TaxTMI 
TaxTMI 
2024 (4) TMI 374
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.... (for short "the Act of 2002") had provisionally attached the 3 (three) properties mentioned in the Schedule to the impugned order. 3. Before dealing with the legality and validity of the said impugned order, this Court would like to deal with the facts involved which would have material bearing on the decision. 4. From a perusal of the writ petition, it reveals that one Kuruna Bordoloi, APS, the Deputy Superintendent of Police, Vigilance & Anti-Corruption, Assam lodged a First Information Report on 12.02.2018 stating inter alia that an enquiry was initiated at the Directorate of Vigilance & Anti-Corruption, Assam against the Petitioner No.1 on the basis of a complaint regarding accumulation of assets disproportionate to his known source of income. Upon completion of enquiry, it revealed that the estimated disproportionate assets acquired/possessed by the Petitioner No.1 was to the tune of Rs. 1,42,59,064/-. Upon receipt of the said First Information Report dated 12.02.2018, the Officer-in-Charge, ACB Police Station cum Superintendent of Police, Vigilance & Anti-Corruption, Assam registered a case being ACB Police Station Case No.02/2018 under Sections 13(1)(e) and 13(2) of t....
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....titioners have assailed the said impugned order by way of the instant writ petition alleging that the condition precedent for exercising the powers under the second proviso to Section 5(1) were not satisfied inasmuch as for exercising of the powers under the second proviso to Section 5(1) of the Act of 2002, the concerned Officer has to have reasons to believe which is required to be recorded in writing and it was alleged that the Respondent No.2 who passed the impugned order did not record any reasons as would be apparent from the impugned order. It was alleged that the twin conditions for initiating action under Section 5(1) of the Act of 2002 were not fulfilled. 7. In addition to the above, it was the case of the Petitioners that a perusal of the Schedule attached to the impugned order would show that three properties have been attached and out of the three properties, one property admittedly is a property acquired by the Petitioner No.1 on 06.03.1997 on which date, the Act of 2002 was not even enacted. It is also the case of the Petitioners that various provisions of the Act of 1988 were included as Scheduled Offences in Part-B by the Prevention of Money Laundering (Amendmen....
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...., it was stated that the "proceeds of crime" which have been defined in Section 2(1)(u) of the Act of 2002 also brings within its ambit 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. As per the Respondents, the term "or the value of any such property" can be deemed to include any property acquired even prior to the enactment and enforcement of the Act of 2002. 11. An affidavit-in-reply was filed by the Petitioners to the said affidavit-in-opposition wherein the case as set out in the writ petition was reiterated and further it was mentioned that the writ petitioners cannot be prosecuted for alleged offences, as the offences were not scheduled offences under the Act of 2002 till 01.06.2009. It was also mentioned in the said affidavit-in-reply that the Directorate of Enforcement, Government of India, Guwahati Zonal Office had filed a complaint under Sections 44 and 45(1) of the Act of 2002 before the Court of the Special Judge, Assam at Guwahati against the Petitioners on 18.01.2022 and the learned Trial Court vide order dated 19.01.2022 in ECIR No.01/GWZO/201....
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....s brought within the ambit of Scheduled offence in terms with the Act of 2002 for the first time w.e.f. 01.06.2009. In that regard, the learned Senior counsel therefore submitted that on the face of it, the reasons on which the belief was formed cannot be sustained for passing the impugned order. In that regard, he referred to the various provisions of the Act of 2002 and specifically referred to the judgment of the learned Division Bench of the Punjab and Haryana High Court in the case of Seema Garg Vs. Deputy Director, Directorate of Enforcement reported in (2020) SCC OnLine P&H 738. (B) On the other hand, the learned Deputy Solicitor General of India, Mr. R. K. D. Choudhury, submitted that the reasons to believe for exercise of jurisdiction under the second proviso to Section 5(1) of the Act of 2002 is required to be recorded only which have been duly done and as such the question of the condition precedent being not there as alleged does not arise. During the course of hearing, the learned Deputy S.G.I. duly produced the records to show that the reasons on which the belief was formed was duly recorded in writing. Further to that, the learned Deputy S.G.I. submitted that the ....
