AI Drafter 
TaxTMI 
TaxTMI 
2018 (5) TMI 1066
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 23.11.2007 sub registrar Nelamangala). Smt. Saraswati& Smt. Reshma Rs. 4,80,000/- ii) One property held in the name of Smt. Saraswathi and Smt. Reshma situated at Site No.4 Kaneshumari No.754/4, SLV Layout, Basavanahalli Village, KasabaHobli, Nlmangala measuring 3465 sft registered during the year Nov, 2007 (Regd Deed No.5651 dated 23.11.2007 sub registrar Nelamangala). Smt. Saraswati& Smt. Reshma Rs. 4,50,000/- iii) Property held in the name of Smt. V. Saraswathi, a Flat bearing No.1713, Ist Floor, 17th Wing, Measuring 1639 sft Situated on Corporation No. 59, at Palace Road, Ward No. 78, Vasanthanagar, Bangalore Smt. Saraswati Rs. 70,00,000/- iv) House situated at No.20, 18th Cross, Malleswaram, Bangalore. (Registered vide Sub registrar No.3861 dated 28.12.1973 (site No.20) and sub registrar No.4266, dated 28.01.1974 (site No.20A). Sub- registrar, Rajajinagar, Bangalore. S.K.V. Chalapathy (Mr. S.V.Srinivas used the money for renovation of this house0 Rs. 10,44,000/- [Rs.44,000/- (cost of land)+ Rs. 10,00,000/- (cost ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vanagar, Bangalore - 560 080, and (3) Mr. S.V. Srinivas S/o Mr. S. Venkatachalapathy R/o No. 20, 18th Cross, 8th Main Mallewwaram, Bangalore - 560 055, together had entered into criminal conspiracy and that during the year 2004 floated a company by name "M/s Itaska Software Development Pvt Ltd. (ITASKA)', Mr. S.V. Srinivas, alongwith Mr. Katta Subramanya Naidu and Mr. K.S. Jagadish @ Katta Jagadish Naidu, through ITASKA Software Development Pvt. Ltd. had submitted an application to Karnataka Udyog Mitra for acquisition of 325 acres of land in Bandikodigehally with an intention to get wrongful gain. (ii) On 30/11/2006 the ITASCA Company for the process of land acquisition had made an application to KIADB. Mr. K.S. Jagadish had purchased the demand Draft from his Bank Account and had enclosed the same with the said application and thereby proceeded further in the criminal conspiracy. (iii) It is alleged that Mr. Katta Subramanya Naidu has misused his power in the process of land acquisition by doing a lot of irregularities in the acquisition process. (iv) Mr. K.S. Jagdish, in furtherance to the said conspiracy joined hands with Mr. Jagaiah and Mr. Venkaiah ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Mr. B.K. Manju, Mr. M. Gopi all together had enered into a criminal conspiracy. Accordingly in order to fulfill the purpose of getting the land for the SEZ for OTASCA Company, the lands, which were identified for the SEZ purpose of the said company, the above persons had given false promises and assurances of giving more money to the land owners. Land owners were also threatened that if they fail to give the land, a false case will be filed against them and they will neither get money nor compensation. Without explaining the contents of the documents, the signature of the land owners of such land (identified for the SEZ purpose of ITASCA) were obtained as well as thumb impressions from the illiterates land lords on the documents/title, which were prepared to their convenience were obtained. Mr. B.K. Manju & Mr M. Gopi were brining the land lords to the officer of Mr. S.V. Srinivas, Mr. Jagaiah & Mr. Venkaiah were getting the signature on various documents and also a notary by name Mr. Jayanna was called to the office of Mr. S.V. Srinivas and were getting the documents so prepared by them notarized. Such illegal things carried out by the above accused persons were brought to light b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....8 r/w 120(B) IPC 5 Mr Venkaiah (absconding at the time of filing chargesheet) 420, 465,468 r/w 120(B) of IPC 6 Mr Basavapoornaiah 12 PC Act, 1988& 120(B) of IPC 7 Mr T.P.Muninarayanappa 13(1)(d) r/w 13(2) P.C. Act, 1988 & 120(B) of IPC 8 Mr B.K.Manju. 