Partly allowed

FPA-FE-25/Patiala/2012 of Shri Harish Kumar @ Rinku v/s The Joint Director Directorate of Enforcement, Patiala

ATFP8 Mar 2019FPA-FE-25/Patiala/2012

Case brief

AI extract

What is this about?

Appeal against a penalty order under FEMA. The Tribunal held the appellant guilty of receiving foreign exchange without RBI permission. However, due to undue hardship and inability to deposit the penalty, the Tribunal waived the penalty while upholding the forfeiture of seized currency.

What did the court decide?

The appeal was dismissed regarding liability but the penalty was waived. The seized currency was forfeited.

FPA-FE-25/Patiala/2012 of Shri Harish Kumar @ Rinku v/s The… — Banking and Recovery | ATFP (2019)

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APPELLATE TRIBUNAL FOR SAFEMA, FEMA, PMLA, NDPS & PBPT ACT AT NEW DELHI

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Date of Decision : 08.03.2019

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FPA-FE-25/Patiala/2012

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Shri Harish Kumar @ Rinku … Appellant Versus The Joint Director Directorate of Enforcement, Patiala … Respondent

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Advocates/Authorized Representatives who appeared

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For the appellant : Shri T.K. Gadoo, Advocate For the respondent : Ms. Aagam Kaur, Legal Consultant CORAM JUSTICE MANMOHAN SINGH : CHAIRMAN

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JUDGEMENT

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FPA-FE-25/Patiala/2012

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By this order, I propose to decide the above-mentined appeal filed against the order dated 16.10.2012.

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By the impugned order, the penalty Rs. 25,00,000/- (Rs. Twenty-

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Five Lakhs only) were imposed.

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Facts are recorded in the impugned order, the same reads as under:

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“(a) During the year 2003, an information was received in Jalandhar Zonal office of the Directorate of Enforcement that one Shri Harish Kumar @ Rinku S/o Shri Kanwar Bhan, R/o H.No. 1969, Sanatan Dharam Mandir, Rajpura Town, District Patiala (Punjab) was indulging in receipt and

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FPA-FE-25/Patiala/2012

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Page 1 of 13

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distribution of compensatory payments on a large and organized scale under the instructions of persons residing abroad. Acting on the above information, on 10.01.2004 the above-mentioned residential premises of Shri Harish Kumar @ Rinku was searched under section 37 of Foreign Exchange Management Act, 1999 read with section 132A(1) of the Income Tax Act, 1961, and as a result thereof Indian Currency totaling to Rs. 21,75,000/- and incriminating documents were recovered and seized.

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(b). Statement of Shri Harish Kumar @ Rinku was recorded under Section 37 of Foreign Exchange Management Act, 1999 read with Section 132(4) of Income Tax Act, 1961 on 10.01.2004 in which he, inter-alias, stated that his friend Madan, earlier residing in Phase-11, Mohali, Punjab, had gone to U.S.A about 3-4 years ago; that the said Madan proposed to him to distribute money in India to relative of persons residing abroad from who he (Madan) collected foreign exchange; that in lieu of this he i.e. Harish Kumar @ Rinku, would earn a commission @ Rs. 700/- per Rs. 1,00,000/-; that as he was not having any occupation he agreed to do this work and was doing it for the last an year and a half; that he did not remember the address of Madan in U.S.A but he remembered his telephone number which was 4089464843; that Madan used to inform him about the money being sent for distribution over telephone from U.S.A alongwith details of the persons to whom the money was to be distributed and he used to distribute the money among those persons after deducting his commission; that the amount of Rs. 21,75,000/- recovered and seized from his residence was delivered to him by a person on 19.01.2004, under the instructions of Madan of U.S.A, that the details of such persons among whom the said money was to be distributed was given on page no. 8 and 9 of the loose sheets recovered and seized from his residence; that the amounts mentioned in these documents were written in codes, for example 50 written against the serial No. 2 in front of Resham Singh meant that Resham Singh was to be given an amount of Rs. 50,000/- on the instruction of his relative Guljinder Singh, residing abroad and similarly 200 written against serial No. 5 against Darshan Singh Jat meant that Darshan Singh Jat was to be given an amount of Rs. 2,00,000/- on the instruction of his relative Kuldip Singh residing abroad; that in these two fax messages names and addresses of 21 persons were written from the relatives of whom the fax messages names and addresses of 21 persons were written from the relatives of whom the said Mandan had collected foreign exchange in U.S.A and to these 21 persons a total of Rs. 31,27,000/-was to be distributed; that when asked that as per the fax message he had to distribute total amount of Rs. 31,27,000/- whereas an amount of Rs. 21,75,000/- was seized from his residence, he stated that he was to receive more money from U.S.A under instructions of Madan; an average he was receiving about Rs. 40 lacs per month under the instructions of Madan residing in U.S.A and

