SAFEMA Tribunal upholds provisional attachment in money laundering case, appellants fail to prove legitimate income sources under Section 8(1) PMLA

Chanda Singh, Santoshi Devi, Sonanchal Buildcon Pvt. Ltd., Angesh Trading Co. Pvt. Ltd. Versus The Joint Director, Directorate of Enforcement, Lucknow

Chanda Singh, Santoshi Devi, Sonanchal Buildcon Pvt. Ltd., Angesh Trading Co. Pvt. Ltd. Versus The Joint Director, Directorate of Enforcement, Lucknow - ... 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.