Benami property tracing through layered funds and accommodation entries can preserve the underlying taint despite later banking transfers.
Funds introduced through entities that were non-existent, untraceable, or lacking creditworthiness, then layered through paper concerns and cash deposits, were treated as benami consideration under the amended law. Later banking-channel lending or repayment did not change the character of the original infusion, because the traced funds remained part of the underlying benami pool. The definition of benami property was applied to both the property and its proceeds, and arrangements where the provider of consideration is fictitious or not traceable were covered. On that basis, the provisional attachment was upheld and the refusal to confirm it was found erroneous.
Issues: Whether the funds parked in the company and thereafter advanced to group concerns constituted a benami transaction within the meaning of the amended Act, and whether the provisional attachment of the properties was liable to be confirmed.
Analysis: The material on record showed that the company had no genuine business activity, that substantial share premium was introduced through entities found to be non-existent, not traceable, or lacking creditworthiness, and that the funds were layered through multiple paper concerns and cash deposits. The subsequent lending or repayment through banking channels did not alter the character of the original infusion of funds, because the later movements were traced to the earlier benami pool. The definition of benami property covers not only the subject-matter of the transaction but also its proceeds, and the amended definition of benami transaction includes arrangements where the person providing consideration is fictitious or not traceable.
Conclusion: The transaction fell within the statutory definition of benami transaction, and the refusal to confirm attachment was erroneous.
Final Conclusion: The provisional attachment was upheld and the departmental appeal succeeded.
Ratio Decidendi: Where the source of consideration is traced to fictitious or untraceable entities and the funds are introduced and circulated through layering or accommodation entries, subsequent banking-channel transfers do not negate the benami character of the underlying property or its proceeds.
TaxTMI 
AI Drafter ✕
TaxTMI 
