SAFEMA Overturned Penalty on Appellant for UK Property Purchase as ED Fails to Prove Unauthorized Fund Transfer

Case Details: Ahmed Suleman Hajiji v. Special Director, Directorate of Enforcement, Mum. - [2024] 165 taxmann.com 766 (SAFEMA-New Delhi)

Judiciary and Counsel Details

• Munishwar Nath Bhandari, Chairman & Balesh Kumar, Member
• R.K. Handoo & Ms Medha Gaur, Advs. for the Appellant. Ms Anwesha Mishra, Proxy Counsel for the Respondent.

Facts of the Case

In the instant case, the appellant was alleged to have contravened provisions of sections 9 and 25 of the Foreign Exchange Regulation Act, 1973 (FERA), by purchasing immovable property in the U.K. for a consideration of 70,000 pounds without general or special permission of the Reserve Bank of India.

The respondent, the Enforcement Directorate (ED), issued the SCN to the appellant and imposed a major penalty of Rs 16 lakhs for violating sections 8, 9, and 25 of FERA.

The appellant contended that the said allegation was the outcome of information given by his brother-in-law, who informed the respondent that the appellant had purchased a house in the U.K. for a consideration of 70,000 pounds by transferring the said amount to him.

The appellant further contended that there was ongoing litigation in the U.K. between his brother-in-law and his sister, and thus, it was not possible to transfer 70,000 pounds to his brother-in-law.

It was noted that the appellant never visited the U.K., and no document could be produced by revenue showing the amount transferred. Further, since even otherwise, the execution of a power of attorney for its use in the U.K. was required to be notarised as per British Law, which did not exist in an instant matter, the penalty could not have been imposed without proof of contravention of the provisions of the Act.

Appellate Tribunal Held

The Appellate Tribunal held that since the respondent failed to prove the transfer of the amount, the penalty could not have been imposed without proof to show contravention of provisions of the Act. Therefore, the impugned order imposing a penalty upon the appellant for contravention of provisions of sections 9 and 25 could not be sustained, and the same was to be set aside.