Dismissed

FPA-FE-59/CHN/2015 of Shri P.R. Ganapathy v/s The Joint Director Directorate of Enforcement, Chennai

ATFP4 Oct 2017FPA-FE-59/CHN/2015

Case brief

AI extract

What is this about?

The Appellate Tribunal dismissed the appeal against an adjudication order imposing a penalty under Section 50 of FERA, 1973. Upholding the impugned order, the Tribunal found that the appellant's claim that foreign exchange receipts were gifts from friends was unsustainable, noting no logical link between the donors and the appellant.

What did the court decide?

The appeal is dismissed with no order as to costs.

FPA-FE-59/CHN/2015 of Shri P.R. Ganapathy v/s The Joint… — Banking and Recovery | ATFP (2017)

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APPELLATE TRIBUNAL, FOREIGN EXCHANGE MANAGEMENT ACT

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AT NEW DELHI

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Date of Decision: 04.10.2017

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FPA-FE-59/CHN/2015

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Shri P.R. Ganapathy … Appellant Versus The Joint Director Directorate of Enforcement, Chennai … Respondent

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Advocates/Authorized Representatives who appeared

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For the appellant	:	Shri S. Ravi, Advocate
For the respondent	:	Shri Prashant Pandey, Legal Consultant
CORAM
JUSTICE MANMOHAN SINGH	:	CHAIRMAN
JUDGEMENT

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FPA-FE-59/CHN/2015

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The appellant conducted auspicious function in the family and for that the close friends and relations were invited from India and from abroad. At the time of function the appellant has received several gifts including money in the form of Demand Draft and Cheque. The appellant has disclosed the payment received as gift to Income Tax Authority while filing the return for the financial year 1994-95/Assessment year 199596.

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The Enforcement Directorate received information from the sources

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that the 27 persons mentioned in the Memorandum all being non residence in India except the appellant where involved in the transaction

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FPA-FE-59/CHN/2015

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of Foreign Exchange in violation of FERA, 1973. On the basis of information investigation were conducted against the appellant.

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After conducting investigation a Memorandum was issued to the appellant in F.No. T.4/6/SZ/C/2000 dated 31.12.1999 alleging that he has contravened Section 9(1)(d) of FERA, 1973 and thereby rendered himself liable to be proceeded against him under section 50 of FERA, 1973 read with sub section (3) & (4) of Section 49 of Foreign Exchange Management Act, 1999.

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It was alleged in the Memorandum that the appellant a person residing in India without the general or special exemption from the Reserve Bank of India (RBI) has made payments totaling Rs. 47,89,900/to various persons residing outside India in lieu of NRE Cheques/Demand Drafts received from them.

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Accordingly the appellant was asked to show cause as to why the adjudication proceedings contemplated under Section 51 of FERA, 1973 should not be held against him.

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The above said Memorandum was duly replied vide the appellant reply dated 27.03.2015 and Personal Hearing was also attended by the Counsel of the appellant.

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Thereafter an Order in Original No. AD/CEZO/04/2015(TJ) dated 31.03.2015 in F.No. T-4/6/SZ/C/2000 has been passed by the Assistant Director of Enforcement Directorate (Adjudicating Authority). The Adjudicating Authority after taking into account the reply and

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FPA-FE-59/CHN/2015

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submissions made during the Personal Hearing, imposed a penalty of Rs. 1,00,000/- on the appellant under Section 50 of FERA, 1973.

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Shri P.R. Ganapathy of Chennai, a person resident in India, in his statements dated 10.11.97, 11.11.97 and 11.12.97 under FERA has interalia, stated that for his investments he has received Rs. 46,44,150/through drafts/cheques from NRIs; that all the 26 of NRIs were from Kerala and they had given that amount of Rs. 46,44,150/-; that he deposited the draft for Rs. 89,150/- from John Valiath in SBI Coimbatore; that Shri Philip sent him the draft for Rs. 1,50,000/-; that Shri Kuriakose George sent a draft for Rs. 1 Lakh to him; that Shri James Matthew sent him Rs. 1,40,000/- through courier; that Sam John sent him Rs. 1,55,000/-; that Shri Joshph had sent Rs. 1 Lakh through draft; that K.M. Joy sent him draft for Rs.1,00,000/-; that Cecily had sent him draft for Rs. 1,00,000/-; that Shri Chaco Ninan had sent him Rs. 50,000/- as draft; that Smt. A.V. Nair sent him Rs. 50,000/- as draft; that Shri David Mathew sent him Rs. 1,70,000/- as draft; that Abdul Karim Rs. 50,000/- as draft; that Smt. Monikutty Augustine sent him Rs. 40,000/- as draft; that Shri Thomas sent him draft for Rs. 2 Lakhs; that Shri P.V. Samuel sent him a draft for Rs. 3,60,000/-; that Smt. Elsamma Thomas sent him a draft for Rs. 95,000/-; that Shri V.K.A. Saleem sent him a draft for Rs. 1,30,000/-; that Shri. P.A. Joy has sent draft for Rs. 4 lakhs; that Shri Joseph Mathew sent him draft for Rs. 3 lakhs; that Smt. Lisy Joseph sent him a draft for Rs. 1 lakhs; that Shri Sayed Mohammed had sent draft for Rs. 40,000/-; that Shri P.M. Mathew sent him a draft for Rs. 1 lakh; that Shri Abdul Kareem Jabbal sent him a draft for Rs. 1 Lakh; that Shri Abdul Thahir sent him a draft for Rs. 3 lakhs; that the 28 person from whom he had received Rs. 46,44,150/- as gifts were all known to him.

