2026 (1) TMI 522 - AT - Money Laundering

Salary, booking refund, and advance forfeiture payments challenged as 'proceeds of crime'; provisional attachment set aside on evidence

Whether the appellant was a recipient of 'proceeds of crime' so as to justify provisional attachment was the dominant issue. The Tribunal held that salary ... Money Laundering - Provisional Attachment Order - proceeds of crime - appellant is recipient of the proceeds of crime or not - justification to provisionally attach her property or appellant could disclose the source for purchase of the property - HELD THAT:- The Appellate Tribunal is not agreed with the view taken by the respondents and accordingly receipt of the salary by the appellant could not have been taken towards the proceeds of crime. It is more so when the appellant had even produced the appointment order issued by M/s SRS Finance Ltd. and has not been disputed by the witnesses other than one named in the earlier para to show that he had not seen appellant’s working in SRS Group of Companies. As against oral evidence, we cannot ignore the documentary evidence. Thus, the first limb towards proceeds of crime in the hands of the appellant cannot be accepted. The fake statement of facts regarding receipt of the huge amount by the appellant from M/s SRS Real Infrastructure Ltd. cannot be accepted having not visualized after taking into consideration the documents available on record. It would be relevant to add that the reference of the loan amount and payment by banking transaction was given but the relevant document in the shape of bank statement were not produced and it was later on produced along with the application on the direction of the Tribunal. It is sufficient to fortify the claim of the appellant that she had not received the proceeds of crime, rather return of money was for cancellation of the booking of the Villa. The third allegation regarding receipt of the amount is from M/s Shivnash Sale Agencies Pvt. Ltd. from which Company the appellant has received Rs. 25 lakhs each on two different dates - The appellant has placed on record copy of the income-tax return to indicate the payment of tax on the forfeiture of the advance amount of Rs. 50 lakhs. The Agreement to Sell and the income-tax return was acknowledged but has been ignored by the respondents while holding proceeds of crime in the hands of the appellant. In the light of the discussion made above, we do not find that the amount indicated by the respondents to be proceeds of crime received by the appellant is in ignorance of the documentary evidence available on record. If one has disclosed the source and is not recipient of the proceeds of crime, Provisional Attachment Order may not sustain. The impugned order cannot be confirmed - The Provisional Attachment Order and its confirmation by the Adjudicating Authority vide the impugned order - appeal allowed. 1. ISSUES PRESENTED AND CONSIDERED (i) Whether the appellant's property could be validly attached under the Act of 2002 on the allegation that she was a recipient of 'proceeds of crime', despite not being named as an accused in the FIRs or the ECIR. (ii) Whether the specific monetary receipts relied upon by the respondents (salary from a group company; refund amounts received from a real infrastructure company; and advance amounts received under an agreement to sell from an associate company) were conclusively established, on the record, to be 'proceeds of crime' or whether the appellant had disclosed legitimate sources supported by documentary evidence, thereby defeating the basis for attachment and confirmation. 2. ISSUE-WISE DETAILED ANALYSIS Issue (i): Attachment of property of a person not named as an accused Legal framework (as discussed by the Tribunal): The Tribunal considered the contention that absence of the appellant's name in the FIRs/ECIR prevents attachment, and held that for provisional attachment it is not necessary that proceeds should be in the hands of the accused; it can be in the hands of any person. Interpretation and reasoning: The Tribunal rejected the proposition that non-implication as an accused is, by itself, a ground to invalidate attachment, and treated the decisive inquiry as whether the appellant was in fact a recipient of proceeds of crime, or could disclose a legitimate source for the amounts relied upon for attachment. Conclusion: Non-naming of the appellant as an accused did not, by itself, bar attachment; the legality of attachment depended on proof that the relevant amounts in her hands were proceeds of crime. Issue (ii): Whether the alleged receipts constituted proceeds of crime or were explained by documentary evidence Legal framework (as applied in reasoning): The Tribunal proceeded on the premise that if the person discloses the source and is not a recipient of proceeds of crime, the provisional attachment cannot be sustained. It evaluated the evidentiary worth of documentary material (bank statements, income-tax scrutiny/assessment records, appointment order, agreement to sell, and tax disclosures) against the respondents' reliance on oral assertions. Interpretation and reasoning (salary receipts): The Tribunal found the appellant produced documentary records showing salary credited over time (not as a lump sum), corresponding TDS deductions, income-tax scrutiny/assessment acceptance for the relevant years (including scrutiny under section 143 and block assessment under section 153), and an appointment order. The respondents relied mainly on a statement of an officer claiming he had not seen the appellant working during 2010-2016 and treated the salary as layering. The Tribunal held that documentary evidence could not be ignored in favour of such oral evidence, and concluded the salary receipts could not be treated as proceeds of crime. Interpretation and reasoning (refunds from real infrastructure company): The Tribunal accepted the appellant's explanation, supported by bank statements, that she paid amounts for booking a villa (including a bank loan disbursal and other payments through banking channels) and, upon cancellation, received refunds in instalments. The Tribunal held the respondents wrongly characterized these refunds as proceeds of crime while ignoring the loan and transaction documents, and treated the receipts as return of booking money rather than illicit proceeds. Interpretation and reasoning (advance under agreement to sell): The Tribunal accepted that the appellant received two RTGS payments totalling 50 lakhs as advance under an agreement to sell, with a contractual stipulation that failure to pay the balance within two years would result in forfeiture. The Tribunal further noted the appellant's tax return reflected tax paid on the forfeited advance amount, and held that the respondents ignored the agreement and tax disclosure while treating the receipts as proceeds of crime. Conclusions: On all three components relied upon as 'proceeds of crime', the Tribunal held the respondents' inference was contrary to documentary evidence. Since the appellant disclosed the sources and the amounts were not established as proceeds of crime, the provisional attachment and its confirmation were unsustainable; accordingly, both the provisional attachment order and the confirming order were set aside and the appeal was allowed.