2025 (5) TMI 2103 - AT - Money Laundering

Money Laundering - Provisional Attachment Order - proceeds of crime - scheduled offences - recruitment racket - demand of bribe for recruitment on the post of Dental Surgeon conducted by the Service Commission - HELD THAT - The appellant has disclosed the source out of his salary and largely from the sale of property for a sum of Rs. 3 crores out of which he received Rs. 2.8 Crores between 2011-2016. It is important to note that a disclosure of the amount towards the sale of the property was not made by the appellant in his statement under Section 50 of the Act of 2002 and even in the statement before the police rather the fact aforesaid was disclosed subsequent to the issuance of the Provisional Attachment Order - The appellant has tried to justify the cash deposits in reference to the agreement to sell but it has not been trusted and accepted in view of the fact that it was not disclosed at the time of recording of the statement of the appellant under Section 50 of the Act of 2002 and even in the statement before the police in the investigation. The amount of Rs. 2.8 Crores was received without registration of the property in the name of the purchaser. At this stage it is further necessary to add that the amount deposited in cash was upto Rs. 8 lakhs ignoring the transaction in cash of Rs. 2 lakhs or more is not permissible under the Income-Tax Act. Accordingly the appellant has failed to disclose the source to accumulate huge amount of Rs. 4.05 crores and also the amount found at the time of search. So far as the salary and income out of it is concerned the entire amount cannot be taken towards the savings because one has to incur a reasonable amount for himself and the family but appellant has taken the entire amount of salary to be his savings of Rs. 48 lakhs to justify a total amount of Rs. 4.05 crores in his hand. It is in ignorance of the fact that the salary is received through the banking channel whereas the bank statement along with the written arguments shows even cash deposit in the Bank accounts - The reflection of the salary amount has been correctly given therein but appellant has utterly failed to justify accumulation of the fund of Rs. 4.05 Crores. It is more so when if the bank statement is minutely examined till the year 2011and beginning of 2012 the deposit of the amount has been indicated through the cheque but thereupon involved cash deposits and that too of substantial amount starting from 04.04.2012 onwards. The appellant could not justify the deposit in cash in two different bank accounts out of the alleged agreement to sell of the property. Thus the Adjudicating Authority rightly confirmed the attachment finding it to be proceeds of crime out of the offence of money laundering. It is when they found prima facie case of money laundering. The amount received towards the acquisition of land would not justify the deposit of cash from time to time after the appellant became Member of the Service Commission who otherwise admitted about the receipt of Rs. 2-3 lakhs per candidate to enhance the marks in the selection for appointment in services. The appellant Sazzadur Rehman said to be working as a sub-contractor under the Water Resources Department and Public Works Department of the Govt. of Assam from 2014 to 2016. He had undertaken various sub-contracted works including a contract and completed the work in the year 2016. The payment received in lieu of the sub-contract was deposited in the Axis Bank and ICICI Savings Bank Accounts. The amount aforesaid was received through the banking channel but the appellant has failed to place on record a document to prove sub-contract in favour of the appellant Sazzadur Rahman and its execution by him. Conclusion - i) The appellant has failed to disclose the source to accumulate huge amount of Rs. 4.05 crores and also the amount found at the time of search. ii) The Adjudicating Authority rightly confirmed the attachment finding it to be proceeds of crime out of the offence of money laundering. Appeal dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether the Provisional Attachment Order confirming attachment of 46 movable and immovable properties as proceeds of crime under the Prevention of Money Laundering Act (PMLA) was justified.

- Whether the appellants' deposits amounting to Rs. 4.05 crores in various bank accounts and acquisition of properties could be considered proceeds of crime linked to the alleged offence of recruitment racket and corruption in the Assam Public Service Commission.

- Whether the appellants successfully demonstrated lawful sources for the disputed amounts and properties, including salary, ancestral property sale proceeds, and other income.

- Whether procedural irregularities occurred in the production of additional documents and bank statements at the appellate stage, affecting the fairness of the proceedings.

- Whether the Adjudicating Authority and the Tribunal correctly applied the legal framework and evidence to conclude the appellants' involvement in money laundering.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Justification of Provisional Attachment Order and designation of properties as proceeds of crime

The relevant legal framework is the Prevention of Money Laundering Act, 2002 (PMLA), under which the Adjudicating Authority has power to provisionally attach properties suspected to be proceeds of crime. The ECIR and investigation revealed a recruitment racket involving the appellants and others, including receipt of large sums of money in exchange for securing government jobs.

The Court noted that the appellants, particularly Dr. Samedur Rahman, had admitted receipt of Rs. 2-3 lakhs per candidate to enhance marks in the selection process. Investigations uncovered cash deposits in bank accounts of the appellant and his family members, acquisition of properties, and extensive communications corroborating involvement.

