ITR Can’t Whitewash Crime Proceeds – Tribunal Upholds ED Attachment

Chandrama Prasad Singh Vs Deputy Director (Appellate Tribunal Under SAFEMA Delhi)

ITR Can’t Whitewash Crime Proceeds – Tribunal Upholds ED Attachment- Land Mafia’s Properties Worth ₹4 Crore Confirmed as Proceeds of Crime

A batch of appeals was filed challenging the Adjudicating Authority’s order dated 09.09.2022, which had confirmed the provisional attachment order dated 31.03.2022 under the Prevention of Money Laundering Act, 2002 (PMLA).

Background of the Case

The Enforcement Directorate (ED), Patna recorded an ECIR based on multiple FIRs against the appellants.

1. FIR No. 95/2007 (u/s 302 IPC & others) concerned the murder for which Chandrama Prasad Singh was charge-sheeted.

2. FIR No. 68/2012 (u/s 147, 148, 149, 385, 354, 379, 323, 307, 504, 506 IPC) involved allegations of extortion of ₹5 lakh, assault, & snatching of ornaments.

ED’s investigation revealed that the accused & their family members were habitual offenders engaged in extortion, cheating, & fraudulent land deals. They allegedly acquired immovable & movable properties worth ₹4.04 crore from tainted money, projecting it as legitimate. Frequent cash deposits exceeding ₹2.7 crore were detected in various accounts of Chandrama Prasad Singh, his relatives & associates. Their declared incomes were meagre — e.g., ₹75,600 in FY 2012-13, ₹4.47 lakh in 2013-14, ₹6.55 lakh in 2015-16 — without any supporting proof of business or profession.

Appellants’ Arguments

The appellants contended that:

• The FIRs did not involve extortion or loot, hence no proceeds of crime existed.
• The ingredients of Section 3 (money laundering) were missing.
• Reliance was placed on the Supreme Court’s bail order dated 02.02.2024 in Chandrama Prasad Singh v. State of Bihar, where no prima facie case of money laundering was found.
• Income Tax Returns (ITRs) had been filed showing legitimate income, & hence attachment was unwarranted.

Respondent’s (ED) Submission

ED argued that:

• Investigation under PMLA clearly established that appellants acquired proceeds of crime through land grabbing, extortion, forged deeds, & manipulated development agreements.
• Witnesses under Section 50(2)/(3) PMLA confirmed use of muscle power & fraudulent transfers.
• Income Tax Returns were fabricated to legitimise illicit gains, unsupported by any business records or bank trail.

Findings of the Tribunal

Tribunal found:

• The modus operandi involved befriending victims, acquiring land documents under pretext of helping in mutation, and then forcibly taking over or selling such land through fake deeds.
• Statements under Section 50 of PMLA from complainants, builders, & relatives corroborated these allegations.
• The appellants had no verifiable source of income, & their ITRs were merely a façade to whitewash tainted money.
• Mere filing of ITRs cannot convert illicit income into lawful income, especially when no evidence of actual business, invoices, or corresponding bank transactions existed.
• The Supreme Court’s bail order was based only on a prima facie view, not a finding of innocence, and did not preclude the Tribunal from assessing material afresh.

Tribunal’s Observations/Decision

• Sangeeta Kumari, shown as a housewife, had ₹11 lakh declared income in AY 2018–19 without any business proof.
• Dablu Kumar’s alleged dairy & ice cream business was unsupported by any documentation.
• Shivji Prasad, a relative, too failed to disclose genuine sources for his property purchases.
• Total declared income of the family (~₹36 lakh) was grossly disproportionate to properties worth several crores.
• Thus, the appellants’ properties represented proceeds of crime, and their actions amounted to projecting & concealing tainted money as untainted, attracting Section 3 of PMLA.
• Tribunal held that the ED’s attachment was valid. The appellants failed to establish lawful sources of income or rebut the findings of money laundering.
• Accordingly, all appeals were dismissed & the attachment of properties worth ₹4.04 crore was confirmed.

FULL TEXT OF THE JUDGMENT APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI

The batch of appeals have been filed to challenge the order dated 09.9.2022 passed by the Adjudicating Authority confirming the provisional attachment order dated 31.3.2022. It was in reference to the ECIR recorded in furtherance to the FIRs registered against the accused.