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....stioned on the ground of not fulfilling the condition precedent as stipulated in Section 5(1) as well as its second proviso of the Act of 2002. This question touches on the very jurisdiction for initiation of the proceedings under Section 5(1) or its second proviso of the Act of 2002. 16. This Court finds it relevant to take note of the judgment of the Supreme Court in the case of Godrej Sara Lee Ltd. Vs. Excise and Taxation Officer cum Assessing Authority and Others reported in (2023) 109 GSTR 402/ (2023) SCC OnLine SC 95 wherein the Supreme Court had observed that when a pure question of law is raised and if investigation into the facts is unnecessary, the High Court would entertain a writ petition in its discretion even though the alternative remedy was not availed. It was further observed that where a controversy is a purely legal one and it does not involve disputed questions of facts but only question of law, then it should be decided by the High Court instead of dismissing the writ petition on the ground of an alternative remedy being available. Paragraph Nos. 4 to 8 of the said judgment in the case of Godrej Sara Lee (supra) being relevant are reproduced herein under: ....
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....and "maintainability" of a writ petition are distinct concepts. The fine but real distinction between the two ought not to be lost sight of. The objection as to "maintainability" goes to the root of the matter and if such objection were found to be of substance, the courts would be rendered incapable of even receiving the lis for adjudication. On the other hand, the question of "entertainability" is entirely within the realm of discretion of the high courts, writ remedy being discretionary. A writ petition despite being maintainable may not be entertained by a high court for very many reasons or relief could even be refused to the petitioner, despite setting up a sound legal point, if grant of the claimed relief would not further public interest. Hence, dismissal of a writ petition by a high court on the ground that the petitioner has not availed the alternative remedy without, however, examining whether an exceptional case has been made out for such entertainment would not be proper. 5. A little after the dawn of the Constitution, a Constitution Bench of this Court in its decision reported in 1958 SCR 595 (State of Uttar Pradesh vs. Mohd. Nooh) had the occasion to observe....
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.... appears on a plain reading of the former decision is that whether a certain item falls within an entry in a sales tax statute, raises a pure question of law and if investigation into facts is unnecessary, the high court could entertain a writ petition in its discretion even though the alternative remedy was not availed of; and, unless exercise of discretion is shown to be unreasonable or perverse, this Court would not interfere. In the latter decision, this Court found the issue raised by the appellant to be pristinely legal requiring determination by the high court without putting the appellant through the mill of statutory appeals in the hierarchy. What follows from the said decisions is that where the controversy is a purely legal one and it does not involve disputed questions of fact but only questions of law, then it should be decided by the high court instead of dismissing the writ petition on the ground of an alternative remedy being available." 17. From the above quoted proposition of law settled by the Supreme Court, it would show that maintainability and entertainability are two separate and distinct concepts. While maintainability strikes at the root of the jurisdict....
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.... of it in the Central Government, setting up of agencies and mechanisms for coordinating measures for combating money-laundering and also to prosecute the persons indulging in the process or activity connected with the proceeds of crime. This need was felt throughout the world, owing to the serious threat to the financial systems of the countries, including their integrity and sovereignty because of money-laundering. Notably, before coming into force of the Act of 2002, various other legislations including the Act of 1988 were already invoked to deal with attachment and confiscation/forfeiture of the proceeds of crime linked to concerned offences. Notwithstanding the then existing dispenses to deal with the proceeds of crime under various enactments including the Act of 1988, the Parliament enacted the Act of 2002 as a result of international commitments to sternly deal with the menace of the money-laundering of the proceeds of crime having transnational consequences and on the financial systems of the countries. It is seen that the said Act of 2002 was passed by both the Houses of the Parliament and received the Presidential assent on 17.01.2003 however, the same was brought into ....
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....vity of placement, layering and finally integrating the tainted property in the formal economy of the country. However, taking into account that Section 3 of the Act of 2002 specifically defines the offence of money-laundering, this Court finds it relevant to quote the said provision. Section 3 reads as under: "3. Offence of money-laundering - Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected [proceeds of crime including its concealment, possession, acquisition or use and projecting of claiming] it as untained property shall be guilty of offence of money-laundering. [Explanation. - For the removal of doubts, it is hereby clarified that,- (i) a person shall be guilty of offence of money-laundering if such person is found to have directly or indirectly attempted to indulge or knowingly assisted or knowingly is a party or is actually involved in one or more of the following processes or activities connected with proceeds of crime, namely - (a) concealment; or (b) possession; or (c) acquisition; or (d) use; or ....