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FPA-FE-25/Patiala/2012

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Page 2 of 13

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distributing the same to the persons in India as per the details sent by Madan; that he used to finalize the accounts of above transactions in the end of every month. While explaining the seized loose sheets marked 1 to 10 and the Diary containing written pages 1 to 10 recovered and seized from his residence he stated that these contained the detailed accounts of receipt and distribution of Hawala Payments; that page No. 7 of the seized loose sheets contained Account No. 181-3-611439 of Hongkong Shanghai Corporation, Kawaloon Branch of one Usman Niyaz Ahmed Sheikh in which Madan was transferring money from U.S.A; that as per page No. 6 of the seized loose sheets he received total amount of Rs. 43,75,000/-on the instructions of Madan residing in America and the „Peti‟ written on this page meant Rs. 1,00,000/-; that as per this page he received Rs. 9,00,000/-, Rs. 700,000/-; Rs. 700,000/-; from Singh Rs. 11,50,000/- from Pali, and Rs. 9,25,000/- from Happy under the instructions of Madan residing in U.S.A which he distributed among the persons residing in Patiala, Nakodar, Dhada, Nawanshehar and other areas. On this page 13-29-500 is written before fax which meant that he had distributed Rs. 13,29,500/- to the persons whose details were given in the fax sent by Madan. While explaining Page No. 1 of the seized loose sheets, he stated it was a Visiting card of Harvinder Ahuja @ Happy who used to send him money from Delhi under instructions of Madan residing in U.S.A. While explaining the seized Diary he sated that as per Page No. 1 of the said Diary, he distributed Rs. 57,30,750/- in India among those persons whose details were sent by Madan from America; that on this Page also amounts were written in Codes i.e. 290 was written against Serial No. 1, 70 was written against Sr. No. 2, 50 was written against Sl. No. 3 which meant that he distributed Rs. 2,90,000/- to the person at Sr. No. 1, Rs. 70,000/- to the persons at Sr. No. 2 and Rs. 50,000/- to the person at Sr. No. 3; that the persons of Manda who came to deliver money to him used to call him at Rajpura Bye-pass and deliver him money after ascertaining his vehicle No; that he had received and distributed money under instructions of Madan residing in U.S.A during 2002-03 and he was not having any license from the Reserve Bank of India to carry out this business. Summons were issued to Harish Kumar @ Rinku on various dates to record his further statement but he did not appear.

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(c ). On the basis of the documents recovered and seized from the residence of Shri Harish Kumar @ Rinku, and the investigation made therein, on 13.01.2004 the residential premises of Shri Harvinder Ahuja @ Happy at 27/17, Upper Ground Floor, East Patel Nagar, New Delhi and the business premises of his company-M/s Om Forex Pvt. Ltd., 143-Gaffar Market, Karol Bagh, New Delhi were searched under Section 37 of Foreign Exchange Management Act, 1999 read with Section 132 of Income Tax Act, 1961, and as a result thereof, a document, viz one loose sheet was recovered and seized from the above-mentioned business premises of the said Shri Harvinder Ahuja @ Happy.

