Full Judgment Text
IN THE HIGH COURT OF DELHI AT NEW DELHI
CRL.A. No. 630 of 2008
Reserved on: September 15, 2014
Decision on: September 24, 2014
RAKESH JAIN ..... Appellant
Through: Mr. Abhinav Vasisht, Senior
Advocate with Mr. Abhishek Vikram,
Advocate.
versus
UNION OF INDIA & ANR. ..... Respondents
Through: Mr. Vineet Malhotra, Advocate
for ED.
WITH
CRL.A. No. 756 of 2008
RAVINDER JAIN ..... Appellant
Through: Mr. Gaurav Duggal with
Mr. Shekhar Kumar, Advocates.
versus
ENFORCEMENT DIRECTORATE ..... Respondent
Through: Mr. Vineet Malhotra, Advocate
for ED.
AND
CRL.A. No. 818 of 2008
SOM CHAI CHAI SRICHAWLA ..... Appellant
Through: Mr. Gaurav Duggal with
Mr. Shekhar Kumar, Advocates.
versus
ENFORCEMENT DIRECTORATE ..... Respondent
Through: Ms. Rajdipa Behura, Advocate
CRL.A. Nos. 630 of 2008, 756 of 2008 & 818 of 2008 Page 1 of 15
for ED.
CORAM: JUSTICE S. MURALIDHAR
JUDGMENT
24.09.2014
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1. These three appeals are directed against the judgment dated 3
June 2008 passed by the Appellate Tribunal for Foreign Exchange
(„AT‟) in Revision Petition Nos. 376, 377 and 378 of 2000. By the
said impugned judgment, the AT allowed the aforementioned
Revision Petitions filed by the Enforcement Directorate („ED‟) and
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set aside the two adjudication orders („AOs‟) dated 6 January 2000
passed by the Special Director („SD‟), ED exonerating the
Appellants herein from the charges of contravention of Sections 9
(1) (b), 9 (1) (c) and 9 (1) (d) read with Section 64 (2) of the Foreign
Exchange Regulations Act, 1973 („FERA‟).
Background facts
2. The background facts are that Oki Estates (P) Ltd. („OEPL‟)
purchased a farm house and land situated at Mehrauli in New Delhi
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by 12 registered sale deeds dated 2 March 1995 from Apaar
Construction Private Limited („ACPL‟) whose director Mr. Rakesh
Jain is the Appellant in Criminal Appeal No. 630 of 2008. The sale
consideration of Rs.23,76,000 was paid by 12 pay orders of Rs.1.98
lakhs each and the balance Rs.1,51,24,000 was paid in cash to
Mr. Rakesh Jain by some unknown persons on behalf of Mr. Som
Chai Chai Sri Chawla (the Appellant in Criminal Appeal No. 818 of
2008) who is a resident of Bangkok, Thailand. Mr. Ravinder Jain
and Mr. Sri Chawla (Appellants in Criminal Appeal Nos. 756 and
818 of 2008 respectively) were Directors of OEPL.
CRL.A. Nos. 630 of 2008, 756 of 2008 & 818 of 2008 Page 2 of 15
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3. On 24 June 1995 in response to summons issued to him under
Section 40 FERA, Mr. Rakesh Jain made a statement purportedly
admitting to having received the 12 pay orders for Rs. 23,76,000 and
cash of Rs.1,51,24,000 from unknown persons on behalf of Mr. Sri
Chawla. He claimed to have been introduced to Mr. Sri Chawla by
one Mr. L.R. Madan. The statement of Mr. Madan under Section 40
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FERA was recorded on 26 June 1995. Mr. Sri Chawla gave a
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declaration on 1 March 1997 at the Embassy of India in Bangkok
stating that he had paid to two persons, who came on the
instructions of Mr. Rakesh Jain, Thai Bahts in the sum of
1,09,50,000. The statement of Mr. Ravinder Jain was recorded on
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13 February 1997. The residential premises of Mr. Ravinder Jain
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and business premises of OEPL were searched on 19 February
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1997. The statement of one Mr. Sunil Kapoor was recorded on 29
October 1996.