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....enience is reproduced herein under: (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" including property not only derived or obtained from the scheduled offence but also any property which may directly or indirectly be derived or obtained as a result of any criminal activity relatable to the scheduled offence." 25. Before further expanding the analysis of Section 3 of the Act of 2002, let this Court slightly deviate and deal with the aspect "proceeds of crime". The original provision prior to the amendments carried out took within its ambit any property (as defined in Section 2(1)(v) of the Act of 2002) derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of such property. By the amendment carried out vide the Fi....
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.... 2(1)(u) of the 2002 Act. Similarly, possession of unaccounted property acquired by legal means may be actionable for tax violation and yet, will not be regarded as proceeds of crime unless the concerned tax legislation prescribes such violation as an offence and such offence is included in the Schedule of the 2002 Act. For being regarded as proceeds of crime, the property associated with the scheduled offence must have been derived or obtained by a person "as a result of" criminal activity relating to the concerned scheduled offence. This distinction must be borne in mind while reckoning any property referred to in the scheduled offence as proceeds of crime for the purpose of the 2002 Act. Dealing with proceeds of crime by way of any process or activity constitutes offence of money-laundering under Section 3 of the Act. 252. Be it noted that the definition clause includes any property derived or obtained "indirectly" as well. This would include property derived or obtained from the sale proceeds or in a given case in lieu of or in exchange of the "property" which had been directly derived or obtained as a result of criminal activity relating to a scheduled offence. In the....
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....y absolved by a Court of competent jurisdiction owing to an order of discharge, acquittal or because of quashing of the criminal case (scheduled offence) against him/her, there can be no action for money-laundering against such a person or person claiming through him in relation to the property linked to the stated scheduled offence. This interpretation alone can be countenanced on the basis of the provisions of the 2002 Act, in particular Section 2(1)(u) read with Section 3. Taking any other view would be rewriting of these provisions and disregarding the express language of definition clause "proceeds of crime", as it obtains as of now." 27. From the above quoted paragraphs, it would be seen that the Supreme Court observed that the term "proceeds of crime" being the core of the ingredients constituting the offence of money-laundering, the said expression needs to be construed strictly. It was observed that all properties recovered or attached by the Investigating Agency in connection with criminal activity relating to Scheduled Offence under the General Law cannot be regarded as a proceeds of crime. There may be cases where property involved in commission of a Scheduled Offenc....
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....been used by the legislature while defining the term "proceeds of crime". The question arises why? The terms "relating" and "relatable" are distinct adverbal expressions. While the former denotes in connection with a Scheduled Offence whereas the latter connotes possibility to connect to a Scheduled Offence. The only reason for doing so is to bring the second and third category of property within the fold of "proceeds of crime". Further to that, the definition of "proceeds of crime" does not state that property/properties derived or obtained after the offence is made a Scheduled offence would come within the fold of proceeds of crime. The definition envelopes all properties derived or obtained, directly or indirectly as a result of a criminal activity relating to or relatable to a Scheduled Offence. Simply put, all properties derived or obtained, directly or indirectly, as a result of a criminal activity relating to or relatable to a Scheduled Offence would be proceeds of crime, irrespective of when the said property/properties is/are derived or obtained. In the opinion of this Court, any other interpretation would go against the legislative intent behind the Act of 2002. 30. Th....
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....to be prosecuted for offence of money-laundering under the Act of 2002 - for continuing to possess or conceal the proceeds of crime (fully or in part) or retaining possession thereof or using it in trenches until fully exhausted. It was further observed that the relevant date i.e. the date on which the person indulges in the process or activity connected with such proceeds of crime irrespective of when the property was derived or obtained. Paragraph Nos. 270 and 296 of the said judgment is quoted herein under. "270. Needless to mention that such process or activity can be indulged in only after the property is derived or obtained as a result of criminal activity (a scheduled offence). It would be an offence of money -laundering to indulge in or to assist or being party to the process or activity connected with the proceeds of crime; and such process or activity in a given fact situation may be a continuing offence, irrespective of the date and time of commission of the scheduled offence. In other words, the criminal activity may have been committed before the same had been notified as scheduled offence for the purpose of the 2002 Act, but if a person has indulged in or con....