420 ,506 r/w 120(B) of IPC 9 Mr M.Gopi 420, 506 r/w 120(B) of IPC 8. Mr. S.V. Srinivas was arrayed as accused No. 3 in the schedule offence which was numbered as SPL CC 135/2011 and the same is quashed against Mr. S.V. Srinivas by the Hon'ble High Court of Karnataka in CrIP 5102/2015. He is also an accused in the section 45 compliant filed by the Respondent herein numbered as SPL CC 124/2014 and is arrayed as accused No. 3. The said SPL CC 124/2014 was instituted on 24.03.2014 after the impugned order dt. 21.02.2013 passed by the Adjudicating Authority in OC 158/2012. 9. Similarly Accused No. 1 and Accused No. 8 in FIR 57/2010 resulting in charge sheet numbered as SPL CC 135/2011, i.e. Mr. Katta Subramnaya Naidu and M. Gopi respectively challenged FIR 57/2010resulting in charge....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... being the Respondent filed a complaint bearing No. 158/2012 under Section 5(5) of the Prevention of Money Laundering Act ("Act'), before the Adjudicating Authority under the Act. The said authority has issued direction to issue notice to all defendants as they have reason to believe that an offence was committed under section 3 of the Act by the defendants. These are the only reason to believe recorded by the Adjudicating Authority. 15. After hearing the parties, the order was reserved on 3.1.2013. The Adjudicating Authority, on 21.02.2013 confirmed the provisional order of attachment in respect of many properties, including two properties which are the subject matter of above-mentioned appeal. 16. The allegation made against S.V. Srinivas is that he himself has declared in the Income Tax returns by Mr. S.V. Srinivas for the period 2007-08 was only Rs. 5,17,880/- whereas the two properties (Declared value of Rs. 9,30,000/-) and how can he purchased these two properties above. It is also mentioned that the period 2010-11 was only Rs. 43,18,104/- whereas the property (Stated value of Rs. 70,00,000/-) as mentioned were purchased during the same period in the name of his mother,....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... is a separate agreement for construction of flat, which is not with them. Approximately the total value of construction cost of flat taken by the builder is Rs. 50 lakhs. The total cost of the flat is Rs. 70 lakhs including the cost of undivided share of land. 19.3 The Income from all source as declared in the income tax returns for the period 2007-08 was only Rs. 5,17,880/- whereas the two properties (Declared value of Rs. 9,30,000/-) as mentioned at Sl.No. 30 and 31 of Para 2 above and as discussed above were purchased during the same period. It is also observed that the income from all source as declared in the Income tax returns for the period 2010-11 was only Rs. 43, 18,104/- whereas the property (Stated value of Rs. 70,00,000/-) as mentioned at Sl. No. 32 of Para 2 above and as discussed above were purchased during the same period. The property mentioned at Sl. NO. 30 of Para-2 above has already been admitted by Mr. S.V. Srinivas in his statement dated 12.06.2012 having renovated the house out of the money received from ITASCA account. 19.4 Mr. S.V. Srinivas was the person involved in the entire conspiracy of defrauding the money as discussed in the charges....
