TaxTMI 
TaxTMI 
2025 (11) TMI 1709
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.... properties belonging to the appellants was confirmed vide the impugned order: i. Plot of five Marlas (approx.) with shed at Lane No. 11, Sidra, Jammu. ii. Flat No. 4, upper ground floor, Building No. 125, Block-A, Freedom Fighter Enclave, Neb Sarai, Near gate no. 2, New Delhi. iii. Flat No. 2/2A at Custodian General Flat situated at Wazarat Road, Jammu. iv. Rs. 4,57,243/- in the A/c No. 041510000002228 in HDFC Bank, Residency Road, Srinagar in the name of Sh. Mushtaq Ahmad Peer. v. Rs. 6,40,790/- in the A/c No. 04151530005241 in HDFC Bank, Residency Road, Srinagar in the name of Mrs. Iqra Mushtaq. 2. Aggrieved by the said order of the Ld. Adjudicating Authority, the appellants have filed the present appeals challenging the same on various grounds as discussed below. FPA-PMLA-662/SNR/2014 3. This appeal has been filed by Mr. Mushtaq Peer. It is contended by the appellant that the order of the Ld. AA is devoid of any merit and liable to be discarded as same is based on tainted investigation. The appellant has, firstly, prayed that the present proceedings may be deferred as his appeal against the conviction and sentence is pending....
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....works out to be Rs. 3,38,79,360/-. The argument, therefore, is that the attached assets were acquired out of legitimate and explained sources of the appellant and his wife. It is also stated that in the present case, it is an admitted fact that proceeds of crime of Rs. 45 lakh could not be traced and the attachment was made in value thereof. 7. Explanations have also been advanced by the appellant for the sources of acquisition of each of the properties attached. So far as Plot of 5 Marlas (approx.) with shed at Lane No. 11, Sidra, Jammu is concerned, it is submitted that the appellant took the same on lease against consideration of Rs. 25 lakh. It is further submitted that the appellant raised a bank loan of Rs. 15 lakh from the J & K Bank as has been admitted in the OC at Page No. 14. The said loan is yet to be liquidated. The remaining 7 lakh have been paid by the appellant from his savings. It is also claimed that the property in question was acquired for Rs. 22 lakh and not Rs. 25 lakh as reflected. 8. As regards Flat No.4, Upper Ground Floor, Building No. 125, Block-A Freedom Fighter Colony, Neb Sarai New Delhi, it is submitted that the same has also been acquired by th....
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....aint under the said Act, was pending. Admittedly, in the present case, no proceedings under the PMLA had been initiated when the impugned order was passed by the Ld. AA. In the absence of any pending proceedings, the provisional attachment order ceased to have effect after the period of 180 days as contemplated under Section 5(1) of the Act. The confirmation of the provisional attachment order was of no consequence because the condition precedent for confirmation had not been satisfied which is mandatory in nature as the word used in section 8(3) are "such attachment shall continue during the proceedings relating to any offence under this Act before a Court." The period of 180 days from the date of provisional attachment order, i.e., 25.03.2014 came to an end somewhere in September, 2014. The law required that the AA can confirm the order only if the proceedings relating to any offence under this Act, namely, prosecution under Section 3 & 4 of the PMLA had been initiated or were pending. It is, accordingly, contended that confirmation of the provisional attachment of properties was contrary to the amended provisions of Section 8(3) which were mandatory in nature. It is further subm....
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....xt, the appellant has sought to rely on the judgment of the Division Bench of the Hon'ble Punjab and Haryana High Court in Seema Garg v. Deputy Director, Directorate of Enforcement (2020 SCC On Line PH 738) wherein it was held that recording of 'reason to believe' is a mandatory pre-requisite for provisional attachment. It is pointed out that SLP against the order of the Hon'ble Punjab & Haryana High Court was dismissed by the Hon'ble Supreme Court in SLP (C) Nos. 14713- 14715/2020. 16. It is contended that in the instant case, the first time the appellants were able to peruse the alleged 'reasons to believe' was only upon receipt of copies of the Original Complaint and the Relied Upon Documents, which were received on 12.04.2021. It is further submitted that even otherwise, the reasons to believe as provided to the appellants, do not satisfy the requirements of Sections 5(1)(a) of the PMLA, as neither the material on record, nor the factual narration contained in the same, provide a rationale as to why "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 co....
