TaxTMI 
TaxTMI 
2026 (8) TMI 801
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....The firm had generated unaccounted income by way of melting loss, suppression of sales, cancellation of membership in Easy Gold Purchase (EGP) Scheme. During the process of search, Income Tax Department recovered the documents showing transfer of a sum of Rs. 305,84,12,240/- from India to Dubai through hawala channel during the financial years 2012-13 to 2017-18. The money so transferred to Dubai was credited in the accounts of M/s Joy Alukkas Jewellery LLC, Dubai with Mashreq Bank and Standard Chartered Bank. 3. In the light of the information and documentary evidence received from the Income Tax Department, Enforcement Directorate, Kochi Zone had taken up the investigation to examine contravention of the provisions of the Act of 1999. In the investigation, it was found that on the directions of Shri Alukkas Verghese Joy, the employees of M/s Joy Alukkas India Ltd. had transferred Rs. 305,84,12,240/- to Dubai through hawala operators during the period given above. It was found to be in contravention of Section 4 of the Act of 1999 in view of the cross-border transfer of money at the instance of Shri Alukkas Verghese Joy. The year wise break up of transfer of money was discovere....
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....said to be going beyond the jurisdiction. The Competent Authority did not find a case to allege contravention of Section 4 of the Act of 1999 so as to invoke Section 37A(1) of the Act of 1999. It accordingly refused to confirm the order of seizure of the properties to the tune of Rs. 305,84,12,240/-. 10. The learned counsel for the appellant further submitted that in the midst of the proceedings, even Settlement Commissioner under the Income Tax Act, 1861 has also passed an order and is binding on these proceedings as per Section 245 of the Income Tax Act, 1861. The order of the Settlement Commissioner was not available during the pendency of the proceedings before the Competent Authority. It was received during the pendency of the appeal and accordingly it has been relied. 11. Both the parties raised detailed arguments to support their case. It would be unnecessary to refer their rival submissions separately, rather it would be referred and dealt with simultaneously to avoid bulkiness of the order and for the sake of brevity. Finding of the Tribunal 12. I have considered the rival submissions and perused the record carefully. 13. It is a case where Income Tax Depart....
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....was handled by Gold Division Manager Shri Anup Thomas who used to co-ordinate with Shri P.D. Jose. Once the ornaments are received in India, a confirmation of it would be sent by him initially and thereafter by Shri Joseph Francis @Jackichan. The payment for it would be made following the methodology stated by him, as above. These activities were undertaken by him, as directed by the Chairman Shri Alukkas Varghese Joy. Copy of internal mail attached to the statement indicates transfer of Rs. 10.62 Crores from India to Dubai via unauthorized channel. The tally data recovered from M/s Joy Alukkas India (P) Ltd. contains items like "Dubai payment" and "Dubai receipt". 16. In the statement of Shri Alukkas Varghese Joy dated 27.08.2018 before Assistant Director, he admitted that "Dubai receipts" were cash sale proceeds of unaccounted bullion and gold Jewellery. The term "Dubai payment" is for cash purchase of unaccounted bullion and gold Jewellery. As per the tally data, "Dubai receipt" is of Rs. 59,96,03,292/- and "Dubai payment" is of Rs. 305,84,12,240/-. These "Dubai payments" and receipts appeared to be hawala transactions, which Shri C.P. Suresh Babu has alluded in his statement....
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.... Joy Alukkas India Pvt. Ltd. It was also revealed with the list of the intermediaries and their mobile numbers to whom the cash was physically handed over by employees of M/s. Joy Alukkas India Pvt. Ltd. 20. The statement of Shri P.D. Jose, Executive Director of the company was recorded on 11.03.2019 which revealed the names of Shri P.D. Davis and Shri P.D. Francis working for M/s Joy Alukkas India Pvt. Ltd. and accordingly statements of Shri P.D. Davis and Shri P.D. Francis were also recorded. 21. Shri Joseph Francis in his statement dated 18.02.2020 stated that he used to hand over the money to Mr. Iqbal and others on the directions of Shri Anil C. Raphael and others. He had admitted exchange of cash amount to hawala operators. It was on emails sent by Shri C.P. Suresh Babu. Shri Joseph Francis admitted about his role to inform the name of the hawala operator along with his mobile number and token number for identification purpose to Shri P.D. Davis. On his instructions, Shri P.D. Davis used to collect the cash from the Loveshore Arcade Office which is the workshop of M/s Joy Alukkas India Pvt. Ltd. The cash used to be delivered by Shri P.D. Davis after identifying the hawa....