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FPA-FE-59/CHN/2015

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Shri Sam John, in his letter dated Nil, interalia, stated that he was advised that he can obtain premium for NRE funds transferred to needy parties and that he had with Rs. 1,55,000/- from his NRE account from IOB and purchased a DD for Rs. 1,50,000/- in the name of P.R. Ganapathy for which he collected a premium of Rs. 9,000/- and that he had no relation with Shri. P.R. Ganapathi.

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9.1 Shri K.C. Philip of Muscat in his letter dated 7.1.96 to ED, Chennai, interalia, stated that he had to give money for his building contractor Shri Muthusamy; that as requested by Shri Muthusamy for payment in the form of demanded draft in the name of Shri P.R. Ganapathy and he had given the same.

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9.2 Shri K.M.A. Rahim, in his letter dated 2.1.96, interalia, stated that he had issued a cheque for Rs. 2.25 lakhs against settlement for a list of partnership business to one Shri Krishnan of Kerala who might have deposited in the account of Ganapathy which was not known to him.

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9.3 Shri Kurakose George of Switzerland in his letter dated nil, interalia, stated that he had not direct connection with Shri P.R. Ganapathy, but he had given 2 drafts for Rs. 50,000/- each through Shri George Verghese of South Indian Bank who arranged this as loan to Shri Ganapathy and he had received the amount and with interest of Rs. 5000/- from him.

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9.4 Shri P.L. Joy, in his statement before IT Officials on 13.9.96, interalia, stated that he returned to India on 29.4.94 and while he was in Angamally, he was approached by one Elias who asked him to issue a cheque from his NRE account and he filled the cheque with amount

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FPA-FE-59/CHN/2015

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signature without filling the name for Rs. 1 Lakh and handed over the same to Shri Elias; that he had received the amount and some commission on the same day from Elias; that his cheque might have been used for purchasing a draft in the name of Shri P.R. Ganapathy.

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9.5 Shri Thomas Mathew in his statement before ED that when he came back to native place in Kerala in Feb. 1993, a person by name Kabeer of Kottayam informed him that if he utilized his money from his NRE account and send drafts to persons as directed by him he promised to give 3% commission; that he withdrew Rs. 4,25,000/-.

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9.6 Shri P.I. Joy, in his statement dated 24.3.98 given before EO, ED, Trivandrum interalia, stated that during July, 1994 one Shri Elias of Angamalli contacted him and requested that if he issued a NRE Cheque for Rs. 1,00,000/- to his or his nominee he would give a commission of Rs. 2000/- accordingly on 22.7.94 he issued a cheque for Rs. 1 lakh in the name of Shri Ganapaty and received in cash Rs. 1,02,000/-.

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With regard to the argument of Shri P.R. Ganapathy, that the said amounts were given as gifts by his friends, I find that the said argument as precarious in as much as from the profiles of the persons who had given the cheques, it could be observed that there is no logical link or topographical connection between them for construing them as family friends of Shri P.R. Ganapathy. I note that the concept of receipt of gifts from family friends has just been invented by Shri P.R. Ganapthy in his attempt to circumvent the process of law. Further he placed reliance on certain case laws and disputed that there are no independent corroborative material apart from the statements relied on by the department. However, in my opinion, the said case laws and the issues discussed in the said case laws are extraneous in nature and are not

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FPA-FE-59/CHN/2015

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relevant to the present case. Further, I observe that the statements were recorded initially by the officers of Income Tax and the same persons who have deposed before the officers of Enforcement Directorate after a period of 2 years neither made any re-traction of their earlier statements not have distorted the facts of the earlier statements.

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However, it is the admitted position that Shri P.R. Ganapathy who did not dispute the receipt of the money both in his reply to the Memorandum and during the personal hearing before the Authority. He only attempted to project it as investment from friends. It is correctly mentioned in the impugned order that his denial that he had not given money in return for the cheques/DDs as the statements recorded rather confirmed that the cheques/DDs were received after making payment in cash. Admittedly penalty amount has been deposited by the appellant. I totally agree with the impugned order passed against Shri P.R. Ganapathy. There is no infirmity in the order. Even I am of the view that routine small function such a big amount is not possible to receive as gift from NRI. It is evident that against the gift amount, the cash must have been given by the appellant.

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As the amount in question was unaccounted sources for his own benefit and directly involved in the contraventions of the provisions of Section 9(1)(a) of FERA, 1973.

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There is no merit, the appeal is accordingly dismissed.

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No costs.

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(Justice Manmohan Singh) Chairman

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New Delhi, 4^th October, 2017. ‘d’

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FPA-FE-59/CHN/2015

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FPA-FE-59/CHN/2015 of Shri P.R. Ganapathy v/s The Joint Director Directorate of Enforcement, Chennai

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FPA-FE-59/CHN/2015 of Shri P.R. Ganapathy v/s The Joint Director Directorate of Enforcement, Chennai

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