9911796707
TMI Blog2024 (9) TMI 559X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een 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 add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t black money in foreign bank, i.e., HSBC Zurich, Switzerland. Acting on the same, the Directorate of Enforcement, Delhi Zonal Office, filed an application before Hon'ble Addl. Chief Metropolitan Magistrate (Spl. Acts), Tis Hazari Courts, Delhi who, vide his order dated 11.09.2015 directed that a copy of prosecution complaint No. 70/4/2014, be given to the Directorate of Enforcement. After obtaining documents from the court, investigation was taken up by the Directorate of Enforcement. 3. Investigation carried out in this regard by the Directorate, revealed that the Sh. Pradip Burman had acquired USD 32,12,000/- outside India and had kept the said amount with Hong Kong and Shanghai Banking Corporation (HSBC), Zurich and had not repatriated the said amount to India till date. Inquiries were made with Sh. Pradip Burman by issuing summons for his appearance before the Dy. Director, Directorate of Enforcement. Sh. Pradip Burman, in his statement dated 13.07.2017 stated, inter-alia, that he was resident of Dubai from the period 1999 to Sep. 2001 and, thereafter, he has been permanent resident in India; that he had an account with HSBC, Zurich, Switzerland, but the said account stand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im during the investigation under the FEMA disclosing the destination of this USD 32,12,000/-; (iii) That the Sh. Pradip Burman was evasive about the repatriation of the said foreign exchange to his account maintained in India; (iv) That though the Sh. Pradip Burman claimed that he earned this amount by advising certain foreign companies in the capacity of investment advisor during the period 1999-2001, but he could not furnish evidence indicating that the entire amount of USD 32,12,000 was earned during this period. 5. The Directorate was of the view that the appellant, Sh. Pradip Burman acquired and deposited foreign exchange to the tune of USD 32,12,000/- with HSBC Bank, Zurich Switzerland and did not get that amount repatriated to India in contravention of provisions of Section 4 of the FEMA, 1999 and that a total amount of USD 32,12,000/- was still held outside India in contravention of Section 4 of the FEMA, 1999 and, therefore, the equivalent value of the property, i.e., USD 32,12,000/-with HSBC Bank, Zurich Switzerland was liable to be seized in terms of the provisions of Section 37A(1) and in terms of G.S.R. 702 (E) dated 16.09.2015 G.S.R. 701(E) dated 16.09.2015 issued by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this regard is drawn to Article 28 of the India-France Double Taxation Avoidance Agreement, a copy of which has been filed by the appellant. 11. A copy of the discharge order in Prosecution Complaint No. 70/4/2014 has also been filed during the course of the proceedings before this Appellate Tribunal. The appellant submits as follows: ■ The very existence of the alleged foreign bank account, at specific branch with specific account number is not established (paras 25, 32, 33, 34, 49, 53, and 59 of the Order of the Ld. ACMM are referred to) ■ No occasion ever arose to conduct investigation and file the prosecution complaint (para 33) ■ The Appellant's offer to pay tax to buy peace cannot be construed as an admission of existence of a bank account/bank branch, and in any event, these stood retracted (paras 41-45) ■ The Prosecution has failed to establish even a prima facie case (para 53) ■ The information allegedly obtained from the French Government are not trustworthy, authentic, and reliable (para 33) 12. It is submitted that the above findings of fact having been established in a judicial proceeding, the confirmation order dated 18.05.2018 has n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a seizure under Section 37A of FEMA. 15. The decision of the Hon'ble Supreme Court of India in Union of India v. Ganapati Dealcom 2022 SCC OnLine SC 1064 para 127 is relied upon for the proposition that in rem civil procedure for confiscation of property cannot be applied retroactively, and would be characterized as penal. It is contended that similarly, the provision of S. 37A of FEMA, 1999, which authorizes seizure of property which is penal in nature by way of amendment effective on 09.09.2015, cannot be applied retroactively to transactions between 29.12.1999 and 08.09.2015, including the transactions relating to AY 2006-2007 and AY 2007-2008. 16. Thus, according to the appellant, the purported seizure and actions taken pursuant thereto by retroactive application of S. 37A FEMA are illegal, arbitrary, and must be quashed. 17. Thirdly, without prejudice to the 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. In the present case, the Government Bonds of the Appellant were seized on 08.05.2018. The said order of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Respondent in confiscating the Government Bonds in the name of the Appellant, without any authority of law and beyond the order of the Ld. Competent Authority. 21. The appellant is also aggrieved that the present appeal was filed on 28.12.2018, the appellant was discharged in the underlying Income Tax Prosecution Complaint on 18.11.2020, a certified copy of the discharge order has been placed on record on 17.12.2020. Even so, the matter has not moved forward due to the failure of the respondent Directorate to file any reply despite multiple requests sought and opportunities granted to do so, over a period of 28 months at the time of filing the present submissions. It is contended that the respondents have sought over 20 adjournments in the present matter, and grave prejudice is being caused to the appellant, who is a very senior citizen over 80 years of age and suffering from various ailments. 22. Based on these contentions, the counsel for the appellant submitted that the impugned order of the Ld. Competent Authority ought to be set aside, and the respondent should be directed to return the government bonds under their confiscation/seizure to the Appellant forthwith. Argument ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... closed long ago, and he cannot produce statement of the said accounts. Further, the appellant also admitted that he did not repatriate this amount to India. Now, the appellant has contended that the alleged bank account is not his individual bank account or from his individual funds. 