Legal Principle & Question Decided

Ruling Summary: This decision was rendered by the Islamabad High Court on 2024-05-21, officially reported as 2025 MLD 454. In this matter between The State and Said Jan Afridi, etc, the court adjudicated key questions of statutory construction, procedural regularity, and legal precedent under Pakistani law.

Core Holding: The honorable bench evaluated governing statutory provisions and judicial authorities to establish the rights of the parties, delivering the binding reasoning set out below.

Full Judgment Text & Judicial Ruling

Court Name: Islamabad High Court Judge(s): Mohsin Akhtar Kayani Title: The State vs Said Jan Afridi, etc Case No.: Crl. Appeal No. 138/2023 Date of Judgment:2024-05-21 Reported As: 2024 IHC 168, 2025 MLD 454 Result: Appeal Dismissed

JUDGMENT

JUDGMENT MOHSIN AKHTAR KAYANI, J:- Through this Crl. Appeal, the appellant/State through I.O, Directorate of Intelligence & Investigation, IR has challenged the order dated 04.01.2023, passed by learned Judge Special Court (Customs, Taxation & Anti-Smuggling), Rawalpindi/Islamabad, whereby respondents were acquitted u/s 265-K Cr.P.C. in complaint case No.03/2020, dated 22.07.2020, U/S 3, 4 & 8 of Anti-Money Laundering Act, 2010. 2. Brief facts referred in the instant appeal are that as per report u/s 173 Cr.P.C. accused/respondents established a business in Dubai in the name & style of HEAVY EQUIPMENT TRANSPORT CO. & SAID JAN GENERAL TRADING CO, who returned back to Pakistan during the year 2013-2014. It is in the record that accused respondents have received remittances in their bank accounts amounting to Rs.64,14,280/- during Tax Year 2014 while they have claimed Rs.1,45,31,610/- in their replies. The difference of amount of Rs.81,17,330/- remained un-explained. This amount was required to be offered for taxation under Section 11(5) of the Income Tax Ordinance (ITO), 2001 but they failed to pay tax on the said income. The accused respondents have claimed Debt Receipts of Rs.106,996,657/- between Tax Years 2014 to 2017, however, they failed to provide any explanation regarding sources of income/nature of the said amount. Hence, this amount remained unexplained and chargeable to tax under Section 111(1)(a) of the Income Tax Ordinance, 2001. The accused respondents have also claimed various Interbank Transfers of Rs.7,781,698/- for Tax Years 2015 to 2017 and failed to put forth any explanation. This amount also remained un-explained and chargeable to tax under Section 111(1)(a) of the Income Tax Ordinance, 2001. The accused respondents have claimed amounts received on account of vehicles sold amounting to

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Rs.45,301,956/- between the years 2016 & 2017 but failed to furnish any documentary evidence/bank statements regarding sources/nature of transactions. This amount remained un- explained and chargeable to tax under Section 111(1)(a) of the Income Tax Ordinance, 2001. A detailed investigation report dated 06-07-2020 was prepared by one Suhail Abbas (Deputy Director) and referred the same to Chief Commissioner Inland Revenue. The report contains the details of 16 bank accounts of the Respondent (Said Jan Afridi) and the notices of 176(1)(b) of ITO 2001 were sent to him to explain his sources of income from year 2014 to 2017 However, all the notices sent to Respondent regarding the explanation of true sources of income with allied documents, as to why respondent's case must not be treated under the provision of concealment of income tax evasion u/s 111 of ITO 2001 and why he must not be proceeded under AMLA 2010, however, respondent failed to dispense with any explanation. In its report the Deputy Director finalized that Respondents have following un- explained/concealed income (Rupees):

Tax Year Net un-explained/concealed income (Rupees) 2014 66,561,815/- 2015 84,884,527/- 2016 21,193,667/- 2017 59,392,803/- Total 231,965,812/-

