TaxTMI 
TaxTMI 
2024 (6) TMI 1600
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.... by ShriMadhuKoda, the former Chief Minister of Jharkhand State, and others. Another PIL was also filed by one ShriAmanMundaagainst the ShriMadhuKoda, Sanjay Kumar Chaudhary, BinodSinha and others. In the aforesaid PILs, the charges of corruption were levelled against ShriKoda and others, alleging that they had amassed wealth by corrupt or illegal means disproportionate to their known sources of income. The allegations inter alia indicated that ShriKoda acquired huge properties, both immovable and movable, through his close associates, including ShriBinodSinha, Shri Sunil Kumar Sinha, VikasSinha, Sanjay Chaudhary, DhananjayChaudhary, Manoj Kumar Punamiya, ArvindVyas, Lalit Jain, Vijay Joshi, Rohitash Krishnan and others. In pursuance to the aforesaid PILs, an F.I.R. bearing No. 09/09 dated 02.07.2009 was registered at Police Station Nigrani, District Ranchi against the appellant and others for the violation of Sections 409, 420, 423, 424, 465, 120-B of the Indian Penal Code and Sections 7, 10, 11 and 13 of Prevention of Corruption Act, 1988. The case was taken up for investigation by the Vigilance Department of Ranchi Police as per order of the Ld. Special Judge Vigilance, Ranch....
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.... 5. M/s India Cars and Motors Pvt. Ltd. (Formerly M/s India Diesels and Tractors Pvt. Ltd.) 6. M/s Vini Iron & Steel Udyog Ltd. 7. M/s Creative Fiscal Services Ltd. 8. M/s Kolhan Trading Pvt. Ltd. 9. M/s Bharat Glass Tube Ld. 10. M/s IAG Company Ltd. 11. M/s Smridhi Sponge Ltd. 12. M/s Bill Body VyaparPvt. Ltd. 13. M/s Lacky Project Pvt.Itd. 14. M/s AnjaniputraIspat Ltd. 15. M/s ShivamDevconPvt. Ltd. 16. M/s ParbatiDevconPvt. Ltd. 17. M/s Milestone VinimayPvt. Ltd. 18. M/s Majestic VinicomPvt. Ltd. 7. The company-wise details of financial transactions undertaken, including accommodation entries in the form of share application money or unsecured loans and investments, made by various persons involved, including BinodSinha, VikasSinha, Vijay Joshi etc. were also disclosed in the OC. 8. In conclusion of the adjudication proceedings under the PMLA, 2002, the Ld. AA, vide the impugned order dated 06.04.2011, confirmed the provisional attachments made vide PAO dated 10.11.2010 in respect of the properties of all the appellants whose appeals are under consideration ....
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....re, to remove this difficulty, provisions of section 8(3)(a) were amended by the Act 2 of 2013 which came into force on 15.02.2013. The amended section 8(3) read as follows: "Where the Adjudicating Authority decides under subsection (2) that any property is involved in money laundering, he shall, by an order in writing, confirm the attachment of property made under sub-section (1) of section (5) or retention of property or record seized or frozen under section 17 or section 18 and record a finding to that effect, whereupon such attachment or retention or freezing of the seized or frozen property or record shall (a) continue during the pendency of the proceedings relating to any offence under this Act before a court or under the corresponding law of any other country, before the competent court of criminal jurisdiction outside India as the case may be: and (b) become final after an order of confiscation is passed under subsection (5) or sub-section (7) of section 8 and section 58B or subsection (2A) of section 60 by the Special Court." 15. It is submitted that on the day when the impugned order dt. 06.04.2011 was passed, as well as in the year ....
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....roceedings under PMLA by the respondent" "48. Since the charge-sheet/prosecution complaint has not been filed under the provision of Section 8(3)(a) of the Act within the prescribed period of time, the attachments stand lapsed, thus, the same are released. Therefore, there is no need to go into the merit of the case." 18. Reliance is also placed on judgment dated 11.05.2018 by this Appellate Tribunal in the case of S.V. Srinivas us The Joint Director, Bangalore in FPA/PMLAJ445/BNGI2013, wherein it was held that provision of section 8(3)(a) was incorporated on 15.02.2013 with the intention that at the time of confirmation of order of attachment, the prosecution complaint along with evidence collected after independent investigation must be pending. 19. The judgment dated 02.05.2019 of this Appellate Tribunal in the case of Sanjay Kumar vs Deputy Director, New Delhi in FPA PMLA-2313- DLI-2018 is also cited. In the said case, adjudication order was passed on 04.04.2018. Since no prosecution complaint under PMLA, 2002 Act was filed, the appeal was allowed on the legal issue raised u/s 8(3) (a). 20. Judgment dated06.03.2020 by Hon'ble Punjab & Haryana High Court in....
