2023 (9) TMI 1561 - AT - FEMA

Receiving payment on behalf of a person resident outside India - information gathered from the sheets of paper and from the further explanation the directorate located 14 of the recipients and recorded their statements - effect of retracted statement - Appellant for having received payment under instructions of one Mr. Imtiyaz Ahmed of Dubai, resident outside India without any general or special permission of the Reserve Bank of India (RBI) in contravention of section 3(c) of FEMA, 1999 - Validity of search and seizure operation conducted under section 37(3) of FEMA, 1999 ead with section 132 of the Income-tax Act, 1961 at the residence of the appellant wherein certain documents were seized - appellant seeks to refute the contents of the two statements made by him under oath through a simple letter. HELD THAT - By virtue of section 37(3) of FEMA, 1999, in the matter of search and seizure, issue of summonses and recording or statements etc., the officers of the Directorate of Enforcement exercise the same powers which are conferred on Income-tax authorities under the Income-tax Act, 1961. The above legal position, in our view, creates a strong presumption in favour of the respondent Directorate's case which is built on the foundation of documents seized during search and seizure operation. The appellant on the other hand, has not placed any material before us to rebut the documentary evidence gathered during the search operation. It is also extremely significant to note in the instant case that in his subsequent statement recorded 11 days after the original statement, he not only confirmed as true the contents of his earlier statement dated 10/01/2003, but also explained certain other seized documents and explained the modus operandi adopted for receipt of money from abroad and its distribution to the ultimate beneficiaries in India. In his statement the appellant admitted that he had noted down the details of the beneficiaries on pieces of paper which he had later destroyed. However, some sheets of paper were retained which contained details of amounts, dates, names etc.. The names and telephone numbers of the recipients were noted too. He also provided the names and contact numbers of some of the beneficiaries, including one Mrs. Rukiya Biwi of Udupi to whom an amount of Rs. 2.60 lakh had been paid recently and whose telephone number was 530556, and another Mr. Lobo to whom payment of Rs. 4.5 lakh had been made and whose telephone number was 212318. Based on the information gathered from the sheets of paper and from the further explanation the directorate located 14 of the recipients and recorded their statements. They too confirmed receipt of amounts on instructions from abroad. It is also very significant to note that the appellant admitted that entries in the sheets of paper were in the handwriting of his wife, a fact which has not been denied by either the appellant or his wife. The so-called retraction, if at all it can be seen as one, was clearly an afterthought and of little evidentiary value. As regards the respondent directorate's failure to independently verify the identity and whereabouts of Imtiyaz, it is noteworthy that though the appellant has questioned the respondent directorate's failure to do so neither in the pleadings, nor during verbal arguments has the appellant or his learned counsel categorically denied that he had a brother-in-law by the name Imtiyaz or even that the said Imtiyaz lived in Dubai at the relevant time. Thus, no reason to interfere with the impugned order of the Ld. Special Director. Accordingly, the appeal is dismissed being devoid of any merit. All pending miscellaneous applications are also hereby disposed of.

Issues Involved:

1. Legality of the search and seizure operation conducted under section 37(3) of FEMA, 1999.
2. Validity of the statements made by the appellant and their evidentiary value.
3. Contravention of section 3(c) of FEMA, 1999 by the appellant.
4. Adequacy of evidence to establish the appellant's guilt.
5. Procedural aspects related to the adjudication and appeal process.

Detailed Analysis:

1. Legality of the Search and Seizure Operation:

The search and seizure operation at the appellant's residence was conducted under section 37(3) of FEMA, 1999, in conjunction with section 132 of the Income-tax Act, 1961. The Tribunal noted that section 132(4A) of the Income-tax Act creates a presumption that documents found during a search belong to the person in possession. This legal presumption was applied to the appellant's case, strengthening the Directorate's position. The appellant did not provide any material to rebut this presumption, thereby affirming the legality of the search and seizure operation.

2. Validity of the Statements Made by the Appellant:

The appellant's statements recorded on 10/01/2003 and 21/01/2003 were crucial to the Directorate's case. The Tribunal emphasized that these statements were made under oath and provided detailed information about the transactions, including the modus operandi, amounts involved, and identities of beneficiaries. The appellant's subsequent attempt to retract these statements was deemed an afterthought and lacked evidentiary value. The Tribunal found no independent retraction and noted that the appellant's retraction was merely a response filed much later, which did not undermine the credibility of the initial statements.

3. Contravention of Section 3(c) of FEMA, 1999:

The appellant was accused of receiving payments totaling Rs. 2,69,82,000 from abroad without the Reserve Bank of India's permission, violating section 3(c) of FEMA, 1999. The Tribunal found that the appellant's admissions, corroborated by seized documents and statements from recipients, established the contravention. The appellant's argument that the identity of Imtiyaz, the alleged sender, was not verified, was dismissed as the appellant did not deny Imtiyaz's existence or his residence in Dubai.

4. Adequacy of Evidence to Establish the Appellant's Guilt:

The Tribunal considered the seized documents, the appellant's statements, and corroborative statements from 14 recipients as sufficient evidence. The appellant's wife's handwriting on the documents further supported the Directorate's case. The Tribunal concluded that the evidence presented was comprehensive and consistent, leaving no doubt about the appellant's involvement in the contravention.

5. Procedural Aspects Related to the Adjudication and Appeal Process:

The procedural history revealed challenges, including unsigned draft orders and a dissenting opinion by a Tribunal member. The Delhi High Court intervened, directing a three-member bench to hear the appeal. Despite procedural delays due to vacancies and the pandemic, the Tribunal ultimately upheld the Special Director's order. The Tribunal dismissed the appellant's appeal, finding no merit in the arguments presented.

In conclusion, the Tribunal affirmed the penalty imposed by the Special Director, concluding that the appellant contravened section 3(c) of FEMA, 1999. The appeal was dismissed, and all pending applications were disposed of.

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