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TMI Blog2024 (12) TMI 1312X X X X Extracts X X X X X X X X Extracts X X X X ..... it or given premium to non-response. Rather, adverse inference can safely be drawn against the appellant. In the background aforesaid and in the light of the discussion made above, we are unable to accept the argument raised by the counsel for the appellants and otherwise find that against an amount of Rs. 208 Crores, penalty of only Rs. 20 Crores has been imposed on the company and Rs. 5 Crores each on the individuals holding the position in the company. Accordingly, finding no reason to cause interference in the impugned order appeals would fail and are dismissed. - JUSTICE MUNISHWAR NATH BHANDARI CHAIRMAN AND SHRI BALESH KUMAR MEMBER For the Appellants: Mr. R.S. Gill, Adv. Mr. Randhir Singh, Adv. For the Respondent: Mr. Varun Mishra, Adv. FINAL ORDER FPA-FE-957-960/MUM/2008 The batch of appeals have been filed under Section 19 of the Foreign Exchange Management Act, 1999 (in short the Act of 1999 ) to challenge the order dated 03.08.2004 passed by the Adjudicating Authority imposing penalty on the appellants for contravention of Section 8(1) of the Foreign Exchange Regulations Act, 1973 (in short the Act of 1973 ). The penalty of Rs. 20 crores has been imposed on the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incorporated in Nassau, Bahamas on 25.11.1992. The said Company was having share capital of USD 2 only. It was also revealed that Shri D.P. Agarwal and one Shri Vinod Shah were the Directors of M/s Twinstar while the former was also the Director of M/s Sterlite and the latter was an employee of M/s Sterlite. The documents seized during the course of search were taken to indicate that the company was actually operating from 15, Health fields Court, Frampton Road, Hounslow Heath, Middlesex. The documents showed remittance of Rs. 34,50,25,280/- by M/s Twinstar to M/s Sterlite on 28.01.1993 for subscribing 958400 debentures at the rate of Rs. 360/- each immediately after incorporation of M/s Twinstar on 12.01.1993. Since M/s Twinstar was not having the capital to invest Rs. 208 Crores in various companies, the respondent presumed that Rs. 208 Crores were diverted by the appellants to route it through the foreign entity for investment in the Indian company. Since it was without permission of the RBI and even without compliance of the provisions of the Act of 1973, the order was passed finding contravention of the provisions and accordingly the penalty was imposed, as indicated. 5. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to presume transfer of money by the appellants to M/s Twinstar at Mauritius and in turn M/s Twinstar invested the amount of Rs. 208 Crores in different companies under the appellant company. The impugned order and the material on record would not show any clinching evidence to prove transfer of Rs. 208 Crores by the appellants to M/s Twinstar in violation of the provisions of the Act of 1973 to circulate the amount back to the appellants company. Once the RBI had given the permission/approval for transfer of foreign exchange for investment in the appellants company, presumption of transfer of the amount by the appellant to M/s Twinstar to circulate it back could not have been taken. The entire order is based on presumption and thus not sustainable in the eyes of law. In the light of the aforesaid, the prayer was made to set aside the impugned order imposing irrational penalty on the company as well as on the individual appellants. 9. The appeal was vehemently contested by the counsel for the respondents on all the issues. The learned counsel submitted that an amount of Rs. 208 Crores was received as investment in different entities of the appellant company. The amount of Rs. 208 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Year Ending M/s Sterlite Industries (I) Ltd. (SIIL) Dwaraka Prasad Anil Kumar Investment Ltd. (DPAK) Pravin Navin Investment Trading Pvt. Ltd. (PNIT) M/s Sterlite Copper Rolling Mills Pvt. Ltd. (SCRM) M/s Eastern Galvanising Pvt. Ltd. (EGPL) 1993 34,50,25,280 1994 3,13,60,000 3,13,60,000 3,13,59,600 1995 34,50,24,000 15,68,00,000 15,67,99,600 10,66,23,200 1996 4,71,24,600 4,84,94,600 1997 2,50,94,800 1998 1999 65,16,00,000 2,71,74,400 3,21,09,280 4,33,94,00 8,54,500 1,00,750 TOTAL 134,16,49,280 26,24,59,000 26,87,63,480 20,64,71,700 9,55,250 GRAND TOTAL Rs. 208,02,98,710/- (Rupees 208 Crores Approx.) 13. It is not in dispute that investment of Rs. 208 Crores was made by M/s Twinstar in M/s Sterlite Group companies though its capital was only USD 100. No material was produced to show source of M/s Twinstar to invest 208 crores while its paid up capital was USD 100 only. It is no doubt that investment in M/s Sterlite Group companies was with the permission and approval of the RBI but the issue was as to from where the funds of Rs. 208 Crores came to M/s Twinstar. The appellants did not produce any document to show the source of Rs. 208 Crores to justify the transfer of fund by M/s T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 208 Crores in appellants group companies. The respondents sent summons to Shri D.P. Agarwal who was the Director of M/s Twinstar at Mauritius and was even of the appellant company but he did not turn up or respond to the summons to disclose the source of Rs. 208 Crores for its transfer to the appellant company for the investment. Shri D.P. Agarwal could have produced the document which includes the bank statement to show how Rs. 208 Crores came to M/s Twinstar. Despite all the efforts by the respondents, Shri D.P. Agarwal did not turn up to make a statement and even to produce the documents. The respondents made further investigation and recorded the statement to trace out the source of Rs. 208 Crores for its onwards transfer by M/s Twinstar. It is not in dispute that the appellants have received Rs. 208 Crores as investment from offshore company having no means to make huge investment where it was none else but Shri D.P. Agarwal, the key person of the company. In the light of the facts aforesaid, we may refer to the judgement of the Delhi High Court on the burden of proof decided in the case of Prem Singh Chawla Vs. Director of Enforcement reported in 1987 (12) SCC Online Del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the heavy onus and the courts below in my opinion, were justified in raising the presumption against the appellant. No interference in this finding is called for. The judgment in reference to the Act of 1973 would also be relevant along with the reference of the provisions of the Code of Civil Procedure for drawing adverse inference against the party. Section 40 and 53 of the Act of 1973 are quoted thus: 40. Power to summon persons to give evidence and produce documents - (1) Any Gazetted Officer of Enforcement shall have power to summon any person whose attendance he considers necessary either to give evidence or to produce a document during the course of any investigation or proceeding under this Act. (2) A summons to produce documents may be for the production of certain specified documents or for the production of all documents of a certain description in the possession or under the control of the person summoned. (3) All persons so summoned shall be bound to attend either in person or by authorised agents, as such officer may direct; and all persons so summoned shall be bound to state the truth upon any subject respecting which they are examined or make statements and produce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R 400(SC), this Court observed: ....... it must in the first instance be observed that it is for the revenue to establish that a particular receipt is income liable to tax......... . 10. We may point out, as some argument was advanced on the question of burden of proof, that this Court did not lay down that the burden to establish that an income was taxable was on the Revenue was immutable in the sense that it never shifted to the assessee. The expression in the first instance clearly indicates that it did not say so. When sufficient evidence, either direct or circumstantial, in respect of its contention was disclosed by the Revenue, an adverse inference could be drawn against the assessee if he failed to put before the Department material which was in his exclusive possession. This process is described in the law of evidence as shifting of the onus in the course of a proceeding from one party to the other. There is no reason why the said doctrine is not applicable to income tax proceedings. While the Income-tax authorities have to gather the relevant material to establish that the compensation given for the loss of agency was a taxable income, adverse inference could be drawn agai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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