TaxTMI 
TaxTMI 
2025 (8) TMI 1474
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....edge. The FIRs were lodged u/s 420, 467, 468, 471 I.P.C. r.w.s. 120-B I.P.C. The said FIRs were registered on the basis of complaints lodged by Rajnish Kumar Tiwari, Sh. Vinay Kumar Jain, Shri Umadutt Haldkar and Sh. Amar Dahayat that they received notice from Income Tax Department stating that they have performed business activities through their bank accounts in Axis Bank, Katni in the name of M/s S.K. Minerals, M/s Mahadev Trading Company and M/s Amar Traders. The first three complaints stated that they have not opened any bank account in Axis Bank and are not aware of any business activities in the said account. Whereas, the fourth complainant admitted that one Santosh Garg opened the bank account in his name, but he is not aware of the transaction in the account. After investigation, police filed chargesheets in first three FIRs and the fourth FIR was closed as accused Santosh Garg has expired. On the basis of above information, ED recorded the ECIR No. INSZO/01/2017 dated 19.01.2017 against Axis Bank officials and known persons, and thereby, initiated investigation for the offence of money laundering. The gist of the said chargesheets is reproduced as under: (i) C....
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.... on some printed forms in English were obtained by Shri Manvendra Mistri and Shri Somesh Maheshwari through Ms. Nikki David. He had also denied any transaction through the account of M/s SK Minerals. He has further stated that Account opening form contains his forged signature and financial transactions done from the bank accounts opened in his name have been done by others. Sh. Vinay Kumar Jain stated that he had received notice from Income Tax Income Tax Department in March 2016 and only then he came to know that a firm by the name of M/s Mahadev Trading Company was being operated in his name. He stated that this account was never operated by him. He further stated that copy of electricity bill submitted as KYC document is forged and he did not make any application regarding registration of shop establishment. He stated that around August/ September 2008, Shri Naresh Barman, employee of Shri Satish Saraogi came and got the account opening form signed from him. Sh. Umadutt Haldkar stated that he got to know about the account number 317010100037846 in Axis Bank and financial transaction worth Rs. 34,21,750/-from the Income Tax department. He stated that he has not undertaken ....
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....his wife also. He has purchased one plot in Shivnagar Katni in the name of his wife for Rs. 4,00,000/-. He purchased one Scorpio vehicle bearing R.C. No. MP21CA-3676 in the name of his wife in the year 2012-13 for which Rs. 1,00,000/- was paid in cash by him and rest of the amount was financed by HDFC Bank. He could not explain the transaction in his own account and account of his wife on the pretext that the accounts were operated by Shri Prahlad Agrawal. Though, he has accepted that the deposits and withdrawals were affected by him and that he had obtained signed cheque book from his wife to operate her account. In his statement dated 27.04.2017 he accepted receipt of Rs. 15,75,000/- from the account of M/s SK Minerals in his account, which he withdrew in cash and had given it to Shri Prahlad Agrawal. He further stated that current account No. 317010200014030 was opened by him in the name of M/s Venus Trading Company. He further stated that this account was used to receive sale proceeds by selling coal obtained at discounted rates from South East Coal Ltd., Madhya Pradesh Laghu Udyog Nigam. He further stated that transactions from account of M/s Radhaswamy Enterprises (CA 3170101....
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....su Patel opened different firms in their names and started the works of cheque discounting through different accounts. He further stated that Shri Manvendra Mistry was engaged in illegal trading of coal and provides fake bills and 'C' form related to Sales Tax. He further stated that his brother Shri Satish Saraogi is the Director of M/s Nirnidhi Marketing Private Limited. He has also provided a list of bank accounts opened by his associate by various names. He further stated that he has used accounts such as Mahadev Trading Company to transfer Cash credited into various bank accounts. He further stated that through the above said modus he has earned money by means of commission and same has been spent completely and no immovable property has been bought. In reply to the banking transactions with bank accounts of the firms, he stated that the said transactions were done upon receipt of cash from various persons only to transfer it to the accounts desired by such persons, on commission basis. Sh. Naresh Burman in his statements accepted that he along with Shri Manish Saraogi, Shri Naresh Poddar and Shri Dassu Patel started the work of cheque discounting from a shop in Gaj....
