TaxTMI 
TaxTMI 
2025 (12) TMI 883
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....nate to make it proportionate to the amount involved in the alleged contravention. 3. Since both these appeals are arising out of the same order and involve common question of law and fact, therefore these appeals are heard and decided by this common order. 4. The brief fact of the case is that a Show Cause Notice (SCN) F. No. TI4/3-D/2018 dated 20.04.2018 was issued to the appellant/ noticee Mr. Sanjiv Lamba on the basis of the complaint filed under Section 16(3) of the FEMA, 1999 in respect of following contraventions: Contravention-I: By incorporating Kalobri Investment Ltd. British Virgin Islands on 20.04.2010 and by making investment in this company, without prior approval of Reserve Bank of India, Sh. Sanjiv Lamba, then person resident in India appears to have contravened the provisions of Regulation 5(1) of the Foreign Exchange Management (Transfer of issue of any Foreign Security) Regulations, 2004 r/w AP (DIR Series) Circular No. 24 (RBI/2013-14/181) dated 14.06.2013 r/w Sections 6(3) (a) and 47(3) of the Foreign Exchange Management Act, 1999 to the total extent of USD 50000 (total amount equivalent to INR 23.39.000 as detailed in Tables No. 5 & 6 of complai....
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.... c) with respect of contravention no. III- "it comes out that the Noticee has sent the funds abroad for investment through LRS and subsequently lent the same to M/s. Kalobri Investments Ltd, BVI. The funds remitted outside India through LRS were permitted by RBI as per the LRS scheme. He had lent the funds to the said overseas company to the tune of USD 1,00,000 from the account held by the Noticee in accordance with LRS. The Noticee made declaration under LRS for the purpose, "Capital Investment". However, the Noticee did not follow the specific provisions of Regulation 3 of the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations, 2000 r/w Sections 6(3)(d) and 47(3) of the Foreign Exchange Management Act, 1999 wherein RBI approval was required as discussed above. Thus Contravention-III is sustained. Considering the facts and circumstances of the case, a penalty of Rs. 4,50,000 u/s 13(1) of FEMA, is hereby imposed." Submissions of the appellant 6. The appellant Mr. Sanjiv Lamba has challenged the imposition of penalty of Rs. 88,00,000/- and Rs. 4,50,000/- with respect to contravention number II and III respectively inter alia on the gro....
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....ction Regulation r/w RBI Master Circular are saved and they will have primacy/precedence over provision/prohibition under Regulation 3 of FEM Lending Regulation. Since transaction of loan is within four corners of law, there was no contravention. Submissions of the respondents: 11. The Ld. Counsel for the respondent submitted that with regard to contravention II, the noticee maintained a foreign bank account No. 11071449 with HSBC, Geneva, between the years 2000-2012, in which he deposited USD 18,57,878.72 and transferred USD 9,45,687.46. The said account was opened and operated without any approval from the Reserve Bank of India, thereby violating Section 4 of FEMA, which prohibits a person resident in India from holding foreign exchange or foreign assets outside India except as permitted. The noticee has admitted opening of the foreign account, citing ignorance of law and claiming subsequent closure of the account and repatriation of balances on 10.12.2012 and 13.06.2013, amounting to USD 18,12,641. 12. The Ld. Counsel for the Respondent also submitted that it is not a case where the appellant himself attained the knowledge that he had violated the provisions of the Sect....
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....as capital account transactions. The appellant herein invested equivalent amount of USD 52,341 which is under the prescribed limit of USD 200,000 and the investment was made for the purpose of "capital investment". Hence, we do not find contravention of any of the provision by the Appellant as alleged by the Enforcement Directorate. 15. With respect to contravention-II, the counsel for the Appellant limited his argument by submitting that the penalty of Rs. 88,00,000/- is disproportionate. The appellant sought reduction on the ground that he made full and true disclosure of foreign income and receipts such as fiduciary deposit, investment, interest/dividend income on investment/fiduciary deposit outside India through HSBC Bank before ITSC in his application dated 16.12.2012 and had paid income tax and interest of Rs. 4,24,37,458/-. He further stated that ITSC through its order dated 06.02.2014 had accepted that he fully disclosed his income and cooperated throughout. It was also submitted that he wasn't aware of the legal requirements at the time, however, once he became aware, he immediately brought the foreign money back to India. 16. We are of the view that the penalty....