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FPA-FE-25/Patiala/2012

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(d). Statement of Shri Om Prakash Ahuja S/o Shri Gobind Ram Ahuja was recorded on 13.01.2004, in which he interalia stated that he did not know about the Accounts written in the Document seized from their business premises and that his son Shri Harvinder Ahuja @ Happy was one of the Directors in M/s Om Forex. Statements of Shri Harvinder Ahuja @ Happy S/o Shri Om Prakash Ahuja was recorded on 13.01.2004 and 03.02.200, in which he, inter-alia, stated that he was running a Company in the name of M/s Om Forex Pvt. Ltd. from Gaffar Market, Karol Bagh, Delhi which dealt in sale/purchase of foreign exchange, in which he and his father Shri O.P. Ahuja were Directors; that phone No. 25850156, 25755249 were installed at his Residence; Phone No. 25767036, 25801182 were installed at his Shop and his Mobile number was 35002900; that he knew Harish Kumar @ Rinku who was residing in Punjab; that he had given Shri Harish Kumar @ Rinku had visited his Shop two-three times; that when confronted with the Statement dated 10.01.2004 of Shri Harish Kumar @ Rinku, in which he had stated that he had been receiving money from Shri Harvinder Ahuja @ Happy under the instructions of Madan residing in America, he stated he knew Shri Harish Kumar @ Rinku, but had no business with him. Though Shri Harvinder Ahuja @ Happy in his statement dated 03.02.2004 denied any business dealing with Shri Harish Kumar @ Rinku, the documents seized from the Residential premises of Shri Harish Kumar @ Rinku clearly mentioned his name ‘Happy’ as well as the amounts received by Shri Harish Kumar @ Rinku from him; the total of such payments made by him to Shri Harish Kumar @ Rinku as recorded in the said documents aggregated to Rs. 61,00,000/-.

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(e). On the basis of Fax Message recovered and seized from the premises of Shri Harish Kumar @ Rinku, statements of various persons were recorded under section 37 of Foreign Exchange Management Act, 1999 r/w Section 131(1) of Income Tax Act, 196, the details of which are as under:

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(i) Smt. Darshan Kaur, Smt. Harminder Kaur, Smt. Harvinder Kaur @ Susan Kaur, Shri Dharmpal and Master Gurmej Singh: In their respective statements dated 14.01.2004, 14.1.2004, 14.01.2004, 14.01.2004 and 28.01.2004 they admitted that their relations living abroad had sent them Rs. 6,00,000/-, Rs. 1,44,000/-, Rs. 63,200/-, Rs. 2,00,000/- and Rs. 2,00,000/- respectively, but the same were not received by them till then.

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(ii) Shri Niranjan Singh Lamberdar, Shri Lakhvir Singh @ Chacha, Shri Avtar Singh, Smt. Mohinder Kaur, Shri Gurinder Singh, Shri Gian Chand Calcutta Wala, Shri Rachhpal Singh and Shri Kulawant Singh;

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FPA-FE-25/Patiala/2012

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Page 4 of 13

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In their respective statements dated 14.2.2004, 30.08.2004, 29.09.2004, 18.10.2004, 14.10.2004, 12.10.2004,7.8.2004 and 23.08.2004, they admitted that their relations living abroad had sent them Rs. 1,00,000/-, Rs. 68,000/-, Rs. 2,00,000/-, Rs. 1,00,000/-, Rs. 2,00,000/-, Rs. 2,00,000/-, Rs. 85,000/- and Rs. 1,00,000/-, respectively, but the same were not received by them. However, later on their said overseas relations informed them that the said amounts could not be delivered as the concerned Delivery Agents had been caught and they had received back their money.

