2025 (8) TMI 24 - AT - Benami Property

Benami Transactions Upheld Under Section 2(9) PBPTA Despite Fictitious Entries During Demonetization

Shri Kapil Dineshbhai Patel, Shri Ajeshbhai Amrutlal Patel, Shri Dinesh Cheldas Patel, Shri Ajeshbhai Amrutlal Patel and Shri Ajeshbhai Amrutlal Patel Versus The Initiating Officer, BPU, Ahmedabad

The AT under SAFEMA upheld the provisional attachment order, holding the transactions as benami under Section 2(9) of PBPTA. It found that accommodation ... Benami Property Transaction - Provisional Attachment Order - cash deposited in the accounts of proprietors - as argued no money was found during the course of search and that if the transactions are held to be fictitious then the same cannot be held to be benami transaction. HELD THAT:- Benami transactions may be a transaction or an arrangement. The material made available to us goes to show that there were accommodation entries provided by M/s Ghanshyam Jewelers and M/s Raj Enterprises against some commission for routing the alleged unaccounted money during the period of demonetization. The so-called Proprietors of M/s Ghanshyam Jewelers and M/s Raj Enterprises have given their statements in this regard that they have lent their names against payment of commission, which goes to show that some arrangements were provided to the Beneficial Owners through the Benamidars, without transferring the gold bullion as stated in the preceding paras. Therefore, it is held that the transactions alleged against the Appellants are covered by the definition of Benami transactions as defined u/s Section 2(9) of the PBPTA. As argued from the side of the Appellants that no money was found during the course of search - By no stretch of imagination, this can be accepted that if no money is found, then the entire allegations are false. It may so happen that the Appellants have concealed the money generated out of the arrangements on or before the search. So, the argument of the Appellants that the order is bad in law as no money was found during the search is liable to be rejected. Appellant’s arguments that if it is alleged that the transactions are fictitious, then, there cannot be any benami transactions - In the present case, the Respondent Authority has argued that the Appellants had made arrangements of accommodation entries to route the OHD currencies during demonetization period with back-dated bills/kachha slips, so, it falls within the second limb of definition of Benami transaction i.e. ‘arrangement’. In view of the same, it is held that even though the word ‘fictitious transactions’ have been used, the same is nothing but an arrangement, therefore, can be termed as Benami transactions to defeat the law. Non-verification of the names of the purchasers are concerned - As admitted fact that most of the retail sales of bullion were made below Rs. 1,00,000/- as shown in the kachha slips/books of account, wherein the name of the purchasers, their addresses and their PAN Card number were not mentioned. In the absence of these information, we failed to understand as to how the authorities will verify the name of purchasers. So, this contention of the Appellants has no legs to stand, therefore, cannot be accepted. Assessment of Income Tax Authority has not been considered is also not acceptable. The assessment of income is for the purpose of only ascertaining the tax to be paid by the assessee. This has nothing to do with the present proceedings under the PBPTA. So, the contention of the Appellants cannot be accepted. It is also to be noted that no appeal has been filed by the Benamidar Sh. Yogesh B. More in reference no. 139/2017. Sh. Kapil D. Patel and Sh. Ajeshbhai A. Patel regarding retraction of their statements are also not accepted in view of the fact that these two Appellants have retracted their statements much after the statement made before the Authorities under Income Tax Act, which is nothing but an afterthought. The judgments of Hon’ble Supreme Court of India in the matter of Narayan Bhagwantrao Gosavi Balajiwale v. Gopal Vinayak Gosavi [1959 (9) TMI 53 - SUPREME COURT] and Avadh Kishore Das v. Ram Gopal [1978 (12) TMI 185 - SUPREME COURT] cited by the Respondent Authority are applicable to the present fact and circumstances of the case. The retraction is held to be an afterthought. Therefore, this contention is of no help to the Appellants. Appellants have failed to substantiate their respective cases. The appeals are devoid of merits and hence liable to be dismissed. ISSUES: Whether the transactions involving cash deposits and bullion sales constitute 'benami transaction' under section 2(9) of the Prohibition of Benami Property Transactions Act, 1988 (PBPTA).Whether the absence of physical money found during search negates the existence of benami transactions.Whether fictitious or fabricated transactions can amount to benami transactions under the PBPTA.Whether the failure to verify names, addresses, and PAN details of purchasers affects the validity of benami transaction findings.Whether retraction of statements made under oath affects the reliability of evidence in benami proceedings.Whether assessment under the Income Tax Act impacts the findings under the PBPTA.Whether the definition of 'benami transaction' requires proof of consideration paid by the beneficial owner to the benamidar and immediate or future benefit to the beneficial owner.Whether the transactions involving dummy or accommodation entries, backdated bills, and cash deposits in benami accounts fall within the scope of benami transactions under clauses (A), (B), and (C) of section 2(9) of PBPTA.Whether the principles of natural justice and due procedure were followed before declaring a person as beneficial owner under PBPTA. RULINGS / HOLDINGS: The transactions involving cash deposits, backdated bills, accommodation entries, and fictitious stock creation constitute 'benami transactions' as defined under section 2(9) of the PBPTA, including clauses (A), (B), and (C).The absence of physical money found during search does not negate the existence of benami transactions, as concealment of money is possible and the material on record establishes the transactions.Fictitious or fabricated transactions are considered arrangements and fall within the ambit of benami transactions under the PBPTA.The failure to verify names, addresses, and PAN details of purchasers, especially when transactions are split below Rs. 1,00,000 and no proper records are maintained, supports the conclusion of benami transactions.Retraction of statements made under oath much after initial statements are held to be afterthoughts and do not affect the reliability of the original statements.Assessment under the Income Tax Act is distinct and does not affect the proceedings and findings under the PBPTA.The definition of 'benami transaction' requires that the property is held by one person while consideration is provided by another, and the property is held for the immediate or future benefit of the person providing the consideration; this condition is satisfied in the present case.Transactions involving dummy accounts, accommodation entries, and cash deposited in the name of benamidar but benefiting the beneficial owner fall within the scope of benami transactions under section 2(9) of PBPTA.The principles of natural justice and due procedure were observed; the findings of beneficial ownership are supported by evidence and material on record. RATIONALE: The Court applied the statutory framework of the Prohibition of Benami Property Transactions Act, 1988, particularly the definition of 'benami transaction' under section 2(9), which includes transactions where property is held by one person but consideration is paid by another, as well as transactions in fictitious names or where the owner is unaware of ownership.The Court relied on investigation findings, including statements recorded under section 131 of the Income Tax Act, survey reports under section 133A, and the pattern of cash deposits and backdated bills, to establish the existence of benami transactions.The Court rejected the applicability of precedents cited by the appellants (Meenakshi Mills Ltd. v. CIT and V N Nandhini Devi v. Dy. Commissioner of Income Tax) on the ground that the facts and nature of transactions differ significantly.The Court held that retraction of statements made after the initial disclosures is an afterthought and does not undermine the original evidence, citing Supreme Court precedents (Narayan Bhagwantrao Gosavi Balajiwale v. Gopal Vinayak Gosavi and Avadh Kishore Das v. Ram Gopal).The Court emphasized that the Income Tax assessment proceedings are separate and do not preclude or affect proceedings under the PBPTA.The Court found that accommodation entries and use of benami accounts to convert demonetized currency notes into accounted cash demonstrate the immediate or future benefit to the beneficial owner, satisfying the definition of benami transactions.The Court rejected the argument that no physical money found during search negates benami transactions, recognizing the possibility of concealment and reliance on circumstantial evidence.