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....esh Burman, Shri Rakesh Kumar Patel, Shri Sandeep Burman, Shri Sanjay Tiwari and Shri Vinay Kumar Jain are employee of his brothers Manish Sarangi and Sharad Saraogi and firms opened in his name were involved in the business of cheque issuance on commission basis. Shri Manish Saraogi was also involved in the business of cheque issuance. He did not own any immoveable property. Shri Arujani Kejriwal (his brother- in-law) had received loan of Rs. 35 lakhs from M/s Charidra Trading Company through Manish Saraogi. On asking about the manufacturers who have traded subsidized coal procured from M/s South East Coal Ltd. (SECL) or MP Laghu Udyog Nigam (MPLUN), he replied that most of the coal received by manufacturers located in Katni from SECL or MPLUN was diverted to the market, but the manufacturers had accounted the consumption of coal in their accounts. He stated that Shri Manvendra Mistry was involved in trading of coal obtained through the means of diversion. When asked about transaction of M/s SK Minerals & M/s Mahadev Trading Company with the firms owned by the employees of his brother. He stated that the amount received as coal trading in M/s SK Minerals and other firms were used ....
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....entries and then transferred to the beneficiaries and on the other hand the debit cash entries indicate the money withdrawn to compensate the coal traders selling illegal coal through these paper companies. During investigation, the transactions in the bank accounts of the firms named in FIR no. 738/2016 namely M/s S K Minerals i.e. A/c no. 317010200010007 and 317010200013378 in Axis Bank, Katni were analyzed. Upon scrutiny it was revealed that Rs. 10.08 crore were credited into the A/c no. 317010200010007 of M/s SK Minerals out of which Rs. 28 Lakhs (approx.) was credited in the form of cash. Further, on the debit side Rs. 4.55 crore was withdrawn as cash and the rest of the amount was transferred to other accounts namely M/s Ganapathi Trading Co., M/s Shri Lakshmi Enterprises, M/s Hari Om Enterprises, M/s Vishnu Trading Co., M/s Bahubali Trading Co., M/s Krishna Enterprises. Further, an amount of Rs 15.50 Lakhs was found to be debited in the name of Shri Manvendra Mistry, who has been named as one of the accused in the Charge sheet filed by the Katni Police. Investigation thus far has been able to reveal a clear money trail of amount Rs. 1,12,13,700/- that was layered from ....
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....par Trading Company. Thus, he had deposited Rs. 2,02,96,500/-in the bank account of M/s Mahadev Trading and transferred the said amount to various bank accounts of his paper firms. However, during the course of investigation, it was revealed that the amount deposited in cash was later on layered through number of intermediary banks accounts of various firms and finally transferred to the bank account of M/s Nirnidhi Marketing Pvt. Ltd. which is controlled by Shri Satish Saraogi. It is an amount of Rs. 37,90,000/- has been transferred from account of M/s Mahadev Trading to the accounts of the firms such as Vyapar Trading and Bahubali Trading which were opened by Manish Saraogi and his accomplices. This amount is then subsequently transferred to the account no. 3101115000026521 of M/s Tanisha Suppliers in KVB bank, Kolkata. On verification of the address of the M/s Tanisha Suppliers it is found that it does not exist at the given address thus clearly establishing its role as a paper firm giving accommodation entries. Three money trails clearly establish the link between the accounts involved in the scheduled offence and the final beneficiary of the proceeds of crime generated f....
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....erted in the open market. The same were sold within, as well as, outside M.P. in the name of fake-firms and sale proceeds were received in the account of concerned fake firms. ED gave ample opportunities to Shri Satish Saraogi to cooperate with the ongoing investigation vide summons, dated 14.08.2017, 11.10.2017, 25.10.2017, 09.11.2017 & 17.11.2017, but he failed to cooperate with the investigation proceedings by not appearing, on one pretext or the other. In addition to the modus operandi of using these accounts in the name of fake firms for laundering illegal money, the above persons, especially, Shri Manish and Satish Saraogi have also used these firms for sale of illegal/diverted subsidized coal into open market for personal gains. Thus, ED concluded that these persons have generated proceeds of crime as a result of the criminal activity of opening accounts in Axis Bank, Katni in the name of their employees and in many cases using forged documents. They have further used these accounts for illegal sale of coal for self and other persons on commission basis and at the same time used these accounts for laundering illegal money into their business activities and purchase of pro....