28. Thirdly, it is contended that the respondent has successfully discharged its burden to prove that the amount was lying outside India in the account of the appellant and has not been repatriated back to India. Thereafter, the onus was upon the appellant to prove that it had in fact been repatriated by him but the appellant made no such averment which further proves his liability under Section 4 of FEMA, 1999. 29. Fourthly, with regard to the argument that Section 37A was enacted only on 09.09. 2015 and impugned foreign exchange has been held prior to 09.09.2015 therefore, the contravention is not made out since S.37A does not have a retrospective effect, it is submitted that Section 37A applies to the present case since the offence is continuing. Had the amount been repatriated by the appellant, then the proceedings initiated by the respondent under Section 37A could have been held to be invalid. Bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confirmation order dated 05.11.2018 be dismissed in limine. 34. During oral argument of the case on 07.05.2024, the learned counsel for the respondent raised a fundamental legal issue which goes to the root of the matter. He drew our attention to the language of Section 37A which reads as below: 37A. Special provisions relating to assets held outside India in contravention of section 4. (1) Upon receipt of any information or otherwise, if the Authorised Officer prescribed by the Central Government has reason to believe that any foreign exchange, foreign security, or any immovable property, situated outside India, is suspected to have been held in contravention of section 4, he may after recording the reasons in writing, by an order, seize value equivalent, situated within India, of such foreign exchange, foreign security or immovable property: Provided that no such seizure shall be made in case where the aggregate value of such foreign exchange, foreign security or any immovable property, situated outside India, is less than the value as may be prescribed. (2) The order of seizure along with relevant material shall be placed before the Competent Authority, appointed by the Central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder of the Ld. ACMM in the prosecution case filed by the Income Tax Department, and the decision of Hon'ble ITAT. The order appealed against is an order passed under section 37A(3). When the said the order was passed by the Ld. Competent Authority, the aforementioned developments had not taken place. Section 37A, is a selfcontained provision. From the heading of the section, it is also evident that it is a special provision which must be given full effect. Under the said provision, the next step is adjudication by the Adjudicating Authority under Section 37A(4). It is submitted before us that adjudication proceedings under Section 16 are still pending in this case. During the adjudication proceedings, the appellant will have an opportunity to bring on record subsequent developments, including the order of the Hon'ble ITAT and the Ld. ACMM. But until the adjudication proceedings are contemplated under Section 37A(4) are complete, the impugned order passed by the Competent Authority shall continue in accordance with the clear and unambiguous language of the statute. During the pendency of the adjudication proceedings, this Appellate Tribunal cannot pass an order based on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;s submission that this Appellate Tribunal cannot take into account subsequent developments, he contended that the Appellate Tribunal alone has the jurisdiction to do so as the order of the lower authority is to be tested before the Appellate Tribunal to see whether or not the same in accordance with the law. He further submitted that the essence of section 37A is that till the time the person concerned repatriates the amount held abroad, he is offering an alternate security to the Directorate. He also contended that the orders of the Appellate Tribunal have no application to the present case. There is a categorical judicial order passed by the Ld. ACMM recording a finding that there is not even enough material to proceed with the framing of charges. He emphasized that it is case of discharge at the stage of framing of charges and not an acquittal. Therefore, he contends, the very genesis or the basis of the order does not survive. He reiterated that the adjudication proceedings are yet to even begin though six years are over. Analysis and Findings 39. We have given our thoughtful consideration to the material on record and the rival contentions of the parties. Since a legal iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... once the Adjudicating Authority passes its order in the matter, the same would also be appealable to this Appellate Tribunal under Section 19(1) as the same would constitute an order made by an Adjudicating Authority within the meaning of the said Section 19(1). A question, therefore, arises what is the scope of the appeal to the Appellate Tribunal under Section 37A(5) when adjudication by the Adjudicating Authority is yet to take place. A single-member bench of this Appellate Tribunal, in its judgement in the case of Nirayu Private Ltd. FPA-FE-44/MUM/2018 (order dated 11.09.2018) has held as below: 3. In response, the learned counsel for the respondent stated that the Tribunal has no jurisdiction to get into new issues which the impugned order had not dealt with. He also drew attention to the Seizure Order No. 01/2017 dated 08.12.2017 wherein the seizure was done on the basis of an investigation. He further stated that Section 37(A)(4) clearly mentions that the seizure order passed by the Competent Authority will continue till the disposal of adjudication proceedings and hence the appellants will have a chance to represent their case with regard to the subsequent developments, sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly, and not review its own order once passed under Section 37(A)(3). Hence, the contention of the appellant that it has the powers to review, is not borne out by this legal provision. Coming to the Appellate Tribunal's power, Section 37(A)(5) clearly mentions that any person aggrieved by any order passed by the Competent Authority under Section 37(A)(3) may prefer an appeal to the Appellate Tribunal. Hence, the Appellate Tribunal jurisdiction is