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....unal allowing the appeal holding that the provisional attachment order passed by the Respondent and the impugned adjudication order u/s 8(3) of the Act passed on 06.04.2011 confirming attachment order, have not survived/ have lapsed and issue directions for release the attached properties. 23. It is further contended that FIR No.09/2009 was registered on 02.07.2009 and Charge Sheet No.5/2010 was filed on 28.01.2010 in the court of special judge Ranchi against Mr. MadhuKoda for offences u/s 409, 420, 423, 424, 465 and 120B of IPC and 7, 10, 11, 13(2) r/w 13(1)(e) of PC Act. The appellant is neither an accused in scheduled offence as per FIR/Charge sheet nor has it received any money out of alleged proceeds of crime. However, based on aforesaid FIR/ Charge sheet, proceedings were initiated against the appellant and legally acquired properties of appellant were wrongfully attached. 24. It is further pointed out that the period of scheduled offence as per aforesaid FIR/ Charge-sheet is February 2005 to August 2008, when Mr. MadhuKoda was Minister/Chief Minister in Jharkhand. At the time of passing the PAO on 10.11.2010 and impugned order on 06.04.2011, alleged proceeds of crime (....
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....al activity relating to a scheduled offence. To put it differently, the vehicle used in commission of scheduled offence may be attached as property in the concerned case (crime), it may still not be proceeds of crime within the meaning of Section 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. 32. Be it noted that the definition clause includes any property derived or obtained "indirectly" as well. This would inc....
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....dent has no reasons to believe and has no jurisdiction to proceeds against the appellant since as per details of assets acquired and expenses incurred by accused which are taken into consideration for computing disproportionate asset being proceeds of crime, no amount has been invested into or paid to appellant and (ii) assets aggregating in value of more than Rs.8.42/-Crores are already attached in the hands of accused persons. 31. Thus, it is concluded, in view of the above facts and provisions of law, the attachment of Appellant's legally acquired and owned properties of Rs. 2.19 lakh is completely wrong, illegal, and unsustainable and deserves to be quashed/ set aside. 32. It is further reiterated that the Appellant is neither accused in the schedule offence nor it has received any money from the accused persons. None of the accused or their nominee was ever director or shareholder or investor in the appellant company. The proceedings under the Act against the appellant was premised on the allegation that director of the Appellant Sh. MrinalKanti Paul is also director in M/s Creative Fiscal Services Ltd. (in short 'Creative') which is a company involved in all....
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.... statement recorded under Section 132(4) of the Income Tax Act on 17.02.2010 by the Income Tax Officials has made disclosure of undisclosed income pertaining to past years, in his family concerns which was invested in other group companies including in the Appellant for Rs. 15 crores approximately during the FY 2008-09 relevant to AY 2009-10. It is contended that the Ld. Adjudicating Authority, disregarding several facts, including the fact that the income tax return of the Appellant was accepted u/s 143(1)(a) of I-T Act at returned income without making any addition, and disregarding the fact that statement of Sh. MrinalKanti Paul was recorded under coercion, confirmed the attachment. It is also stated that the Assessing Officer in the income tax scrutiny proceedings u/s 147/143(3) of I-T Act, 1961 vide order dt. 29.08.2011 accepted the returned income as well as accepted the genuineness of additions of Rs. 13.37 crores to share capital of the appellant. This clearly shows that share capital additions in the Appellant during the FY 2008-09 have no link nexus with the alleged proceeds of crime. Reliance is placed on extracts from Vijay Madanlal judgment (supra) wherein Hon'ble ....
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....perty. ARGUMENTS ON BEHALF OF THE RESPONDENTS. 41. The respondent Directorate, on the other hand, has strongly contested the arguments and contentions raised by the appellant. It is submitted on behalf of the respondent that the documents seized by the Income Tax Department during searches on 31.10.2009 revealed huge amount of unaccounted money to the tune of Rs. 106,40,56,700/- laundered through different companies, including the present appellant, M/s Bill Body Vyapar Pvt. Ltd., through which Rs. 15 crore was laundered as mentioned in para "uu" of the complaint at page 201. Sh. MrinalKanti Paul, in his statement dated 17.02.2010, had also disclosed this amount vide para "ww" (page 203 of the complaint). As such, the fixed assets of this company, at least to the extent of Rs. 15 crore, represented proceeds of crime. Accordingly, the attachment order with regard to fixed assets was rightly confirmed by the Ld. AA. 42. It is further contended that the appellant failed to discharge the evidentiary burden under the PMLA, 2002 in its reply before the Ld. AA and, further, has not discharged the same even in the Memorandum of Appeal filed before this Appellate Tribunal. It is su....