During investigation accused respondents found involved in money laundering from predicate offences of false statement in verification u/s 192 of the Income Tax Ordinance, 2001, concealment of income/furnishing inaccurate particulars of income u/s 192A of the Income Tax Ordinance, 2001 as provided us XIIA of the Schedule-I of the Anti- Money Laundering Act, 2010. Accordingly, a complaint/Challan was submitted before the Court for trial. 3. Complaint case No.3/2020 dated 22.07.2020 was filed by the I.O Muhammad Anwar (I&I IR) against the Respondent and two others (his sons) u/s 192 and 192A of ITO as predicate offence and reproduced the above year wise breakdown of un-explained amount and sought permission to investigate the offences. 4. The I.O also forwarded and application u/s 8 AMLA 2010 in the complaint case No. 3/2020 before the learned Special Judge to attach the properties and freeze the bank accounts of the respondents. Pursuant to the above application of I.O/Muhammad Anwar, learned Special Judge (Customs, Taxation & Anti-Smuggling), Rawalpindi/Islamabad granted permission to investigate the Respondents and froze the bank accounts and also attached the properties of the respondents vide order dated 22.07.2020. The I.O Muhammad Anwar sent notice u/s 8 of AMLA 2010 to the respondents on 28.07.2020. 5. Respondents filed petition u/s 265-K Cr.P.C. in the complaint case with the objection that 192 and 192A in the Schedule of AMLA has been added through SRO No. 425(1)/2016 dated 20.05.2016 which cannot take retrospective effect in terms of Article 12 of the Constitution of Islamic Republic of Pakistan, 1973. Therefore, the bank credits of 7.961 Million rupees based on IO's investigation report) for tax year 2017 were presumed as un-explained source of income on which the tax computed comes at Rs.1.388 Million, which is far below the threshold of Rs.10/- Million as an essential condition for predicate offence in terms of schedule of AMLA 2010. 6. Pursuant to the application of respondent's u/s 265-K CrPC the learned Special Judge dismissed the application of the Respondents by observing that the criminal liability of the accused pertaining to the year 2017 will be determined after the recording of evidence and the instant

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matter is at the stage of faming of charge. Therefore, prima-facie sufficient material is available on record to frame the charge against the accused 7. Learned Special Judge (Customs, Taxation and Anti-Smuggling) charged the accused u/s 3, 4 and 8 AMLA 2010 for predicate offences of false statements in verification u/s 192 and concealment of income/furnishing inaccurate properties of income under Sections 192A of ITO 2001 in the following manner:- "I, Tariq Mahmood Zargham, District & Sessions Judge/Judge Special Court (Customs, Taxation & Anti-Smuggling). Rawalpindi/Islamabad do hereby charge you Said Jan Afridi, Said Fareed & Abubakar accused persons are as under:- 1. That you accused being taxpayer established a business in Dubai in the name & style of HEAVY EQUIPMENT TRANSPORT CO. & SAID JAN GENERAL TRADING CO. and returned back to Pakistan during the year 2013-2014. It is evident from record that you accused have received remittance in your bank account amounting to Rs.6,414,290/ during Tax Year 2014 while you have claimed Rs.14,531.610/- in replies. The difference amount of Rs.8,117,330/- remained unexplained. This amount was required to be offered for taxation under section 11(5) of the Income Tax Ordinance, 2001. You failed to pay tax on said income. 2. That you have claimed Debt Receipts at Rs. 106,996,657/ between Tax Years 2014 to 2017. However, you are failed to provide any explanation regarding sources / nature of the said amount. Hence this amount remained unexplained and chargeable to tax under section 111(1)(a) of the Income Tax Ordinance, 2001. 3. That you have claimed various Interbank Transfers at Rs.7,781,698/- for Tax Years 2015 to 2017 and failed to put forth any explanation. This amount remained un- explained and chargeable to tax under section 111(1)(a) of the Income Tax Attested to be Ordinance, 2001. 4. That you have claimed amounts received on account of vehicles sold amounting to Rs.45,301,956/- between Tax Years 2016 & 2017 but failed to furnish any documentary evidences/bank statements regarding sources/nature of transactions. This amount remained un- explained and chargeable to tax under section 111(1)(a) of the Income Tax Ordinance, 2001. Thus, you accused persons were involved in money laundering as well as you accused persons have committed an offence punishable u/s 3, 4 and 8 of the Anti- Money Laundering Act, 2010 from predicate offences of false statement in verification u/s 192 of the Income Tax Ordinance, 2001, concealment of income / furnishing inaccurate particulars of income u/s 192A of the Income Tax Ordinance, 2001 as provided u/s XIIA of the schedule-l of the Anti-Money Laundering Act, 2010, which is within the cognizance of this court. And I hereby direct that you accused persons be tried by this court for the said charge." 8. Total 19 PWs' statements were recorded by the Special Judge including Muhammad Anwar/I.O/PW-18 and Suhail Abbas (Deputy Director-IR/PW19. In his statement the I.O/PW-I8 conceded that the audit of respondents pertaining to years 2014-2017 is under process and not yet concluded as per his personal knowledge. Also said that the report he has submitted u/s 173 CrPC containing his signatures has nowhere mentioned income tax evasion. 9. Respondents again filed a petition u/s 265-K Cr.P.C. before the Special Judge with the grounds that the I.O Muhammad Anwar who investigated the matter and exercised the powers u/s 111 of ITO 2001 has alleged that the assets provisionally attached were required through concealed taxable income for the year 2014-17 are:-

