TaxTMI 
TaxTMI 
2026 (7) TMI 78
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....er section 107 of the Bharatiya Nyaya Surkhsha Sanhita (in short BNSS) and for passing necessary order upon the Branch Manager of Canara Bank, Bally branch thereby directing not to allow encashment of term deposit without obtaining specific orders from the learned Magistrate. On 21.04.2025, notice was served to OP no.2. Thereafter on 19.05.2025, the investing agency filed a second application under section 107 of the BNSS for attachment of properties of OP no.3 Satarupa Sarkar, who received notice on 22.05.2025. Charge sheet was also filed against the accused persons on 29.05.2025. Thereafter learned Magistrate, Baruipur, by an order dated 09.06.2025, directed attachment of such properties under section 107 of BNSS. 2. The relevant portion of the order passed by learned magistrate is reproduced below:- "This court apprehending that the articles seized and the properties identified in the petition of investigating officer might be proceeds of crim, issued notice upon both the accused persons directing them to show cause within 14days of the received of the notice as to why the seized articles shall not be attached. The notice to Taraknath Bhattacharjee was issued by this....
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.... identified as figured out in the petition while the power of attachment lies only with the magistrate. It was also urged that admittedly revisionist did not file reply to show cause notice but non furnishing of reply to show cause notice does not empower learned trial court to have the sufficient 'reason to believe' that the properties in question were obtained through the proceeds of crime. 4. Learned Revisional Court, while setting aside the order of trial Court noted that the prayer made by the IO to the learned ACJM for attachment clearly reveals that he 'assumed' that the properties listed by him were obtained as proceeds of crime. The relevant portion of that order may be quoted below:- "The prayer made by the IO to the Ld. ACJM, baruipur for attachment clearly reveals that he 'assumed' that the properties listed by him were obtained as proceeds of crime. The notice to the revisionist, as was issued by the Ld. ACJM, Baruipur, manifests that it was issued as the I.O. 'apprehended' the seized articles and properties were derived or obtained directly or indirectly because of commission of the offence alleged in the case. Assumption and apprehension are obviously not....
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....ated 29.08.2025 is allowed to stand, it would result in grave prejudice to the petitioner and would frustrate the ongoing criminal proceeding since the properties representing the proceeds of crime which were lawfully attached by the learned magistrate would now be free to be dissipated or alienated by the accused persons. Learned Court below ought not to have set aside the attachment order dated 09.06.2025 on hyper technical grounds, because omission of the expression 'reason to believe' is curable in nature and cannot justify vacating an attachment order, which was otherwise supported by overwhelming evidence and is also necessary to safeguard public interest. Infact, learned court below did not consider that no prejudice whatsoever was caused to the opposite party no. 2 and 3 by the attachment order dated 09.06.2025, which only preserved the status quo of the properties, prima facie represented to be from proceeds of crime and it serves larger public interest by preventing further concealment, alienation or dissipation of the said properties pending trial. In short, the order impugned dated 29.08.2025 has frustrated the statutory scheme for seizure and preservation of proceeds o....
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....minor offences. 11. Here lies the importance of using terminology 'reasons to believe'. Legislature very wisely and consciously used the term 'reasons to believe' twice in sub section (1) and sub section (2) of section 107. This has been done so that the provision may not fundamentally alter the architecture of the criminal law by collapsing the distinction between 'suspicion' and 'guilt'. The legislature while framing the law of attachment were conscious that unless a barrier is put, it may create a regime where attachment may be invoked, though situation does not warrant such drastic intervention, in the absence of any classification based on gravity or nature of offence. However unlike the PMLA, section 107 does not provide detailed mechanism for protecting bona fide third party interest. 12. The Supreme Court in Attorney General for India Vs. AmratLal Prajibhandas, reported in (1994) 5 SCC 54 and Fatima Md. Amin Vs. Union of India, reported in (2003) 7 SCC 436 emphasises that forfeiture laws must not penalise innocent parties. The definition of proceeds of crime under chapter VIII includes not only the property itself but also its equivalent value thereby allowing attachm....
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.... and must be grounded in material, that has a rational connection with the conclusion reached. It explicitly states that the reasons must not be extraneous or irrelevant and must bear a nexus to the formation of believe. The belief must emerge from a chain of probable reasoning based on circumstances, even if those circumstances do not establish guilt with certainty. The court also underscores that 'reason to believe' cannot be formed selectively or arbitrarily. The authority cannot pick and choose only incriminating materials while ignoring exculpatory evidence. The exercise of power cannot be based on whims and fancies and subjectively is not a license to disregard relevant material. This introduces an important requirement of fair evaluation of the entire material, not merely a prosecution oriented selection. Para 61 of this judgment runs as follows:- 61. The legality of the "reasons to believe" has to be examined based on what is mentioned and recorded therein and the material on record. However, the officer acting under Section 19(1) of the PML Act cannot ignore or not consider the material which exonerates the arrestee. Any such non-consideration would lead to diffic....
