TaxTMI 
TaxTMI 
2024 (9) TMI 559
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....h. Pradip Burman S/o Late Sh. R.C. Burman, alleging that he had kept black money in foreign bank, i.e., HSBC Zurich, Switzerland. Acting on the same, the Directorate of Enforcement, Delhi Zonal Office, filed an application before Hon'ble Addl. Chief Metropolitan Magistrate (Spl. Acts), Tis Hazari Courts, Delhi who, vide his order dated 11.09.2015 directed that a copy of prosecution complaint No. 70/4/2014, be given to the Directorate of Enforcement. After obtaining documents from the court, investigation was taken up by the Directorate of Enforcement. 3. Investigation carried out in this regard by the Directorate, revealed that the Sh. Pradip Burman had acquired USD 32,12,000/- outside India and had kept the said amount with Hong Kong and Shanghai Banking Corporation (HSBC), Zurich and had not repatriated the said amount to India till date. Inquiries were made with Sh. Pradip Burman by issuing summons for his appearance before the Dy. Director, Directorate of Enforcement. Sh. Pradip Burman, in his statement dated 13.07.2017 stated, inter-alia, that he was resident of Dubai from the period 1999 to Sep. 2001 and, thereafter, he has been permanent resident in India; that he had....
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....on of provisions of the FEMA, 1999; (ii) That though, Sh. Pradip Burman stated that this account stands closed, but no evidence was submitted by him during the investigation under the FEMA disclosing the destination of this USD 32,12,000/-; (iii) That the Sh. Pradip Burman was evasive about the repatriation of the said foreign exchange to his account maintained in India; (iv) That though the Sh. Pradip Burman claimed that he earned this amount by advising certain foreign companies in the capacity of investment advisor during the period 1999-2001, but he could not furnish evidence indicating that the entire amount of USD 32,12,000 was earned during this period. 5. The Directorate was of the view that the appellant, Sh. Pradip Burman acquired and deposited foreign exchange to the tune of USD 32,12,000/- with HSBC Bank, Zurich Switzerland and did not get that amount repatriated to India in contravention of provisions of Section 4 of the FEMA, 1999 and that a total amount of USD 32,12,000/- was still held outside India in contravention of Section 4 of the FEMA, 1999 and, therefore, the equivalent value of the property, i.e., USD 32,12,000/-with HSBC Bank, ....
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....ared information received under the India-France Double Taxation Avoidance Agreement with any other authority or court, except for authorities dealing with income tax proceedings. Our attention in this regard is drawn to Article 28 of the India-France Double Taxation Avoidance Agreement, a copy of which has been filed by the appellant. 11. A copy of the discharge order in Prosecution Complaint No. 70/4/2014 has also been filed during the course of the proceedings before this Appellate Tribunal. The appellant submits as follows: ■ The very existence of the alleged foreign bank account, at specific branch with specific account number is not established (paras 25, 32, 33, 34, 49, 53, and 59 of the Order of the Ld. ACMM are referred to) ■ No occasion ever arose to conduct investigation and file the prosecution complaint (para 33) ■ The Appellant's offer to pay tax to buy peace cannot be construed as an admission of existence of a bank account/bank branch, and in any event, these stood retracted (paras 41-45) ■ The Prosecution has failed to establish even a prima facie case (para 53) `....
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....djudication that the Appellant continues to hold any foreign exchange/bank accounts outside India after the introduction of Section 37A FEMA. In the absence of such evidence, there is no basis to claim that there is a continuing FEMA contravention and, consequently, no occasion for a seizure under Section 37A of FEMA. 15. The decision of the Hon'ble Supreme Court of India in Union of India v. Ganapati Dealcom 2022 SCC OnLine SC 1064 para 127 is relied upon for the proposition that in rem civil procedure for confiscation of property cannot be applied retroactively, and would be characterized as penal. It is contended that similarly, the provision of S. 37A of FEMA, 1999, which authorizes seizure of property which is penal in nature by way of amendment effective on 09.09.2015, cannot be applied retroactively to transactions between 29.12.1999 and 08.09.2015, including the transactions relating to AY 2006-2007 and AY 2007-2008. 16. Thus, according to the appellant, the purported seizure and actions taken pursuant thereto by retroactive application of S. 37A FEMA are illegal, arbitrary, and must be quashed. 17. Thirdly, without prejudice to the main argument that S. 37A of....