Tax Year Net un-explained/concealed income (Rupees) 2014 62,561,815/- 2015 43,734,527/- 2016 7,913,667/-

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2017 7,960,803/- Total 122,170,812/-

Respondents again objected that Section 192 and 192A of ITO, 2001 in the Schedule of AMLA have been added through SRO No. 425(1)/2016 dated 20.05.2016 which cannot take retrospective effect in terms of Article 12 of the Constitution of Islamic Republic of Pakistan, 1973. Therefore, the bank credits of 7.961 Million rupees based on I.O's investigation report for tax year 2017 were presumed as un-explained source of income on which the tax computed come at Rs.1.388 Million, which is far below the threshold of Rs.10/- Million as an essential condition for predicate offence in terms of schedule provided in AMLA 2010. Further objected that the Inspector has no power to impose liability u/s 111, 230 and 209 of ITO 2001. Also, as per the SRO No.115(1)/2015, dated 09.02.2015, which was superseded by SRO No. 272(1)/2021 Dated 02.03.2021 the office of the Director General (Intelligence and Investigation, Inland Revenue) has been empowered specifically to exercise and perform functions of ITO 2001, specified in column No.4 of above referred SROs. Under the said SROs the Inspector is not empowered to impose liability of Section 111 of ITO, 2001. Therefore, the accused be acquitted. 10. The Special Judge reproduced the details from the report under Section 173 Cr.PC. submitted by the I.O and held that the 2014-2016 period is excluded and whereas the tax for year 2017 is concerned the same does not meet the threshold of tax amount of 10 Million rupees. The Special Judge relied on the judgment of IHC in WP. No. 3095/2021 (Altaf Ahmed Gondal vs FOP etc.) that to attract the offence of money laundering there has to be a nexus of the proceeds of crime with one of the predicate offences described under the schedule of the Act 2010 and in case proceeds of crime are not relatable to the predicate offences then offence under the Act of 2010 would not be attracted. Learned Special Judge accepted the petition of respondents under Section 265-K Cr.P.C. and acquitted the accused from the charge. Hence, this appeal. 11. Learned counsel for the appellant/State contends that powers exercised U/S 265-K Cr.P.C. is not permissible at this stage, especially when 19 PWs have been recorded and trial was likely to be concluded in near future; that learned trial court has totally ignored that the accused have given false statement while submitting Returns/wealth statements, concealed income where tax sought to be evaded is more than Rs..10/- Million, which brings the cases of accused/respondents under AMLA, 2010 and ITO, 2001 and whereas the same could only be ascertained through documentary evidence in the final judgment. The interbank transfer of Rs.7,781,698/- in the tax years 2015 to 2017 and respondents/accused failed to put any explanation, therefore, this amount remained un- explained and chargeable to tax u/s 111(1)(a) of the ITO, 2001. The respondents have not been able to explain their sources of income, receipts against the vehicles sold, and debt receipts, thus after investigating the source of income, appellant reached to the conclusion that respondents have been committing the offence of money laundering u/s 3 of the AMLA, 2010 through commission of predicate offence of tax evasion u/s 192A and false statement in verification u/s 192 of the section XIIA of the Schedule-I of Anti-Money Laundering Act, 2010 without paying due income tax thereon concealed income; that learned trial court was not justified in relying on Article 12 of the Constitution of Islamic Republic of Pakistan, 1973 by holding that AMLA, 2010 was not applicable for the tax years 2014, 2015 and 2016 as Section XIIA was inserted in Schedule-I to AMLA, 2010 on 20.05.2016, whereas the accused filed income tax returns for 2014, 2015 and 2016 on 07.09.2018 which is posterior to the date 20.05.2016, which squarely falls within the period when Section 192 and 192A of the ITO, 2001 were declared as predicate offences; that learned trial court was not justified in relying on judgment passed by this Court in W.P No. 3095/2021 titled Altaf Ahmad Gondal vs. Federation of Pakistan necessitating nexus between predicate offence and proceeds of crime, whereas Section 3 of the AMLA, 2010 has a broader scope; that trial court has ignored the

