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TMI Blog2014 (10) TMI 404X X X X Extracts X X X X X X X X Extracts X X X X ..... AT has relied on material that was not part of the record of the case. In particular, while the AO correctly notes that the Investigation Officer had not conducted any inquiry to ascertain the fair price and has also taken note of the order of the CIT and on that basis held that the SCN is not supported by proper evidence, the AT appears to have not referred to the proceedings under the Income Tax Act, 1961 at all. The conclusion of the AT that there was payment over and above the sale consideration shown in the sale deed, appears to be based on the AT taking 'judicial notice' of the price of agricultural land in the vicinity of Gurgaon on the basis that it is an 'adjacent area'. No such plea was advanced by any of the parties before the AT. The Appellants are, therefore, justified in their criticism of the impugned order of the AT for travelling well beyond the scope of its revisional jurisdiction and adjudicating upon factual matters for which there was no basis in the record. The Court is unable to sustain the impugned order dated 3rd June 2008 of the AT and restores the AO dated 6th January 2000. The appeals are accordingly allowed, but in the circumstances, with no order as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch 1997 at the Embassy of India in Bangkok stating that he had paid to two persons, who came on the instructions of Mr. Rakesh Jain, Thai Bahts in the sum of 1,09,50,000. The statement of Mr. Ravinder Jain was recorded on 13th February 1997. The residential premises of Mr. Ravinder Jain and business premises of OEPL were searched on 19th February 1997. The statement of one Mr. Sunil Kapoor was recorded on 29th October 1996. 4. On the basis of the above evidence gathered, a Memorandum/ Show Cause Notice ('SCN') dated 11th February 1998 was issued to the three Appellants stating inter alia, that by remitting an amount equivalent to ₹ 1,51,24,000 from abroad, Mr. Sri Chawla appeared to have contravened Section 9 (3), Mr. Rakesh Jain had contravened Section 9 (1) (b) and Mr. Ravinder Jain had contravened Section 9 (1) (d) read with Section 64 (2) of FERA. They were asked to show cause as to why proceedings should not be initiated against them under Section 50 FERA and as to why the farm house and land should not be confiscated under Section 63 of the FERA. 5. In a reply dated 30th August 1999 counsel on behalf of Rakesh Jain pointed out to the ED that he had been as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by Mr. Sri Chawla in the name of OEPL and apart from the sale consideration of ₹ 23,76,000 against the 12 registered sale deeds, ₹ 3 crores were paid in cash. (b) Mr. Sri Chawla stated that he had paid Thai Baht to the tune of 1,09,50,000 to two persons on 16th and 30th January 1995 in Bangkok. (c) The above statements were contradictory to each other. If indeed payment had been made in Thai Baht in Bangkok, it appears that Rakesh Jain had acquired them in violation of Section 8(1) of the FERA. However, there was no such allegation in the impugned memorandum. It accordingly showed that the ED itself did not give much credence to the statement of Mr. Sri Chawla. (d) Secondly, although Mr. Madan states that three crores were paid in cash to Mr. Rakesh Jain on payment of 1% commission, Mr. Rakesh Jain retracted his statement and statement of Dr. Seth was not recorded. (e) Thirdly, the CIT had also upheld the sale consideration showed in the sale deed as being fair price. Since there was no reliable evidence to support the allegation in the SCN, the proceedings were dropped. Filing of Revision Petitions before the AT 9. In terms of the Section 52 FERA, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eration then it was above ₹ 45 per sq. yard even in 1994 and in the vicinity of Gurgaon which is the adjacent area, it should be more than ₹ 200 per sq. yard in 1995. In the retraction statement of Mr. Rakesh Jain there was an admission that an extra amount of ₹ 1,51,24,000 had been paid and this was corroborated by the statement of Mr. Madan and the declaration given by Mr. Sri Chawla. It was further held that the above transactions involving Mr. Rakesh Jain and Mr. Sri Chawla could not have been done without the wilful acquiescence of Respondent No.3 Mr. Ravinder Jain who had not come out with the full truth. Therefore, he was equally to be blamed. Accordingly, the AOs were reversed and a penalty of ₹ 45,372,000 was imposed by the AT on each of the Respondents. Maintainability of the Revision Petitions 15. The first question that arises concerns the maintainability of the revision petitions before the AT. It was submitted on behalf of the Appellants by Mr. Abhinav Vashisht, learned Senior counsel and Mr. Gaurav Duggal, learned counsel, that when Section 49 (5) (b) did not save revision petitions filed under Section 52 (4) FERA but only the appeals fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contingency is introduced without a saving clause in favour of pending proceedings, then it can be reasonably inferred that the intention of the legislature is that the pending proceedings shall continue but a fresh proceeding for the same purpose may be initiated under the new provision. 18. In the present case, it cannot be said that there is no saving clause qua the revision petitions filed under Section 52 (4) FERA. Anticipating such a contingency, Section 49 (6) FEMA was introduced. This explains the expression the mention of particular matters in sub-Sections (2), (4) and (5) shall not be held to prejudice or affect the general application of Section 6 of the General Clauses Act, 1897 . What was clearly intended therefore was if within the sunset period under Section 49 (3) FEMA, a revision petition was filed under Section 52 (4) FEMA, such revision petition would continue before the AT even after the repeal of FERA. Companies not issued notice 19. The Court next proposes to deal with the issue whether in terms of Section 68 FERA, proceedings under FERA could be maintained against the Appellants notwithstanding that the companies themselves have not been proceeded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs were initiated only against its Directors in their individual capacities. 25. The wording of Section 68 FERA is identical to the wording of Section 141 of the Negotiable Instruments Act, 1881 ('NI Act') with the only difference being that the above provision in the NI Act is penal in nature whereas Section 68 FERA, although its titled 'Offences by Companies' talks of contravention by companies. It was explained by the Supreme Court in Aneeta Hada v. Godfather Travels Tours (P) Ltd. (2012) 5 SCC 661, in the context of Section 141 NI Act that in the absence of making the company, which issued the dishonoured cheque, an accused, vicarious liability cannot be fastened under that provision on the directors of the company. On the same analogy it can be concluded that for the purposes of Section 68 FERA, where the contravention is by a company, liability cannot be fastened on its directors if the company itself is not proceeded against. 26. Neither the AO nor the AT appeared to have noticed this fundamental legal flaw in the entire proceedings that neither the seller nor the buyer, i.e., the two companies ACPL and OEPL, were proceeded against for contravention o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ability on the noticees for contravention of Section 8(1) FERA. It was submitted that the retracted confessional statements of Mr. Rakesh Jain could still be relied upon as long as it was corroborated in broad particulars. Mr. Rakesh Jain admitted to receiving ₹ 1,51,24,000 in cash and this coupled with the amount stated in the sale deeds, more or less, corresponded to the sum stated by Mr. Sri Chawla in his declaration to have been paid at Bangkok. 30. In the first place, it must be observed that the ED itself is not clear whether the declaration made by Mr. Sri Chawla in Bangkok could be termed as a statement under Section 40 FERA. It is not shown that the procedure envisaged under FERA was followed while recording the said declaration. In any event, Mr. Sri Chawla only talks of payment being made to two persons who met him on behalf of Mr. Rakesh Jain. The payment is purportedly made for the purchase of land. The sale deeds show that the purchaser was OEPL and the seller was ACPL. The said statement, therefore, does not help in proceeding only against Mr. Rakesh Jain, if no proceedings had been initiated against ACPL, which is the true beneficiary. While the declaration ..... X X X X Extracts X X X X X X X X Extracts X X X X
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