TaxTMI 
TaxTMI 
2019 (4) TMI 1087
X X X X Extracts X X X X
X X X X Extracts X X X X
....t that the income and assets of Appellant Nos. 2 & 3 have been incorrectly attributed to Appellant No.1, income of the Appellant No.1 has been suppressed and several other errors have been made in computation of income, assets and expenditure of the appellants. The Respondent being independent agency without proper investigation under this Act has erroneously concluded that the Appellant No.1 has acquired disproportionate assets to the tune of Rs. 2,28,89,632.56 whereas income of Rs. 2,20,28,015/- has been suppressed. 3. The following properties owned by the appellants have been provisionally attached by the respondent vide the Provisional Attachment Order and by the impugned order, the confirmation order was passed:- S. No. Details of the asset/ property Amount involved i. Bank Account No. 01810120022494, in the name of Appellant Nos. 2 & 3, @ Kotak Mahindra Bank, Sector-18, Noida Rs. 5,66,604.74/- Note: Frozen by the CBI ii. Bank Account No. 00431000084976, in the name of Appellant Nos. 1 & 2, @ HDFC Bank, Saket, New Delhi Rs.14,59,940.54 Note: Frozen by the CBI iii. Property bearing No. C-80, Sector 47, Noida, in the name of Appellant Nos. 1 & 2 R....
X X X X Extracts X X X X
X X X X Extracts X X X X
....iii) The Appellant No. 1 and his family members earned an income of Rs. 2,37,61,629.79/-, during check period. iv) The Appellant No. 1 and his family members incurred a total expenditure of Rs. 1,87,70,713.74/- during the check period. d) It is submitted that the CBI incorrectly inflated the assets and expenditure of Appellant No. 1, and wrongly concluded that Appellant No. 1 accumulated disproportionate assets to the tune of Rs. 2,28,89,632.56/- in conspiracy with Appellant No.3 (his son) Mr. Sumant Narang and one K. S. Dhaliwal. The CBI also wrongly concluded that Appellant No.2 - wife of the Appellant No 1 - abetted him in the commission of the offences. e) The CBI charged the Appellants for having committed the offences punishable under Sections 13(2) r/w 13(1)(e) of the Prevention of Corruption Act, 1988 and under Section 120-B r/w Sections 465, 471 of the IPC 1860. f) On the basis of the Final Report filed by the CBI, the Respondent registered case being ECIR No. SHSZO/01/2015 dated 22.05.2015 against the Appellants for having committed offences of Money Laundering punishable under Section 4 of the Prevention of Money Laundering Act, 2002 (hereinafter "PMLA"). g) Ap....
X X X X Extracts X X X X
X X X X Extracts X X X X
....son to believe that any person has committed an offence under section 3 or is in possession of proceeds of crime". 7. The Appellants filed a Joint Reply dated 16.06.2016 to the Show Cause Notice, along with supporting documents, before the Adjudicating Authority on 16.06.2016, clearly demonstrating inter alia that the Provisional Attachment Order was bad in law since the Complainant had failed to satisfy the mandatory preconditions under Section 5 (1) of the PMLA.The allegations made in the Charge sheet against the Appellants were demonstrably false even as per the documents filed by the CBI in its Charge sheet and therefore, there was no „reason to believe that‟ the Appellants were in possession of „proceeds of crime‟; and the Appellants acquired the Bank Balances and House property attached from legitimate sources of income.The Appellants also further filed additional documents to substantiate the submissions made in the Joint Reply, which were taken on record by the Ld. Adjudicating Authority on 30.06.2016. 8. In reply to Section 8(1) of the Act, the appellants (who are the defendants before the Adjudicating Authority) have given full details. The appel....
X X X X Extracts X X X X
X X X X Extracts X X X X
....te by January 2012, whereas work on the building, including major woodwork, plumbing etc. was completed in late 2013. 19. It is further pertinent to mention that the Defendants incurred a substantial expenditure of nearly Rs. 23,00,000/-on the cost of construction after the check period, which has not been accounted for by the CBI in its Charge Sheet, and thus has also been ignored by the Complainant due to the lack of any independent inquiry conducted by the latter. 20. It is, therefore, submitted that an amount of Rs. 70,17,047/- ought to have been reduced from the cost of construction as expenditure incurred by the Defendants during the check period. The report so prepared by the Independent Government appointed Surveyor commissioned by the Defendants has been annexed along with the letter dated 09.11.2016 filed hereto. Double/wrong accounting of assets and expenditure 21. Rs.5,00,000/- paid to RK Enterprises, accounted as expenditure by the CBI, was one of the payments made towards cost of construction and ought to have been deducted from the total cost of construction. 22. Investment of Rs. 20,000/- in Infra Bonds is shown both as an asset and an expenditure. 23. In....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t property. ii. Remainder of Rs. 36,99,050/- financed by Defendant No.2inter alia through the following gifts, self-acquired funds, and loans: 1. Rs. 50,000 gifted by Smt. Raj Malik (mother of Defendant No.2) 2. Rs. 1,50,000 by Defendant No.3 3. Rs. 1,50,000 by Defendant No.1 4. Loans taken and returned: a. Saideep Enterprises i. 13.06.2008: Rs. 6,00,000/- ii. 10.07.2008: Rs. 2,00,000/- b. Mr. G.K. Sharma i. 12.07.2008: Rs. 5,00,000/- ii. 15.07.2008: Rs. 5,00,000/- c. Mr. Umesh Jain i. 11.06.2008: Rs. 2,00,000/- ii. 08.07.2008: Rs. 2,00,000/- d. Umesh Jain (HUF) i. 08.07.2008: Rs. 2,00,000/- ii. 24.05.2008: Rs. 2,00,000/- e. Mr. M.S. Tanwar i. 11.06.2008: Rs. 5,00,000/- f. Ms. Seema Aggarwal i. Rs. 3,00,000/- These loans were received and repaid vide Bankers Cheques. Copies of the receipts disclosing the taking and return of loans are annexed to the letter dated 29.10.2015. Copy of A/c Statement for S.B. A/c No. 00431000084976 held with HDFC Bank, Saket is annexed to the letter dated 29.10.2015.. 