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....ased from any proceeds of crime, then there can be no offence of money laundering and the question of attaching properties does not arise. The whole case of ED is based on the statements recorded Section 50 of the PMLA Act, 2002 which are false and incorrect and are not corroborated with any documentary evidence. It is crystal clear that the appellants have not derived their income from any criminal activities. Further, on behalf of appellant Reeta Mistry it is argued that the properties of the appellant were purchased by her through her own income, which was capital receipt, received on giving possession of old house and loans from family/friends. The Adjudicating Authority failed to apply its mind to the fact that the amount received by her husband in his Axis Bank Account No. 317010100039677 was on 9.09.2008 and the property purchased by the appellant was on 07.11.2012, i.e. after 4 years and 2 months. The Ld. counsel for the appellant Hemlata Saraogi contended that the Authorities did not take into account the fact that though the appellant is a housewife, she however enjoyed the rental income on a monthly basis and has been filing Income Tax regularly for the same. He fu....
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....ther the properties of appellant no. 2 & 4 cannot be attached since they are not accused persons and have not committed any predicate offence? Now, we will discuss the above issues one by one in the following paras. Issue No. 1 Whether there were reasons to believe with ED for passing the PAO and with Adjudicating Authority for issuing the Show Case Notice? 6. Now, for deciding the issue no. (i), the relevant portion of Section 5(1) is reproduced as under: "5 (1) Where the Director or any other officer not below the rank of Deputy Director authorised by the Director for the purposes of this section, has reason to believe (the reason for such belief to be recorded in writing), on the basis of material 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 this Chapter, he may, by order in writing, provisionally attach such property for a period not exceeding one hundred and eighty days from the date of the o....
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....the stance of commission of offence of money laundering in the present matter. Moreover, there is apparent apprehension of alienation of these properties, seeing the fact that ED has recorded the ECIR and the properties of the Appellants are likely to be confiscated in due course under PMLA, 2002, after attachment proceedings. Thus, the conditions as stated under the second proviso of Section 5(1) are fulfilled. As regards, the reasons under section 8, it is seen that the language of the said provision is different insofar as section 8 does not specifically lay down that the reasons to believe are to be recorded or that there should be any material in possession, other than the original complaint filed by the Directorate under section 5(5). Nor does the provision specifically necessitate recording of the reasons in writing, before issuing SCN. SCN is issued by the Adjudicating Authority on the basis of Original Complaint and the relied upon documents and the same is self-explanatory for issuing the same. Nevertheless, a perusal of the impugned order itself provides the detailed reasons leading to the registration of ECIR by the Directorate, further investigations conducted by....
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.... for the predicate offence. Thus, ED has to confine its inquiry/investigation qua the quantum of proceeds of crime and the remaining four points mentioned above. Further, ED can also point out any glaring mistake, or lacunae in the said investigation conducted by Police/CBI, which may come to its knowledge while conducting the investigation under PMLA. However, ED cannot arrive at different conclusion qua the predicate offence, while conducting investigation under PMLA, as it is not a supervisory investigating agency over police/CBI. But ED can certainly exceed the limit of quantum of proceeds of crime on the basis of investigation conducted by it, if new facts and evidence comes to its knowledge, and thereafter, inform the police/CBI regarding the same for filing supplementary chargesheet, if any. However, it will be the prerogative of the police/CBI to file the supplementary chargesheet on the basis of information received from ED. Accordingly, issue no.ii), is decided against the appellants and in favour of Respondent ED. issue no. 3. Whether the properties purchased prior to the commission of scheduled offence can be attached, as value thereof? 8. To analyze this issue....
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....ts are unable to discover the tainted property that they can take the statutory recourse to move against properties which may fall within the ambit of ―value of any such property or "property equivalent in value held within the country or abroad". To the aforesaid limited extent, properties purchased prior to 01 July 2005 may also become vulnerable and subject to action under the Act. However, enforcement action against such properties would have to satisfy the tests and safeguards as propounded in Axis Bank with the learned Judge observing that in such a situation it would have to be established that the person accused of money laundering had an interest in such property at least till the time that he indulged in the proscribed criminal activity. The learned Judge further observed that bona fide rights acquired by third parties prior to the commission of the predicate offense would stand saved." Further, this Tribunal has also given an elaborate judgment on the issue in the case of Sadananda Nayak v. The Deputy Director, Directorate of Enforcement, Bhubaneswar reported in FPA-PMLA- 5612/BBS/2023 on 14.10.2024 where all the judgments on the issue have been considered and t....