2026 (2) TMI 127 - AT - Money Laundering

Proceeds of crime and property of equivalent value: untraceable illicit funds justify provisional attachment, appeal dismissed.

Proceeds of crime untraceability permits attachment of property of equivalent value where accused cannot substantiate a lawful source. The tribunal found ... Proceeds of crime - property of equivalent value - burden of proof under Section 24 - confirmation of provisional attachment - provisional attachment and notice u/s 8(1) - third-party bona fide interest - statements u/s 50(2) and 50(3) - appeal u/s 26 - non-traceability of proceeds - definition of 'proceeds of crime' in Section 2(1)(u) - HELD THAT:- There is no loan document on record and even the bank statement to show that the amount of consideration for purchase of property was taken on loan. It has been admitted by the appellant that no repayment towards the alleged loan has been made. Even no bank document has been placed on record to substantiate the facts, therefore, respondents have rightly taken the property for provisional attachment because the amount acquired by the appellant’s son out of the commission of crime was not found traceable. In such circumstances, the property of equivalent value can be attached even if it was purchased prior to the commission of crime. The view is supported by the detailed judgment of this Tribunal in the case of Shri Sadananda Nayak Vs. Directorate of Enforcement, Bhubaneswar [2024 (10) TMI 1619 - APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI] and recent judgment of the Punjab and Haryana High Court in the case of Dilbag Singh @ Dilbag Sandhu Vs. Union of India & Ors. [2024 (11) TMI 833 - PUNJAB AND HARYANA HIGH COURT] The reference of the judgments has been given for consideration on the issue and to show that even if property was acquired prior to the commission of crime, then it can be attached if the proceeds of crime is not found available having been vanished and thus not traceable. The respondents have attached the property taken it to be out of proceeds of crime but alternatively we have referred to the judgment holding that if the proceeds of crime are not found traceable, the property of equivalent value can be attached. Thus, we do not find any reason to cause interference in the impugned order because consideration for purchase of property has been taken out of the source of the accused son Suresh Kumar and that remains the reason that the appellant could not disclose his own tenable source for purchase of property. The appeal is accordingly dismissed. Issues: (i) Whether immovable property purchased prior to the predicate offence can be treated as proceeds of crime or be subject to attachment; (ii) Whether the appellant discharged the burden to prove the lawful source of funds for purchase of the attached property; (iii) Whether provisional attachment of property in the name of the appellant can be sustained for alleged criminal acts of his son.Issue (i): Whether immovable property purchased prior to the predicate offence can be treated as proceeds of crime or be subject to attachment.Analysis: The definition of 'proceeds of crime' in Section 2(1)(u) contains multiple limbs, including property derived or obtained directly or indirectly from criminal activity and the value of any such property to permit attachment of property of equivalent value where actual proceeds are not traceable. Judicial precedents cited establish that properties acquired prior to the commission of the scheduled offence may be attached as property of equivalent value when the tainted proceeds cannot be located.Conclusion: Property purchased prior to the predicate offence is not a direct proceed of crime but can be attached as property of equivalent value where proceeds of crime are not traceable.Issue (ii): Whether the appellant discharged the burden to prove the lawful source of funds for purchase of the attached property.Analysis: Investigation summoned the alleged lenders and sought documents and bank records; none of the alleged lenders appeared and the appellant did not produce loan documents or bank evidence of repayment. Section 24 places the evidentiary burden on the person against whom attachment proceedings are instituted to prove the lawful source once the authority establishes a prima facie case.Conclusion: The appellant failed to discharge the burden under Section 24 to prove lawful source of funds; therefore the attachment was sustainable on that ground.Issue (iii): Whether provisional attachment of property in the name of the appellant can be sustained for alleged criminal acts of his son.Analysis: Evidence on record linked the appellant's son to the predicate offence and showed the son as recipient of proceeds; statements indicated the son's involvement in initiating purchase though consideration was paid by the appellant. In the absence of credible proof of independent lawful source for the appellant's property and given non-traceability of proceeds, provisional attachment of property in appellant's name as equivalent value was permissible.Conclusion: Provisional attachment of the appellant's property in consequence of the son's alleged criminality is sustainable as property of equivalent value where the appellant failed to establish a lawful source.Final Conclusion: The appeal is dismissed and the Adjudicating Authority's confirmation of the provisional attachment is upheld, with the property characterized as attachable for equivalent value rather than direct proceeds of the crime.Ratio Decidendi: Under Section 2(1)(u) of the Prevention of Money Laundering Act, 2002, the expression 'proceeds of crime' includes property directly or indirectly derived from scheduled offences and also the value of any such property, permitting attachment of property of equivalent value when tainted proceeds are not traceable; once a prima facie case is made, Section 24 requires the affected person to prove lawful source, failing which provisional attachment may be confirmed.