2024 (9) TMI 1361 - AT - Money Laundering

Provisional attachment of certain immovable and movable properties of the appellants herein - money laundering - proceeds of crime - burden to prove - offences punishable under section 409, 420, 423, 424, 465 120B of IPC, 1860 and Section 7, 10, 11 and 13 of Prevention of Corruption Act 1988 - disproportionate assets - HELD THAT - There are no cogent evidence that the property was acquired out of known sources of income. The appellant has claimed various sources of income including substantial agricultural income rental income contract work etc. but no reliable proof has been adduced in respect of any of these. ITRs have been filed belatedly after investigations began and even considering the best case scenario of the returns being accepted at face value the same are not sufficient to explain the actual purchase consideration for the subject land. The legal position is undisputed that once a notice under Section 8(1) of PMLA 2002 is issued it is for the noticee to indicate the sources of his income earning or assets out of which or by means of which he has acquired the property attached under Section 5(1) the evidence on which he relies and other relevant information and particulars and to show cause why all or any of such properties should not be declared to be the properties involved in money laundering and confiscated by the Central Government. Further the presumption in inter-connected transactions under Section 23 as also the presumption under Section 24 is against the appellant. There are no merit in the contention that the Ld. AA has not considered the definition of proceeds of crime under PMLA 2002. Even at the relevant time (prior to the amendments of 2015 and 2019) the definition of proceeds of crime took within its sweep any property derived or obtained directly or indirectly by any person as a result of criminal activity relating to a scheduled offence and even the value of any such property . The term property was also very widely defined to mean property of every kind whether corporeal or incorporeal movable or immovable tangible or intangible. It also includes deeds and instruments evidencing title to or interest in such property or assets wherever located. Having perused the contents of the order carefully and the evidence of the written agreement on nonjudicial Stamp Paper the value of the attached property should rightly be reflected as Rs. 60, 00, 000/- and not Rs. 4, 37, 500/- - there are no reason to interfere with the order of the Ld. Adjudicating Authority - appeal dismissed.

Summary

Issues Involved:
1. Legitimacy of the provisional attachment of properties under PMLA, 2002.
2. Whether the properties in question were acquired through proceeds of crime.
3. The burden of proof and the definition of "proceeds of crime" under PMLA, 2002.
4. The relevance of income tax returns and other financial documents in proving legitimate sources of income.
5. The admissibility of evidence under the Indian Evidence Act, 1872.
6. The role of interconnected transactions and the presumption under Sections 23 and 24 of PMLA, 2002.

Issue-wise Analysis:

1. Legitimacy of the Provisional Attachment of Properties under PMLA, 2002:
The appeals arose from the order of the Ld. Adjudicating Authority (AA) confirming the attachment of certain immovable and movable properties of the appellants under PMLA, 2002. The properties were provisionally attached by the Jt. Director of Enforcement, Lucknow Zonal Office, based on a reasonable belief that they were involved in "proceeds of crime." The AA confirmed the attachment, leading to the appeals.

2. Whether the Properties in Question were Acquired through Proceeds of Crime:
The properties were allegedly acquired by Shri Bhanu Pratap Sahi, a former Minister, through disproportionate assets during his tenure. The investigation revealed that the assets were acquired in his name and in the names of his relatives and front companies, amounting to Rs. 6,99,95,964/-, which was 3217.29% of his known income. The properties attached included lands, investments in companies, fixed deposits, and bank accounts.

3. The Burden of Proof and the Definition of "Proceeds of Crime" under PMLA, 2002:
The appellants contended that there was no evidence to show that the properties were acquired through proceeds of crime. They argued that the AA did not correctly understand the difference between "reason to suspect" and "reason to believe." The respondents, however, pointed out that the burden of proof was on the appellants to show that the properties were acquired through legitimate sources. The AA and the Appellate Tribunal upheld the attachment based on the material evidence and the presumption under Sections 23 and 24 of PMLA, 2002.

4. The Relevance of Income Tax Returns and Other Financial Documents in Proving Legitimate Sources of Income:
The appellants claimed that the properties were acquired through legitimate sources, including income from family properties, rental income, and agricultural income. However, the respondents pointed out inconsistencies in the income tax returns and other financial documents. The ITRs were filed belatedly, and the declared income was insufficient to cover the actual value of the properties. The Tribunal found no reliable proof of legitimate income sources and upheld the attachment.

5. The Admissibility of Evidence under the Indian Evidence Act, 1872:
The appellants argued that the statements of witnesses and other evidence were inadmissible under Sections 91 and 92 of the Indian Evidence Act, 1872. The respondents, however, cited the decision in R. Janakiraman v. State of Tamil Nadu, which held that oral evidence could be led to show that a transaction was sham or fictitious. The Tribunal found the evidence admissible and relevant to the case.

6. The Role of Interconnected Transactions and the Presumption under Sections 23 and 24 of PMLA, 2002:
The respondents argued that the interconnected transactions and the presumption under Sections 23 and 24 of PMLA, 2002, supported the attachment. The Tribunal agreed, stating that the burden of proof was on the appellants to show that the properties were not proceeds of crime. The appellants failed to discharge this burden, and the Tribunal upheld the attachment.

Conclusion:
The Tribunal dismissed the appeals, upholding the provisional attachment of properties under PMLA, 2002. The Tribunal found that the properties were acquired through proceeds of crime, and the appellants failed to prove legitimate sources of income. The burden of proof and the presumption under Sections 23 and 24 of PMLA, 2002, were key factors in the decision. The Tribunal also found the evidence admissible and relevant, supporting the attachment.