It is Mandatory for the Tax Authorities to conclusively establish Tax Evasion before proceeding with Money Laundering Charges --- Islamabad High Court, Islamabad
Islamabad 29-08-2024: The Islamabad High Court (IHC) has upheld the acquittal of Said Jan Afridi and his co-accused in a significant money laundering case, dismissing the State’s appeal against the trial Court’s decision. The case, which involved allegations of tax evasion and money laundering amounting to over Rs. 1.22 billion, was a critical test of the application of the Anti-Money Laundering Act, 2010 (AMLA, 2010) in conjunction with the Income Tax Ordinance, 2001 (ITO, 2001).
The State, through the Directorate of Intelligence & Investigation, Inland Revenue (I&I IR), had appealed against the January 4, 2023, decision of the Special Court (Customs, Taxation & Anti-Smuggling) in Rawalpindi/Islamabad, which acquitted Afridi and his sons under Section 265-K of the Criminal Procedure Code (Cr.P.C.). The original complaint accused the respondents of establishing businesses in Dubai, receiving unexplained remittances, and failing to declare substantial income, thus committing offences under Sections 192 and 192A of the ITO, 2001, which are considered predicate offences under AMLA, 2010.
The High Court, in its ruling, emphasized that the predicate offences under the AMLA, 2010 must meet a specific financial threshold of Rs. 10 million. The Court agreed with the trial Court that the prosecution failed to meet this threshold, particularly for the tax years prior to 2016, when Sections 192 and 192A were added to the AMLA schedule via SRO No. 425(1)/2016. The Court further ruled that applying these sections retrospectively would violate Article 12 of the Constitution, which prohibits retrospective punishment.
The judgment reaffirmed several key legal principles, including the requirement for a clear nexus between the predicate offence and the alleged money laundering, the importance of proper investigation and evidence collection, and the exclusive jurisdiction of Special Courts in matters related to customs, taxation, and money laundering under AMLA, 2010.
The Court also highlighted the necessity for tax authorities to conclusively establish tax evasion before proceeding with money laundering charges. In this case, the Court found that the investigation was flawed, and the tax liabilities were not conclusively determined by the relevant authorities, leading to the collapse of the prosecution's case.
This ruling is a significant reminder of the rigorous legal standards required for prosecuting money laundering cases in Pakistan. The judgment not only upholds the acquittal of Afridi and his co-accused but also sets a precedent regarding the application of AMLA, particularly in cases involving retrospective application of laws and the necessity for a clear linkage between alleged financial crimes and money laundering.
The IHC’s decision is likely to influence future prosecutions under the AMLA, ensuring that the legal and constitutional safeguards are meticulously observed in financial crime cases.
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