X X X X Extracts X X X X
X X X X Extracts X X X X
....bsp; TOTAL 2600000 It is thus evident that the Construction/Purchase of Properties mentioned at Sl. No.29 to 32 of Para 2 have been undertaken out of the proceeds of crime withdrawn/transferred/payment made on behalf of Mr. S.V. Srinivas from the account of M/s. Indu Builders & Developers Karnataka Bank Account, Indiranagar Bangalore as per the facts revealed in the statements recorded under Section 50 of PMLA and also the corroborative evidences supported by the bank statements depicting transfer of funds, huge cash withdrawal and payment made for purchase of aforementioned properties. Therefore, the said properties are involved in money laundering.' 19. It is matter of fact that the proceedings of schedule offence have been quashed against S.V. Srinivas and others have also been acquitted from all charges. Counsel has argued that since the prosecution has failed to establish any case against him, he was merely the director of the said company. No illegal cash was ever transferred in his account. 20. It is stated by the counsel appearing on behalf of appellants that the entire amount received by Itasca is....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 29,47,929 3 Other Income 0 4 Rental Income 36,000 36,000 72,000 1,08,000 1,08,000 3,60,000 5 Professional Income 99,208 11,99,064 36,67,309 49,65,581 6 Salary from M/s ITASCA 20,00,000 20,00,000 7 Agricultural Income 2,57,087 2,44,805 2,42,652 2,33,636 1,55,360 1,83,540 13,17,080 Total 7,77,744 13,01,746 21,14,581 45,62,264 51,82,985 51,29,140 1,90,68,460 Net Agricultural income earned by the 1st Appellant from 1997-98 to 2003-04* Total Income Earned by this Defendant 23. It is alleged by S.V. Srinivas that his only source of income during the financial years 1997-98 to 2003-04 corresponding to the assessment years 1998-99 to 2004-05 was agricultural income and hence, the 1st Appellant has not filed income tax returns during the said years. 24 It was stated that from Sl. No. 1 in t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and the same has been deposited in his bank accounts and declared all the said income in his income tax returns. 27. Therefore, it was alleged that the total income earned by the Appellant during the financial years 1997-98 to 2009-10 corresponding to the assessment years 1998-99 to 2010-11 is Rs. 2,04,77,081/-. All the cheque and cash deposits in his bank accounts pertain to the above said sources of income only. It is also stated that his client S.V. Srinivas has not paid any amount for purchase of flat bearing no.1713, 17th Wing, Palace Road, Bangalore. 28. It was stated that apart from the Rs. 20 lakhs received as salary from M/s ITASCA and Rs. 8 lakhs as legal remuneration from M/s Indu Builders, who had sufficient income from the above said sources of income to purchase the properties described at Sl. Nos. 30 and 31 in para 2 of the complaint. But, the respondent while passing the order of Provisional Attachment against properties described at Sl.No.30 and 31 in para 2 of the complaint has computed the income of the Appellant only for the period FY: 2005-06 to 2007-08, who has concluded that the Appellant did not have sufficient funds to purchase the above said propert....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he said property wrongly passed. 31. On merit in order to justify his stand before the Adjudicating Authority, the Appellants filed vide their reply by submitting that the charge sheet filed by Lokayuktha Police Wing against the Appellant S. V. Srinivas before the Special Court for Prevention of Corruption Act, Bangalore in Spl CC 135/2011 against his is mainly divided into two categories: i) Offences under Sections 12 of Prevention of Corruption Act and ii) Offences under Sections 420, 465, 468 and 506 of IPC r/w Sections 120(b) of the IPC. 32. It is argued on behalf of appellant Shri S.V. Srinivas that as far as offences under Sections under the Prevention of Corruption Act are concerned, the only section attributed to the S.V. Srinivas - Appellant in the above complaint is under Section 12 of the Act, which is not a scheduled offence under the Prevention of Money Laundering Act. 33. It is alleged that there is also no allegation in the charge sheet filed by Lokayuktha Police Wing that the Appellant has received any payments which can be brought within the purview of Prevention of Corruption Act. Against the Appellant, it is mentioned in the charge-shee....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e copy of the statement given by Mr. S. Jaggaiah to the Respondent is filed as ANNEXURE 'A-13'& 'A-14' available at page 435 and 437 respectively of the appeal. 38. It is stated that S. Jaggaiah has attempted to involve the Appellant with several transactions but statements of various persons, recorded when does not even mention the name of the Appellant. Therefore benefit of doubt goes in favour of the appellant and the reliance, of his statement of Mr. S. Jaggaiah has not much value as admittedly he had mainly acquaintance and relationship of Katta Subramanya Naidu and his son. 39. It is stated that even answers to question Nos. 5, 10 and 12 given by Mr. B.L. Venkaiah, to which a reference is made in the complaint, does not even remotely indicate that the Appellant received any payments drawn from the account of M/s. Indu Builders, other than a sum of Rs. 8 lakhs by means of account payee cheque. In so far as this payment of Rs. 8 lakhs is concerned, M/s. Indu Builders who were doing real estate business obtained the services of the Appellant and this payment of Rs. 8 lakhs was towards professional fees. In the Income Tax returns filed by the Appellant, this payment is show....
