he uses the materials so collected, is bound to give the necessary opportunity to the assessee to test the evidence, to adduce any evidence in rebuttal and to explain the facts that appear against him. Thus, it is clear that the ITO cannot be asked to put on, or be thrust with, the garb of a court, even at the stage of collection of evidence. There can be no reasonable apprehension of the ITO not utilising the favourable materials appearing in such evidence. The Supreme Court has examined this aspect in Suraj Mall Mohta and Co. v. A.V.Visvanatha Sastry (1954) 26 I.T.R. 1, at page 13 and pointed out the rights available to the assessee under the I.T. Act as contrasted with the rights available under the Taxation on Income (Investigation Commission) Act, 1947 (Act No. XXX of 1947). It was pointed out that while in the proceedings under Act No. XXX of 1947, the assessee would be entitled only to get copies of that portion of ....
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....r's account books relating to his accounts in India and abroad and his property details. If we take into consideration the required documents mentioned in the schedule, the enquiry relates only to the petitioner in respect of his involvement in some transaction under the FERA Act. If the investigation relates to any other person, then the authorities would have mentioned the documents relating to the concerned third parties or the transaction between the petitioner and those third parties. Hence, I am of the view that the non-mentioning of the (nature) of investigation and the purpose of the requirement of documents do not vitiate the summons in any manner." 21. Further, the attack on the ground of non-application of mind and also summoning of documents having nexus with the investigation, were also repelled by this Court in paragraphs 12 and 13 and it reads as follows :- Para 12. "So far as the second point is concerned, the learned Senior Counsel for the petitioner contends that the summons has been issued without application of mind, because it does not specify as to whether the appearance of the petitioner is necessary to give evidence or to produce the documents specifi....
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....ning to him, it cannot be said that the investigation has no nexus with the documents called for from the petitioner. When an investigation is commenced, it is not possible for the authorities to come to the conclusion with retard to the involvement or the non-involvement of any person until the enquiry is completed. During the enquiry if the authorities get any information with regard to the involvement of any other individual, those individuals can also be summoned by the concerned officer in order to complete the enquiry. When Section 40(4) of the FERA Act specifically mentions that the proceedings taken by the authorities are judicial proceedings, it is not open to the petitioner to challenge the summons issued under the said proceedings as ab initio void. The petitioner cannot claim any right under Article 21 of the Constitution of India and Section 24 of the Evidence Act, as he is not an accused." 22. The learned special counsel has also referred to another judgment of this Court in Kishore J.Chawla v. Union of India reported in 2000 (117) E.L.T. 4 (Mad.), wherein this Court has held that when a person is examined under Section 108 of the Customs Act, 1962, he does not ....
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....nder Article 20(3) of the Constitution. Therefore, the concept of applying the theory of self-incrimination even at the stage of investigation in case of violation of FEMA cannot be raised to the level of an investigation of a criminal offence protected by Articles 20(3) and 21 of the Constitution. 26. If it is seen in this context, then the attack made against the summons issued by the Department cannot be countenanced by this Court. The petitioner in essence seeks for a writ of prohibition against the department for having issued the summons by the exercise of the powers vested on them under Section 37 read with Section 131 of the Income Tax Act. In Standard Chartered Bank and Others v. Directorate of Enforcement and Others reported in 2006 (197) E.L.T. 18 = (2006) 4 S.C.C. 278 which arose out of the FERA violation, the Supreme Court spelt out the parameters in entertaining a writ petition against initiation of adjudication proceedings. Para 25 of the said decision may be usefully extracted below :- "25. The prayer for the issue of a writ of prohibition restraining the authorities under the Act from proceeding with the adjudication and the prosecution is essentially b....