limited only to the orders passed by the Competent Authority under Section 37(A)(3). He does not have any original jurisdiction to get into any issues which have not been dealt by the original authority or are subsequent developments to the passing of the order by the Competent Authority. The judgments referred to by the appellants as at para 2 (iv) supra, pertain to different facts and different law. Even there the Hon'ble Supreme Court has held as at para 11 of the judgment in the case Om Prakash Gupta v. Ranbir B. Goyal that the doctrine itself is of an exceptional character only to be used in very special circumstances . Moreover, the courts have extraordinary powers which this Appellate Tribunal, which is a creature of the sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The powers of the Appellate Tribunal are stipulated in Section 19(3) of FEMA, 1999 which states ..............the Appellate Tribunal may after giving the parties to the appeal an opportunity of being heard pass such orders thereon as it thinks fit, confirming, modifying or setting aside the order appealed against. 7. The powers of the Appellate Tribunal are general in nature and does not have any specific powers. Whereas Section 37-A(4) is a specific provision. In a clash between a general provision and a specific provision, the specific provision would prevail. The decision of the Supreme Court of India in the case of Suresh Nanda v. CBI dated 24.01.2008 dealt with the issue of a special Act with the specific subject and a general Act. It laid down where there is a special Act dealing with specific subject, resort should be had to that Act instead of general Act providing for the matter connected with the specific Act. The golden rule of interpretation of statues stipulates that no law or any part thereof can be so interpreted to make the other part redundant. The appellant's plea of setting aside the seizure would tantamount to that. [ Emphasis added ] 43. In the present cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 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. 47. Coming now to the merits of the case, the first issue raised before us on behalf of the appellant is that the 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. It is also emphasized that the Ld. ACMM (Central), Special Acts, Tis Hazari while discharging the appellant observed that the prosecution had fail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oke 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. 50. In light of the above discussion, we do not agree with the appellant that the action taken under section 37A in the present case no longer has any legs to stan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. However, 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. 53. It is next contended that Section 37A of FEMA, 1999 was introduced by way of an amendment in the year 2015, it came into effect from 09.09.2015. It is not a clarificatory amendment and grants entirely ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... avily 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 relevant part of the said letter reads as below: Dear Sir, We have been informed by Dr. Anand Burman r/o 2 Rajesh Pilot Marg, New Delhi, Chairman of Dabur India Limited, New Delhi that certain stolen data relating to his account at HSBC Private Bank (Suisse) SA, Paradeplatz 5, PO Box, CH-8027, Zurich will be shared with the Indian Authorities by French Government as per information available with him vide letter of 25 August 2011 of HSBC Bank, Zurich (letter enclosed as Annexure 1). We would like to inform you that Dr. Anand Burman........ Further, we have been informed that Mr. Siddharth Burman......... Further, Mr. Pradip Burman (brother of Mr. Siddarth Burman) r/o A 5/3 Vasant Vihar, New Delhi, Whole-time Director, Dabur India Limited, has also been informed through Banking Channels that in the stolen data his also name appears. Mr. Pradip Burman was a non-resident for the AY 2000-01 and 2001-02 under Indian incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said letter are as follows : HSBC Private Bank Anand Burman 11 Gloucester Gate Regents Park London NW1 4HG 25 August 2011 Theft of Client Data Dear Anand We refer to the Bank's letter which was sent on the 11th March 2010. At the end of June 2011 we were informed by the Swiss authorities that France will share the stolen data with the Indian authorities. They have explained that this decision has been taken following the signing of the new tax treaties with India that allows the exchange of information under strict conditions. Please accept our unreserved apologies for this situation. Yours sincerely, HSBC Private Bank (Suisse) SA Sd/- Subir Mittra, Director Sd/- Adolf Meier, Director 58. Upon perusal of the letter it is also seen that the same clearly reflects the close relationship the Bank enjoyed with the Burman family even in 2011, pointing towards the strong likelihood that the account in question among others, was still being maintained and had not been closed. 59. Furthermore, in the letter dated 30.08.2011 addressed to the DG of Income Tax, the Authorised Representative of the appellant while admitting that the appellant continued to operate the said account even afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave already discussed at length in para 39 above; and also considering the interim nature of the proceedings under Section 37A at this stage wherein adjudication is yet to take place, we are of the view that action under Section 37A was justified in the facts and circumstances of the case. We also note that even the source of funds in the account have not been substantiated by the appellant as no proof has been adduced regarding the 'investment advisory services' claimed to have been provided by him while in Dubai. Since the date of closure of the account and even the factum of closure is not proved, the question of retrospective application of law would not arise. Thus, the appellant's reliance upon the decision of the Hon'ble Supreme Court in Ganpati Dealcom Pvt. Ltd. (supra) would not assist him. It may also be pointed out that this Appellate Tribunal, vide its order dated 15.12.2023 in the case of Prism Scan Express Pvt. Ltd.(FPA-PBPT-1079/MUM/2020) 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 ' ..... X X X X Extracts X X X X X X X X Extracts X X X X
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