The Court applied the law to facts by observing that the cash deposits and property acquisitions were prima facie linked to the proceeds of crime derived from the recruitment racket. The Adjudicating Authority's confirmation of attachment was therefore upheld as justified, given the evidence of illicit gains.

Competing arguments by appellants regarding lawful sources were examined but found insufficient to rebut the presumption of proceeds of crime. The Court emphasized that the burden to disclose legitimate sources was not met satisfactorily.

Conclusion: The attachment order was rightly confirmed as the properties were proceeds of crime under PMLA.

Issue 2: Lawful sources claimed by appellants for deposits and properties

The appellants contended that the large deposits and properties were acquired from lawful sources including salary as Assistant Professor and Member of the Service Commission, ancestral property sale proceeds, pension, and other incomes.

The legal principle requires that the accused must satisfactorily explain the source of deposits and assets when challenged under PMLA. The Court scrutinized the appellants' claims and found critical deficiencies:

• The appellant did not disclose the sale of ancestral property and receipt of Rs. 2.8 crores in his statement under Section 50 of the PMLA or during police investigation, only revealing it after attachment orders were passed.
• The agreement to sell property was executed on a low-value stamp paper and no registered sale deed was executed, indicating the transaction was incomplete and possibly a cover-up.
• Bank statements produced for the first time at the appellate stage were not filed according to proper procedure, diminishing their evidentiary value.
• The salary and pension income were insufficient to justify the accumulation of Rs. 4.05 crores, especially considering reasonable living expenses and the fact that large cash deposits were made, which is inconsistent with normal salary crediting through banking channels.
• The appellant failed to produce documentary evidence for sub-contract works claimed by his son, weakening the claim of lawful income.

The Court rejected the appellants' explanation as unconvincing and held that the unexplained cash deposits and property acquisitions were proceeds of crime.

Conclusion: The appellants failed to establish lawful sources for the disputed amounts and properties, supporting the attachment.

Issue 3: Procedural irregularities in production of documents at appellate stage

The appellants submitted bank statements and other documents for the first time along with written submissions without formal application to admit additional evidence at the appellate stage. The Tribunal noted this was contrary to procedural rules and raised concerns about the conduct of counsel.

Despite procedural impropriety, the Tribunal considered the documents but found them insufficient to alter the outcome. The Court emphasized the importance of following proper procedure for evidence submission to ensure fairness and orderly adjudication.

Conclusion: Procedural irregularities were noted but did not prejudice the final decision as the new evidence lacked credibility and was insufficient to overturn findings.

Issue 4: Application of law and findings on involvement in money laundering

The Court relied on the statutory provisions of PMLA and relevant Supreme Court precedents (including the cited Vijay Madanlal Choudhary case) to assess the evidence. The Court found that the appellants were prima facie involved in money laundering by receiving illicit payments and converting proceeds into movable and immovable assets.

The Court highlighted that the appellants' admissions, recovered cash, forensic examination of mobile phones, and circumstantial evidence collectively established a prima facie case. The burden to explain the source of deposits was not discharged.

The Court rejected the appellants' competing contentions and held that the Adjudicating Authority correctly applied the law and confirmed the attachment.

Conclusion: The law was correctly applied and the appellants' involvement in money laundering was established on the evidence.

3. SIGNIFICANT HOLDINGS

- "The appellant has failed to disclose the source to accumulate huge amount of Rs. 4.05 crores and also the amount found at the time of search."

- "The amount deposited in cash was upto Rs. 8 lakhs ignoring the transaction in cash of Rs. 2 lakhs or more is not permissible under the Income-Tax Act."

- "The appellant introduced an agreement to sell at the stamp paper of Rs. 10 to prove receipt of money in cash from the year 2011-16. It is, however, with the admission that the sale deed was not executed in favour of the alleged purchaser for the reason that the appellant was arrested and the amount of Rs. 2.8 Crores was retained by the appellant."

- "The bank statements filed along with the written submissions are yet considered. We find that the appellant made cash deposits running into many lakhs from time to time without disclosing source and the aforesaid amount is subsequent to the nomination of the appellant Dr. Samedur Rahman as Member of the Service Commission."

- "The Adjudicating Authority rightly confirmed the attachment finding it to be proceeds of crime out of the offence of money laundering."

- "The appellants failed to establish lawful sources for the disputed amounts and properties, supporting the attachment."

- "Procedural irregularities in filing additional documents at appellate stage were noted but did not affect the outcome."

The Tribunal dismissed the appeals, affirming the confirmation of the Provisional Attachment Order under PMLA, holding that the properties and amounts in question were proceeds of crime linked to the recruitment racket and money laundering offences. The appellants' explanations were found inadequate and unsubstantiated, and the attachment was upheld as lawful and justified.