Seized amount prima facie proceeds of crime cannot be treated as income before conclusion of PMLA trial

ACIT Vs State (Delhi High Court)

Delhi High Court held that seized amounts prima facie being proceeds of crime cannot be termed as income of accused as trial in PMLA case is yet to be conclude. Accordingly, it is erroneous to treat such amount as taxable income recoverable by Income Tax Department.

Facts- Petition under Section 482 of the Code of Criminal Procedure, 1973 has been filed on behalf of the Petitioner/Asst. Commissioner of Income Tax (ACIT), to challenge the Order dated 05.02.2018 of learned Special Judge (PC Act), CBI-05, New Delhi, dismissing the Application under Section 226(4) of the Income Tax Act, 1961 , filed by the Petitioner in SC No. 9593/2016 for direction to release all the FDRs, for recovery of Tax Demand against the Respondent Nos. 3 to 6 and M/s Stockguru India, a Partnership Firm of the Respondent Nos. 3 and 4, for the Assessment Years (AY) 2010-2011 and 2011-2012.

Conclusion- The proceeds of crime as in the present case, can in no way be termed as the income of the Accused at this stage, as trial in PMLA case is yet to be concluded.

The seized amounts in the present case subject to investigation under PMLA are prima facie proceeds of crime, and not lawful income from trade or business. Therefore, till such time the trial is concluded under PMLA/the FIR No.84/2011 dated 07.04.2011 (regarding cheating the investors) and it is established that the income/money recovered from the various Bank accounts which has been put in FDRs was indeed the income of the accused persons, the Income Tax Department cannot appropriate for tax liability by holding it as the income of the Company/Directors. Therefore, to treat such amounts as taxable income recoverable by the Income Tax Department, prior to the conclusion of the PMLA trial or adjudication, would be erroneous.