2025 (3) TMI 281 - AT - Benami Property

Appellate Tribunal upholds provisional attachment of Rs. 98 crore cash and gold as benami properties under Section 2(9)(D) PBPTA

The DCIT, Initiating Officer (BPU), Chennai Versus M/s. SRS Mining

The Appellate Tribunal under SAFEMA upheld the provisional attachment of cash worth Rs. 98,93,34,581 and 166.27 kg gold bullion as benami properties. The ... Benami Property Transactions - Provisional Attachment order had held that the movable properties comprising of total cash of Rs. 98,93,34,581/- and total gold bullion weighing 166.27 kg are the Benami Property - Adjudicating Authority has not confirmed the Provisional Attachment Order Whether the provisions of Section 2(9)(D) of the PBPTA require it to be shown that the Benamidar holds the benami property for the benefit of the Beneficial Owner, who is not traceable or fictitious? -HELD THAT:- The circumstances under which the statement or its retraction is to be accepted or rejected need to be evaluated by the Tribunal/ Court. Very circumstance of working in unison among the three partners while shifting their positions at the time of tendering statements and retractions, which are supposed to be true and voluntary, cast doubt on the veracity of their narrations. The recovery of huge cash and gold bullion of substantial amount and quantum cannot be overlooked. The seizure was made by the Appellant only of that amount of cash and the quantum of gold which was not even explained in the parallel books of account, besides, no mention thereof in the regular books of account. The reason stated by the Respondent that Shri S Nagarathinam could not have kept record of these recoveries because the Respondent undertook sand sale at many places cannot cut much ice in view of the Firm having established businesses which how could not even keep regular accounts. It is not convincing that the Firm was clueless of its business activities so as to maintain its record even in informal accounting. It cannot also be ignored that the detection and the recovery of unaccounted cash and gold bullion happened within a months‟ time of the demonetization. The rush by the Respondent as reflected in the filing of the ITRs for the seizures effected under the PBPTA on the same date for the AYs 2016-17 & 2017-18 cannot but show their attempt to bypass the provisions of the PBPTA. It, therefore, appears to us that the seized cash and gold bullion are Benami Properties for which the Respondent lent its name rather disclose the name of the Beneficial Owner(s). We find that the transactions or the arrangements relating to seized movable properties are Benami within the import of Sub-Section 2(9)(D) of the PBPTA. We, therefore, set aside the Impugned Order as being devoid of merit and allow the Appeal. The pending applications are accordingly disposed of. ISSUES PRESENTED and CONSIDEREDThe Tribunal considered the following core legal questions:(a) Whether Section 2(9)(D) of the Prohibition of Benami Property Transactions Act, 1988 (PBPTA) requires proof that the Benamidar holds the property for the benefit of a Beneficial Owner who is not traceable or fictitious.(b) Whether the disclosure and assessment of benami property under the Income Tax Act, 1961, in the hands of the Benamidar, removes the taint of it being Benami.(c) Under what circumstances will the statements initially made and subsequently retracted be admitted or rejected as evidence for holding the property as Benami.ISSUE-WISE DETAILED ANALYSISIssue (a): Interpretation of Section 2(9)(D) of PBPTA- Relevant Legal Framework and Precedents: Section 2(9)(D) of the PBPTA was analyzed in contrast with Section 2(9)(A) to understand the requirements for proving a benami transaction. The definitions of 'Benamidar' and 'Beneficial Owner' under Sections 2(10) and 2(12) were also considered.- Court's Interpretation and Reasoning: The Tribunal clarified that Section 2(9)(D) does not require proof that the property is held for the benefit of an untraceable or fictitious Beneficial Owner. The provision aims to cover transactions where the person providing the consideration is not traceable.- Application of Law to Facts: The Tribunal found that the Respondent firm acted as a Benamidar by lending its name to the benami properties, benefiting unknown Beneficial Owners without needing to identify them.- Conclusions: The Tribunal concluded that the properties were held as benami under Section 2(9)(D) without needing to establish the identity of the Beneficial Owner.Issue (b): Impact of Income Tax Disclosure on Benami Transactions- Relevant Legal Framework and Precedents: The Tribunal referred to the Supreme Court's ruling in the case of State of Karnataka Vs. Selvi J. Jayalalitha, which held that income tax returns do not prove the lawful source of income.- Court's Interpretation and Reasoning: The Tribunal emphasized that income tax proceedings do not validate the lawful source of income and cannot negate the benami nature of the property.- Key Evidence and Findings: The Tribunal noted the timing of the Respondent's ITR filings, which were made after the search and seizure, indicating an attempt to legitimize the seized properties.- Conclusions: The Tribunal determined that income tax disclosures do not remove the benami taint from the properties.Issue (c): Admissibility of Retracted Statements- Relevant Legal Framework and Precedents: The Tribunal referred to the Supreme Court's judgment in Vinod Solanki Vs. Union of India, which discussed the factors for considering retracted statements.- Court's Interpretation and Reasoning: The Tribunal considered the timing and circumstances of the retractions, finding them suspicious due to the coordinated actions of the partners.- Key Evidence and Findings: The Tribunal noted the inconsistency in the partners' statements and the lack of records for the seized properties in the firm's accounts.- Conclusions: The Tribunal rejected the retracted statements as unreliable, supporting the finding of benami transactions.SIGNIFICANT HOLDINGS- Core Principles Established: The Tribunal clarified that Section 2(9)(D) of the PBPTA does not require identifying the Beneficial Owner, and income tax proceedings do not validate the source of income under the PBPTA.- Final Determinations on Each Issue: The Tribunal set aside the Impugned Order, confirming that the seized properties were held as benami under the PBPTA and allowing the appeal.