X X X X Extracts X X X X
X X X X Extracts X X X X
....u) of PMLA. The details of the same which are mentioned in Para-8 of the complaint dated 5th October, 2012 reproduce as under:- S. No. Description Direct (Rs) Amounts withdrawn through bearer cheques (In the name of Land lords) (Rs.) Amount withdrawn through bearer cheques ( in the name of non existing land lords and their legal heirs (Rs.) Amount (Rs) 1 A/c INDU BUILDERS 16,03,07,700/ - 37,23,29,000/- 32,02,27000/- 85,2863,700/- 2 A/c ITASCA MALLESHWARA M 5,77,00,000/- 33,87,18,000/- 30,90,33,178/- 70,54,51,178/- 3 A/c ITASCA BASAVESHWA RNAGAR 5,25,00,000/- 13,20,50,000/- 20,58,00,000/- 39,03,50,000/- Total 27,05,07,700/ - 84,30,97,000/- 83,60,60,178/- 194,86,64,878/- 43. With respect to allegations regarding the receipt of any money either from the account of M/s Indu Builders or M/s Itasca by way of bearer cheques, admittedly the appellant has filed an Interlocutory Application in terms of section 35 of PMLA read with Order 16 Rule 1 to the Lokayuktha Police Wing and an Interlocut....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ued on behalf of the appellant that the said confirmation by the Adjudicating Authority is void as it does not satisfy the requirement of section 8(3) as on 22/02/2013 and for the same, the properties of the appellant cannot be confiscated under section 8(5) of the Act. Counsel argued that since Srinivas was acquitted from the schedule offence, the adjudicating authority ought not to have passed the order under the Amendment Act once the order was reserved in the proceedings under the old Act. 48. Learned counsel for the appellant also argued the plain language of the Act, that for the confirmation to continue under the amended Act, it is sine-quo-non that there should exist a proceeding under the Act relating to an offence under this Act, more specifically, a complaint under section 45 of the Act should exist for an offence under section 3 punishable under section 4 of the Act. 49. After one year i.e. on 24.03.2014 the Respondent herein filed a complaint under section 45(1) of the Act before the Principal City Civil and Session Judge and Special Court for Prevention of Money Laundering Act, Bangalore on 24.03.2014 in which S.V. Srinivas and his wife are arrayed as a Accused.....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the said provision was amended and became operative w.e.f. 15.2.2013. The order was pronounced on 21.2.2013. It is not denied that the hearing was conducted when the unamended provision of section 8(3) (a) of the Act. It is also matter of record, the matter was not re-heard after amendment and after pronouncement. The prosecution complaint was filed after a period of one year from the date of passing the impugned order. 54. As mentioned earlier, the Adjudicating Authority has also extracted the language of the amended section 8(3) of the Act in the order confirmation, which highlights the fact that the adjudicating authority was aware that it was confirming the provisional attachment as per section 8(3) of the Act as amended by the Amending Act of 2012 which have come rinto force w.e.f. 15.2.2013. At the time of amendment, the order was already reserved, but it was passed after amendment was incorporated. 55. Section 8(3) pursuant to the Amendment Act of 2012 reads as follows:- "8(3) Where the Adjoining Authority decides under sub-section (2) that any property is involved in money-laundering, he shall, by an order in writing, confirm the attachment of the property m....
X X X X Extracts X X X X
X X X X Extracts X X X X
....be initiated, failing which, no confirmation can be made and the confirmation may become non est in the eye of law. The expression continue during proceedings to any offences indicates that the prosecution complaint must be pending, otherwise, there were no proceedings left under this Act. There is also a logic behind it that once the confirmation is passed, nothing remains left under this Act after continuation of attachment orders, except the prosecution complaint if filed by the respondent before the Special Court. 59. Even very recently the said provision of sub-section (3) of Section 8 has now again been amended by Act 13 of 2018 in the same lines as observed in earlier paras wherein sub-section (3)(a) of section 8 after the words "continue during' the words "investigation for a period not exceeding ninety days' has been inserted. So the intention of the insertion is that within 180 days at the time of passing the confirmation order, the Adjudicating Authority shall also to go through the prosecution complaint and evidence conducted by the respondent and details mentioned therein. 60. From the above, prima facie I am of the view that the prosecution complaint must be pen....