2. It is a case where FIRs were registered against the accused on the complainants from time to time. FIR no. 95/2007 was lodged on 14.02.2007 for an offence under section 302 IPC apart from other offences wherein one Anil Kumar Pathak was murdered. The chargesheet was filed against the appellant Chandrama Prasad Singh and others.

3. Another FIR 68/12 dated 28.05.2012 was lodged for the scheduled offence with police station, Ramkrisha Nagar against Chandrama Prasad Singh, Dablu Kumar and many others causing offence under section 147, 148, 149, 385, 354, 379, 323, 307, 504 and 506 IPC. The allegation was that the accused person entered into the house of Pankaj Suman for extortion of Rs. Five lakhs. They had beaten the family of the complainant and snatched the mangalsutra.

3. The ECIR was then recorded followed by investigation where statements under section 50 (2) and 50 (3) of the PMLA Act of 2002 were recorded. The investigation revealed that the accused had acquired tainted money as a result of their criminal activities relating to scheduled offence and acquired movable and immovable properties in their own name or in the name of the family members to camouflage ill-gotten money to project it to be un-tainted.

4. The provisional attachment order was caused finding proceeds of crime to the tune of Rs. 4,04,29,415/- in the hands of the appellant. The modus operandi was revealed by the letter dated 09.10.2013 of the Suprintendent of Police, Economic Offence Unit, Patna, Bihar and another letter dated 19.11.2013 of Sub Divisional Police Officer, Sadar, Patna where it was found that accused along with their family members and related person remained involved in commission of extortion, cheating and in property transaction using forged documents. The appellant Chandrama Prasad Singh and his family members were found habitual offenders.

5. The statement of complainant apart from others were recorded. Santosh Kumar Pathak, the complainant in his statement under section 50 PMLA stated that his brother Anil Kumar Pathak was having acquaintance with Chandrama Prasad Singh who financially helped him in kidney treatment. However, on 07.07.2007, the said Chandrama Prasad Singh demanded and collected the documents of a land purchased by his brother Anil Kumar Pathak. The documents were taken to get the land mutated in their name but intended to grab it and thereafter Anil Kumar Pathak was brutally murdered by gang of Chandrama Prasad Singh. He took signature of Santosh Kumar Pathak on a blank paper. The land was then shown to have been sold to Chandrama Prasad Singh by creating forged documents for which separate FIRs were lodged. The modus operandi of the accused was to first take innocent person into confidence by way of financial help and then to insist to purchase the land in their name and later on to procure the documents by making commitment of mutation etc. and thereafter to take over the land. The accused thus acquired many properties out of their criminal activities.

6. The description of those facts has been given in the impugned order otherwise the appellant Chandrama Prasad Singh and others were not having financial condition to acquire many properties. His income in the year 2012-13 was only Rs. 75,600 per year which was increased manifold in the next year 2013-14 to sum of Rs. 4,47,720/- and thereupon in the following year Rs. 6,55,200/-. No document was existing to support the income.

7. The accused were asked to disclose the income but they failed to give source of income. However one Dablu Kumar had shown his earning out of sale and purchase of land. Sangeeta Kumari, wife of Dablu Kumar, otherwise admitted to be a housewife having no source of income at her own. Frequent cash deposits in the bank accounts of Chandra Prasad Singh and his family members apart from Dablu Kumar and others were found where Rs. 2.7 crores was deposited in various bank accounts without having source of income to the extent of the cash deposited frequently in their bank account. Thereby, the respondents caused the provisional attachment order and confirmed by the Adjudicating Authority. Aggrieved by the order, the appellant preferred this appeal.

Argument of the learned counsel for the appellant

8. The learned counsel for the appellant submitted that the FIR registered against the accused did not disclose extortion of the money or loot so as to make out a case of money laundering. In fact, the commission of alleged offence did not yield the properties rather false allegations were made by the complainant for commission of offence under section 307 and 302 IPC apart from others. The ingredient of section 3 of the Act of 2002 could not be satisfied. It is missing in this case and to support the argument, reference of the bail order of the Supreme Court, the case of Chandrama Prasad Singh, criminal appeal number 569/24 dated 02.02.2024 was given. Therein, the Apex Court did not find a case of money laundering and even a scheduled offence to acquire proceeds of crime. The appellant was thus granted bail.