4. On the basis of the above evidence gathered, a Memorandum/
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Show Cause Notice („SCN‟) dated 11 February 1998 was issued to
the three Appellants stating inter alia, that by remitting an amount
equivalent to Rs. 1,51,24,000 from abroad, Mr. Sri Chawla appeared
to have contravened Section 9 (3), Mr. Rakesh Jain had contravened
Section 9 (1) (b) and Mr. Ravinder Jain had contravened Section 9
(1) (d) read with Section 64 (2) of FERA. They were asked to show
cause as to why proceedings should not be initiated against them
under Section 50 FERA and as to why the farm house and land
should not be confiscated under Section 63 of the FERA.
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5. In a reply dated 30 August 1999 counsel on behalf of Rakesh
Jain pointed out to the ED that he had been assessed by the income
tax authorities and in an order passed by the Commissioner of
CRL.A. Nos. 630 of 2008, 756 of 2008 & 818 of 2008 Page 3 of 15
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Income Tax („CIT‟) on 20 August 1998 the sale price of
Rs.23,76,000 shown on the 12 sale deeds was accepted as correct.
The sale deeds of 99 other transactions of sale of lands in the
adjoining areas for approximately the same price were also enclosed
with the said reply. It was also pointed out that Mr. Rakesh Jain had
been forced to make the statement under Section 40 FERA There
were also inconsistencies in the statements of Mr. Rakesh Jain and
Mr. Sri Chawla in as much as Mr. Rakesh Jain has stated that he was
paid the money at his residence in Delhi whereas Mr. Sri Chawla
stated that he had paid it in Bangkok. It may also be mentioned that
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on 30 June 1995 itself Mr. Rakesh Jain through a representation to
the Finance Minister retracted in writing the statement made by him
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on 24 June 1995 alleging that he had been beaten up and coerced
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by the officials of the ED. On 25 June 1995 he sent a telegram to
that effect to the ED.
6. As far as Ravinder Jain is concerned he pointed out that he came
to know of the purchase of land by Mr. Sri Chawla much after the
event and he was nowhere involved in any of the transactions. He
also was not an active Director in OEPL.
7. The stand of Mr. Sri Chawla was that there were inconsistencies
in the two statements of Mr. Rakesh Jain and himself. Their
statements were also contradicted by the statement of Mr. L.R.
Madan who stated that Rs.3 crores had been given by Mr. Sri
Chawla to Mr. Rakesh Jain in March 1995.
The Adjudication Order
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8. The SD passed the AO on 6 January 2000 exonerating the three
Appellants for the following reasons:
CRL.A. Nos. 630 of 2008, 756 of 2008 & 818 of 2008 Page 4 of 15
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(a) In his statement dated 24 June 1995, Mr. Rakesh Jain had
claimed that Rs.1,51,24,000 had been received by him in cash
in two to four instalments in the last week of February 1995 at
his residence through some unknown persons on behalf of
Mr. Sri Chawla. This was done without any receipt being
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issued to the persons who gave him the cash. On 7 August
1999 he stated that he had nothing further to add. Mr. Madan,
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the property broker in his statement dated 26 June 1995
stated that one Dr. Seth had approached him in February 1995
to find a farm house for Mr. Sri Chawla and that he had
introduced Dr. Seth to Rakesh Jain. According to him, the
property was purchased by Mr. Sri Chawla in the name of
OEPL and apart from the sale consideration of Rs.23,76,000
against the 12 registered sale deeds, Rs.3 crores were paid in
cash.
(b) Mr. Sri Chawla stated that he had paid Thai Baht to the
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tune of 1,09,50,000 to two persons on 16 and 30 January
1995 in Bangkok.
(c) The above statements were contradictory to each other. If
indeed payment had been made in Thai Baht in Bangkok, it
appears that Rakesh Jain had acquired them in violation of
Section 8(1) of the FERA. However, there was no such
allegation in the impugned memorandum. It accordingly
showed that the ED itself did not give much credence to the
statement of Mr. Sri Chawla.