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....und that the contravention of Section 4 of the Act of 1999 has been alleged mainly based on tally software data. The Competent Authority ignored the e-mails extracted by the appellant to demonstrate a case of hawala transaction. Those e-mails were exchanged by M/s Joy Alukkas India Pvt. Ltd. Tally software data were sufficient to make out a case for contravention of Section 4 of the Act of 1999 but was not accepted by the Competent Authority below on the ground that e-mails were merely illustrative of the scheme and modus operandi involved in the transactions between M/s Joy Alukkas India Pvt. Ltd. and M/s M/s Joy Alukkas Jewellery LLC, Dubai without any quantification of the actual fund transmissions. The authority below ignored not only the documents to show the actual amount transmitted and even revealed from the two bank accounts at Dubai with Mashreq Bank and Standard Chartered Bank. 26. The Competent Authority even recorded the opinion that the evidence collected by the appellant would broadly indicate that the authorized officer has subscribed that the figures under the head "Dubai Payments" were month-wise funds used for the purchase of unaccounted gold jewellery of Sing....
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....atement before the Deputy Director (DGIT) had revealed that Shri P.D. Jose who was the Director of M/s. Joy Alukkas India (P) Ltd. or his assistant Shri Joseph Francis @ Jackichan from India while sending cash either used to call him or send message through WhatsApp conveying him a token which was nothing but a number of a rupee note and that token along with cash would be delivered by some persons at their shops mostly in Dubai. The money on being delivered to him by staff was deposited in bank accounts held in the name of Joy Alukkas Jewellery LLC with Mashreq Bank / Standard Chartered Bank. In addition, gold ornaments were also sent through carriers from UAE to India (Mostly to Mumbai), which was handled by Shri Anup Thomas, Manger, Gold Division in co-ordination with Shri P.D. Jose and payments was done from above cash. He undertook these activities on the directions of the chairman Shri Joy Varghese Alukkas and copy of internal mail attached to the statement indicated transfer of Rs. 10.62 Crores from India to Dubai through unauthorized channel. (ii) Indistinctly, Shri C.P.Suresh Babu, Accounts Manager (Overseas Operations), JAJLLC, Dubai in his statements deposed und....
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....and Joy Alukkas Jewellery LLC, Dubai were related jewellery from Mumbai based agents. Moreover, he deviously conceded that the referred to cash payments against the unaccounted purchase of Singapore/ Dubai design gold tally data were the figures of fund used for the purchase of unaccounted gold from Dubai. (iii) Shri Alukkas Varghese Joy in his statement dated 25.07.2018 before Assistant Director (DGIT) averred that Dubai receipts were cash sale proceeds of unaccounted bullion and gold Jewellery and Dubai payment were cash purchase of unaccounted bullion and gold Jewellery. As per the tally data, Dubai receipt was Rs. 59,96,03,292/- and Dubai payment was Rs. 305,84,12,240/- and these appeared to be hawala transactions. However, Shri Joy Varghese Alukkas in his statements deposed under Section 37 of FEMA conflictingly asserted that they have made payments in cash to unauthorized persons like Mr. Iqbal and these payments were towards purchase of gold jewellery of Singapore design (called Dubai jewellery) from places like Mumbai and Chennai, which were brought to India by unidentified persons and made available for sale in Mumbai and other places without invoice for purchase ....
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....ri P.D. Davis, he was not aware of the content of the mail and in his opinion 'Dubai Payment' means payment made in lieu of purchase of unaccounted gold. (vii) Shri Pravin Davis, Manager Finance of JAIPL, in his statement dated 18.03.2019 recorded under Section 37 of FEMA feebly averred that to his knowledge Dubai payment were made for purchase of gold ornaments and Joy Alukkas India (P) Ltd had export transaction with M/s Joy Alukkas LLC. Dubai during the period of 2012-13 to 2017- 18 approximately to the extent of Rs. 50 to 100 crores per year. Though he acknowledged the referred mail with contents about deal date, exchange rate, deal rate, amount, token No, the name of a person called Babu, 10 Rs note with number, he simply alluded that the mail communication seemed to talk about cash paid, gold recovery account and 50 box. (viii) Shri Anil Raphael, Sr. Accountant, in JAIPL, in his statements deposed under Section 37 of FEMA disclosed that he was exchanging mails with Shri C.P. Suresh Babu on the instructions of Shri P.D. Jose who was then General Manager of M/s. Joy Alukkas India (P) Ltd and the same were regarding payment details to the person who rec....