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.... proceedings, including the attachment/confiscation under challenge, (iii) inapplicability of S. 37A FEMA, which was introduced in the statute book with effect from 09.09.2015 to transactions alleged to have taken place in AY 2006-2007 and AY 2007 2008, (iv) gross abuse of power and illegal action of the Respondent in confiscating the Government Bonds in the name of the Appellant, without any authority of law and beyond the order of the Ld. Competent Authority. 21. The appellant is also aggrieved that the present appeal was filed on 28.12.2018, the appellant was discharged in the underlying Income Tax Prosecution Complaint on 18.11.2020, a certified copy of the discharge order has been placed on record on 17.12.2020. Even so, the matter has not moved forward due to the failure of the respondent Directorate to file any reply despite multiple requests sought and opportunities granted to do so, over a period of 28 months at the time of filing the present submissions. It is contended that the respondents have sought over 20 adjournments in the present matter, and grave prejudice is being caused to the appellant, who is a very senior citizen over 80 years of age and suffering from va....
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....e could not declare his foreign income to the tune of USD 32,12,000/- . Then the appellant changed his statement and declared this amount as his foreign earnings and offered to pay applicable Income Tax on the amount. Then before the respondent Department, the appellant again changed his statement and said that the account was closed long ago, and he cannot produce statement of the said accounts. Further, the appellant also admitted that he did not repatriate this amount to India. Now, the appellant has contended that the alleged bank account is not his individual bank account or from his individual funds. 28. Thirdly, it is contended that the respondent has successfully discharged its burden to prove that the amount was lying outside India in the account of the appellant and has not been repatriated back to India. Thereafter, the onus was upon the appellant to prove that it had in fact been repatriated by him but the appellant made no such averment which further proves his liability under Section 4 of FEMA, 1999. 29. Fourthly, with regard to the argument that Section 37A was enacted only on 09.09. 2015 and impugned foreign exchange has been held prior to 09.09.2015 therefore....
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.... has been initiated and pursuant to the impugned order, the amount has been seized by the respondent herein as per the provisions of FEMA, 1999. Hence the averments made by the appellant herein are wrong. 33. In light of the above facts and circumstances, it is prayed by the Respondent department that the appeal filed by the Appellant against confirmation order dated 05.11.2018 be dismissed in limine. 34. During oral argument of the case on 07.05.2024, the learned counsel for the respondent raised a fundamental legal issue which goes to the root of the matter. He drew our attention to the language of Section 37A which reads as below: "37A. Special provisions relating to assets held outside India in contravention of section 4.-(1) Upon receipt of any information or otherwise, if the Authorised Officer prescribed by the Central Government has reason to believe that any foreign exchange, foreign security, or any immovable property, situated outside India, is suspected to have been held in contravention of section 4, he may after recording the reasons in writing, by an order, seize value equivalent, situated within India, of such foreign exchange, foreign security or imm....
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....3), shall continue till the disposal of adjudication proceedings. He pointed out that in the instant case, the Adjudicating Authority is yet to pass its order in adjudication proceedings, and therefore, the order of the Competent Authority cannot be interfered with at this stage of the proceedings by this Appellate Tribunal taking into account the developments subsequent to the passing of the impugned order, including the order of the Ld. ACMM in the prosecution case filed by the Income Tax Department, and the decision of Hon'ble ITAT. The order appealed against is an order passed under section 37A(3). When the said the order was passed by the Ld. Competent Authority, the aforementioned developments had not taken place. Section 37A, is a selfcontained provision. From the heading of the section, it is also evident that it is a "special provision" which must be given full effect. Under the said provision, the next step is adjudication by the Adjudicating Authority under Section 37A(4). It is submitted before us that adjudication proceedings under Section 16 are still pending in this case. During the adjudication proceedings, the appellant will have an opportunity to bring on reco....
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.... Directorate refers to the adjudication proceedings, there is no sign of such 'imaginary' adjudication proceedings. No such proceedings have even commenced though six long years are already over. He further emphasized that in the instant case, the bonds were offered by the appellant as security, but Department has transferred the bonds to a demat account in its own name and has thus confiscated the same. Disputing the respondent's submission that this Appellate Tribunal cannot take into account subsequent developments, he contended that the Appellate Tribunal alone has the jurisdiction to do so as the order of the lower authority is to be tested before the Appellate Tribunal to see whether or not the same in accordance with the law. He further submitted that the essence of section 37A is that till the time the person concerned repatriates the amount held abroad, he is offering an alternate security to the Directorate. He also contended that the orders of the Appellate Tribunal have no application to the present case. There is a categorical judicial order passed by the Ld. ACMM recording a finding that there is not even enough material to proceed with the framing of char....
