2024 (9) TMI 718 - AT - Benami Property

Appellate Tribunal confirms benami transaction findings, rejects fiduciary capacity defense for illegal property transfers

DCIT (BPU-1) Mumbai Versus Shri Jiten Pujari & Ors.

The Appellate Tribunal under SAFEMA upheld findings against the appellant regarding benami transactions. The Tribunal clarified that fiduciary capacity ... Benami transaction - reliance on sworn statement u/s 32(4) to make out a case of benami transaction - reference of the meaning of “fiduciary capacity” - appellant would submit that the cash with the alleged benamidars was not in the capacity of trustee, executor, partner or a Director of the Company, thus would not fall in one of the exception given under sub-clause (ii) - HELD THAT:- The fiduciary capacity cannot be used as an exception in all the circumstances which may include transfer of property for or is held for illegal purpose. It cannot be even when there is a concluded contract which pass on the title to others then keeping the property by the person on whose favour title gets transferred would not keep it in “fiduciary capacity” rather with the transfer of the title, the relationship would also change and those cases would not fall in the sweep of the exception of fiduciary capacity. It would be simpliciter in those cases where the money has been kept with other person on trust for safe custody. It would not apply even in the cases where a conflict exist in regard to the relationship and the fiduciary should not be to make profit. It can be illustrated further but looking to the limited issue involved in the present case and as there is no allegation against the respondents for putting the money with the employees against any of the principle laid down by the Supreme Court [2015 (12) TMI 1775 - SUPREME COURT] RBI Vs. Jayanti Lal N. Mistry the elaborate discussion is not made however, this order would apply in the case where a person stand in the fiduciary capacity towards others simpliciter. As statement of the witnesses have been analyzed by the Adjudicating Authority at length and for that even the statements have even been quoted. The fact remains that the alleged benamidar did not claim right and ownership on the property and at the same time alleged beneficial owner did not disown the cash found with the alleged benamidar rather claimed it to be their. The Income Tax Assessment was made adding the amount in the income of the beneficial owners which obviously was not shown in the books of accounts and therefore only the addition was made in the Income Tax Assessment. This fact also supports the respondent. Issues Involved:1. Legitimacy of the Adjudicating Authority's rejection of the attachment order under the Prohibition of Benami Property Transactions Act, 1988.2. Interpretation of the term 'fiduciary capacity' under Section 2(9)(A)(ii) of the Act.3. Consistency and credibility of the statements made by the alleged benamidars and beneficial owners.Detailed Analysis:1. Legitimacy of the Adjudicating Authority's Rejection of the Attachment Order:The appeal challenged the order dated 30.05.2022 by the Adjudicating Authority under the Prohibition of Benami Property Transactions Act, 1988, which refused to confirm the attachment of Rs. 9,94,00,000/- found in various bank lockers. The appellant argued that the sworn statements under section 132(4) of the Income Tax Act were sufficient to establish a benami transaction. However, the Adjudicating Authority did not find it to be a benami transaction, considering the cash was held in a fiduciary capacity for safe custody by the employees of the beneficial owner, thus falling under the exception provided in Section 2(9)(A)(ii) of the Act.2. Interpretation of the Term 'Fiduciary Capacity' under Section 2(9)(A)(ii):The Adjudicating Authority and the Tribunal referred to the definition and interpretation of 'fiduciary capacity' as provided in various legal texts and judgments, including the Supreme Court's ruling in Sri Marcel Martins Vs M. Printer & Ors. The term implies a relationship based on trust and confidence, such as that between a trustee and beneficiary. The Tribunal noted that the cash was held by the alleged benamidars in a fiduciary capacity for the beneficial owners, who did not disown the cash but claimed it was given to their employees for safe custody. This interpretation aligns with the exception to the definition of a benami transaction under Section 2(9)(A)(ii), which includes relationships where one person holds property for the benefit of another in a fiduciary capacity.3. Consistency and Credibility of Statements:The appellant contended that the statements of the alleged benamidars and beneficial owners were inconsistent, as different names were given for the beneficial owners. However, the Tribunal found that the Adjudicating Authority had thoroughly analyzed the statements and noted that none of the alleged benamidars claimed ownership of the cash. Instead, they consistently stated that the cash belonged to the beneficial owners, who also did not disown it. The Tribunal concluded that the alleged benamidars held the cash in a fiduciary capacity, and the addition of the amount to the income of the beneficial owners under the Income Tax Act supported this conclusion.Conclusion:The Tribunal upheld the Adjudicating Authority's decision, finding no merit in the appeal. The cash found in the lockers was held in a fiduciary capacity for the beneficial owners, falling under the exception to the definition of a benami transaction under Section 2(9)(A)(ii) of the Prohibition of Benami Property Transactions Act, 1988. The appeal was dismissed.