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....ant appeal, attempt has been made by the appellant to show that Mr.BinodSinha's tainted money was never directly infused in the appellant company. However, the perusal of records prima-facie establishes reason to believe against the appellant herein and the appellant has completely failed to explain substantial amount of money which was channelized by it. Sh. MrinalKanti Paul, Director of M/s. ParbatiDevcon Pvt. Ltd. (Defendant no. 23 before the Ld. AA) who admittedly has invested amount to the tune of Rs. 15 Crore in the appellant company, completely failed to explain the source of his income. In this context, statement dated 17.02.2010 which is available in Vol-V (pages 1234-1245), is referred to and it is contended that the record profoundly clarifies the modus-operandi adopted by the appellant in laundering of mentioned amount. 45. It is further submitted that the appellant company has entirely failed to produce any document substantiating its claim. It is also pointed out that the Ld. AA, in Para 172 of the impugned order, observed as follows: "We may add that though in income tax operations evidences for unaccounted money with the above three Companies were fo....
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....wo or more inter-connected transactions and one or more such transactions is or are proved to be involved in money laundering, then for the purpose of adjudication or confiscation under Section 8, it shall unless otherwise proved to the satisfaction of the AA, be presumed that the remaining transactions form part of such inter- connected transactions." 49. It is also reiterated that the Second Proviso to Section 5 of the PMLA allows attachment of property involved in money- laundering even if such property is in the possession of a person not charged of having committed a scheduled offence under the PMLA. 50. In summary, the main contentions of the respondents are that the appellants have completely failed to discharge their burden of proof under the PMLA, 2002 and that the impugned order which confirms the PAO dated 10.11.2010 issued by the Deputy Director, is sound, well- reasoned, justified and completely impregnable as it amply satisfies the "reason to believe" test under the PMLA, and the same was confirmed by the Ld. AA after carefully considering all the material evidence on record. 51. In light of the above contentions, the respondents have prayed that the appeal b....
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....gs) if the attachment proceedings are to be continued. 53. Reliance is also placed on judgment dated 11.05.2018 by this Appellate Tribunal in the case of S.V. Srinivasus The Joint Director, Bangalore in FPA/PMLAJ445/BNGI2013, wherein it was held that provision of section 8(3)(a) was incorporated on 15.02.2013 with the intention that at the time of confirmation of order of attachment, the prosecution complaint along with evidence collected after independent investigation must be pending, and judgment dated 02.05.2019 in the case of Sanjay Kumar vs Deputy Director, New Delhi in FPA PMLA-2313- DLI-2018 wherein the adjudication order was passed on 04.04.2018. Since no prosecution complaint under PMLA, 2002 Act was filed, the appeal was allowed on the legal issue raised u/s 8(3)(a). 54. Judgment dated. 6.3.2020 by Hon'ble Punjab & Haryana High Court in SeemaGarg v Deputy Director, Directorate of Enforcement PMLA, in PMLA no. 1 of 2019 is also cited wherein the Hon'ble High Court pointed out that as per Section 8(3)(a), provisional attachment shall continue during investigation for a period not exceeding 90 days. The concept of 90 days period during investigation was introd....
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....diction outside India 19.04.2018 to 19.03.2019 During investigation for a period not exceeding 90 days or pendency of the proceedings relating to any offence under PMLA, 2002 before a court or before the competent court of criminal jurisdiction outside India w.e.f. 20.03.2019 During investigation for a period not exceeding 365 days or pendency of the proceedings relating to any offence under PMLA, 2002 before a court or before the competent court of criminal jurisdiction outside India 57. In the present case, the order of the Ld. AA confirming the provisional attachment, i.e., the impugned order, was admittedly passed on 06.04.2011. At the relevant time the law applicable was that upon confirmation by the Ld. AA, the attachment will continue during the pendency of the proceedings relating to any scheduled offence before a court. The impugned order of the Ld. AA records that a final report under section 173/174 of the Cr. P.C was filed on 28.01.2010 (Final Report No. 5/2010 dated 28.01.2010) by the State Vigilance Department before the Ld. Special Judge, Ranchi against Sh. MadhuKoda, the principal accused in the group of cases in which the present ap....