(d) Secondly, although Mr. Madan states that three crores
were paid in cash to Mr. Rakesh Jain on payment of 1%
CRL.A. Nos. 630 of 2008, 756 of 2008 & 818 of 2008 Page 5 of 15
commission, Mr. Rakesh Jain retracted his statement and
statement of Dr. Seth was not recorded.
(e) Thirdly, the CIT had also upheld the sale consideration
showed in the sale deed as being fair price. Since there was
no reliable evidence to support the allegation in the SCN, the
proceedings were dropped.
Filing of Revision Petitions before the AT
9. In terms of the Section 52 FERA, if ED was aggrieved by the
order of the AO, it could have filed an appeal. Under Section 52 (3)
FERA, the appeal should have been filed within 45 days and if ED
was unable to file it within that period, it could still file it within 90
days from the date of the order provided that the Appellate Board
constituted under Section 52(1) FERA was satisfied with the reasons
for the delay. In terms of the first proviso to Section 52 (2) ERA, no
appeal could have been filed after the expiry of 90 days from the
date of the AO.
10. Admittedly, no appeal was filed by the ED within a period of 90
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days from the date of the AO. This period expired on 6 April 2000.
11. FERA was repealed by the Foreign Exchange Management Act,
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1999 („FEMA‟) with effect from 1 June 2000. Realising that the
deadline for filing the appeal had been missed and FERA itself had
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been repealed with effect from 1 June 2000, the ED on 30 May
2000 filed four revision petitions being Revision Petitions Nos. 376,
377, 378 and 379 of 2000 before the AT. Under Section 52(4) of
FERA, a revision petition was maintainable before the Appellate
Board and there was no period of limitation for filing such revision
CRL.A. Nos. 630 of 2008, 756 of 2008 & 818 of 2008 Page 6 of 15
petition.
Decision of the AT
12. When the revision petitions were taken up for hearing before the
AT, one of the first questions to be considered was whether the
revision petitions were at all maintainable. This was the first
objection taken by the Appellants herein in the revision petitions. It
was pointed out that under Section 49(5) FERA, a revision petition
which was filed when FERA was in force would not automatically
continue under the FEMA.
13. The AT rejected the above contention by referring to Section
49(6) FEMA which brings in the application of Section 6 of the
General Clauses Act, 1897 („GC Act‟) and held that although under
Section 49 (5) (b) it is not expressly stated that the revision petitions
would continue, the continuation of such a petition was implicit on a
reading of the provisions of FEMA as a whole.
14. It was further held by the AT that since the revision petitions
were filed within a reasonable time, with there being no limitation as
such prescribed, they were not barred by laches. On facts it was
held that when the rates payable for agricultural land falling under
the present boundary of the municipality of Dwarka was taken into
consideration then it was above Rs.45 per sq. yard even in 1994 and
in the vicinity of Gurgaon which is the adjacent area, it should be
more than Rs.200 per sq. yard in 1995. In the retraction statement
of Mr. Rakesh Jain there was an admission that an extra amount of
Rs.1,51,24,000 had been paid and this was corroborated by the
statement of Mr. Madan and the declaration given by Mr. Sri
Chawla. It was further held that the above transactions involving
CRL.A. Nos. 630 of 2008, 756 of 2008 & 818 of 2008 Page 7 of 15
Mr. Rakesh Jain and Mr. Sri Chawla could not have been done
without the wilful acquiescence of Respondent No.3 Mr. Ravinder
Jain who had not come out with the full truth. Therefore, he was
equally to be blamed. Accordingly, the AOs were reversed and a
penalty of Rs.45,372,000 was imposed by the AT on each of the
Respondents.
