TaxTMI 
TaxTMI 
2021 (11) TMI 178
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.... the assets/properties of the petitioner being land measuring 2.49/1.6 acres situated at R.S. Khatian No.287 (Old 90), Dag No. 614 (old 37/4), J.L. No.731, Mauza Jungle Khash, Police Station and Sub Registry Office, Jhargram, District West Midnapore, West Bengal along with a building/ Hotel standing thereon (Kaushalya Heritage) in lieu of proceeds of crime to the extent of Rs. 1,08,95,583/- for a period of 180 days. 3. Mr. Indrajit Sinha, learned counsel for the petitioner submits that the facts giving rise to this writ petition are that the CBI, ACB Ranchi had registered FIR No. RC-19(A)/09-R dated 22.10.2009 for the offence allegedly committed under Section 120 (B) read with Sections 420, 467, 468 and 471 of the Indian Penal Code, 1860 and under Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988 against three accused persons, in which, the petitioner-company has also been arrayed as accused no.3. In the FIR, it has been alleged that one Baleshwar Baitha and Heeraman Mahto both Executive Engineers, Road Construction Department, Daltonganj, during period 2004-06 entered criminal conspiracy amongst themselves and with the petitioner-company. In pur....
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....eve". "Knowledge" is an awareness on the part of the person concerned indicating his state of mind. "Reason to believe" is another facet of the state of mind. "Reason to believe" is not the same thing as "suspicion" or "doubt" and mere seeing also cannot be equated to believing. "Reason to believe" is a higher level of state of mind. Likewise "knowledge" will be slightly on a higher plane than "reason to believe". A person can be supposed to know where there is a direct appeal to his senses and a person is presumed to have a reason to believe if he has sufficient cause to believe the same. Section 26 IPC explains the meaning of the words "reason to believe" thus: "26. 'Reason to believe'.- A person is said to have 'reason to believe' a thing, if he has sufficient cause to believe that thing but not otherwise." In substance what it means is that a person must have reason to believe if the circumstances are such that a reasonable man would, by probable reasoning, conclude or infer regarding the nature of the thing concerned. Such circumstances need not necessarily be capable of absolute conviction or inference; but it is sufficient if the circumstances are su....
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....to emphasise that before the Commissioner can levy a provisional attachment, there must be a formation of "the opinion" and that it is necessary "so to do" for the purpose of protecting the interest of the government revenue. The power to levy a provisional attachment is draconian in nature. By the exercise of the power, a property belonging to the taxable person may be attached, including a bank account. The attachment is provisional and the statute has contemplated an attachment during the pendency of the proceedings under the stipulated statutory provisions noticed earlier. An attachment which is contemplated in Section 83 is, in other words, at a stage which is anterior to the finalisation of an assessment or the raising of a demand. Conscious as the legislature was of the draconian nature of the power and the serious consequences which emanate from the attachment of any property including a bank account of the taxable person, it conditioned the exercise of the power by employing specific statutory language which conditions the exercise of the power. The language of the statute indicates first, the necessity of the formation of opinion by the Commissioner; second, the ....
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.... alive to the fact that such provisions are not intended to authorise Commissioners to make pre-emptive strikes on the property of the assessee, merely because property is available for being attached. There must be a valid formation of the opinion that a provisional attachment is necessary for the purpose of protecting the interest of the government revenue. 51. These expressions in regard to both the purpose and necessity of provisional attachment implicate the doctrine of proportionality. Proportionality mandates the existence of a proximate or live link between the need for the attachment and the purpose which it is intended to secure. It also postulates the maintenance of a proportion between the nature and extent of the attachment and the purpose which is sought to be served by ordering it. Moreover, the words embodied in sub-section (1) of Section 83, as interpreted above, would leave no manner of doubt that while ordering a provisional attachment the Commissioner must in the formation of the opinion act on the basis of tangible material on the basis of which the formation of opinion is based in regard to the existence of the statutory requirement. While dealing wit....
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....he assessment of that year, held that the power to reopen an assessment must be conditioned on the existence of "tangible material" and that "reasons must have a live link with the formation of the belief". This principle was followed subsequently in a two-Judge Bench decision in CIT v. Techspan (India) (P) Ltd. While adverting to these decisions we have noticed that Section 83 of the HPGST Act uses the expression "opinion" as distinguished from "reasons to believe". However for the reasons that we have indicated earlier we are clearly of the view that the formation of the opinion must be based on tangible material which indicates a live link to the necessity to order a provisional attachment to protect the interest of the government revenue. 56. A significant aspect of Rule 159(5) is that upon the levy of a provisional attachment, the person whose property is attached is empowered to file an objection within seven days on the ground that the property was or is not liable to attachment. In using the expression "was or is no longer liable for attachment", the delegate of the legislature has comprehended two alternative situations. The first, evidenced by the use of the word....
