Prakash Bafna vs Special Director, Enforcement ...
2009 Latest Caselaw 5156 Del

*       IN THE HIGH COURT OF DELHI AT NEW DELHI

+                   W.P.(C) 5632/2007

      PRAKASH BAFNA                              ..... Petitioner

                             Through      Mr. R.K. Handoo, Mr. S.P. Pandey, Mr.
                                          Atul Sharma, Advocates.
                                          Petitioner in person.

                    versus


      SPECIAL DIRECTOR ENFORCEMENT DIRECTORATE & ORS ... Respondent
                        Through    Ms. Rajdipa Behura and Mr.
                                   Shravanth Shankar, Advocates for ED.
      CORAM:
      HON'BLE MR. JUSTICE SANJIV KHANNA

                             ORDER

% 11.12.2009

This writ petition by Mr. Prakash Bafna is directed against the order

dated 28th May, 2007, passed by the Appellate Tribunal for Foreign Exchange,

disposing of the application for waiver of pre deposit. By order dated 28 th May,

2007, the petitioner has been directed to deposit 50% of the penalty amount

of Rs. 50 lacs. The impugned order records that if it is necessary, it will be

open to the petitioner to seek relaxation from income-tax authorities.

2. Counsel for the petitioner submitted that the adjudication order is an

W.P.(C) 5632/2007 Page 1 ex-parte order and is passed upon retracted statements. He further pleads

that the entire assets of the petitioner have been attached by the Income Tax

Department and the financial condition of the petitioner does not permit him

to deposit Rs. 25 lacs to enable him to have hearing of his appeal on merits.

3. The adjudication order refers to several NRE bank accounts which were

credited with foreign exchange and then transferred in Indian currency to third

parties as gifts. The allegation is that these deposits and transfers were made

in violation of the provisions of the Foreign Exchange Regulation Act, 1973 to

avail of tax benefits and exemptions. The show cause notice specifically refers

to transcript or statement of accounts from the NRE accounts. As per the

adjudication order, the total amount of foreign exchange deposited in the NRE

accounts was equal to Indian Rs.1,23,29,010/-

4. Pursuant to the directions of this Court, the petitioner has filed

statement of accounts of his saving account for the period 1st April, 2005 to

31st March, 2006. The statement of accounts reveals that the petitioner has

been applying for issue of shares under initial public offers. It also shows that

the petitioner has made payments for purchase of shop Nos. 7 and 8 at

Easteet and a flat at Ekbote Colony. The statement of accounts indicates

W.P.(C) 5632/2007 Page 2 transactions of substantial value in the said account. Counsel for the petitioner

submits that the attachment order passed by the Income Tax Department was

not in operation for some time and, therefore, during this period the

petitioner was able to procure loans from third parties and had made

payments for purchase of two shops and the flat. The balance sheet for the

period 1st April, 2005- 31st March, 2006, reveals that the petitioner is a joint

owner of the property at Rituraj Society, Pune Satara Road, Pune and has

shown rental income from shop No.2124, East Street, Pune. It also shows

capital gains from sale of residential houses of Rs.15,98,318/-. The petitioner,

however, states that the entire sale consideration of Rs. 39,70,000/- approx.

received from sale of flats has been deposited with the Income Tax

Department.

5. I have mentioned the aforesaid facts to show that the petitioner is a

man of means and has been making investments.

6. In view of the aforesaid facts, it cannot be said that the petitioner

should be given complete waiver of pre deposit of the penalty amount.

However, at the same time the petitioner has right to press his appeal and the

tribunal has itself stated that if required the petitioner should approach the

W.P.(C) 5632/2007 Page 3 Income Tax Department. Question of quantum and the benefit earned in the

transactions in which the main beneficiaries were the recipients is also an

aspect which requires consideration by the tribunal. The petitioner claims that

in other cases similar proceedings have been dropped. In these circumstances,

it is directed that the petitioner will deposit a sum of Rs. 10 lacs in two equal

installments with the Enforcement Directorate. The first installment will be

paid on or before 15th January, 2010 and the second installment will be paid

on or before 31st March, 2010. The petitioner will file an affidavit with the

Enforcement Directorate giving full details of his bank accounts and de-mat

accounts. The petitioner will also furnish full details of his investments in

mutual funds. In case, Income Tax Department withdraw their attachment

order, the petitioner will immediately inform the respondent, Enforcement

Directorate. The petitioner will not sell, transfer, encumber or alienate his

immovable properties without permission of the Appellate Tribunal for

Foreign Exchange till the disposal of the appeal.

7. The writ petition is accordingly disposed of. In the facts and

circumstances of the case, there will be no order as to costs. It is clarified that

the observations made in this order are for the purpose of disposing of the

W.P.(C) 5632/2007 Page 4 writ petition and will not influence the Appellate Tribunal for Foreign Exchange

when it decides the appeal on merits. It is further clarified that all the

contentions raised by the petitioner and the department on merits are left

open and will be examined by the Appellate Tribunal for Foreign Exchange.

Dasti to the counsel for the parties.

SANJIV KHANNA, J.

DECEMBER11, 2009
NA/P




W.P.(C) 5632/2007                                                         Page 5