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....binding merely the same is challenged in the Supreme Court and its operation stayed by the Supreme Court. In that case, the Hon'ble Court also pointed out the difference between a judgment being quashed and set aside and its operation being stayed by the higher court. The judgment being stayed does not wipe it out and unless until it is so wiped out, it continues to be binding on the lower and subordinate courts. 19. Next, the decision of the Hon'ble High Court of Delhi in Mahanivesh Oils & Foods Pvt. Ltd. Vs. Directorate of Enforcement WP (C) 1925/2014 and CM No. 4017/2014 is relied upon wherein, while allowing the Writ Petition, and setting aside the provisional attachment passed, the Hon'ble High Court held as under: "48. Although, the impugned order records that the concerned officer has reason to believe that the property in question is likely to be concealed, transferred or dealt with in a manner, which may result in frustrating the proceedings relating to confiscation of the said proceeds of crime, there is no reference to any fact or material in the impugned order which could lead to this inference A mere mechanical recording that the property is likely to b....
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....ions of PMLA, existence of „proceeds of crime' is a sine-qua-non. The proceeds of crime are defined under section 2(1)(u) of PMLA to mean any property derived or obtained directly or indirectly, by any person as a result of criminal activity relating to a Scheduled Offence or value of such property. Therefore, it is essential that the property is obtained as a result of "criminal activity relating to Scheduled offence" which is a primary fact. The respondent has proceeded on a generic observation or presumption that all monies that are transferred to the appellant were 'proceeds of crime'. In the absence of any material to show that the loans advances by PAL to appellant's companies, it cannot be established that the money received by appellant is money relatable to the criminal activity relating to the Scheduled Offense. 23. The decision of the Hon'ble Punjab & Haryana High Court in Seema Garg v. Deputy Director, Directorate of Enforcement (2020 SCC OnLine PH 738) Para 34 is once again referred to wherein it was held: "We to examine contention of Respondents from another angle, i.e., offence of money laundering as defined under Section 3 of the PM....
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....ved as aforesaid, in a process or activity connected with "proceeds of crime" as defined, which would include concealing, possessing, acquiring or using such property, would be guilty of the offence, provided such persons also project or claim such property as untainted property. Section 3, therefore, contains all the aforesaid ingredients, and before somebody can be adjudged as guilty under the said provision, the said person must not only be involved in any process or activity connected with proceeds of crime, but must also project or claim it as being untainted property." 25. It is next contended that there was no nexus between scheduled offence and proceeds of crime. The judgment of the Hon'ble Supreme Court in Vijay Madan Lal Choudhary is cited wherein it was observed: "30. In other words, property in whatever form mentioned in Section 2(1)(v), is or can be linked to criminal activity relating to or relatable to scheduled offence, must be regarded as proceeds of crime for the purpose of the 2002 Act. 31. There may be cases where the property involved in the commission of scheduled offence attached by the investigating agency dealing with that offence, cann....
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....alf of the Respondent 28. The respondent Directorate has strongly contested the arguments raised on behalf of the appellants. It is reiterated that in the present case, an FIR (FIR No 24/2013 dated 24.09.2013) was registered by the Crime Branch, J&K Police, Kashmir against Sh. Mushtaq Ahmad Peer, the then Chairman of the Board of Professional Entrance Examination (BOPEE), for abusing his official position during the CET-2012. It was alleged that he dishonestly leaked the examination papers along with answers to brokers for monetary consideration. He entered into an arrangement with Mr. Farooq Ahmed Itoo for Rs.60,00,000/-, out of which Rs.30,00,000/- was paid in cash on 22.06.2012, a day prior to the examination, and the balance amount after the declaration of the results. A charge sheet (Charge Sheet No. 01/2014 dated 12.01.2014) was filed before the Special Judge, Anti-Corruption, Kashmir under Sections 1203 and 420 Ranbir Penal Code corresponding to the Indian Penal Code, 1860 covered under Part-A of scheduled offences under the Prevention of Money Laundering Act, 2002. 29. The investigations revealed that Mr. Mushtaq Ahmad Peer's HDFC Bank accounts reflected cash depo....
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....hedule. In the present case, the scheduled offences alleged against the Appellant under Sections 420 and 120B of the Ranbir Penal Code, corresponding to the Indian Penal Code, fall squarely within Part A of the scheduled offences in the PMLA. 33. Coming next to the argument that the entire process, including the final order dated 12.08.2014, which confirmed the provisional attachment order, was illegal and contrary to the provisions of the PMLA, that the Adjudicating Authority wrongly confirmed the PAO, and that the mandate of Section 8(3) was not satisfied, the Respondent refutes the Appellant's contention concerning non-satisfaction of Section 8(3) of the PMLA by asserting that the necessary legal steps were fully and timely complied with and the Adjudicating Authority, after hearing both sides, confirmed the PAO dated 25.03.2014 by order dated 12.08.2014, well within the statutory period. Further, it is argued that sufficient material established a prima facie case of money laundering, showing the Appellant received Rs. 60 lakhs as proceeds of crime in connection with offences under Sections 120-B and 420 RPC. Relying on the "reason to believe" standard and judicial prece....