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....relation to or relatable to a Scheduled Offence. The judgments of both the Delhi High Court in the case of Axis Bank (supra) as well as Punjab and Haryana High Court in the case of Seema Garg (supra) which in the opinion of this Court would therefore neither help the Petitioners nor the Respondents in view of the categorical observations made by the Supreme Court in the above quoted paragraphs. 33. In the backdrop of the above, let this Court take the third point for determination formulated above. It would be seen from the impugned order that for the period from 01.04.1986 to 2012, the total income of the Petitioner No.1, his wife, son and daughter from all known sources was arrived at Rs. 2,17,95,572/-. It was also mentioned in the said impugned order that the total expenditure so made was Rs. 3,60,54,636/- and the difference amount was Rs. 1,42,59,064/- which was opined to disproportionate assets. Therefore, from a perusal of the said impugned order, it appears that there is an allegation of criminal activity relating to offences under the Act of 1988 having been committed between the period from 1986 to 2012. It is also alleged that during this period, various properties wer....
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....t below the rank of the Deputy Director so authorized by the Director has to have reasons to believe (the reasons for such believe to be recorded in writing) on the basis of materials in his possession that (a) Any person is in possession of any proceeds of crime; and (b) Such proceeds of crime are likely to be concealed, transferred or dealt with in any manner which may result in frustrating any proceedings relating to confiscation of such proceeds of crime under Chapter-III. On the basis of the said reasons to believe or for that matter the formation of the opinion which is required to be recorded in writing, the Director or any other Officer not below the rank of the Deputy Director by an order in writing, provisionally attach such property for a period not exceeding 180 days from the date of the order in such a manner as may be prescribed. There are three provisos to Sub-Section (1) of Section 5 of the Act of 2002. The first proviso stipulates that no such order of attachment shall be made unless, in relation to the Scheduled Offence, a report has been forwarded to the Magistrate under Section 173 of the Code of Criminal Procedure, 1973 or a complaint ha....
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....ord the reasons for formation of his belief in writing that there is urgency to invoke the powers under the second proviso to Section 5(1) of the Act of 2002, taking into consideration that such extraordinary powers have been conferred only to be exercised with immediacy. The third proviso to Section 5(1) of the Act of 2002 stipulates that while computing the 180 days of the validity of the provisional attachment order, the period of stay by the High Court shall be excluded and further period not exceeding 30 days from the date of order of vacation of such stay order shall be counted. This third proviso assumes relevance taking into account that this Court vide order dated 10.09.2020 had stayed the impugned order dated 24.06.2020 and presently the stay order is in operation. 36. This Court finds it very pertinent to observe that Section 5(1) of the Act of 2002 envisages an action of provisional attachment can be initiated only on the basis of materials in possession of the Authorized Officer indicative of any person being in possession of proceeds of crime. The precondition of being proceeds of crime is that the property has been derived or obtained, directly or indirectly by....
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....ent, the appellant and others are said to have preferred appeal before the Appellate Tribunal and stay has been granted by the appellate authority and the said appeal is stated to be pending." 38. Before further proceedings on the point of determination in hand, this Court would like to deal with one categorical submission of the learned Senior counsel for the Petitioners that the reasons which have been recorded has to be mentioned in the Provisional Attachment Order or for that matter, the said reasons are to be furnished to the Petitioners. In the opinion of this Court, the said submission is totally misconceived inasmuch as a perusal of Section 5 of the Act of 2002 do not in any manner stipulate that the said reasons to believe which is required to be recorded in writing is to be furnished to the person whose property have been provisionally attached or the reasons so recorded are to be a part of the Provisional Attachment Order. A similar submission has also been made in respect to Section 8 of the Act of 2002 by filing an additional affidavit which in the opinion of this Court is also fallacious for the same reason as Section 8 of the Act of 2002 also does not require the ....
