TaxTMI 
TaxTMI 
2026 (4) TMI 1159
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....me Whether attachment is as equivalent value of Proceeds of Crime Value of the Property 1. Land measuring 3.034 DEC with a shopping premise of approximately 600 sq ft attached thereto registered under Gift Deed no I-2078/2012 in the office of ADSR, Habra, West Bengal. Smt. Reshma Biswas Das, W/o Shri Prasenjit Das - Defendant No. 1 In the year 2012 No Value thereof(V) 4,66,484/- (As per deed Market Value) 2. Land measuring 0.825 DEC registered under deed Gift Deed No I- 2079/2012 in the office of A.D.S.R. Habra, West Bengal In the year 2012 No Value thereof(V) 23,894/- (As per Market value mentioned in deed) 3. Land measuring 1.65 DEC with an old three stories residential premise of total approximately 800*3=2400 sq ft attached thereto registered vide title Gift Deed No I- 265/2012 (Plot Mark "A" in Schedule-II) in the office of ADSR, Habra, West Bengal In the year 2012 No Value thereof(V) 8,64,238/- 4. Land measuring area of 6.6 Decimal, Area of Structure 2184 00218/00000, Khatain No. 02942/00 District: North 24 Parganas, PS: Habra, Mouza: Asrafabad, Habra Road. Vide deed no. I-07097 of 2013 In the year 2013 ....
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.... 6. During the course of investigations conducted by the ED under the PMLA, statements of various persons were recorded and various documents from the CBI, Banks, Sub-Registrars etc., were called for and examined. 7. It was found that the proceeds derived from the criminal activity had been diverted and siphoned off dissipated/consumed or expended by Shri Purnendu Das and Shri Prasenjit Das for their personal gains and the same were not available for attachment. Therefore, the properties which could be identified and traced were attached vide Provisional Attachment Order (PAO) No. 10/2024 dated 03.07.2024. 8. Consequent to the passing of the PAO, an Original Complaint (O.C.) No. 2371 of 2024 dated 26.07.2024, was filed before the Ld. Adjudicating Authority as per the provisions of section 5(5) of PMLA. The Ld. AA initiated adjudication proceedings thereon and, vide its order dated 10.12.2024, confirmed the attachment of the properties. Aggrieved by the said order of the Ld. AA, the appellant has filed the present appeal before this Appellate Tribunal under Section 26 of the Act challenging the said order on the grounds discussed in greater detail below. Contentions of P....
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....n provided therewith, constitutes a boundary within which the ED has to identify the property derived from criminal activity. 11. It is contended that the said provision does not provide any blanket power to the ED to attach any property in the event it is unconnected with any criminal activity on the pretext of non-traceability of proceeds of crime. The provision does not provide for any threshold to be satisfied so far as the so-called un-traceability is concerned and only one aspect is provided in the definitive terms of proceeds of crime as far as un-traceability is concerned, i.e., the power regarding properties held abroad. Only in situations of properties held abroad the equivalent value of such a property can be attached in India., Barring this exception, the ED is not accorded with any power regarding attachment of properties unconnected with criminal activity. 12. It is next contended that section 5(1) provides for attachment of proceeds of crime when the officer empowered under the said provision has reason to believe, based on the material in his possession, that any person is in possession of the proceeds of crime and such proceeds of crime are likely to be conce....
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..... The Act does not bar indulging in proceeds emanating out of legitimate activity which is not criminal in nature and not provided in the schedule appended to the PMLA Act. 16. It is submitted that in the instant case, it is an admitted position, as that ED could not find any proceeds of crime and, therefore, it has gone for attachment of property involving value of the proceeds of crime merely because the said properties were 'available'. Attention of the Bench is invited in this regard to page 35 of the impugned order wherein it is stated: "B. It is evident from the perusal of records including the reasons recorded u/s 8(1) by the undersigned that in this case the alleged criminal activity falling under scheduled offence as enumerated under the PMLA, 2022, resulted in generation of proceeds of crime. Out of this generation of proceeds of crime the ED could not lay hands on the entire direct deployment of proceeds of crime and hence it has gone for attachment of property involving value thereof." 17. In support of the arguments, the appellant has sought to rely on the following judgments: i. Pavana Dibbur v. Directorate of Enforcement, 2023 SCC OnLine S....
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....ime were utilised in the purchase of the said property." 19. In light of the above, it is contended that the properties have no nexus with the alleged crime and there is, admittedly, nothing on record to demonstrate that the said properties were part of money laundering. The impugned order does not indicate any reason to believe as to whether the instant properties are proceeds of crime or there is commission of crime under Section 3 of the PMLA. The attachment of properties acquired prior to the commission of crime is violative of principle of non-retroactivity of penal provisions. 20. Based on the above submissions, it is prayed that the impugned order of the Ld. AA may be set-aside and the appeal be allowed. 21. The Respondent (ED) has made detailed submissions contesting the arguments raised on behalf of the appellant. In the interest of brevity and to avoid repetition, the same would be referred to at the appropriate places while considering the merits of arguments raised from the side of the appellant. Consideration 22. I have given careful consideration to the material on record and the rival contentions of the parties. I find that the underlying argument put ....