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....Complaint U/s 8(3) of the Act. 36. In light of the aforesaid submissions, the Respondent contends the appeal preferred by the Appellant has no merit and is liable to be dismissed. Analysis and Findings 37. I have given careful consideration to the facts on record and the rival contentions of parties. In the first set of contentions, the appellant has claimed that he is innocent of the alleged scheduled offence and the case against him is false and frivolous. As regards these contentions, it is sufficient to observe that the Appellant stands convicted in the case by the Trial Court. Although the sentence has been suspended by the Hon'ble High Court of J&K, upon perusal of the copy of the order of the Hon'ble J&K High Court, it is seen that the same was on account of the precarious health condition of the Appellant, which has nothing to do with the merits of the scheduled offence case against him. It is not the case of Appellant that he has been absolved of the charges in the scheduled offence case by an order of discharge or acquittal or quashing of the FIR by a court of competent jurisdiction so that the case under PMLA against him would become legally untenable. Rather, a....
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.... his onus of proving the legitimate sources for the acquisitions of the said property. Neither the payment of the full amount of consideration nor the sources of the deposits into the account out of which the partial payment is seen to have been made, have been explained with reference to the entries in the bank accounts. Further, I find that while passing the PAO, the authority has accepted the claim of the appellant of having taken a loan of Rs. 15 lakhs from the bank, from which amount, he has rightly deducted the amount repaid by the appellant out of unexplained sources, and attached the property for an amount of Rs. 12,90,079.99. As such, I do not find any grounds to interfere with the order as regards this property. 41. It need not be reiterated that under PMLA, the burden of proof is squarely upon the person against whom proceedings under the Act have been undertaken. It was incumbent upon the appellant to discharge the burden of indicating the sources of his income, earnings or assets out of which he had acquired the properties attached and the evidence on which he relies in this regard. The Appellant has entirely failed to discharge his onus in this regard. Accordingly,....
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.... deposits lying with the Custodian General, J & K Govt. Upon perusal of bank statements of Account No. 04151930017391 it is seen that the payment of Rs. 10 lakhs has been made on 26.07.2013 to Mr. Hamidullah Bhat. However, prior to said date an identical amount has been received from the appellant's own Account No. 051510000002228 in HDFC Bank, Residency Road, Srinagar. The source of the said amount in the hands of the appellant, therefore, remains unexplained. Accordingly, there is nothing on record to show the legitimate source of acquisition of this property either. 44. Next, coming to Account No. 041510000002228 with HDFC Bank, Residency Road, Srinagar standing in the name of appellant, it is seen that there were cash deposits of Rs. 1 lakh and 5 lakh on 02.07.2012 and another Rs. 40,000/- on 17.10.2012, the sources of which could not be explained by the appellant. The balance remaining in the account was Rs. 4,57,243/- which has been attached. It is seen that even at the appellate stage, no specific explanation has been put forward by the appellant for the cash deposits of Rs. 6,40,000/- made in the account except for a broad statement that the appellant was in the receipt ....
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.... of provisional attachment is only for a period of 180 days, and therefore, the initial order has all the characteristics of a show cause notice and no further requirement is contemplated in the statute. 47. As regards communication of the reasons to believe recorded u/s 8, as noted by the appellant himself, the operation of the judgment was stayed by the Hon'ble Supreme Court. On the other hand, the Hon'ble Madras High Court in G. Gopalakrishnan Vs. Deputy Director WP (MD) Nos. 11454, 14860, & 14894 to 14899 of 2018 (Order dated 03.01.2019) has held that the language used in section 8(1) of the Act is different from the one used in section 5(1). The Adjudicating Authority is not required u/s 8(1) to record reasons and on the basis of the complaint filed by the initial authority u/s 5(5), can proceed with the process on the basis of subjective satisfaction. Having perused the OC filed by the Respondent Directorate before the Ld. AA, I am of the view that the same disclosed sufficient reasons by outlining the predicate offence, providing details of the transaction found in the bank account as well as the ownership of properties by the appellant, for the authority concerned to com....
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....LA will be attracted. It is contended that natural justice demands a humanitarian look as to whether a child can be deemed to have the knowledge that the money transferred to her account by her father could have been earned by unlawful means. 55. It is further submitted that in the reply, the respondent has not justified the attachment qua the appellant as to how the respondent has arrived at the conclusion that the amount in the account of appellant was the amount out of the proceeds of crime. The appellant is the daughter of Mr. Mushtaq Peer and was undergoing further studies. At the time of her marriage on 30-5-2011, she was gifted by her relatives and family friends in cash as well as in kind according to Kashmiri tradition. Same is also true of his second daughter who was married in the year 2012. The amount of cash gifts was deposited by the appellant's father in the bank, from which he transferred some amount to the account of appellant. 56. It is submitted that no recovery has been affected from the appellant, neither is it the case of the respondent the appellant had indulged in such activities. The defence of the appellant regarding legitimacy of source and bank sta....