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....ve, this Court finds another reason why the said reasons so recorded in writing need not be furnished. In the previous segments of the instant judgment, this Court dealt with the Rules of 2005 which specifically dealt with the manner of forwarding a copy of the order of provisional attachment of property along with materials and copy of the reasons along with the materials in respect of the survey to the Adjudicating Authority and its period of retention. A reading of Rule 3 and 4 of the Rules of 2015 clearly shows that the materials so forwarded including the reasons has to be kept confidential and as such the question does not arise of providing the reasons so recorded in writing more so when the Act of 2002 is completely silent on the said aspect. 40. Now let this Court again proceed as to whether the conditions precedent for issuing the impugned provisional attachment order was duly satisfied. During the course of hearing, the reasons so recorded in writing by the Respondent No.2 was placed before this Court. From a perusal of the reasons, it reveals that the Respondent No.2 had recorded that he had reasons to believe that the properties which have been attached were proceed....
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.... respect to the proceeds of crime. It was observed that only upon recording satisfaction regarding the twin requirements referred to in Sub-Section (1) of Section 5 of the Act of 2002, the Authorized Officer can proceed to issue order of provisional attachment of such proceeds of crime. Further to that, it was also observed that the Authorized Officer has to form his opinion and delineate the reasons for such belief to be recorded in writing which indeed is not on the basis of assumption but on the basis of material in his possession. It was also categorically observed that the order of provisional attachment is thus the outcome of such satisfaction already recorded by the authorized officer. 43. This Court further finds relevant to take note of paragraph No. 300(i) and (ii) of the said judgment wherein the Supreme Court amongst others has also dealt with the procedural safeguards in respect to provisional attachment. Paragraph Nos. 300 (i) and (ii) of the judgment in the case of Vijay Madanlal Choudhary (supra) is quoted herein under: "300. The procedural safeguards provided in respect of provisional attachment are effective measures to protect the interest of the pers....
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.... attachment shall be made unless, in relation to the scheduled offence, a report has been forwarded to a Magistrate under Section 173 of the Code of Criminal Procedure, 1973 (2 of 1974), or a complaint has been filed by a person authorised to investigate the offence mentioned in that Schedule, before a Magistrate or court for taking cognizance of the scheduled offence, as the case may be." 45. In the backdrop of the above, if this Court again reverts back to the "reasons to believe" which was placed before this Court, there is not a single whisper as to what materials were available with the Respondent No.2 that the properties which have been attached, if left unattached, the said properties would be transferred, disposed, parted with or otherwise dealt with. There is not a single mention as regards the reasons for immediacy for the purpose of passing the impugned order. On the other hand, the reasons to believe so recorded by the Respondent No.2 mentioned that if the properties were left unattached, they are likely to be transferred, disposed of, parted with or otherwise dealt with in any manner prejudicial to the purpose of investigation carried out under the provisions of the....
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....he Act of 2002 as well as the second proviso to Section 5(1) of the Act of 2002 were not fulfilled. The second question raised is a pure question of law as to whether a property derived or obtained prior to the enactment of the Act of 2002 or for that matter prior to the Act of 1988 being made a Scheduled Offence can be treated as a proceeds of crime. These questions raised being questions of law and questions challenging the jurisdiction, in the opinion of this Court, require that the instant writ petition be entertained. (C) The term "proceeds of crime" as defined in Section 2(1)(u) of the Act of 2002 relates to property/properties derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a Scheduled Offence or the value of 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. Therefore, the said definition of proceeds of crime encompasses three kinds of properties as detailed above in the instant judgment. (D) The term "proceeds of crime" do not in any manner refer to the date the property/properties were derived or obtaine....
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....ference between the known income and the assessment of the value of the assets of the Petitioners and their family members had arrived at the opinion that the properties mentioned in the Schedule to the impugned order are proceeds of crime. This was done on an incorrect interpretation of the terms "proceeds of crime" as would be seen from the law laid down herein as well as the Supreme Court in the case of Vijay Madanlal Choudhary (supra) more so when the said expression "proceeds of crime" is required to be construed strictly. (H) For the purpose of taking action under the second proviso to Section 5(1) of the Act of 2002, the Authorized Officer has to record his reasons to believe that the offence of money-laundering have been committed in his opinion and if the "proceeds of crime" are not attached immediately, it would frustrate the proceedings under the Act of 2002. These reasons to believe have to be on the basis of materials in possession of the Authorized Officer and the same are required to be recorded in writing. In other words, the Authorized Officer has to come to an opinion on the basis of the materials in his possession as regards the existence of the three P'....