Maintainability of the Revision Petitions
15. The first question that arises concerns the maintainability of the
revision petitions before the AT. It was submitted on behalf of the
Appellants by Mr. Abhinav Vashisht, learned Senior counsel and
Mr. Gaurav Duggal, learned counsel, that when Section 49 (5) (b)
did not save revision petitions filed under Section 52 (4) FERA but
only the appeals filed under Section 52 (2) FERA, the revision
petitions could not have been continued before the AT. Reliance
was placed on the decisions in Shiv Shakti Cooperative Housing
Society, Nagpur v. Swaraj Developers (2003) 6 SCC 659, Hari
Shankar v. Rao Girdhari Lal AIR 1963 SC 698 . It was further
submitted that the revision petitions were in any event filed beyond
the maximum period of limitation. Reliance was placed on the
decision in Ketan V. Parekh v. Special Director, Directorate of
Enforcement AIR 2012 SC 683 . Thirdly, they were filed with the
affidavit of an Assistant Director who was not authorised to file
such revision petitions. Reliance was placed on the decision in
Mohtesham Mohd. Ismail v. Spl. Director, Enforcement
Directorate (2007) 8 SCC 254.
16. In reply it was pointed out by Mr. Vineet Malhotra and Ms.
Rajdipa Behura, learned counsel for the ED, that by virtue of
Section 6 (e) of the GC Act read with Section 49 (6) FEMA, the
CRL.A. Nos. 630 of 2008, 756 of 2008 & 818 of 2008 Page 8 of 15
revision petition filed under Section 52 (4) FERA was saved and
could continue before the AT under FEMA. Reliance was placed on
the decisions in M/s. P.V. Mohammad Barnay Sons v. Director of
Enforcement AIR 1993 SC 1188 and Abid Malik v. Union of India
[2009] 93 SCL 177 (Delhi) .
17. The Court finds that the wording of Section 49 (6) FEMA read
with Section 6 (e) of the GC Act reflects the legislative intent that
even the revision petition which was filed prior to the effective
repeal of the FERA would continue before the AT functioning under
the FEMA. In Shiv Shakti Cooperative Housing Society, Nagpur
v. Swaraj Developers (supra), the Supreme Court referred to the
earlier decision in Kolhapur Canesugar Works Ltd. v. Union of
India (2000) 2 SCC 536 and held as under (SCC @ p.674):
“........if a provision of statute is unconditionally omitted
without a saving clause in favour of pending proceedings, all
actions must stop where the omission finds them, and if final
relief has not been granted before the omission goes into
effect, there is no scope for granting it afterwards. There is
modification of this position by application of Section 6 of the
General Clauses Act or by making special provisions.
Operation of repeal or deletion as to the future and the past
largely depends on the savings applicable. In a case where a
particular provision in the statute is omitted and in its place
another provision dealing with the same contingency is
introduced without a saving clause in favour of pending
proceedings, then it can be reasonably inferred that the
intention of the legislature is that the pending proceedings
shall continue but a fresh proceeding for the same purpose
may be initiated under the new provision.”
18. In the present case, it cannot be said that there is no saving
clause qua the revision petitions filed under Section 52 (4) FERA.
Anticipating such a contingency, Section 49 (6) FEMA was
CRL.A. Nos. 630 of 2008, 756 of 2008 & 818 of 2008 Page 9 of 15
introduced. This explains the expression “the mention of particular
matters in sub-Sections (2), (4) and (5) shall not be held to prejudice
or affect the general application of Section 6 of the General Clauses
Act, 1897”. What was clearly intended therefore was if within the
sunset period under Section 49 (3) FEMA, a revision petition was
filed under Section 52 (4) FEMA, such revision petition would
continue before the AT even after the repeal of FERA.
Companies not issued notice
19. The Court next proposes to deal with the issue whether in terms
of Section 68 FERA, proceedings under FERA could be maintained
against the Appellants notwithstanding that the companies
themselves have not been proceeded against.
20. It must be recalled that the genesis of the present proceedings
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are the 12 registered sale deeds dated 2 March 1995. Under the
said sale deeds, the seller was ACPL and the buyer was OEPL.
Admittedly no notices were ever issued to ACPL. Proceeding
against only Mr. Rakesh Jain in his individual capacity and not in
his capacity as Director, ACPL was clearly a mistake. In fact the
third paragraph in the Memorandum states that the OEPL had
purchased the property from Mr. Rakesh Jain when in fact the
registered sale deeds make it abundantly clear that it purchased from
ACPL. The fourth paragraph of the Memorandum also states that
consideration was paid to Rakesh Jain when clearly in terms of the
sale deeds it was paid to ACPL. Therefore, there was a fundamental
error in the entire proceedings.