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....s that the assets attached in the instant case are far in excess of the proceeds of crime quantified by the respondent Directorate. It is pointed out that while the disproportionate assets in the hands of Sh. MadhuKoda have been quantified at Rs. 1,40,10,333/-, in the supplementary chargesheet filed by the CBI an amount of Rs. 8,42,22,056/- has been mentioned as per the extract of charge. It is further pointed out that total properties attached in the hands of the accused are much more than the aforesaid amount of Rs. 8.42 crore and therefore there was no occasion to attach properties of the appellant company to the tune of Rs. 2.19 lakh. 61. Having considered the above contention of the appellant, we are in a concurrence with the view already expressed by this Appellate Tribunal in the case of {Baldev Raj Arora Vs. Deputy Director ED in FPA- PMLA/2568/LKW/2019 (order dated 06.05.2019)} that the respondent Directorate is not entitled to attach the immovable property more than the value of proceed of crime. The same position has also been upheld by the Hon'ble Delhi High Court in their judgment in the case of Deputy Director Enforcement Vs. Axis Bank, CRL.A.143/2018 (order da....
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....ding M/s BillbodyVyapar Pvt. Ltd. through which Rs.15/-Crore was laundered. Sh. MrinalKanti Paul, in his statement dated 17.02.2010, had disclosed this amount. Accordingly, the Ld. AA noted that the fixed assets of the company to the extent of Rs. 15/-Crore represented proceeds of crime. As against this the attachment amounts of fixed assets is only Rs.2.19/-Lakh. Accordingly, the Ld. AA confirmed the said attachment. 64. Having considered the facts outlined above, we find that the extent of attachment is almost negligible compared to the alleged proceeds of crime. Further, as per the appellant's own submission, the same stands further depreciated due to the efflux of time. Furthermore, the conclusion of the Ld. AA is substantiated by the statement of Sh. MrinalKanti Paul. Other than bare statement the appellant has not been able to discharge its burden of proof that no amount was laundered by the group through the appellant company, the assets have been attached by the respondent Directorate as 'value' of the proceeds of crime and not as direct proceeds of crime. In view of these facts, we are of the view that substantially probable cause has been adequately establi....
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.... those in the case of M/s BillbodyVyapar Pvt. Ltd. (supra) and are not repeated here in the interest of brevity. 70. Next, it is submitted that in the present case assets as per the balance sheet as on 31.03.2009 of Rs.6,07,21,821/- were attached on the ground that Sh. BinodSinha/ VikasSinha invested Rs. 8.9 crore(Rs.6.56 Cr.+ Rs.2.4/-Cr.) in the appellant company. Secondly, Sh. AbhijeetSinha, Accountant of the appellant company, in his statement recorded during the I-T Department search on 31.10.2009, could not reply to the query on share application money received from three companies of the Rungta Group. In this regard, it is submitted that the appellant company was managed by the Rungta family upto 2006. The company's plant was under lockdown since 2001 due to which it suffered huge losses and was not able to run its business. Sometime in 2006-07 Sh. Vijay Joshi approached Sh. R.S. Rungta to become a partner in the appellant company and later introduced sh. BinodSinha for further investments in the appellant company. In pursuance of this Vijay Joshi Group and BinodSinha Group as well as Rungta Group brought in investments in the appellant company for running the business....
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....r investment by Appellant also needs to be considered true and be relied upon to admit that both exited with return of their investments from the Appellant. From the statement of Sh. R.S. Rungta recorded by Respondent u/s 50 of Act and relied upon by him, it is clear that Sh. BinodSinha/VikashSinha and Sh. Vijay Joshi have exited from appellant Company and they have taken back their entire investment in the appellant and no investment by them remained with the appellant company. It is pertinent to mention that Sh. Vijay Joshi resigned from directorship of appellant on 02.04.2008, Sh. BinodSinha and Sh. VikashSinha resigned from directorship of appellant on 06.08.2007. Thus, at the time of statement of Sh. R. S. Rungta, both Sh. Vijay Joshi and Sh. BinodSinha /VikashSinha had exited from the Appellant Company and had also taken back their investment and the appellant was not in possession of any amount out of alleged proceeds of crime. 73. Insofar as share application money of Rs. 9.77 crore contributed by Rungta Group from three associate/group companies M/s JMD Mercantile Pvt Ltd, M/s Hiteshwari Marketing Pvt Ltd and M/s BhaneshwariDealcomPvt Ltd. are concerned, it is submitted....
