Dismissed

FPA-PMLA-2825/DLI/2019 of Subash Chandra Gupta v. The Deputy Director, Directorate of Enforcement

ATFP13 Aug 2024FPA-PMLA-2825/DLI/2019

Case brief

AI extract

What is this about?

This appeal against an attachment order under the PMLA was dismissed. The Appellate Tribunal held that the appellant failed to prove legitimate sources for the attached fixed deposit as witness statements and money trails indicated dummy transactions orchestrated to convert demonetized cash.

What did the court decide?

The appeal is dismissed and the attachment order is upheld.

FPA-PMLA-2825/DLI/2019 of Subash Chandra Gupta Vs. The Deputy… — Money Laundering | ATFP (2024)

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APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI

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MP-PMLA-5948/DLI/2019(E.H.)

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FPA-PMLA-2825/DLI/2019

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Subash Chandra Gupta … Appellant Versus The Deputy Director, Directorate of Enforcement …Respondent

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Advocates/Authorized Representatives who appeared

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For the Appellant : Piyush Kumar , Advocate Saurabh Gupta,Advocate CD Joshi,Advocate NishantBishnoi,Advocate For the Respondent : Shri Mirnal Kumar, Advocate

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CORAM JUSTICE MUNISHWAR NATH BHANDARI : CHAIRMAN SHRI V. ANANDARAJAN : MEMBER

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FINAL ORDER 13.08.2024

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FPA-PMLA-2825/DLI/2019

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This appeal has been preferred under section 26 of Prevention of Money Laundering Act 2002(‘in short the Act of 2002’) against the order 10-09-2018 passed by Adjudicating Authority confirming the attachment order. The Impugned order

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FPA-PMLA-2825/DLI/2019

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was passed to confirm the attachment of the fixed deposit of Three crores created by the appellant. The facts given rise to the caseisthat the appellant is proprietor of M/s Archit Sales having his office in Delhi. He is into the business of Tobacco and accordingly was purchasing and sellingthe tobacco. The case against the appellant was found for creation of an FD of 3 crores earned out of demonetized money by the Govt. of India.

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A case of money laundering was recorded after registration of the FIR against the accused involved in the case. It was found that a sum of Rs. 38 crores were obtained for converting demonetized currency into untainted monetized currency.The criminal activity was noticed and accordingly the case was registered. The appellant was one of the beneficiaries and was involved in assisting the other parties in the crime. As a result,he received the proceeds and was transferredto create a FD (Fixed Deposit)which has been attached by the respondents.

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The facts on record shows that one Ashish Kumar also adopted the same modus operandi and received asum of Rs 3.65 crores for convertingdemonetized currency by way of getting the draft in the name of different persons. The appellant was also involved in a similar manner where he took demonetized money through bank transactions and

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subsequently created FD which has been attached by the respondents.

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The counsel for the appellant submitted that the FD was out of valid transaction. The amount was received fromthe sale of tobacco to four different firms. It has nothing to do with the crime where even Yogesh Mittalmay be involved who is alleged to have used the demonetized money of RohitTandon to monetize through bank channels. It is submitted that the appellant received the amountin the FD out of sale of tobacco to different firms.

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The learned counsel for the appellant submitted that allegation against the appellant is baseless as the amount in fixed deposit was earned legitimately from the sale of tobacco to Yashoda Sales Corporation, M.S.Enterprises, Nikhil Enterprises and P.S. Sales. The payment was received through NEFT. The attachment order was issued without conducting any inquiry or seeking explanation from the defendant. The description of sale, if not given by the four firms in their sales tax return, might beto reduce their tax liability as the tax on fabric sale is ‘NIL’, whereas on tobacco, it is 20%. The description of Archit Sales as NON-TIN holder firm is patently perverse, as M/S Archit Sales is lawfully registered with the Department of DVAT. Therefore, the appellant manifested that the proceeds found in the fixed

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deposit account is out of the legitimate sale proceeds received through NEFT on the sale of tobacco to different firms.

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The allegations against the respondents are that they ignored the ledger as well as the invoices to show receipt of money. The learned counselfor the appellant not only referred to the invoices generated in the names of those firms which purchased the tobacco but also submitted that the payment was received from different companies/ firms to whom the tobacco was sold which is M/s Nikhil Enterprises, M/s Yashoda Sales Corporation, M/sM.S. Enterprises and M/s P.S. Sales. The invoices would show that tobaccowas sold to different firms and the ledger wouldindicate the receipt of the amount as a consequence thereof. It is not that the transaction of the sale of tobacco tothose firms was made for the first time;rather, they had been purchasing tobacco from the appellant since long.Therefore, there were no reasons for the respondents to treat the payment towards the sale of tobacco as ademonetized money channelized through the bank transaction.

