2025 (7) TMI 501 - AT - Benami Property

Appellate Tribunal upholds provisional attachment order in benami transaction case involving agricultural land purchase

Dharmendra Kumar Versus The DCIT, BPU, Kanpur

Dharmendra Kumar Versus The DCIT, BPU, Kanpur - TMI 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Tribunal include:- Whether the transaction involving the purchase of agricultural land by the appellant, financed by a soft loan from Mr. Suraj Singh Patel, constitutes a benami transaction under Section 2(9)(A) of the Prohibition of Benami Property Transactions Act, 1988 (the Act of 1988).- Whether the appellant was the true beneficial owner of the property or merely a benamidaar holding the property for the immediate or future benefit of another person.- Whether the cancellation of the sale deed and settlement with the legal heirs of the original owner effectively nullified the appellant's ownership and thereby negated the benami character of the transaction.- Whether the mutation of the property in the appellant's name and absence of cancellation of mutation or sale deed justifies the confirmation of provisional attachment under the Act.- The applicability of the U.P. Revenue Code, 2006, regarding purchase restrictions on scheduled caste (SC) land, and whether it influences the characterization of the transaction as benami.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Whether the transaction constitutes a benami transaction under Section 2(9)(A) of the Act of 1988Relevant legal framework and precedents:Section 2(9)(A) defines a 'benami transaction' as one where a property is transferred to or held by a person, but the consideration for such property is provided or paid by another person, and the property is held for the immediate or future benefit, direct or indirect, of the person who provided the consideration.Court's interpretation and reasoning:The Tribunal examined the financial transactions and documentary evidence, including the bank statements showing transfer of Rs. 24 lakhs from Mr. Suraj Singh Patel to the appellant. The appellant admitted receiving a soft loan from Mr. Suraj Singh Patel to purchase the property, which was then registered in the appellant's name.Key evidence and findings:- Bank statement reflecting transfer of Rs. 24 lakhs from Mr. Suraj Singh Patel to the appellant.- Registered sale deed executed in favor of the appellant for the agricultural land.- Post-dated cheques for Rs. 30 lakhs issued by the appellant, source of which was not disclosed.- Absence of any loan agreement or documentation evidencing repayment of the Rs. 24 lakhs to Mr. Suraj Singh Patel.Application of law to facts:The Tribunal found that the appellant held the property but the consideration was paid by Mr. Suraj Singh Patel, indicating the property was held for the future benefit of the latter. The absence of evidence showing repayment or ownership transfer negated the appellant's claim of beneficial ownership.Treatment of competing arguments:The appellant argued the property was purchased for his own benefit and that the loan was merely a financial arrangement. However, the Tribunal rejected this, noting the lack of documentation supporting repayment and the fact that the property remained in the appellant's name despite the alleged settlement with legal heirs.Conclusions:The Tribunal concluded that the transaction fulfilled the ingredients of a benami transaction under Section 2(9)(A) of the Act of 1988.Issue 2: Effect of cancellation of sale deed and settlement with legal heirs on ownership and benami statusRelevant legal framework and precedents:Ownership transfer and mutation under revenue laws govern the legal title to property. Cancellation of sale deeds and mutation entries are critical for establishing ownership changes.Court's interpretation and reasoning:The appellant claimed to have settled with the legal heirs of the original owner and cancelled the sale deed with Mrs. Reema Singh, the beneficial owner's wife. However, the Tribunal noted the absence of any registered cancellation deed between the appellant and the legal heirs or mutation cancellation.Key evidence and findings:- No registered cancellation deed of the sale deed executed by the power of attorney holder in favor of the appellant.- Mutation of the property in the appellant's name had not been quashed; proceedings for cancellation were pending without final order.