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material evidence on record and acquitted the respondents despite overwhelming evidence including authorization available from Directorate of I&I, IR, which fully covers the investigation aspect of agency, especially when the tax evaded amount comes to Rs.122,100,000/-. 12. Conversely, leaned counsel for the respondents/accused contends that the impugned order is self-explanatory and as such no illegality has been demonstrated by the appellant/State, especially to the cut of date of offence u/s 192 & 192A of ITO, 2001, which was included in the Schedule-I of the AMLA, 2010 and notified on 20.05.2016 and prior to that the same could not be covered under AMLA, 2010, therefore, any proceedings conducted by the trial court or I.O are beyond the authority and resultantly, trial court has rightly concluded by acquitting the respondents, even the threshold established the prima-facie offence of money laundering which is Rs.10/- Million is not made out; that till date tax authorities have not calculated any evasion of tax against the respondents. 13. Arguments heard, record perused. 14. Perusal of record reveals that complaint case No.03/2020 dated 22.07.2020 was filed by the Directorate of Intelligence & Investigation-IR, against the Said Jan Afridi and his sons Said Fareed and Abubakar under Section 21(2) of the AMLA, 2010 before the Special Judge (Customs, Taxation & Anti-Smuggling), Rawalpindi/Islamabad in the alleged offences in terms of Section 192, 192A of the ITO, 2001 read with Sections 3, 4 & 8 of the AMLA, 2010 for the tentative tax evasion of Rs.116/- Million with the allegation that respondent No.1/Said Jan Afridi who owned several businesses and declared nominal income, whereas respondents No.2 & 3 real sons of respondent No.1 own properties and maintain bank accounts in their names are believed to be from crime proceeds. In the complaint, State alleged that the accused are concealing income, furnishing inaccurate particulars of income and acquiring assets from proceeds of crime by committing predicate offences of tax evasion and concealing taxable income, under the AMLA, 2010. It has been highlighted in the complaint that respondent No.1 registered on tax roll on 29.01.2018 and failed to declare any business activity and the year wise break down of the discrepancies / un-reconciled amounts found in the records submitted/declared by the accused are as follows:-