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....ondent's adverse inference is based on proceedings by Income Tax officials under the provisions of the I-T Act alleging undisclosed income of appellant, and in worst case, possession of unaccounted property/ money acquired by legal means may be actionable for tax evasion/ violation under Income Tax Act but it will not be regarded as proceeds of crime as defined under section 2(u) of the Act. To be proceeds of crime, property must be derived or obtained, directly or indirectly as a result of criminal activity relating to a scheduled offence. Reliance is placed in this regard on the principle of law laid down by the Hon'ble Supreme Court in Vijay MadanlalChoudhary & Orsus Union of India &Ors. SLP Crl No. 4634 of 2014 judgment dt. 27.07.2022: "The "proceeds of crime" being the core of the ingredients constituting the offence of money-laundering, that expression needs to be construed strictly. In that, all properties recovered or attached by the investigating agency in connection with the criminal activity relating to scheduled offence under the general law cannot be regarded as proceeds of crime. There may be cases where the property involved in the commission of sche....
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..../s Bhaneshwari Deal Com Pvt. Ltd. which constitute part of relied- upon documents, reveals that a sum of Rs.70,48,102.57/- is appearing on 1.4.2006 in respect of LCL, Ranchi Office in all three ledger extracts, which was wrongly considered as receipt of share application money from all three companies and after correction of this error, the correct amount share application would work out to Rs.7.66/-crore. 79. It is contended that the Ld. AA failed to consider detailed submissions made on behalf of the appellant. and simply considered that respondent has alleged inflow of Rs. 6.86 crore plus Rs. 2.50 crore from Sh. BinodSinha Group, inflow of Rs. 1.8 crore from Lacky Project/ Vijay Joshi Group, inflow of Rs. 9.77 crore from three companies (total Rs. 20.93 crores) in appellant company against which total assets attached are of Rs. 6.07 crore and Ld. Authority confirmed the attachment which is wrong and unsustainable. 80. From elaborate submissions on nature, source of each of the above inflow of funds from Joshi Group, BinodSinha Group, Rungta Group, received by the appellant and return of money invested by Sh. BinodSinha group and Sh. Vijay Joshi group, it is clear that appe....
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.... and attempt was made to change the colour of tainted money by way of fictitious share application money or through accommodation entries. Records amply demonstrate that the appellant was one of the companies which participated in layering of tainted money to the tune of approximately Rs.21/-Crores. ● The appellant company was one of the frontline companies used by Sh. BinodSinha to park and launder his tainted money. The statements of various persons before authorities, clearly reflect the use and participation of the appellant company in laundering of tainted money. An attempt has been made by the appellant to show that Mr.BinodSinha's tainted money was never directly infused in the appellant company. However, the perusal of records prima-facie establishes reason to believe against the appellant herein and circuitous route was adopted forlayering the tainted money introduced by Mr Sinha and his aides. The impugned order in Paras80-89 and 142-144 specifically reflects the investment in the appellant company by BinodSinha group of companies. The impugned order has suitable discussed the modus operandi adopted to layer the tainted money. ● ....
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.... they stood at the relevant time, the issue has been discussed at length in Paras 43 to 50 while disposing of the appeal filed by M/s BillbodyVyaparPvt. Ltd. (supra). For the reasons discussed in detail therein, this contention of the appellant is rejected. 87. Secondly, it is contended that the appellant is not an accused in any of the chargesheet filed in the scheduled offence or the offence under the PMLA, 2002. This contention has also been discussed at length in Paras 48 to 50 of this order while dealing with the appeal filed by M/s BillbodyVyapar Pvt. Ltd. wherein an identical issue had been raised. For the reasons discussed in detail therein, this contention of the appellant to is rejected. 88. The next contention raised on behalf of the appellant is that the attached fixed assets were from explained sources and, furthermore, they were acquired much prior to any investment by Sh. Vijay Joshi and Sh. BinodSinha, the alleged associates of Sh. MadhuKoda through whom the alleged proceeds of crime were laundered. It is also contended that the investments made by the aforesaid two persons had been taken back by them and no amount of the alleged proceeds of crime remained wit....
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.... as he did not say anything incriminatory. 91. We have considered the above submissions and find that the appellant company itself is admitting inflow of cash from Sh. BinodSinha/ VikasSinha and Sh. Vijay Joshi who are close associates of the prime accused in this group of cases, Sh. MadhuKoda. Although, certain explanations were advanced before the Ld. AA the same remained unsubstantiated by cogent evidence including the fact of repayment to the aforesaid persons which is stated to have been made partly by cheque, partly in cash and partly even in kind. No proof of the same have been submitted and, therefore, the claims remains unsubstantiated. Elaborate submissions have been made to establish the genuineness of Rs. 9.77 crore stated to have been received from the Rungta Group companies, i.e., JMD Mercantile Pvt. Ltd. and two other companies. Without going into the merits of the arguments presented we note that even if this amount was to be excluded, the remaining unexplained amount would still be in excess of the value of assets attached, i.e. Rs. 6.07 crore. As such, having considered the facts before us and the submissions made on behalf of the appellant, we are of the view ....