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.... held that the expression operates at a stage anterior to knowledge and is not confined to established or completed facts. It may arise where circumstances create a credible apprehension of the likelihood of an offence. This decisions reaffirmed that 'reason to believe' is not merely retrospective but may expect of prospective or anticipatory situation provided the belief is grounded on objective material that would persue a reasonable person. 17. The doctrinal roots of the expression 'reason to believe' can be traced to several authoritative decisions that continue to govern the field. In Calcutta Discount Company Limited Vs. Income Tax Officer reported in AIR 1961 SC 372, it was first articulated that the existence of 'reason to believe' is justiciable issue. The court held that the expression "has reason to believe" in section 34(1) (a) of the Income Tax Act does not mean a purely subjective satisfaction of the income Tax officer but predicates the existence of reasons on which such belief has to be founded. That belief therefore, cannot be founded on mere suspicion and must be based on evidence and any question as to the adequacy of such evidence is wholly immaterial at that....
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.... mind that it is not any and every material, howsoever vague and indefinite or distant, remote and farfetched, which would warrant the formation of the belief relating to escapement of the income of the assessee from assessment. The fact that the words "definite information" which were there in Section 34 of the Act of 1922 at one time before its amendment in 1948 are not there in Section 147 of the Act of 1961 would not lead to the conclusion that action can now be taken for reopening assessment even if the information is wholly vague, indefinite, farfetched and remote. The reason for the formation of the belief must be held in good faith and should not be a mere pretence. 12. The powers of the Income Tax Officer to reopen assessment though wide are not plenary. The words of the statute are "reason to believe" and not "reason to suspect" The reopening of the assessment after the lapse of many years is a serious matter. The Act, no doubt, contemplates the reopening of the assessment if grounds exist for believing that income of the assessee has escaped assessment. The underlying reason for that is that instances of concealed income or other income escaping assessment in a ....
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....chargeable to income tax has escaped assessment. He may start reassessment proceedings either because some fresh facts come to light which were not previously disclosed or some information with regard to the facts previously disclosed comes into his possession which tends to expose the untruthfulness of those facts. In such situations, it is not a case of mere change of opinion or the drawing of a different inference from the same facts as were earlier available but acting on fresh information. Since, the belief is that of the Income Tax Officer, the sufficiency of reasons for forming the belief, is not for the Court to judge but it is open to an assessee to establish that there in fact existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and non-specific information. To that limited extent, the Court may look into the conclusion arrived at by the Income Tax Officer and examine whether there was any material available on the record from which the requisite belief could be formed by the Income Tax Officer and further whether that material had any rational connection or a live link for the formation of the requisite belief. It would be....
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....ent if the circumstances are such creating a cause to believe by chain of probable reasoning leading to the conclusion or inference about the nature of the thing. These two requirements i.e. "knowledge" and "reason to believe" have to be deduced from various circumstances in the case. 22. Similarly, in State of Maharashtra Vs. Som Nath Thapa, reported in 1996 (4) SCC 659, the court held that 'reason to believe' requires a strong, reasonable probability but not certainty. The belief must arise from credible material that would induce such conclusion in the mind of a prudent person. The standard is lower than proof beyond reasonable doubt but higher than mere suspicion. 23. In AS Krishnan Vs. state of Kerala, reported in (2004) 11 SCC 576 the court reiterated that 'reason to believe' must be founded on reasonable ground and cannot be equated with suspicion or conjecture. Para 9 of the judgment runs as follows:- 9. Under IPC, guilt in respect of almost all the offences is fastened either on the ground of "intention" or "knowledge" or "reason to believe". We are now concerned with the expressions "knowledge" and "reason to believe". "Knowledge" is an awareness on the par....
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....g, if he has sufficient cause to believe that thing but not otherwise." In the case of Aslam Mohammad Merchant v. Competent Authority1, this Court had an occasion to interpret the same expression. In paragraph 41, this Court held thus: "41. It is now a trite law that whenever a statute provides for "reason to believe", either the reasons should appear on the face of the notice or they must be available on the materials which had been placed before him." However, interpretation of the expression will depend on the context in which it is used in a particular legislation. In some statutes like the present one, there is a power to initiate action under the statute if the authority has reason to believe that certain facts exist. The test is whether a reasonable man, under the circumstances placed before him, would be propelled to take action under the statute. Considering the object of the 1994 Act, the expression "reason to believe" cannot be construed in a manner which would create a procedural roadblock. The reason is that once there is any material placed before the Appropriate Authority based on which action of search is required to be undertaken, if the action is de....
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....es need not necessarily be capable of absolute conviction or inference, but it is sufficient if the circumstances are such creating a cause to believe by chain of probable reasoning leading to the conclusion or inference about the nature of the thing. (iv) The reasons for the formation of the belief must have a rational connection with or an element bearing on the formation of belief. The reason should not be extraneous or irrelevant. In each case recording reasons in writing with rational material basis deuced from circumstances forming probable chain, is highly desirable. (v) Reasons need not appear on notice face but must be available on materials, rational basis suffices without procedural roadblock. Prosecution should record reasons in writing with rational, material basis, deduced from circumstances forming probable chain. (vi) Investigating agency and Court should apply objective "reasonable man" tests and to balance stringent compliance with non absolute conviction, and must furnish reasons to accused unless court approved redaction. (vii) The belief must be held in good faith. It cannot be a pretence and it is open to the court to examin....