Tax Year Net un-explained/concealed income (Rupees) 2014 Rs. 66,561,815/- 2015 Rs. 84,884,527/- 2016 Rs. 21,193,667/- 2017 Rs. 59,392,803/- Total Rs.231,965,812/-

15. As per the stance of, I.O irreconcilable amounts are far greater than Rs.10/- Million and the complainant has reasonable grounds to believe that the accused are in violation of Section 192, 192A of the ITO, 2001, read with Sections 3, 4 & 8 of the AMLA, 2010, hence, charges have to be initiated. The trial court after receiving the complaint along with application for attachment of bank accounts and properties u/s 8 of the AMLA, 2010 attached all the bank accounts and properties of the respondents and passed the order dated 22.07.2020 in which I.O was permitted for investigation and attached the accounts temporarily, there-after extended the attachment of properties and accounts through various orders. Notice U/S 9(1) of the AMLA, 2010 was issued by the I.O by referring the income and record including the remittances of the tax year 2014, 2015, 2016 and 2017 respectively. After submission of final report U/S 173 Cr.P.C. charge was framed on 06.01.2022 by the trial court to which respondents/accused pleaded not guilty and claimed trial. 19 PWs have been recorded including the I.O Muhammad Anwar/PW-18, except PW-18 majority of the witnesses

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are private persons or bank officials, who produced bank records and record of business transactions of respondents/ accused during tax year 2014 to 2017. 16. Before proceeding with the factual aspect of the case, I have gone through the procedure provided under the AMLA, 2010 as to how and under what circumstances the jurisdiction under this law has to be exercised. On plain reading of this law, it appears that investigation in terms of Section 9 by the I.O should be started not later than seven (07) days of order and attachment made under sub-section (1) of Section 8 whereas attachment of property in terms of Section 8(1) could only be initiated on the request of I.O, "on the basis of report in possession of I.O received from the concerned investigating agency by order in writing, with prior permission of the Court and thereafter the properties were provisionally attached if the I.O reasonably believes to be the properties involved in money laundering, therefore, the very initiator of the case under AMLA, 2010 with reference to Section 192 & 192A of the ITO, 2001 is the root of which the intelligence and investigation-IR can proceed only. 17. It has settled that Section 192 & 192A of the ITO, 2001 were added in the Schedule-I of the AMLA, 2010 for the first time vide SRO No.425(I)/2016, dated 14.05.2016 to the following effect:- [Section XIIA The Income Tax Ordinance, 2001 192. Prosecution for false statement in verification--where tax sought to be evaded is ten million rupees or more 192A. Prosecution for concealment of income--where tax sought to be evaded is ten million rupees or more These two specialized crimes have been enlisted in the Schedule-I with reference to Section 2(XXVI) that are predicate offences. 18. The term reasonable believes or reasonably ground for believing is to be considered in terms of judgment rendered by the Supreme Court of Pakistan reported as PLD 1952 Federal Court 19 (Moulvi Fazul-Qader Choudhury v. Crown), whereby it was held that:- A distinction between the expressions 'reasonable grounds for believing' and 'reasonable suspicion' and interpreted the expression. It has held that a certain amount of suspicion is caused by the conduct of a person but the word "believe" is a much stronger word and, moreover, it would require that the belief must be a reasonable one. In the case titled PLD 1968 SC 349 (Ch. Abdul Malik vs. The State) the Supreme Court of Pakistan has explained the expression as follows: "Reasonable grounds" is an expression which connotes that the grounds be such as would appeal to a reasonable man for connecting the accused with the crime with which he is charged, "grounds" being a word of higher import than "suspicion". However, strong a suspicion may be it would not take the place of reasonable grounds. Grounds will have to be tested by reason for their acceptance or rejection. The reasonableness of the grounds has to be shown by the prosecution by displaying its cards to the Court, as it may possess or is expecting to possess as demonstrating evidence available in the case both direct and circumstantial." Supreme Court of Pakistan in another case reported as 1995 SCMR 1249 (Chaudhry Shujat Husain vs. The State) has observed and held as follows: "The term "reason to believe" can be classified at a higher padestal than mere suspicion and allegation but not equivalent to prove evidence. Even the strongest suspicion cannot transform in "reason to believe." In Nisar Ahmad's case the criteria laid down seems to be that where some tangible evidence is available against the accused which, if left unrebutted, may lead to the inference of guilt." Division Bench of Lahore High Court, Lahore in the case reported as PLD 2021 Lahore 411 (Sheikh Shahid Jamal vs. National Accountability Bureau and Others) dilated upon the term reasonable grounds to believe held that:-

