2024 (9) TMI 720 - AT - Benami Property

Appellate Tribunal upholds provisional attachment order for Rs. 1 crore benami property under Section 24(4)

DCIT Mumbai Versus M/s Seasons Warehousing Pvt. Ltd. & Anr.

The Appellate Tribunal under SAFEMA upheld a provisional attachment order under Section 24(4) of the Prohibition of Benami Property Transactions Act, ... Benami transaction - Provisional Attachment Order u/s 24(4) of the Prohibition of Benami Property Transactions Act, 1988 - events of transaction pre- amendment and the post - HELD THAT:- It is even by giving illustration that even if the property has been purchased prior to the amendment w.e.f. 01.11.2016, then it would be subject to the decision of the Apex Court in the case of Ganpati Delcom [2022 (8) TMI 1047 - SUPREME COURT] It is, however, with the clarification that if such a property is transferred prior to the amendment but heldeven after the amendment by the Benamidar, then initiation of action under the amended provision would not be invalid. The significance of the word `held‟ given under Section 2(9)(A) has been elaborately discussed which word was not existing in the earlier definition of Benami transaction (pre-amendment). In the instant case, the Company in whose name the property was purchased i.e. M/s Seasons Warehousing Pvt. Ltd. had no capacity to purchase the property worth of Rs. 01 Crore because as per the annual return submitted with the ROC, it was having worth of around 7 lakhs and that too in the Financial Year 1998-99. It is also a fact that the ITR for the Assessment Year 2020-21 filed by M/s Voltamp Controls Pvt. Ltd. reflected the address of the said property. Adjudicating Authority ignored the definition of “Benami transaction” given under the amending Act of 2016 while passing the order. The property in question was purchased in the name of M/s Seasons Warehousing Pvt. Ltd. – Respondent No. 1 whereas it was not having means to pay consideration. M/s Voltamp Controls (I) Pvt. Ltd. – Respondent No. 2 was holding the property in the name of M/s Seasons Warehousing Pvt. Ltd. Respondents did not contest the factual issues. It may be for the reason that the purchase of the property in the name of M/s Seasons Warehousing Pvt. Ltd. is for a sum of Rs. 01 Crores whereas the Company was not having sufficient funds to purchase the property worth of Rs. 01 Crores. It was thus held by M/s Voltamp Controls (I) Pvt. Ltd. and the address of the property was given even in the Income-tax return. Accordingly, the consideration of the property was paid by M/s Voltamp Controls (I) Pvt. Ltd but it was using the name of M/s Seasons Warehousing Pvt. Ltd. in whose name the Registered Deed was executed. We find reasons to cause interference in the impugned order. Issues Involved:1. Validity of the Provisional Attachment Order under Section 24(4) of the Prohibition of Benami Property Transactions Act, 1988.2. Interpretation of the amended definition of 'Benami transaction' under Section 2(9)(A) of the Act of 1988.3. Retrospective application of the amendment to the Act of 1988 effective from 01.11.2016.4. Legal capacity of M/s Seasons Warehousing Pvt. Ltd. to purchase the property.Issue-wise Detailed Analysis:1. Validity of the Provisional Attachment Order under Section 24(4) of the Prohibition of Benami Property Transactions Act, 1988:The appeal was preferred against the order of the Adjudicating Authority dated 19.10.2022, which did not confirm the Provisional Attachment Order under Section 24(4) of the Act of 1988. The learned counsel for the Initiating Officer argued that the Adjudicating Authority passed a summary order without referring to the relevant provisions of the Act and the facts of the case. They contended that the property was purchased by a non-existent company, M/s Seasons Warehousing Pvt. Ltd., and the Provisional Attachment Order should have been confirmed.2. Interpretation of the amended definition of 'Benami transaction' under Section 2(9)(A) of the Act of 1988:The appellant's counsel argued that the property was held by M/s Voltamp Controls (I) Pvt. Ltd. even after the amendment, making it a 'Benami transaction' under the amended definition. They referred to the Tribunal's decision in M/s. Prism Scan Express Pvt. Ltd. vs. The Initiating Officer, which discussed the amended definition at length. The Tribunal emphasized that the word 'held' in Section 2(9)(A) is significant and should be read with 'transfer' to interpret the provision correctly. The Tribunal clarified that if a property is held by a person whose consideration was paid by another, it falls under the definition of 'Benami transaction.'3. Retrospective application of the amendment to the Act of 1988 effective from 01.11.2016:The Adjudicating Authority refused to confirm the attachment, citing that the property was purchased before the amendment date. The respondents relied on the Apex Court's judgment in Union of India Vs. Ganpati Dealcom Pvt. Ltd., which held that the amendment would not apply retrospectively. However, the Tribunal clarified that if the property is held by the Benamidar after the amendment, it would still fall under the definition of 'Benami transaction.' The Tribunal referenced the judgment in Nexus Feeds Limited & Others, which did not specifically address the holding of property by a person whose consideration was paid by another.4. Legal capacity of M/s Seasons Warehousing Pvt. Ltd. to purchase the property:The Tribunal noted that M/s Seasons Warehousing Pvt. Ltd. had no capacity to purchase the property worth Rs. 01 Crore, as its annual return showed a worth of around Rs. 7 lakhs in the Financial Year 1998-99. The property was held by M/s Voltamp Controls (I) Pvt. Ltd., and the address was reflected in their Income-tax return. The Tribunal found that the Adjudicating Authority ignored the amended definition of 'Benami transaction' and the factual issues, leading to the conclusion that the property was purchased by M/s Voltamp Controls (I) Pvt. Ltd. using the name of M/s Seasons Warehousing Pvt. Ltd.Conclusion:The Tribunal set aside the impugned order, confirming the Provisional Attachment Order and the reference. The appeal was allowed, emphasizing the significance of the word 'held' in the amended definition of 'Benami transaction' and the prospective application of the amendment effective from 01.11.2016. The Tribunal concluded that the property held by M/s Voltamp Controls (I) Pvt. Ltd. after the amendment constituted a 'Benami transaction' under the amended Act.