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....ion 37A(5), an appeal lies to the Appellate Tribunal against the order of the Competent Authority. 41. From the above, it can be seen that after the disposal by the Competent Authority of the petition filed before it, the Act contemplates, firstly, adjudication by the Adjudicating Authority under Section 37A(4) and, secondly, an appeal to this Appellate Tribunal from the said order of the Competent Authority under Section 37A(5) in case any person is aggrieved by the order of the Competent Authority. It is notable that once the Adjudicating Authority passes its order in the matter, the same would also be appealable to this Appellate Tribunal under Section 19(1) as the same would constitute "an order made by an Adjudicating Authority" within the meaning of the said Section 19(1). A question, therefore, arises what is the scope of the appeal to the Appellate Tribunal under Section 37A(5) when adjudication by the Adjudicating Authority is yet to take place. A single-member bench of this Appellate Tribunal, in its judgement in the case of Nirayu Private Ltd. FPA-FE-44/MUM/2018 (order dated 11.09.2018) has held as below: "3. In response, the learned counsel for the respon....
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....an appropriate order as it deems fit including setting aside of the seizure made under Sub-Section 1 of Section 37(A). The subSection 1 authorizes the authorized officer to seize value equivalent situated within India. In the present case, the provisions of subSection 1 of Section 37(A) has led to the issue of seizure order 01/2017 dated 08.12.2017, which was confirmed by the impugned order dated 18.05.2018. A reading of the proviso would therefore make it clear that the CA or Adjudicating Authority has the power to deal with this seizure order only, and not review its own order once passed under Section 37(A)(3). Hence, the contention of the appellant that it has the powers to review, is not borne out by this legal provision. Coming to the Appellate Tribunal's power, Section 37(A)(5) clearly mentions that any person aggrieved by any order passed by the Competent Authority under Section 37(A)(3) may prefer an appeal to the Appellate Tribunal. Hence, the Appellate Tribunal jurisdiction is limited only to the orders passed by the Competent Authority under Section 37(A)(3). He does not have any original jurisdiction to get into any issues which have not been dealt by the ....
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....tion 37-A (4) will become redundant. The Supreme Court in the case of Union of India & Ors. v. Filip Tiago De Gama of Vedem, Vasco De Gama (AIR 1990 SC 981) has laid down the principle that the court cannot read anything into the statutory provision which is plain and unambiguous. The court has to find out legislative intent only from the language employed in the statutes. Surmises and conjectures cannot be for interpretation of the statutes. There is a provision in Section 37-A (5) which states "any person aggrieved by any order passed by the Competent Authority may prefer an appeal to the Appellate Tribunal." The powers of the Appellate Tribunal are stipulated in Section 19(3) of FEMA, 1999 which states "..............the Appellate Tribunal may after giving the parties to the appeal an opportunity of being heard pass such orders thereon as it thinks fit, confirming, modifying or setting aside the order appealed against." 7. The powers of the Appellate Tribunal are general in nature and does not have any specific powers. Whereas Section 37-A(4) is a specific provision. In a clash between a general provision and a specific provision, the specific provision would prevail. T....
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....ppropriate orders; and also, that so-called adjudication proceedings in the matter are merely 'imaginary' at this stage as there is no sign of them even after six years. The same have not even been initiated. 46. We have given careful consideration to the submissions made before us from either side. We note that the most fundamental rule of interpretation of a statute is that where the language of the statute is clear and unambiguous, full effect must be given to it. There cannot be any room for doubt that Section 37A(5) provides for an appeal to this Appellate Tribunal from the order of the Competent Authority. An appeal having been filed before us under the aforesaid Section 37A(5), we propose to dispose of the same on the basis of the material before us. Furthermore, we do not find anything in the language of the statute which states categorically that the Appellate Tribunal must necessarily pass its order on the basis of outdated facts, which would remain frozen in time as they were at the time when the Ld. Competent Authority passed its order. Being the order of a judicial authority, in the appellant's own case, and underlying facts in that case being substantia....