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.... proceeds of crime could not be done as there were numerous transactions dealing with cash deposits and withdrawals. 9. Learned counsel for the petitioner further submits that Section 2(1)(u) and relevant Section of the Prevention of Money Laundering Act has been considered by the Hon'ble Patna High Court in the case of HDFC Bank Limited v. Government of India and ors., reported in MANU/BH/0417/2021. 10. Paragraphs 12, 16 and 25 of the said judgment are quoted herein below: "12. In my view, the property derived from legitimate source cannot be attached on the ground that property derived from scheduled offence is not available for attachment. Limb Patna High Court CR. WJC No.2398 of 2017 dt.28-06-2021 No.II above is confined to value of property derived or obtained from criminal activity and not any property of the person alleged to be involved in money laundering. Otherwise the legislature would not have defined the "proceeds of crime", which was attachable under Section 5 of the PMLA. Indisputably, the property-in-question were acquired by respondent No.5 not from the alleged tainted money; rather it was acquired when there was no allegation of any act of money....
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....he petitioner. 12. On the same line, he submits that the Hon'ble Delhi High Court has recently considered the Act, in question in the case of Abdullah Ali Balsharaf and another v. Directorate of Enforcement and others, reported in 2019 SCC OnLine Del 6428. 13. Paragraphs 56, 107 and 108 of the said judgment are quoted herein below: "56. It is clear from the aforesaid scheme of the PMLA that any property can be provisionally attached under Section 5 or be seized under Section 17 or be frozen under Section 17(1A) of the PMLA. However, any such order can be passed only if the necessary checks and balances are complied with; namely, that the seizure or attachment is preceded by the concerned authority having reason to believe that such properties are proceeds of crime or are otherwise related to crime. Further, such reasons to believe must be formed on the basis of material in possession of the concerned officer and must be recorded in writing. In addition, such orders cannot be extended beyond the period of one hundred and eighty days, within which the Adjudicating Authority has to examine the matter and pass an order after issuing notice to the concerned persons an....
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.... warranted by this Court at this stage. It is relevant to note that the impugned order is only a provisional order of attachment and the question whether the same has to be confirmed is now required to be adjudicated by the Adjudicating Authority in terms of Section 8 of the PML Act. In this view, this Court was initially reluctant to interfere at this stage. However, a plain reading of the impugned order clearly indicates that the impugned order is fundamentally flawed and is without authority of law. The impugned order of provisional attachment is founded on the allegation that the property sought to be attached has been used in commission of a scheduled offence and, therefore, is liable to be attached as proceeds of crime. However, it is obvious that merely because a property used in commission of crime, the same cannot be construed as proceeds of that crime. 15. At this stage, it would be relevant to refer to Section 5(1) of the PML Act, the relevant extract of which is set out below: "Section 5 (1) - Where the Director or any other officer not below the rank of Deputy Director authorized by the Director for the purposes of this section, has reason to believe ....
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....coal block, the capital of HEPL was 5 lakhs which had swelled upto 7.91 crores after filing application for a coal block. The investment made by joint venture constituents of HEPL, namely, Himachal Pradesh Power Corporation Ltd. and EMTA, were further invested by HEPL; including in subscribing to the shares of CGL. The same cannot by any stretch be held to be proceeds of crime. The ED has, essentially sought to attach the investments made in HEPL on the allegation that the same have been used in commission of a scheduled offence. This is apparent from paragraphs 7 and 16 of the impugned order which are set out below: "7. AND WHEREAS, the investment of Rs. 7.91,00,000/- was made after filing for allocation of Coal Block, and the same has been used in commission of scheduled offence. i.e. the allocation of coal block by fraudulent means and to further obtain mining lease on the basis of said allocation. Further, there is a balance of Rs. 1,33,700/- lying in the bank accounts as mentioned at Para 5(xiv) and the fixed deposit No. 015340100288/8 dated 4.7.2017 amounting to Rs. 11,86,710/-. * * * 16. AND WHEREAS, the following amounts have been used in the comm....
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....and confiscated by the Central Government. 31. However, such argument is unacceptable in view of the independent provisions of Sections 5 and 8 which, at each of those stages, contemplate independent reasons to believe. Section 5 stipulates that if the authority concerned has reason to believe, to be recorded in writing, on the basis of material in his possession, that a crime as contemplated therein may have been committed, he may, by an order in writing, provisionally attach the property in question. 45. As such, it is evident that the noticee has no remedy against the illegality of a notice under Section 5(1) or Section 8(1) of the PMLA and/or even on the outcome of the ensuing hearing, if it goes against the noticee. Hence, the line of distinction in Biswanath Bhattacharya (supra), with Ajantha Industries (supra) does not exist in the present case, since there is no provision for a challenge to the legality of the notice or the outcome of the hearing, which is more akin to Ajantha Industries (supra) than Biswanath Bhattacharya (supra)." 18. By way of referring this judgment, he submits that the case of the petitioner is identical in nature. He further submi....