9. The counsel for the appellant further submitted that when no allegation for extortion of money was levied against the accused, there was no reason to infer tainted money with the appellants and its concealment without proceeds of crime in their hands. The appellant had otherwise disclosed the source to acquire the property. They were regularly paying the income tax and income was even assessed by the Income Tax Department.

10. In view of the above, there was no reason for Adjudicating Authority to confirm the provisional attachment order. The prayer was accordingly made to cause interference in the impugned order.

11. The counsel for the appellant did not raise any other argument than referred to above in spite of an opportunity and invite to raise any legal or factual ground. The counsel for the appellant recorded his satisfaction to the argument referred above and accordingly closed his argument.

Argument of the learned counsel for the respondent

12. The counsel for the respondent vehemently contested the appeal on all the issues raised by the appellant. It was submitted that appellant was involved in commission of crime. They acquired the property out of commission of crime and projected it to be untainted property and accordingly after recording of the ECIR, the investigation was caused wherein details of the tainted property was revealed and provisionally attached. Elaborate argument was made by the counsel for the appellant which would be referred while recording the finding in reference to the argument of the counsel for the appellant. It is to avoid repetition of same facts and for the sake of brevity.

Finding of the Tribunal

13. We have considered the rival submission of the parties and scanned the record carefully. In the opening paras of this order, reference of the FIRs registered against the accused has been given. Since FIR’s were disclosing predicate offence, thus an ECIR was recorded by the respondent followed by investigation. They found proceeds of crime in the hands of the appellant and accordingly provisional attachment order was passed. The appellants have contested the case on the ground that despite no allegation for commission of offence of money laundering and acquisition of proceeds of crime, their properties acquired out of the disclosed sources have been attached. A reference of the bail order passed by the Apex Court dated 2^ndFebruary, 2024 was given. The main issue raised by the appellant thus needs to be dealt with at the first step.

14. The FIR discloses commission of crime by the accused who are shown to be habitual. The investigation revealed evidence against the accused. The statement of witnesses were recorded under section 50(2), 50(3) of the Act of 2002 and therein not only allegation of extortion of money was found but even a case of money laundering. We would accordingly refer to the statements relevant to the case.

15. Santosh Kumar Pathak in his statement confirmed fraudulent acquisition of land by the accused in deceitful manner. He lodged the FIRs out of which one was causing offence under section 302 IPC apart from other offences. He stated that his brother Anil Kumar Pathak was having acquaintance with accused Chandrama Prasad Singh who even helped him at one stage. However, when he got to know that Santosh Kumar has purchased a land in the name of Anil Kumar (deceased in the murder case), he took documents to get them mutated in their name. Later on, his brother Anil Kumar was brutally murdered by gang of Chandrama Prasad Singh apart from others. The allegation was made for even fraudulent sale of land by creating fake documents without owner’s knowledge. The FIR was registered followed by charge sheet against Chandrama Prasad Singh and others. The modus operandi of the accused was to forcefully acquire the documents pertaining to the property under false pretense and thereafter to sell it by using fabricated documents. In the investigation, it was found that the accused acquired properties in the name of relatives to camouflage proceeds of crime. Sh. Santosh Kumar further stated that the accused used to change the name of real owner of the property for its onward sale and otherwise it is to frustrate the proceedings under the PMLA.

16. The investigation further revealed that income from house property and agriculture was falsely reported. No documentary proof could be submitted by the appellant. In fact return for income was submitted only to cover up the proceeds of crime. The appellant Chandrama Prasad Singh was having an income of Rs. 75,600/- from the house property in the year 2012-2013 which has increased to Rs. 4,47,720/- in the year 2013-14 and Rs. 6,55, 200 in the year 2015-16. The appellant failed to produce any document to support the income during the course of investigation. He rather failed to produce any evidence to prove source to acquire the property.

17. The accused were possessing insurance policies purchased on payment in cash but no source for purchase of insurance policy could be disclosed and the reason of cash transaction.

18. The Investigation further revealed that loan and repayment through cash deposits without proper documentation suggested illegal financing. The frequent deposit of cash for a sum of Rs. 2.72 crore was without disclosure of its source and reason for its deposit in cash. Apart from Sh. Chandrama Prasad Singh, Dablu Kumar and others were involved and in possession of proceeds of crime which included Smt. Sangeeta Kumari, whose statement was also recorded. She had no knowledge about the source and funds in her account rather shown to be a housewife but huge accumulated funds were found in her account. The transactions were mainly in cash.