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....grave suspicion, could not lead to framing of charges in the case before him and the evidence must be such that at least without considering the evidence/defence of the accused, it establishes the guilt of the accused "just below reasonable doubt". He found that sufficient evidence of requisite standard did not exist. As against this, we note that the language of 37A only requires the Authority acting under sub-section (1) of the said provision to have "reason to believe that any foreign exchange, foreign security, or any immovable property, situated outside India, is suspected to have been held in contravention of section 4" (emphasis added). To invoke the provisions of Section 37A, therefore, there is no requirement of proof "just below reasonable doubt". In fact, there is no requirement even to have the reason to believe that any foreign exchange, foreign security, or any immovable property, situated outside India, is held in contravention of section 4 but merely the reason to believe that it is suspected to have been so held. From the above, it is evident that a very low threshold has been set by the legislature under Section 37A. It appears that the threshold for initiating ac....
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....ody of the respondents and there was no change in circumstances warranting any further action, the Respondent Directorate, on 21.01.2019, being fully aware of the present Appellate proceedings, directed IL&FS Securities Ltd. (the issuer of the tax-free government bonds), to transfer the bonds to the Respondent Directorate. It is contended that the said action was not authorised by the Ld. Competent Authority. An application (numbered as MP-FE-415/DLI/2019) was also filed on behalf of the appellants on 27.02.2019 for restoration of the govt. tax free bond which also remains pending. We have considered this submission. We find that under section 37A the Authorized Officer has been empowered to 'seize' value equivalent in India to the foreign exchange/foreign security/immovable property outside India. The word "seize" is not defined under the Act, being a commonly used of word of general parlance. However, the common meaning of the word is to take possession of something, especially property. Needless to say, possession of financial instruments which are held in a dematerialized form can only be taken by transfer of the same to the demat account of the Respondent Directorate. ....
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....considered the arguments from both sides. On the issue of 'continuing offence', the contention of the appellant essentially is that in the first instance there is no offence/contravention whatsoever in this case. At no stage of the proceedings did the appellant make any admission of continuing to hold any account abroad and the Directorate also does not have any evidence to support that conclusion. The Directorate had relied solely on the Income Tax prosecution case in which the appellant now stands discharged based on the categorical finding that there was no evidence even to charge him. In support of his contention, the learned counsel for the appellant relied heavily upon the language of the letter dated 30.08.2011 addressed to the Director General of Investigation of the Income Tax Department written on behalf of the appellant and the other members of his family by their Authorised Representative, Shri Abhay K. Aggarwal. The relevant part of the said letter reads as below: "Dear Sir, We have been informed by Dr. Anand Burman r/o 2 Rajesh Pilot Marg, New Delhi, Chairman of Dabur India Limited, New Delhi that certain stolen data relating to his account a....
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....nt of balances of various investments lying in these accounts on a particular date in a particular month and a year" and that from the figures, it was not clear when and in what year the amount alleged was deposited. 57. We have considered carefully the above contentions of the appellant. We note, firstly, that the letter written by the Authorised Representative of the appellant to the DG of Investigations, Income Tax Department on 30.08.2011 was in no way voluntary. It was prompted by the clear knowledge that data relating to the account in HSBC, Zurich will be shared with the Indian authorities by the French Government. The said letter was preceded by a letter from Mr. Subir Mitra and Mr. Adolf Meier, Directors of HSBC Private Bank, Zurich, dated 25.08.2011. The contents of the said letter are as follows : "HSBC Private Bank Anand Burman 11 Gloucester Gate Regents Park London NW1 4HG 25 August 2011 Theft of Client Data Dear Anand We refer to the Bank's letter which was sent on the 11th March 2010. At the end of June 2011 we were informed by the Swiss authorities that France will share the stol....
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....l against the penalty. However, perusal of the order reveals that the Hon'ble ITAT relied entirely on the order of the Ld. ACMM discharging the appellant. We have already held that the said order of the Ld. ACMM does not take away the basis of initiation of action under Section 37A of FEMA, 1999. 61. In the absence of any evidence having been adduced by the appellant, or even a definite date when the account was closed, in view of the fact that the appellant himself offered income for taxation when confronted with information relating to the said account as late as in Assessment Years 2006-07 and 2007-08 (financial years 2005-06 and 2006-07) although admittedly he was an NRI only upto 2001; as the correct and full facts with regard to the account are within the specific knowledge of the appellants and the persons looking after his financial affairs which they have not divulged till now, keeping in view the scope and ambit of Section 37 A which we have already discussed at length in para 39 above; and also considering the interim nature of the proceedings under Section 37A at this stage wherein adjudication is yet to take place, we are of the view that action under Section 37....