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....ctly, 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; [Emphasis supplied] 25. From a bare perusal of the said definition it is amply evident that the "value" of property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence is a part and parcel of the definition of 'proceeds of crime'. It may further be pointed out that the term "value" has also been defined by the Act under section 2(1)(zb) as follows: "(zb) "value" means the fair market value of any property on the date of its acquisition by any person, or if such date cannot be determined, the date on which such property is possessed by such person." 26. From the above definition of "value" too, it is clearly evident that the definition of 'proceeds of crime' under section 2(1)(u) covers not only the property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence, but also fair mark....
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....nted out that in the same judgment, the Hon'ble Punjab & Haryana High Court has further observed: "3.5 In Axis Bank's case (Supra), the Delhi High Court has dissected the definition in three parts while covering tainted property and untainted property held in India; and the 'proceeds of crime' taken out of the country or any other property of equivalent value thereof. However, this Court is of the considered view that the definition can be divided into two broader categories namely tainted properties and untainted properties. The first part provides about the tainted properties derived or obtained directly or indirectly by any person as a result of criminal activity relating to a scheduled offence. Thereafter, the untainted properties are further divided into two parts; the first part deals with a situation where the property derived or obtained from 'proceeds of crime' is not traceable. In the aforesaid situation the competent authority is authorized to attach or confiscate any other property of accused, which is of the same value as that of the 'proceeds of crime'. The second sub- category is a result of amendment brought in 2015 and 2019 in t....
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....ellant in support of the contention that the definition of 'proceeds of crime' under section 2(1)(u) of the Act does not include untainted property, i.e., property with no link or nexus with criminal activity, or that 'equivalent property' can be attached only in a case where the tainted property is held abroad and not otherwise. 31. The argument that the attached properties in the present case were acquired prior to the period of the scheduled offence and therefore the same could not have been attached, also does not hold any merit for the same reasons as have been discussed above. When the property has been attached invoking the "value of such property" part of the definition of 'proceeds of crime', the time of its acquisition would be of no consequence. However, since an argument in this regard has been advanced placing reliance on the judgment of the Hon'ble Supreme Court in the case of Pavana Dibbur (supra) and other cases, it may be pointed out that this Appellate Tribunal, in its judgment dated 14.10.2024 in the case of Sadananda Nayak (FPA-PMLA-5612/BBS/2023) has analysed threadbare the entire issue, considered the impact of Pavana Dibbur among other cases, and held as f....
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.... 14. In second part "the value of any such property" the definition aforesaid starts with "or" after the first part referred and discussed in the para above. The second part of the definition is commonly considered to be attachment of property of equivalent value. The second part applies when the property obtained or derived directly or indirectly out of the criminal activities is not available or vanished and, therefore, to secure the proceeds of equivalent value till completion of trial, it would fall under "the value of any such property" which is commonly taken to be the property of equivalent value. The case in hand falls in the second category of the definition of "proceeds of crime" because proceeds are not available and, therefore, the property of equivalent value is attached. 15. The argument has been made in reference to the judgment of Kerala High Court in the case of Satish Motilal Bidri (supra) and the judgment of Apex Court in Pavana Dibbur (supra) to hold that the properties acquired prior to commission of crime would not fall in the definition of "proceeds of crime". We are unable to accept the arguments which may otherwise make second part of the def....
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.... would be only when the proceeds have been taken out of India. The argument aforesaid was not accepted and it simplifies that the definition of "proceeds of crime" has three limbs and elaborate judgment to define the "proceeds of crime" was given by the Delhi High Court in the case of Axis Bank (supra). The relevant paras are quoted herein: "106. Among the three kinds of attachable properties mentioned above, the first may be referred to, for sake of convenience, as "tainted property" in as much as there would assumable be evidence to prima facie show that the source of (or consideration for) its acquisition is the product of specified crime, the essence of "money laundering" being its projection as "untainted property" (Section 3). This would include such property as may have been obtained or acquired by using the tainted property as the consideration (directly or indirectly). To illustrate, bribe or illegal gratification received by a public servant in form of money (cash) being undue advantage and dishonestly gained, is tainted property acquired "directly" by a scheduled offence and consequently "proceeds of crime". Any other property acquired using such bribe as consid....