21. Even from the point of view of other noticees, i.e., Mr. Ravinder
Jain and Mr. Somchai Chai Sri Chawla, both of whom were
CRL.A. Nos. 630 of 2008, 756 of 2008 & 818 of 2008 Page 10 of 15
Directors of OEPL, they were sought to be proceeded against in
their individual capacity and not as Directors of OEPL which was in
fact the purchaser of the property.
22. A doubt arose whether the OEPL was issued the Memorandum.
The name of OEPL appears at the foot of the Memorandum as one
of the addressees. However, a perusal of the memorandum dated
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11 February 1998 shows that there was not a single allegation
against OEPL. In fact the operative portion of the Memorandum
reads as under:
“Now, therefore, S/Shri Rakesh Jain, Ravinder Jain and
Somchai Chai Sri Chawl are required to show cause in
writing within 30 days of the receipt of this Memorandum as
to why Adjudication Proceedings as contemplated in Section
51 of the FERA, 1973 should not be held against them for the
aforesaid contraventions.”
23. Thus it is clear that the Memorandum did not intend that the
OPEL should show cause. This was pointed out by Mr. Kanwal
Nain, who sent a reply on behalf of the OEPL and Mr. Rakesh Jain
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to the ED on 18 October 1998. He pointed out that there was
nothing in the Memorandum against OEPL. It appears that the ED
also accepted the position since no further show cause notice or
Memorandum making any specific allegation against OPEL was
ever issued thereafter.
24. The net result is that for the purposes of Section 68 FERA
although the contravention if at all was by OEPL, there were no
proceedings initiated against it. Proceedings were initiated only
against its Directors in their individual capacities.
CRL.A. Nos. 630 of 2008, 756 of 2008 & 818 of 2008 Page 11 of 15
25. The wording of Section 68 FERA is identical to the wording of
Section 141 of the Negotiable Instruments Act, 1881 („NI Act‟) with
the only difference being that the above provision in the NI Act is
penal in nature whereas Section 68 FERA, although its titled
„Offences by Companies‟ talks of contravention by companies. It
was explained by the Supreme Court in Aneeta Hada v. Godfather
Travels & Tours (P) Ltd. (2012) 5 SCC 661, in the context of
Section 141 NI Act that in the absence of making the company,
which issued the dishonoured cheque, an accused, vicarious liability
cannot be fastened under that provision on the directors of the
company. On the same analogy it can be concluded that for the
purposes of Section 68 FERA, where the contravention is by a
company, liability cannot be fastened on its directors if the company
itself is not proceeded against.
26. Neither the AO nor the AT appeared to have noticed this
fundamental legal flaw in the entire proceedings that neither the
seller nor the buyer, i.e., the two companies ACPL and OEPL, were
proceeded against for contravention of the provisions of FERA.
27. On this ground, the Court finds that the entire proceedings
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commencing with the Memorandum dated 11 February 1998 are
unsustainable in law.
On merits
28. It was submitted by Mr. Abhinav Vashisht, learned Senior
counsel and Mr. Duggal, learned counsel for the Appellants, that
even on merits, there was no reliable evidence to sustain the
impugned order of the AT. It is submitted that the statements of the
noticees and others examined by the ED contradict each other.
CRL.A. Nos. 630 of 2008, 756 of 2008 & 818 of 2008 Page 12 of 15
According to Mr. Madan, Rs. 3,00,00,000 was paid in cash to
Mr. Rakesh Jain and on the said sum, Mr. Madan received 1%
commission. In his statement, Mr. Rakesh Jain stated that he
received Rs. 1,51,24,000 in two instalments at his residence through
some unknown persons in the last week of February 1995. A third
version has come from Mr. Sri Chawla that he paid Thai Bahts
1,09,50,000 to two persons under the instructions of Mr. Rakesh
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Jain on 16 and 30 January 1995. It was submitted that none of
these statements could be relied upon and that in any event, Mr.