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The learned Adjudicating Authority failed to consider that the amount received from different firms were reflected in the ledger and even the tax payments towards the sale of the tobacco was also proved. It may be that there was some misdeclaration or wrongdoing by the firms which purchased the

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tobacco while filing the tax return but that does not mean that the appellant had not sold the tobacco and received the amount. The non-consideration of the documents on record makes the impugned order illegal. Therefore, on this ground alone, the impugned order should be set asidewith the provisional attachment order.

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It is further submitted by the counsel for the appellant that he is not raising any other issue than raised above and when the facts on record prove it to be not a case of money laundering; the impugned order is in total ignorance of the material available on record. The Adjudicating Authority failed to appreciate the aforesaid while passing the impugned order, thus it deserves to be set aside.

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The appeal has been contested by the respondents. Arguments have been raised to support the order passed by the Adjudicating Authority. The facts pertaining to the case have been givenshowing how the transaction was structured to circulate demonetized money and convert it through the banking channel. The personsinvolvedtherein have been referred by the appellant and otherwisementioned in the impugned order. The game plan ofYogesh Mittal was to convert demonetized money of RohitTandon and for that the bank accounts were used. In fact, the cash amount was deposited in the bank accounts and

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thereupon it was transferred in the account of the appellant and othersto circulate the demonetized money so as to convert it.

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The appellant has made reference of the invoices and also of the ledger to reflect the sale of tobacco. The documents were created to save the appellant from the crime.It includes even the tax return.However, the amount reflected in the ledger does not match the amount of the sale of tobacco ifsale is even believed. The sale of the tobacco is for a lesser amount than the amount received by the appellant. It is later shown to be towards advances for sale of tobacco in future, which can’t happen in the manner indicated, and the ledger doesn’t reflect aforesaid. An elaborate argument in reference to each document was made and analysed by us. To avoid repetition of facts, we would record our findings after taking note of the arguments raised by the respondent.

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FINDING.

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It is the case where an amount ofRs. 3 crores lying in the fixed deposit of the appellant has been attached. It is said tobe the proceeds of crime and was generated during the period of demonetization of the money by the Govt. of India. The allegation is against Yogesh Mittal and many others for circulating the demonetized money through the bank

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transaction so as to show it to be untainted money. The complete money trail was traced by the respondents to determine whether a case of schedule offence and of money laundering is made out or not. The argument of learned counsel for the appellant was limited to their own facts.

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In the statements recorded u/s 50 PMLA of YashodaSales Corporation (Gulshan Kumar), P.S. Sales (Puneet Singh) and M S Enterprises (Manish Sharda) where they had categorically stated that the transactions in these firms were actually governed by Yogesh Mittal and all the cash that was deposited in these firms bank accounts were actually collected, transported from the office of Yogesh Mittal and deposited in bank accounts on his clear directions. Further in his statements AshuThapar (Nikhil Enterprises) had confirmed that the transactions in this firm was actually governed by Yogesh Mittal and all the cash that was deposited in bank account of Nikhil Enterprises was actually collected, transported from the office of Yogesh Mittal and deposited in bank account on his clear directions and there were no actual business transactions, sales and purchase of goods took place.

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In his statement before ED, Subhash Chandra Gupta, proprietor Archit Sales claimed that he dealt with these firms, M/s M.S. Enterprises, M/s Nikhil Enterprises, M/s P.S. Sales FPA-PMLA-2825/DLI/2019 Page 7 of 13

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and M/s Yashoda Sales Corporation through one agent named Amitabh Bansal but he was unable to identify the actual proprietors of these firms. He claimed that he had delivered tobacco products which was found to be a purported story.

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Amitabh Bansal in his statements inter alia, stated that he knows Subhash Chand Gupta, proprietor Archit Sales and used to procure sales order for Archit Sales. It was on commission basis on the orders executed through him. He also knew Yogesh Mittal as a businessman of tobacco products since September 2016. He obtainedthe order of firms namely, Yashoda Sales Corporation, MS Enterprises, Nikhil Enterprises and P S Sales for purchase of products from Archit Sales on behalf of Yogesh Mittal only. He stated to have received sales commission from Archit Sales. But as per VAT and other records brought on records by the LEA, there were no actual transaction of goods but only dummy documentation of these transactions. The statement was however not supported by others.

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In fact, Yogesh Mittal remitted the money to Archit Sales bank account in Corporation Bank, A/c no. 05010020100020 via NEFT transactions from shell firm's (P.S. Sales, Yashoda Sales Corporation and Nikhil Enterprises controlled by Yogesh Mittal) Bank of Baroda accounts in guise of

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payments towards the sale proceed is nothing but the further layering of the illegitimate part commission amount. During the LEA investigation it is proved that there were no supply of goods which took place between these firms and only paper transactions were made.