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.... would fall in the definition of "proceeds of crime" and clarified in Para 68 of the same judgment has not been taken into consideration whereas judgement of the Apex Court on the issue is binding on the High Court. 19. The reference to the judgment in the case of Pavana Dibbur (supra) has been given where the Ld. Counsel for the parties did not refer Para 68 of the judgment in the case of Vijay Madanlal Choudhary (supra) decided by three judges of the Apex Court. In fact, elaborate arguments to define "proceeds of crime" on the issue were not raised by the parties after referring to the object of the Act of 2002 which was enacted out of the international convention. The Delhi High Court has discussed the issue elaborately and otherwise if we apply the judgement of Kerala High Court in the case of Satish Motilal Bidri (supra,) it would be making the second limb of the definition of "proceeds of crime" to be redundant. The counsel who appeared before the Kerala High Court did not argue that the definition of "proceeds of crime" has three limbs and unfortunately the view expressed by Delhi High Court in Axis Bank (supra) was not discussed elaborately while it was cited by th....
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....iolence to the plain language of Section 2(1)(u), it would clearly whittle down the scope and intent of the definition itself. It would essentially amount to erasing the expression value of any such property as appearing in Section 2(1)(u) altogether. The Court further notes that in Seema Garg the learned Judges themselves observed that the phrase value of any such property would not mean and include any property which has no link, direct or indirect, with property derived or obtained from commission of a scheduled offence. The Court observes that Section 2(1)(u) clearly and in unambiguous terms includes not only property derived or obtained directly or indirectly as a result of criminal activity relating to a scheduled offence but also the value of any such property. Seema Garg thus seems to gloss over the statutory imperatives underlying the deployment of the phrase ―or the value of any such property and the concept of deemed tainted properties enunciated in Axis Bank. On a plain textual interpretation of Section 2(1)(u) as well as in the backdrop of the amendatory history of that provision, this Court finds itself unable to agree with the line of reasoning adopted in Seema....
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....s ―untainted property with it being permissible to proceed against the latter provided it is being attached as equal to the "value of any such property" or "property equivalent in value held within the country or abroad". However, both the italicised categories would be liable to be invoked in cases where the actual tainted property cannot be traced or found out. It is only where the respondents 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 obs....
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....he scheduled offence but any other property of equivalent value. The word "or" has been placed before "the value of any such property" and is of great significance. Any property of equivalent value can be attached when the proceeds directly or indirectly obtained out of the crime has been vanished or siphoned off. Here, the significance would be to the property acquired even prior to commission of crime. It is for the reason that any property acquired subsequent to the commission of crime would be directly or indirectly proceeds of crime and then, it would fall in the first limb of the definition of proceeds of crime. In the second limb, which refers to "the value of any such property" would indicate any other property which was acquired prior to the commission of crime and it would be attached only when the proceeds directly or indirectly obtained or derived out of the criminal activity is not available. It may be on account of siphoning off or vanished by the accused. In those circumstances the property of equivalent value can be attached. The word "the value of any such property" signifies without any embargo that it should be the property purchased after the commission of crime....
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.... specified detailed reason to believe as follows: "REASON TO BELIEVE 11. That having perused and taken into consideration the record placed before me, including statements of various persons recorded under Section 50 of PMLA, 2002, along with other evidences on record collected during course of investigation in the instant PMLA ECIR No. ECIR/KLZO/08/2018 datech 11.12.2018, the following facts have been revealed: 12. That, Shri Purnendu Das, the proprietor of M/s K.PS Enterprise with the connivance of his family members and others, by committing offence under Sections 1208 r/w 420 & 471 of Indian Penal Code (IPC), 1860, has launderect the proceeds of crime acquired out of commissions of scheduled offences under PMLA, 2002. Shri Purnendu Kumar Das, Proprietor of M/s KPS Enterprise entered into a criminal conspiracy with his son Shri Prasenjit Das, proprietor of M/s P.K. Enterprises and with dishonest and fraudulent intention diverted the proceeds of the loan amount through the account of M/s P.K. Enterprises of his son Shri Prasenjit Das. 13. That, all the properties identified during the course of investigation have been transferred in the name of....
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....e, the respondents in their reply have brought out the following facts with regard to the attached properties: • Shri Purnendu Das gifted properties vide gift deed no. 1-2078/2012 dated 27.03.2012, vide deed no. 1-IND/5079/2012(Gift deed) dated 03.04.2012 to his daughter in law Smt. Reshma Biswas Das (the appellant herein). He deliberately dissociated the properties from himself by transferring the same to his daughter-in-law (the appellant in the present appeal) in order to pre-empt any precipitate action by the bank or any other agency; • Shri Prasenjit Das, S/o Shri Purnendu Das, gifted two landed properties, one having measurement 1.65 DEC with three-storied building (800-3-2400 square feet) as mentioned in Schedule-II, and plot marked as "A" in gift deed no. 1-1265/2012, and another one having measurement 4.54 DEC as mentioned in Schedule-1 and plot marked as "C" in gift deed no. 1-1265/2012 to his wife Smt. Reshma Biswas Das (the appellant herein); • Smt. Reshma Biswas Das further sold one part admeasuring 4.54 DEC as mentioned in Schedule-I and plot marked as "C" in gift deed no. 1-1265/2012 in 2012. Another part admeasuring 1.65 DEC wi....