Rakesh Jain has retracted his statement at the first available
opportunity. It was further submitted that the Commissioner of
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Income Tax in his order dated 20 August 1998 has, while allowing
the appeal of ACPL, accepted the valuation of the property as
reflected in the registered sale deeds and this was binding on the ED
as well. It was submitted that by discarding the said judicial order
of the CIT, as well as the copies of the sale deeds of the adjoining
properties which had been placed on record, the AT went far beyond
the scope of its revisional jurisdiction and entered into the question
of facts, thereby committing a grave error.
29. In response to the above submissions, it is pointed out by
Mr. Vineet Malhotra and Ms. Rajdipa Behura, learned counsel
appearing for the ED, that Mr. Sri Chawla made a voluntary
statement in Bangkok in the presence of the ED officials about
paying Thai Bahts of 1,09,50,000 in cash to Mr. Rakesh Jain.
Although the payment was made in Bangkok, his declaration was to
the effect that it was paid to two persons who came to him on behalf
of Mr. Rakesh Jain. His declaration also mentions the property in
question. The said declaration was never retracted by Mr. Sri
CRL.A. Nos. 630 of 2008, 756 of 2008 & 818 of 2008 Page 13 of 15
Chawla. This declaration by itself was sufficient, according to
learned counsel, to fasten the liability on the noticees for
contravention of Section 8(1) FERA. It was submitted that the
retracted confessional statements of Mr. Rakesh Jain could still be
relied upon as long as it was corroborated in broad particulars. Mr.
Rakesh Jain admitted to receiving Rs. 1,51,24,000 in cash and this
coupled with the amount stated in the sale deeds, more or less,
corresponded to the sum stated by Mr. Sri Chawla in his declaration
to have been paid at Bangkok.
30. In the first place, it must be observed that the ED itself is not
clear whether the declaration made by Mr. Sri Chawla in Bangkok
could be termed as a statement under Section 40 FERA. It is not
shown that the procedure envisaged under FERA was followed
while recording the said declaration. In any event, Mr. Sri Chawla
only talks of payment being made to two persons who met him on
behalf of Mr. Rakesh Jain. The payment is purportedly made for the
purchase of land. The sale deeds show that the purchaser was OEPL
and the seller was ACPL. The said statement, therefore, does not
help in proceeding only against Mr. Rakesh Jain, if no proceedings
had been initiated against ACPL, which is the true beneficiary.
While the declaration of Mr. Sri Chawla may, more or less,
corroborate the statement of Mr. Rakesh Jain as regards the total
amount paid, the statement of Mr. Madan does not corroborate
either statement.
31. On the scope of revisional jurisdiction, the Court finds that the
AT has relied on material that was not part of the record of the case.
In particular, while the AO correctly notes that the Investigation
CRL.A. Nos. 630 of 2008, 756 of 2008 & 818 of 2008 Page 14 of 15
Officer had not conducted any inquiry to ascertain the fair price and
has also taken note of the order of the CIT and on that basis held
that the SCN is not supported by proper evidence, the AT appears to
have not referred to the proceedings under the Income Tax Act,
1961 at all. The conclusion of the AT that there was payment over
and above the sale consideration shown in the sale deed, appears to
be based on the AT taking „judicial notice‟ of the price of
agricultural land in the vicinity of Gurgaon on the basis that it is an
‟adjacent area‟. No such plea was advanced by any of the parties
before the AT. The Appellants are, therefore, justified in their
criticism of the impugned order of the AT for travelling well beyond
the scope of its revisional jurisdiction and adjudicating upon factual
matters for which there was no basis in the record.
Conclusion
32. For all the aforementioned reasons, the Court is unable to sustain
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the impugned order dated 3 June 2008 of the AT and restores the
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AO dated 6 January 2000. The appeals are accordingly allowed,
but in the circumstances, with no order as to costs. The amounts
deposited by the Appellants shall be refunded to them within a
period of eight weeks in accordance with law. The bank guarantees
furnished by the Appellants will stand discharged and be returned to
them.
S. MURALIDHAR, J.
SEPTEMBER 24, 2014
dn/akg/tp
CRL.A. Nos. 630 of 2008, 756 of 2008 & 818 of 2008 Page 15 of 15