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....nd is shown as Rs. 30,12,900/- and the hotel in question was built up in that property in which Rs. 89,63,511/- are being invested. He also submits that so far as building construction is concerned, that is latter and proceeds of crime investment cannot be overlooked. He further submits that in the account, the amount has been interlinked and it is very difficult for respondent no.2 to bifurcate the amount, in question. He also submits that the order is effective for 180 days only and after 180 days, this order will lose its force. The petitioner has already been noticed under Section 8(1) of the Act and the onus lies on the part of the petitioner to disclose before the concerned authority how the property in question was not involved. He refers to paragraph 8 of the impugned order and submits that the finding of 26 numbers of forged invoices is there, which comes to Rs. 1,08,95,583/-. By way of referring page 102 paragraph (x) of the impugned order, he submits that the amount of Rs. 1,08,95,583/- was found to have been credited in the bank account in the name of contractor-company, but the same got intermingled with business venture of the said company therefore proceeds of crime ....
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....ed up from among other properties of the accused, the intent of the legislature being that it must be of the same "value" as the former. The third kind does use the qualifying words "equivalent in value". Though these words are not used in the second category, it is clear that the said kind also has to be understood in the same sense. 111. If such other property as above (the alternative attachable property or deemed tainted property) is owned by, or held in the name of, the accused, objections to attachment (or confiscation) would generally concern the material on which reasons to believe about money-laundering and acquisition of proceeds of crime are founded or the value of the property which has been attached. Again, the possibility of conflict involving interest of a third party comes in for which the bonafides of the acts through which such third party may have acquired interest in the targeted property, as indeed of the lawfulness and adequacy of consideration for such acquisition, would need scrutiny. 122. As in the case of RDBA, the above clause of SARFAESI Act would not render PMLA subservient to it because of the different objects and reasons of both ena....
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....powered enforcement officer has the authority of law in PMLA to attach not only a "tainted property" - that is to say a property acquired or obtained, directly or indirectly, from proceeds of criminal activity constituting a scheduled offence - but also any other asset or property of equivalent value of the offender of moneylaundering, the latter not bearing any taint but being alternative attachable property (or deemed tainted property) on account of its link or nexus with the offence (or offender) of money-laundering. (iv). If the "tainted property" respecting which there is evidence available to show the same to have been derived or obtained as a result of criminal activity relating to a scheduled offence is not traceable, or the same for some reason cannot be reached, or to the extent found is deficient, the empowered enforcement officer may attach any other asset ("the alternative attachable property" or "deemed tainted property") of the person accused of (or charged with) offence of money-laundering provided it is near or equivalent in value to the former, the order of confiscation being restricted to take over by the government of illicit gains of crime. (v....
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....undering, and that it has made all compliances with the existing law including, if so required, by having said security interest registered. (xii). An order of attachment under PMLA is not illegal only because a secured creditor has a prior secured interest (charge) in the property, within the meaning of the expressions used in RDBA and SARFAESI Act. Similarly, mere issuance of an order of attachment under PMLA does not ipso facto render illegal a prior charge or encumbrance of a secured creditor, the claim of the latter for release (or restoration) from PMLA attachment being dependent on its bonafides. (xiii). If it is shown by cogent evidence by the bonafide third party claimant (as aforesaid), staking interest in an alternative attachable property (or deemed tainted property), claiming that it had acquired the same at a time around or after the commission of the proscribed criminal activity, in order to establish a legitimate claim for its release from attachment it must additionally prove that it had taken "due diligence" (e.g. taking reasonable precautions and after due inquiry) to ensure that it was not a tainted asset and the transactions indulged in were l....
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....dents submits that the case of the respondents is fully covered in light of the said judgment and this petition is fit to be dismissed. He tried to distinguish the judgments relied by the learned counsel for the petitioner and by way of referring certain paragraphs of the said judgments, he submits that these judgments are not applicable in the facts and circumstances of the present case. 23. In light of the above submissions of the learned counsel appearing for the parties, the Court has gone through the materials on the record. Proceeds of crime has been defined under Section 2(1)(u) of the Prevention of Money Laundering Act, which is quoted herein below: "2.(1)(u) "proceeds of crime" means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property [or where such property is taken or held outside the country, then the property equivalent in value held within the country [or abroad]]; Explanation.-For the removal of doubts, it is hereby clarified that "proceeds of crime" include property not only derived or obtained from the scheduled offence but als....
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....on precedent under Section 5(1)(b) is that proceeds of crime are likely to be concealed, transferred or dealt with in any manner for passing such order the authority concerned is required to come to clear cut finding that the charged person is taking steps or inclined to alienate the property in question. Although at paragraph (xi) at page 103 of the impugned order, it has been stated by the concerned authority that if the properties are left unattached, they are likely to be concealed, transferred or dealt with by the accused person, but there is no material and reason assigned for coming to that finding. The property in question is mortgaged with the financial institution. In Radha Krishan Industries (supra), the Hon'ble Supreme Court has considered similar provision and held that there will be reason and material to come to that finding. While conditioning the exercise of the power on the formation of an opinion by the Commissioner that for the purpose of protecting the interest of the Government revenue, it is necessary so to do, it is evident that the statute has not left the formation of opinion to an unguided subjective discretion of the Commissioner. The formation of th....