19. The family members were found involved in cash transactions using name of relatives and fake deeds of ownership. In fact, Chandrama Prasad Singh and his brother acted as land mafia for encroaching the land of others after using muscle power which was confirmed by the witness in their statement. The accused encroached the land of a construction Company. The Director of the construction company confirmed the allegation against the appellant. It is with the further statement that development agreements with the builders used to be manipulated to take money without delivery of possession. The Chandrama Prasad Singh and his family members entered into development agreements with various builders and after obtaining payments under those agreements, they did not hand over the possession and did not allow the construction by the builder and thereby illegally retained the land and money. The facts aforesaid were gathered in the statement of the witness recorded under 50 (2) of the Act of 2002 which was corroborative in nature in view of the fact that one Sunil Kumar, Director of Radha Rani Construction Private Limited, Satish Raman, Director of Raman Kumar Construction Ltd. , Sh. Muralidhar Pandey (Secretary of Suman Sahkari Grih Nirman Samiti), Mr Pankaj Suman, Complainant, Mr. Shiv ji Prasad and Sh. Lallu Prasad made statements under section 50 of PMLA Act of 2002 to fortify the allegations against the appellant.

20. Satish Raman, Director of Raman & Kumar Construction Ltd. made specific allegation against the appellant for notorious criminal acts by forming a gang. They were involved in forceful acquisition of land from innocent persons. They were involved even to first obtain government revenue receipt in someone’s name and to make fake ownership claims to enter into development agreements to collect money and later register the disputed land in the name of brother or relatives. Through the aforesaid method, the appellant and his associates cheated the builders and others.

21. In the statement on 24.01.2022, one Sh. Shiv ji Prasad, a relative of Chandrama Prasad Singh stated that land properties without proper documentation were repeatedly sold to different persons by appellant Chandrama Prasad Singh and his brother. They were engaged in selling the properties at higher rates to multiple buyers. Different family members would create separate ownership documents for the same land and would take the possession. The similar allegations were made by other witnesses with disclosure of the fact that after acquisition of the proceeds of crime, it was shown to be untainted and diverted in the name of the relatives which include Sangeeta Kumari.

22. In the light of the evidence referred to above, we find that in the PMLA investigation, material was collected to reveal acquisition of proceeds of crime by the accused with its diversion in the account of relatives and therefore, the property in the name of Sangeeta Kumari was also provisionally attached.

23. At this stage, it would be relevant to refer the bail order passed by the Apex Court. The appellant Chandrama Prasad Singh was granted bail by the Apex Court finding no material to indicate proceeds of crime derived or obtained as a result of criminal activity relating to scheduled offence.

24. We are not aware as to whether the respondents produced copy of the original complaint submitted to the Adjudicating Authority after causing provisional attachment order and even the provisional attachment order to show that during the course of investigation, the proceeds of crime were revealed in the hands of the accused and a case under section 3 of the Act of 2002.

25. The statements recorded under section 50 of the Act of 2002 have been specifically referred to show involvement of the appellant in commission of crime of money laundering. The modus operandi to commit the offence was given which includes causing an offence under section 302 where Anil Kumar Pathak was murdered and thereafter accused involved in the land transaction to extract the money. The detailed analysis of the facts have been made in this case which seems to have not been brought to the notice of the Apex Court. Therefore, we would be unable to ignore the material brought before us to pass the order only on the basis of the bail order which otherwise did not culminate in acquittal or discharge of the accused but only shows a prima facie case based on material produced therein.

26. The case has another aspect to be dealt with for the reason that a notice under section 8(1) of the Act of 2002 is caused to find out the source for acquisition of alleged proceeds of crime and if the sources are not disclosed coupled with the involvement of the proceeds or its acquisition out of money laundering, the Adjudicating Authority passes an appropriate order.

27. In the instant case, the appellant has made effort to disclose the source for purchase of the property. The reference of Income Tax Return disclosing their income has been given, rather copy of the Income Tax Return was filed and is on record. The huge income of appellant Sangeeta Kumari was shown in the return which is amounting to Rs. 11,00,000/- in the Assessment Year 2018-19 as against her statement to be a housewife and a transaction in her account at the instance of the accused husband.