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The facts reflects how the money was circulated at the time of demonetisation andreached to the bank account of the appellant though he has tried to design it to be out of the business transaction. The material available on records and referred to above shows that no transaction took place but only dummy documentation was made. It is only for that reason, the appellant has referred to the ledger to indicate transaction of sale and receipt of money which can be created at any time and otherwise it would have been supported by the documents to prove the sale of tobacco. It is further necessary to indicate that though ledger was produced before the Tribunal to indicate sale of tobacco to the matching amount recovered by the appellant but whilecreating documents, appellant made a mistake because alleged sale of tobacco wasof lesser amount than received as on the date of receipt.

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In the case of M/s M.S.Enterprisess, the so-called sale dated 16.11.2016 is shown to be ofRs. 12,51,031/-

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whereas Rs. 75 lakhs was received by the appellant on 07.12.2016. To justify the receipt of money subsequent alleged sale was shown from time to time butit was much after the receipt of the amount of Rs. 75 lakh.It is not shown to be an advance payment but not reflected in the ledger, thus while creating the documents, a flurry of mistake was committed and could not be clarified by the counsel for the appellant. Similar transaction exist even in the account of other firms.

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The facts given above is only one part otherwise there is no document on record to show previous transaction of sale of tobacco to the firms named by the appellant and referred in the ledger account. Though a statement for it was made by the counsel for the appellant. It isalsoa fact that appellant alone was not the recipient of the demonetised money channelized through the bank channel but there were many others. We would however not refer to the facts of those cases asthe appeal has been filed only by the appellant. It is however a fact that the circulation of demonetised money was at the instance of Yogesh Mittal who put cash in the bank account and thereupon transferred to many persons which includes the appellant to make demonetized money to be untainted.

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The statement ofSubhash Chandra Gupta was recorded under section 50 of PMLA, 2002. It was stated that his FPA-PMLA-2825/DLI/2019 Page 10 of 13

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firm Archit Sales had transaction with M/s P.S. Sales. Rs 50 lakhs and Rs 25 lakhs were received on 30-11-2016 and 01-122016 respectively and fromYasodha Sales Corporation, Rs 50,00,000 andRs 25,00,000 was received on 30-11-2016 and 01-12-2016 respectively.From Nikhil Enterprises, Rs 75 lakhs was received on 7-12-2016 and from MS Enterprises, Rs 75 lakhs was received on 7-12-2016. He claimed that he had received the payments from the firms on sale of tobacco products. The perusal of the ledger, the receipt of the amount largely is prior to alleged sale of the products. The cash amount was deposited in the bank accounts and thereupon it was transferred in the account of the appellant. It was the amount of demonetized money circulated so as to convert it.Yogesh Mittal and many others were involved to circulate the demonetized money through the bank transaction so as to show it to be untainted money. The money trail has proved it.

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The only argument raised by the appellant is that the amount of FD is supported with the sources of its acquisition. It is said to be from the sale of tobacco to four firms which is M/s Nikhil Enterprises, M/sYashoda Sales Corporation, M/s P.S. Enterprises and M/s M.S. Enterprises. The ledger accounts of it has been submitted. The statement of the four firms holder does not support aforesaid, rather it is stated that money in

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their account was deposited by Yogesh Mittal and transferred to the account of the appellant.

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The statement of the proprietor of four firms rather demonstrate that cash amount was deposited in their account at the instance of Yogesh Mittal who was the kingpin to convert the demonetized money to be untainted money.

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The fact aforesaid is quite relevant to nullify the story taken up by the appellant to justify the receipt of the amount in his bank account. The appellant has even failed to submit the bank statements to show any earlier transaction with the same firms and in any case the transfer of money to the appellant was after its deposition in cash in bank account of the firms. It was demonetised money and thereupon transferred through the firms named above.

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It is therefore that theappellant has kept the amount in FD . Had it been its business transaction would have been used as a working capital instead of keeping it idle inthe FD. The observation aforesaid be taken to be based on the general practices.

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In the light of the facts given above and also that the invoices and the ledger were in the hands of the appellant and

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therefore only a proper scrutiny of it has been made. The plea of the appellant is that if the four firms to whom he sold the tobacco have not shown for the tax, then it cannot be of the appellant’s fault goes without substance because to cover the transfer of demonetised money, the appellant had created fictitious sale of the tobacco because no supporting material has been produced to show actual transfer of tobacco rather alleged transaction was only on paper to cover the game plan to convert demonetise money to be monetised.

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In the light of the discussionmade above, we do not find any merit in the appeal. The appeal accordingly fails and is dismissed.

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(Justice MunishwarNath Bhandari) Chairman

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(V. Anandarajan) Member

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New Delhi 13th August, 2024

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FPA-PMLA-2825/DLI/2019 of Subash Chandra Gupta v. The Deputy Director, Directorate of Enforcement

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FPA-PMLA-2825/DLI/2019 of Subash Chandra Gupta v. The Deputy Director, Directorate of Enforcement

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