29. The explanation of the Defendants in respect of the cost of construction has been provided here-in-above. The Defendants are presently c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the properties in question. The instant Complaint is liable to be rejected for this reason alone and strong exception of this conduct ought to be taken by this Hon'ble Authority. 9. It is also stated in the reply that the charge sheet filed by the CBI is replete with errors and deficiencies, and the alleged disproportionate assets computed by the CBI is erroneous and ought to be ignored for the following reasons: A. Income to the tune of Rs.73,72,491/- has not been considered; B. Loans received from family and friends to the tune of Rs.45,99,500/- has not been considered; C. Cost of construction of building at Plot No.C-80 inflated by CBI by over Rs.40,74,000/- D. Cost of construction of about Rs.23,00,000/- towards building at Plot No.C-80 incurred after the check period incorrectly considered as expenditure during the check period E. Double/wrong accounting of assets and expenditure to the tune of Rs.15,70,000/- F. Value of Plot No.11, Aradhana Enclave, Dehradun of Rs.5,22,690/- has been wrongly included in the assets at the end of check period G. Opening balance of the Defendants‟ investment in Shares and Mutual Funds at the beginning of the check period wro....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... by the Defendant No.1 during the check period. 11. It is argued by learned counsel for the appellants that the charge-sheet filed by CBI has many errors and deficiencies about the assets computed by CBI. As far as this para is concerned, this Tribunal is not empowered to go through the said errors, if committed by the CBI. However, the respondent is the agency which has to investigate the matter independently. It is also the duty of the Adjudicating Authority to consider the reply filed by the concerned parties before coming to final conclusion. As far as CBI case is concerned, this Tribunal does not wish to express any opinion. The contention of the appellant would be considered by the Special Court on merit after recording the evidence. 12. In the present appeal, the only concern is as to whether order passed is sustainable under this Act or not. It is not disputed by either party that Section 8(2) mandates that the Adjudicating Authority shall decide the matter after considering the reply and taking all the relevant materials placed on record. The said mandatory provision cannot be ignored by the Adjudicating Authority under any circumstances. 13. Section 5 in the Provision....
X X X X Extracts X X X X
X X X X Extracts X X X X
....elves were not initiated validly, the competent authority did not derive any jurisdiction to enter into the merit of the matter". The said decision was rendered in the context of NDPS Act, provisions of which are substantially in parimateria with PMLA on the point of provisional attachment; 15. The Adjudicating Authority appears to have not even perused the Joint Reply filed by the Appellants to the Show Cause Notice which is evident from its wholly incorrect finding in the Impugned Order that "Counsel for the defendant has submitted reply where he has mentioned that certain incomes have been left out, loans received from the family and friends are also not considered, construction cost is inflated and even expenses incurred after check period have been included. Beside this some other points have also been brought to the notice which reduce the amount of disproportionate assets but prima faciely it appears that some of these are after thoughts and have been mainly suggested for reducing disproportionate assets. 16. The case of the appellant is that all these points were not brought to the notice of the investigative agencies in the beginning. At this stage, it does not appear ap....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ncurred after check period have been included. Besides this some other points have also been brought to the notice which reduce the amount of disproportionate assets but prime facily it appears that some of these are after thoughts and have been mainly suggested for reducing disproportionate assets. All these points were not brought to the notice of investigation agencies in the beginning. At this stage, it does not appear appropriate to differ with the estimates prepared by the CBI and subsequently adopted by the ED. Hence both these amounts in the bank accounts are in the category of proceeds of crime which deserves to be attached." "Conclusion 1. On a through perusal of the PAO, complaint, relied upon documents, the investigations conducted by the ED and the statements recorded under Section 50 of the PMLA and on careful consideration of the arguments advanced on behalf of the complainant & Defendants, undersigned comes to the prima facie conclusion that the defendant have committed the Scheduled Offences, generated proceeds of crime and laundered them. No doubt the properties attached are proceeds of crime or value thereof and are involved in money laundering. Undersign....
X X X X Extracts X X X X
X X X X Extracts X X X X
....or any charge-sheet is filed under this Act. The Authority under this Act is duty bound to deal with the reply and materials on record within the meaning of Section 8(2) of the Act and decide the same on merit rather to simply adopt the CBI report and to give sweeping findings that the person concerned has committed the schedule offence when such matter is still pending before Special Court. 20. The Adjudicating Authority in the Impugned Order merely on presumptions has come to the conclusions arrived at merely on the basis the CBI Final Report dated 19.12.2014, without conducting any independent inquiries, despite the Act requiring the authority to independently apply its mind to the entire matter. 21. It is evident that the impugned order passed in complete non-application of mind is evident from a perusal of the Impugned Order, which shows a cut-paste method has been applied by the Adjudicating Authority, reproducing the Complaint and Reply filed by the parties along with even the typographical errors contained therein. 22. As already mentioned that in the reply paras 15 to 33 where the details of the loan amount received from the relatives and friends, source of income, wron....