28. The fact aforesaid fortified the effort of the appellants.

29. Sangeeta Kumari’s husband Dablu Kumar stated about the source of income to be out of dairy business as well as from ice cream business. So far Sangeeta Kumari is concerned, she did not make a reference of those businesses rather shown herself to be the housewife.

30. We further find that other than the Income Tax Returns, there is no evidence to prove business of dairy or ice cream either by Dablu Kumar or Sangeeta Kumari. They had shown the income to cover up the proceeds of crime in their hands, otherwise there was no reason for Sangeeta Kumari not to disclose her business rather to show herself to be a housewife. The income of more than Rs. 11 lakhs in the hands of Sangeeta Kumari was shown for the Assessment Year 2018-19 without dis-closing and producing the evidence to prove the income either from dairy or ice cream or any other business.

31. The position of fact is similar for the other appellants. They have also made reference of the Income Tax Returns but failed to produce any evidence to prove their disclosed source for generation of income to corroborate the Income Tax Return. They have not even produced the bank statement to find out the source. The amount was deposited in cash obtained out of the criminal activity and with disclosure of it to as income to convert tainted money to be untainted. The production of bank statement could have fortified the source of income corresponding to the statement of the witnesses. The appellants have not produced any invoices or any document co-relating to their business activity and even a document to indicate the sale of ice cream or dairy product or even agriculture product. The investigation otherwise revealed that the purchase of property by Chandrama Prasad Singh was invariably on the lower price. He was having nine landed properties purchased in the year 2010-2013 every year and then in the year 2016. The value of the property is not matching to the income disclosed in the income tax returns of those years, even if we ignore that no document was submitted to disclose the source. The total income reflected in the ITR comes to Rs. 36 lakhs which is much below the value of the nine landed properties. This shows that the appellant failed to disclose the source for purchase of property and even we have commented on the income tax return to disclose the income but there is no corroborating document to show the business and the income generated out of it.

32. Mere reference of income tax return cannot result in with the finding that the income shown therein was not out of proceeds of crime. If we do it then it would be very easy for the accused to generate the proceeds of crime and then deposit cash in the bank account and at the same time, disclose it in the Income Tax Return. The Assessment Orders are otherwise not on record. The appellant has not produced bank statement to prove his income from any of the source corresponding to the income disclosed in the income tax returns. It is apart from the fact that even total income disclosed in the return is also taken note of, it is far below the value of the properties. We need not to reiterate the modus of acquisition of the property corresponding to serious allegation have been made by the complainant and supported by the witnesses which includes the officer of the Corporate who said to have entered into the development agreement with the accused but they were not provided land or the possession to construct the building.

33. The appellant Shiv Ji Prasad has also made statement under section 50 of the Act of 2002, though it is not supporting the main accused Chandrama Prasad Singh but his properties are also under provisional attachment thus, he has also preferred an appeal.

34. The investigation revealed purchase of property by the said appellant without corresponding withdrawal of money from the bank account or disclosing the source. The source to acquire the property remained undisclosed. In the statement made under section 50 (2) of the Act of 2002, the said appellant did not even disclose the source of his income corroborated by the evidence. In fact, the evidence to support the income of any of the appellant is missing despite burden lies on them to prove their case.

35. In the light of the discussion made above, we find that the appellants were involved in the predicate offence for which FIRs were registered and in the investigation pursuance to the FIR and after recording of the ECIR, it was revealed that the accused are involved in extortion of money by using their muscle powers and even to obtain the documents of the land and thereafter with manipulation in the revenue records and otherwise to sell it. The facts aforesaid came in the investigation and accordingly, quantifying the proceeds of crime in the hands of the appellant, provisional attachment order was passed.

36. It is no doubt that in the order passed by the Apex Court, it was mentioned that no case of money laundering has been shown while in our detailed discussion, we have given reference to the material to make out a case of money laundering. The appellant had projected tainted money to be untainted and otherwise involved in concealment to make out an offence under section 3 of the Act of 2002. The quantification of the proceeds is in reference to those allegations only. The appellants would have otherwise disclosed the source to purchase the properties with necessary proof but no material or evidence was produced to prove the source for purchase of the property.

37. In the light of the discussion made above, we do not find a case to cause interference in the impugned order.

38. The appeal accordingly fails and is dismissed.