This update is in continuation of our December 2023 edition of What’s Up in Tax^[1], wherein it was observed that initiation of proceedings under the Prevention of Money Laundering Act, 2002 (‘PMLA’) solely based on  invocation of Section 120B of the Indian Penal Code, 1860 (‘IPC’) against the taxpayers in prosecution proceedings initiated under the IT Act, would be impermissible in terms of the law as laid down by the Apex Court in the case of Pavana Dibbur v. The Directorate of Enforcement^[2] (‘Pavanna Dibbur’).

Recently, this position has been affirmed by the Hon’ble Supreme Court of India in the case of Anjaneya Hanumanthaiah v. Union of India,^[3] wherein while following the decision of Pavanna Dibbur, the Apex Court opined that an offence punishable under Section 120B of the IPC would become a scheduled offence only if the conspiracy alleged is of committing an offence specified as scheduled offence under PMLA. Since offences envisaged under the IT Act are not scheduled offences under the PMLA, the Hon’ble Court quashed the decision passed by the High Court of Karnataka which had upheld the initiation of PMLA solely on the basis of invocation of Section 120B of IPC in prosecution proceedings launched against the taxpayer under the IT Act.

[1] https://www.azbpartners.com/bank/invocation-of-pmla-to-expand-income-tax-prosecution-ambit-abuse-of-legal-process/

[2] Pavana Dibbur v. The Directorate of Enforcement, 2023 INSC 1029 (Supreme Court).

[3] Anjaneya Hanumanthaiah v. Union of India [Order dated March 05, 2024 in WP(Crl.) No. 281 of 2019] (Supreme Court)