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(f). Statement of Shri Harish Kumar @ Rinku was again recorded on 15.3.2005 in which he reiterated the facts as stated in his statement dated 10.01.2004 and again confirmed that the person named Madan mentioned in his statement dated 10.01.2004 was residing in U.S.A and his Telephone No. was 4089464843. Besides, he stated interalia that Page No. 5 (left side) of the seized Diary contained details of amount totaling to Rs. 29,55,000/- received in India from one Shri Harvinder Ahuja @ Happy, as per instructions of Madan of U.S.A; that on the back side of Page No. 5 were also written the details of amount of Rs. 1,47,19,850/- received from Shri Harvinder Ahuja @ Happy, as per instructions of Madan of USA, and the same were distributed of different persons in India; that he used to destroy the fax messages; that he had written the accounts in this Diary in the shape of current account so that in case of seizure of these papers, the details of the persons to whom he had distributed the money had been written but the complete details of the persons to whom the money had been distributed was not mentioned in this diary; that the amounts written on the left/right side of the diary had been received by him for distribution from the agents of Shri Harvinder Ahuja @ Happy of Delhi, as per instructions of Madan of USA; that as per Page No. 6 of the Diary he had distributed an amount of Rs. 1,45,69,900/- to different persons as per instructions of Madan of USA, and the balance amount had been received by him in the shape of commission; that he had written the current account of amounts received as per instructions of Madan of USA, in his Diary.

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(g). Further summons were issued to Shri Harish Kumar @ Rinku on 28.03.2005, 01.04.2005, 12.04.2005, 7.6.2005, 12.7.2005, 27.7.2005, 18.8.2005 and 3.10.2005 but he did not appear in the Office of Directorate of Enforcement, Jalandhar. However, vide his Representation dated nil addressed to the Assistant Director, he inter-alia, claimed that the seized amount was sale proceeds of agricultural land of some other persons who had entrusted the same to him. His Representation was duly taken into consideration but found to be devoid of any merit, and was baseless and made as an attempt to escape the clutches of law. These

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FPA-FE-25/Patiala/2012

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findings were accordingly informed to him vide letter no. T- 3/CP/JL/2004 dated 22.8.2005.”

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The finding of the Adjudicating Authority that the appellant had without any general or special permission of RBI, received amounts totalling to Rs.2,47,99,350/- in India, otherwise than through an authorised person, by order or on behalf of his friend Madan, a person resident outside India, and thereby he has contravened the provisions of section 3(C) of FEMA and the seized amount of Rs.21,75,000/- was the amount involved in the aforementioned contraventions of the provisions of FEMA, is not tenable as the charge is not based on any evidence.

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The case of the appellant on merit was that there was no evidence other than the appellant’s own statements which have not been corroborated independently of any other material. Other statements namely those of Harvinder Ahuja @ Happy as got recorded by the officers on 13.01.2004 & 03.02.2004 are exculpatory in nature. Even though there is allegation of receiving payments from Sh. Harvinder Ahuja by order or on behalf of person resident outside India, he has completely denied that he has any business dealing without appellant.

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It was also submittd by the appellant that evidence relied upon to support the SCN are of statements of 13 persons who were allegedly about to receive amounts of various payments on the instructions of their relatives working abroad. Their statements also do not have any evidentiary value as none of them could identify the appellant from whom, as per the respondent, they should have received their respective payments if the respondent had not seized the amount of Rs.21,75,000/from the appellant.

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FPA-FE-25/Patiala/2012

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Even though the Ld. Adjudicating Authority knew from appellant’s statements and documents seized, the identity of various persons from whom the appellant had been receiving payments in India, he has not made any efforts for a joint trial of the appellant with those identified by the Ld. Adjudicating Authority which fact is evident in his own finding under para 13 of the impugned order at pp. 30 of the Paper Book. Had they been jointly tried with the appellant, the allegation of receiving payment could have been substantiated with adequate evidence.

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It is true that the appellant had retracted his statements during the course of investigations as they have been recorded forcefully under the dictation of Shri Balvinder Singh, Enforcement Officer.