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....his statements recorded under the Section 37 of FEMA admitted to have handed over cash on the instructions of Shri Joseph Francis to Iqbal, whose details including his name, phone number were given by Shri Anil C. Raphael or Shri Joseph Francis, besides being conveyed the amount of cash to be delivered to Iqbal. Though he called Mr. Iqbal and delivered cash he did not remember the exact amount but it might approximate to Rs. 25 Crores. Shri Vinu Joseph accountant in manufacturing section accompanied him while delivering cash to Mr. Iqbal and Shri Anil C. Raphael and Shri Joseph Francis delivered him the cash at Staff Quarters in Thrissur, but he was not aware of the purpose of delivering cash to Mr. Iqbal. The content of the referred email was the details about cash paid to Dubai and gold received from Dubai in 2010. (xii) Shri Anup Thomas, Purchase incharge of JAJLLC, Dubai in his statement recorded under Section 37 of FEMA superficially admitted that Shri Suresh Babu, was the accounts manager of M/s Joy Alukkas Jewellery LLC, Dubai but his interaction with him was limited to payment to the suppliers against import and approving purchase order. However, he did not disclos....
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....,350/- FY 2015-16 Rs. 12,30,15,100/- FY 2016-17 Rs. 73,60,51,805/- FY 2017-18 Rs. 73,80,03,235/- Total Rs. 305,84,12,240/-" The Competent Authority ignored the material referred to above while drawing conclusions. It twisted the facts otherwise the e-mails, apart from tally data and the statements coupled with the amount available in the bank accounts of M/s Joy Alukkas Jewellery LLC at Dubai were sufficient to show a case to invoke Section 37A(1) of the Act of 1999 and, in fact, the Competent Authority was required to see only a prima facie case because final adjudication is made after causing a notice for adjudication which was separately caused and is pending. The way the Competent Authority conducted itself speaks volumes and, therefore, is facing suspension at present though in reference to other case. 28. In ignorance of the statements of facts referred by the Competent Authority in Para 25 of the order quoted above, it recorded the finding that none of the statements touches transmission of Rs. 305,84,12,240/- from India to Dubai through unauthorized channel. It ignored the statements of the witnesses apart from the material recovere....
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....al ground was raised about the distinct entity i.e. one to be an individual and other to be an entity established as per the Regulation of United Arab Emirates under Federal Law No.8 of 1984. It was held that the entity had separate legal personality independent of the partners in the company and there is no provision under the Act of 1999 imposing reverse evidentiary burden of proof on the accused person. The interference in the order was made drawing distinction between the majority shareholders of the company and the entity in ignorance of the provisions of the Act of 1999, rather the finding was driven in reference to separate statute having no bearing on the Act of 1999. 32. A perverse finding has been recorded on proof for transmission of funds from Shri Alukkas Verghese Joy to M/s Joy Alukkas Jewellery LLC, Dubai. It is despite of tally data, availability of emails and even corroborating evidence for transferring the money and ultimately found available in the bank accounts of M/s Joy Alukkas Jewellery LLC, Dubai. 33. The Competent Authority even ignored that Shri Alukkas Verghese Joy was the License Member as per the Federal Law of United Arab Emirates for Limited Lia....
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.... foreign exchange/foreign security at Rs. 305,84,12,240/- suspected to have been held by M/s Joy Alukkas Jewellery LLC, Dubai but according to him, the assets of the respondent Shri Alukkas Verghese Joy could not have been seized for the equivalent value situated in India. The interpretation and the finding are erroneous on the face of it and shows the way the order has been passed by the Competent Authority. It is by giving erroneous interpretation to Section 37A(1) of the Act of 1999. It allows seizure of the property of equivalent value available in India. The finding has been recorded in ignorance of the fact that primary allegation was against the respondent for contravention of Section 4 of the Act of 1999 when he is alleged to have transferred Rs. 305,84,12,240/- by way of hawala transaction and the amount aforesaid was found available with the entity to whom it was transferred and, therefore, the property of equivalent value in India was seized. The interpretation given in Para 30.3 is manifestly erroneous and for the purpose aforesaid, the Competent Authority has referred to the judgment of the Apex Court in the case of Central Bank of India Vs. Ravindra and Ors. (Special ....
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....in contravention of Section 4 of the Act of 1999. It was not necessary that it should be the money involved in hawala transaction but the property of equivalent value till the matter is adjudicated by the Competent Authority. Thus, in Para 30.5, erroneous interpretation of law and the facts has been given to keep the limited liability of the LLC. 39. The reference of Federal Law No.8 of 1984 has been given in ignorance of the fact that it cannot override the provisions of the Act of 1999 and otherwise seizure of the property is of the individual respondent and not of M/s Joy Alukkas Jewellery LLC, Dubai. The reference of M/s Joy Alukkas Jewellery LLC, Dubai has been given as a proof of contravention of Section 4 of the Act of 1999. It was in fact a corroborative evidence but the Competent Authority ignored by separating the status for the individual and M/s Joy Alukkas Jewellery LLC, Dubai which was nothing but to promote the contravention of the Act of 1999 and allow to develop a devise where an individual involved in hawala transaction can send the funds to an entity outside the country and in that case even if the material is recovered, action cannot be taken against such a t....