- Cancellation agreement between appellant and Mrs. Reema Singh was not supported by evidence of repayment of the loan amount.Application of law to facts:Since the mutation and sale deed in favor of the appellant remained valid on record, the Tribunal held that the appellant continued to be the legal owner, thus maintaining the benami character of the transaction.Treatment of competing arguments:The appellant's argument that the property no longer belonged to him due to settlement was rejected for lack of documentary proof. The respondent emphasized the appellant's continued legal ownership and interest in the property as evidenced by the challenge to the attachment order.Conclusions:The Tribunal found that the cancellation and settlement did not extinguish the appellant's ownership or benami status due to absence of proper documentation and mutation cancellation.Issue 3: Applicability of U.P. Revenue Code, 2006 and its impact on the transaction's characterizationRelevant legal framework and precedents:The U.P. Revenue Code restricts purchase of scheduled caste land to persons belonging to scheduled castes, requiring prior permission from the District Magistrate for others.Court's interpretation and reasoning:The appellant argued that the transaction was structured to comply with these restrictions by purchasing the property in his name (an SC person) and then transferring it to Mrs. Reema Singh, who is not SC.Key evidence and findings:The Tribunal observed that despite the appellant's argument, the property remained in his name and no valid transfer to Mrs. Reema Singh was evidenced by mutation or registered deed cancellation.Application of law to facts:The Tribunal held that the appellant's attempt to circumvent the SC land purchase restrictions by holding the property as a benamidaar was not acceptable and did not negate the benami transaction under the Act.Treatment of competing arguments:The appellant's reliance on the Revenue Code was rejected as it did not alter the legal ownership or the nature of the transaction under the Prohibition of Benami Property Transactions Act.Conclusions:The Tribunal confirmed that the Revenue Code provisions did not affect the benami characterization of the transaction.Issue 4: Validity of provisional attachment and reference under the Act of 1988Relevant legal framework and precedents:Under Sections 24(4)(a)(i) and 24(5) of the Act, provisional attachment of benami property can be ordered, and references filed to adjudicate ownership and benami status.Court's interpretation and reasoning:The Tribunal found that the provisional attachment was properly issued based on prima facie evidence of benami transaction and confirmed by the Adjudicating Authority after due process.Key evidence and findings:The appellant's failure to produce evidence negating benami status or proving repayment of the loan amount justified the attachment and adverse reference findings.Application of law to facts:The Tribunal held that the attachment and confirmation thereof were lawful and justified under the Act.Treatment of competing arguments:The appellant's challenge to the attachment was based on the claim of ownership and settlement, which was not substantiated. The respondent's arguments on the appellant's continued ownership and interest were accepted.Conclusions:The Tribunal dismissed the appeal against the provisional attachment and adverse reference findings.3. SIGNIFICANT HOLDINGS'The ingredient of the provision quoted above is made out in this case. In the instant case, the agricultural land exists in the name of the appellant for which consideration was paid by the beneficial owner Mr. Suraj Singh Patel. It was for the future benefit of the beneficial owner.''The appellant has failed to disclose the source of Rs. 30 lakhs and even if it is ignored, there is nothing on record to show repayment of Rs. 24 lakhs to Mr. Suraj Singh Patel other than the averment. The appellant could have produced the bank statement to show repayment of amount but he has failed to do so. Thus, a case for benami transaction is made out where the appellant is been taken as a benamidaar.''The appellant is thus rightly been held to be benamidaar and otherwise the land could not have been existed in the name of the appellant, there would have been no reason to challenge the order at the instance of the appellant.'Core principles established:- A transaction where the property is held by one person but the consideration is paid by another for their immediate or future benefit constitutes a benami transaction under Section 2(9)(A) of the Act of 1988.- The absence of documentary evidence such as loan agreements, repayment records, cancellation of sale deeds, or mutation entries, weakens claims of beneficial ownership and supports benami characterization.- Compliance with revenue laws restricting property purchase by scheduled caste persons does not override or negate the provisions of the Prohibition of Benami Property Transactions Act.- Provisional attachment of property under the Act is justified when prima facie evidence of benami transaction is established and the owner fails to rebut such evidence.Final determinations on each issue:- The transaction was held to be benami as the appellant held the property for the benefit of Mr. Suraj Singh Patel who provided the consideration.- The cancellation of sale deed and settlement with legal heirs did not extinguish the appellant's ownership due to lack of proper documentation and mutation cancellation.- The U.P. Revenue Code's restrictions did not affect the benami nature of the transaction.- The provisional attachment and adverse reference order were confirmed and the appeal dismissed.