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It is stated on behalf of appellant that as the statements were recorded under the signature of Sh. B.C. Mahey, Assistant Director, the Ld. Adj. Officer did not entertain the appellant’s submission and also disallowed the request for cross examination of Sh. Balvinder Singh. It is alleged that had the cross examination been allowed, it could have been proved that it was Sh. Balvinder Singh who recorded the appellant’s statements. Denial of cross examination is in violation of principles of natural justice. The appellant had every right to prove his innocence which right has been violated by not allowing the cross examination.

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It is also alleged that no materials should be relied on against the appellant without his being given an opportunity of explaining them. It is hardly necessary to emphasize that the right to cross-examine the witnesses who give evidence against him is a very valuable right and denial of this right is a violation of principles of natural justice.

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Rather the appellant claimed an amount of Rs. 26,25,000/- out of seized amount of Rs.21,75,000/- as belonging to his relative Harchand Singh who loaned the said amount of Rs.26,25,000/- on interest for using it in his business. The appellant had filed affidavit in this regard but this evidence also had been rejected by the Adj. Officer on untenable reason. It is argued on behalf of appellant if the said amount is not returned, the relative may file the suit in civil court fo recovery of the said amount.

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Counsel for the Respondent mainly supported the findings of impugned order. The judgement of Hon’ble Supreme Court in the case of Monotosh Saha vs. Special Director, Enforcement Directorate and Anr. (2008(12) SCC 359) whereby in paragraph 15 it is stated that “The other aspect relates to imposition of condition to safeguard the realization of penalty. This is an aspect which the Tribunalhas to bring into focus. It is for the Tribunal to impose such conditions as are deemed proper to safeguard the realization of penalty. Therefore, the Tribunal while dealing with the application has to consider materials to be placed by the assessee relating to undue hardship and also to stipulate condition as required to safeguard the realization of penalty.” Accordingly the Appellant was righty directed to furnish bank guarantee equivalent to the penalty amount imposed within 45 days of the receipt of the copy of this order.

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I have heard both the parties and also have gone through the pleadings, documents and impugned order. It is an undisputed and unrebutted fact that based upon specific information that the said Shri Harish Kumar had been engaged in undertaking financial transactions of receiving and making of payments in India under instructions of persons FPA-FE-25/Patiala/2012 Page 8 of 13

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resident outside India, search of his residential premises was conducted on 10.01.2004 and as a result thereof incriminating documents besides Indian currency aggregating to Rs. 21,75,000/- was recovered and seized by the Officers to Directorate of Enforcement, Jalandhar.

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Shri Harish Kumar was examined by Shri B.C. Mahey, the then Assistant Director, Directorate of Enforcement, Jalandhar, after conclusion of search, and his statement recorded under the relevant provisions of FEMA, based upon the documents and Indian Currency recovered and seized from his residence, on 10.01.2004 itself.

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In his statement, Shri Harish Kumar has mentioned facts which were in his knowledge, which could not have been extracted from him, besides providing explanation to the contents of the seized documents, as also with regard to the seized Indian currency.

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In this statement as also in his subsequent statement dated 15.03.2005, which too was tendered by him before Shri B.C. Mahey, the then Assistant Director, he has mostly explained the contents of the seized documents, besides his modus operandi. Most of the documents recovered/seized were written by Shri Harish Kumar himself, as admitted in his statement dated 15.03.2005.

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From the above documents/statements the Investigating Officer became aware of the identity of various persons from whom Shri Harish Kumar had been receiving payments in India, under instructions of his friend Madan, residing in USA, who was earlier residing in Mohali. In view of other certain searches were conducted and a number of persons examined and their statements recorded under FEMA, which brought out FPA-FE-25/Patiala/2012 Page 9 of 13

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corroboratory evidence viz-a-viz the facts as stated by Shri Harish Kumar in his afore-mentioned statements.

