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2024 (9) TMI 559 - AT - FEMAProceedings under the FEMA, 1999 - black money in foreign bank, i.e., HSBC Zurich, Switzerland - use of information received under the India-France Double Taxation Avoidance Agreement - main argument that S. 37A of FEMA, 1999 is inapplicable, it is submitted by the appellant that even assuming S. 37A to be applicable, the section only authorizes seizure of assets, and not confiscation of the same - HELD THAT - 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of the statute which states categorically that the Appellate Tribunal must necessarily pass its order on the basis of outdated facts, which would remain frozen in time as they were at the time when the Ld.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 substantially the same as in the present case, we deem it appropriate in the interest of justice to take the discharge order passed by the Ld. ACMM in the prosecution case filed by the Income Tax Department on record. Entire proceedings under FEMA, 1999 were initiated on the basis of the prosecution case launched by the I-T Department and the appellant stands discharged in the aforesaid case - 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 action under section 37A has been kept low deliberately since the section provides for multiple avenues of redress to the affected person, including adjudication, appeal to the Appellate Tribunal, and also an opening to have the seizure set aside at any stage of the proceedings by disclosing the fact of such foreign exchange or foreign security or immovable property, bringing it back into in India and, thereafter, making an application to the Competent Authority or the Adjudicating Authority. We do not agree with the appellant that the action taken under section 37A in the present case no longer has any legs to stand because the appellant stands discharged in the prosecution case filed by the I-T Department. Information shared under the India-France DTAA could not have been shared with any other authority or court other than authorities dealing with Income Tax proceedings - We find merit in the contention put forward by the respondent that as per the plain language of Section 37A, the Respondent Directorate could invoke the said provision upon receipt of any information or otherwise and it is not relevant as to where the department gained knowledge of such contravention. He further pointed out that Article 28 of the said DTAA provides that any information received by any contracting state shall be treated as secret in the same manner as information obtained under the domestic laws of the contracting state and further provides that the information may be disclosed in public court proceedings or in judicial decisions. In any case, this Appellate Tribunal is not the appropriate forum to look into issue of violation of DTAA, if any. In view of the facts stated above, we do not find any merit in the aforesaid contention of the appellant. Even assuming that the provisions of Section 37A are applicable, the said section only authorises seizure of the assets but not confiscation of the same - 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. 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. The learned counsel for the respondent has pointed out that this is all that has been done in the present case. The Directorate has merely seized the bonds and the same have not been confiscated. Confiscation will happen only after the adjudication proceedings are concluded. Having considered the facts before us and the clarification provided on behalf of the respondents, we find no merit in the argument of the appellant regarding confiscation of the property. Section 37A of FEMA, 1999 was introduced by way of an amendment in the year 2015, it came into effect from 09.09.2015 - 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 appellant's reliance upon the decision of Ganpati Dealcom Pvt. Ltd. 2022 (8) TMI 1047 - SUPREME COURT would not assist him. It may also be pointed out that this Appellate Tribunal in the case of Prism Scan Express Pvt. Ltd. 2024 (1) TMI 203 - APPELLATE TRIBUNAL FOR SAFEMA AT NEW DELHI had held that a property which was transferred' prior to 2016, could still constitute benami property if it continued to be 'held' after the Amendment Act of 2016 came into force, since definition of 'benami transaction' under Section 2 (9) (A) of the amended Act covers not only property transferred to but also property held by a person the consideration for which has been provided by another person. In such cases, the question of retrospectivity would not arise as action was initiated on the ground that the property was 'held' in contravention of the amended Act after it came into force. Similar is the situation with respect to application of S. 37A in the present case. Accordingly, we do not find any grounds to interfere with the impugned order at this stage of the proceedings under Section 37A. We do not find merit in the appeal or the application for restitution of the seized property and accordingly, dismiss the appeal with all pending applications.
Issues Involved:
1. Legality of proceedings initiated under FEMA, 1999. 2. Applicability of Section 37A of FEMA, 1999. 3. Use of information shared under the India-France Double Taxation Avoidance Agreement (DTAA). 4. Seizure versus confiscation of assets. 5. Continuing offence and retrospective application of law. Detailed Analysis: 1. Legality of proceedings initiated under FEMA, 1999: The appellant contended that the proceedings initiated under FEMA, 1999, were illegal as they were based on a tax prosecution case by the Income Tax authorities, where the appellant was discharged. The appellant argued that the prosecution failed to establish a prima facie case, and the Income Tax authorities could not identify a specific bank account or link it to the appellant. The respondent countered that the proceedings were initiated based on secret information about black money in Switzerland and that Section 37A of FEMA allows action upon receipt of any information or otherwise. The Tribunal found that the discharge in the tax prosecution case did not invalidate the proceedings under FEMA, as the threshold for action under Section 37A is lower, requiring only a "reason to believe" that foreign exchange is suspected to be held in contravention of Section 4 of FEMA. 2. Applicability of Section 37A of FEMA, 1999: The appellant argued that Section 37A, introduced in 2015, could not be applied retrospectively to transactions before its enactment. The respondent maintained that the contravention was continuing as the amount was still not repatriated to India. The Tribunal agreed with the respondent, noting that the appellant had not provided evidence of the account's closure or repatriation of funds. The Tribunal held that Section 37A applies to continuing offences, and since the foreign exchange was still held outside India, the provision was applicable. 3. Use of information shared under the India-France Double Taxation Avoidance Agreement (DTAA): The appellant contended that information shared under the India-France DTAA could not be used for purposes other than tax proceedings. The respondent argued that Section 37A allows action based on any information received, and Article 28 of the DTAA permits disclosure in public court proceedings. The Tribunal found merit in the respondent's argument, stating that the DTAA allows sharing of information in judicial decisions and that the Tribunal was not the appropriate forum to address violations of the DTAA. 4. Seizure versus confiscation of assets: The appellant argued that Section 37A authorizes only the seizure, not confiscation, of assets. The respondent clarified that the bonds were seized by transferring them to the respondent's demat account and had not been confiscated. The Tribunal agreed with the respondent, noting that the transfer of dematerialized bonds was necessary to take possession and that the bonds remained seized, not confiscated, until adjudication proceedings were concluded. 5. Continuing offence and retrospective application of law: The appellant argued that the alleged offence was not continuing and that Section 37A could not be applied retrospectively. The Tribunal found that the appellant had not provided evidence of the account's closure or repatriation of funds, and the offer to pay tax on foreign income indicated the account's existence during the relevant period. The Tribunal held that the contravention was continuing, and Section 37A applied to the case. The Tribunal also noted that the appellant's reliance on the Supreme Court decision in Ganapati Dealcom Pvt. Ltd. was misplaced, as the case involved a different context. Conclusion: The Tribunal dismissed the appeal and all pending applications, upholding the order of the Competent Authority confirming the seizure of the appellant's assets under Section 37A of FEMA, 1999. The Tribunal found that the proceedings under FEMA were valid, Section 37A was applicable, the use of information under the DTAA was permissible, the assets were seized and not confiscated, and the contravention was a continuing offence.
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