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21. Halsbury's Laws of India (Volume 5(1) explains: "A person is said to have 'reason to believe' a thing, if he has sufficient cause to believe that thing but not otherwise. The term `reason to believe' is not a matter of purely subjective satisfaction. The belief must be of an honest and reasonable man. It must be held in good faith and this faith must not be merely pretense. There must be relevant material to sustain such a belief and must not be based on mere suspicion, gossip or rumour. 'Reason to believe' suggests that there must be prima facie material even if such material is not precise or absolutely certain without any possibility of doubt. However, the belief must be that of an honest and reasonable person based upon relevant materials and circumstances ... Suspicion or doubt may not be raised to the level of 'reason to believe'. Whether there was sufficient cause to have reason to believe is a question of fact." 22. In AIR 1972 AP 318 (K. Munivelu v. The Government of India and others) the Andhra Pradesh High Court held that "reasons to believe' means coming to a final conclusion on the basis of the information that a thing, condition, statement or a fact exists." 26. The importance of distinguishing between "reasonable suspicion" and "reasonable grounds to believe" lies in the fact that they set different standards for judicial assessment of whether a legal threshold has been met in a particular case. In the former it suffices if the concerned person thinks that there is a possibility, which is, more than fanciful, that the relevant facts exists. Da Silva v. Regina, [2006] 4 All. ER 900. On the other hand, the standard applicable to "reasonable grounds to believe" has both an objective and subjective facet. "The person concerned must not only subjectively believe that the standard has been met, but the grounds must be objectively justifiable in the sense that an ordinary prudent person in his place would conclude that there were indeed reasonable grounds." Ronald Percy Storrey v. Her Majesty the Queen, [1990] 1 S.C.R. 241. 19. Hence, the Investigation Officer of the Intelligence & Investigation Directorate has to demonstrate prima facie on the basis of some incriminating material with certainty and without possibility of any doubt that the income or the property of taxpayer or non-taxpayer is based upon the parameters of proceeds of crime and the accused has concealed the said income in order to evade the tax or submitted false declaration, which is otherwise within the parameters of Sections 192 and 192A of the I.T.O, 2001, therefore, heavy onus has been shifted upon the I.O to justify the reasonable grounds in such type of cases of Anti-Money Laundering. 20. The scheme of law gave rise to a technical procedural requirement and extending powers to intelligence and investigation I&I-IR in terms of Section 24 of the AMLA, 2010 for investigation and appointment of I.Os but the primary requirement is report initiated by the I.O which is to be made basis of entire superstructure under AMLA, 2010. 21. In my humble estimation, I.O before preparing a report has to go through each and every aspect of tax record to collect such data from where the minimum requirement of offences u/s 192 & 192A of the ITO, 2001 is visibly seen. Section 192 of the ITO, 2001 deals with the prosecution for statement in verification of any return or in other documents furnished to the I.O under ITO, 2001 which is false and the person who is furnishing verification knows or believes to be false, therefore, sentence of three years imprisonment and fine has been provided. Similarly, Section 192A deals with the prosecution for concealment of income and such aspect is…

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