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Shri Harish Kumar later on sought to retract from his abovementioned statements, by way of a letter sent during the course of investigations, besides by way of submissions made during the course of personal haring including in the form of Affidavits, both his as also of one other person, in which Affidavit, it is claimed that amount totaling to Rs. 26,25,000/- was received by Shri Harish Kumar from the said person (Harchand Singh) on interest for using the same in his business of Goldsmith.

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It was also contended on his behalf by Counsel that his statement dated was recorded by Shri Balvinder Singh, under duress no doubt Shri Harish Kumar has by his communication/submissions sought to deny the charge, as leveled in the Show Cause Notice under Adjudication.

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It is correctly found in the impugned order that from the seized material and the above-mentioned statements, and find that the said statements, when read with in conjunction with the seized documents/material, brings out the facts that the contention of the Noticee that he was forced to make inculpatory statements is not correct. Not only that these statements are in the form of explanation to the seized documents, it is also a matter of records that the said statements were recorded by Shri B.C. Mahey, Assistant Director and not by Shri Balwinder Singh (the then Chief Enforcement Officer), as alleged by the Noticee.

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Therefore, I agree with the finding arrived in the impugned order that it is established beyond a reasonable doubt that during the years 2002 and 2003, the said Shri Harish Kumar @ Rinku. It is correctly come to the conclusion in the impugned order that the Noticee, had, without any general or special permission of Reserve Bank, received amounts totaling to Rs. 2,47,99,350/-, in India, otherwise then through an authorized person, by order or on behalf of his friend Madan, a person resident outside India, and thereby he has contravened the provisions of Section 3 (c ) of the Foreign Exchange Management Act, 1999, to the extent as above, and I further find that the seized amount of Rs. 21,75,000/was the amount involved in afore-mentioned contraventions of the provisions of FEMA. It is also a matter record that the appellant had retracted his admission after the expiry of almost more than four years. The said period is long period of time. It is after thought thus has no value in the eyes of law.

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Therefore the penalty is rightly imposed upon the said Shri Harish Kumar @ Rinku penalty of Rs. 25,00,000/- (Rupees Twenty-Five Lakh Only), for the above-mentioned contraventions as well as recovery of the Indian Currency of Rs. 21,75,000/-, from his residential premises on 10.01.2004. The amount is also in contraventions in terms of Section 13 (2) of the said Act.

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The admission made by the appellant are corroborated with other evidence. Therefore, there is no merit in the appeal. As far as, it is held the seizure of Rs. 21,75,000/- from his residence; be kept by the respondent and shall be forfeited by the respondent as valid, no interference is needed.

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With regard to the penalty of Rs. 25,00,000/- is concerned, it has come on record that appellant is not in a position to deposit the said amount. The appellant is suffering from undue hardship. The financial condition of the appellant is very weak. He has been residing in House No. 1969, Rajpura Town, Punjab, on rent from the last many years. An affidavit of Shri Harish Kumar S/o Shri Polhar Dass, R/o House No. 1983, Rajpura Town, Distt. Patiala, Punjab has been filed. On the perusal of the affidavit and a copy of the deed of conveyance filed therewith makes it abundantly clear that the father of the appellant Late Shri Kanwar Bhan had been residing in the aforesaid rented house No. 1969 and after the death of his father the appellant has been residing in that house. He is an unemployed person living with the generosity of the Management of the nearby Gurudwara where he and his family are having their daily meals in return of his help to the distribution of free meal to the devotees. He does not have any income who is not an income tax payee and does not have any other financial resources to make the pre-deposit of the penalty.

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There is no material on record on behalf of the respondent to show that the appellant is not suffering from the undue hardship. It appears from the record, there is no contrary evidence available.

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Under these circumstances, with regard to the merit, appeal filed by the appellant is dismissed. The appellant is exempted to deposit the penalty amount. The same is waived in view of the peculiar facts of the present case. The impupgned order is modified only to this extent of penalty component.

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