2025 (8) TMI 273 - AT - Benami Property

Benami Transactions Confirmed Under Section 2(9) PBPTA for Demonetized Currency Deposits and Transfers

The AT under SAFEMA upheld the determination that the transactions involving demonetized currency deposits and transfers constituted benami transactions ... Benami Property Transaction - reference was received from Deputy Director of Income Tax (DDIT, Inv.) - Documents related to enquiries conducted regarding deposit of demonetized currency in a bank account and its subsequent transfer to bank accounts of 4 Beneficiaries - HELD THAT:- It is seen from the record that the Initiating Officer in his reference and the Ld. AA in the impugned order have clearly set out their respective reasons to believe as to why the transactions/arrangements have been held as Benami Transactions as required under Section 2(9) of PBPTA. Therefore, it is held that the judgements relied upon by the Appellant on the question that there is no ‘reasons to believe,’ are of no help to the Appellant. Neither of the parties, during the course of entire proceedings have brought to our knowledge that Sh. AKK, the Benamidar herein, has preferred any appeal against the impugned order. On the basis of the above analysis and findings, we are of the view that the Ld. AA rightly held the aforementioned property as Benami Property, M/s Shivam Enterprises as the Beneficial Owner and Sh. AKK as the Benamidar. Appeal dismissed. ISSUES: Whether the transactions involving deposit and withdrawal of cash through a bank account held in a fictitious name constitute a 'benami transaction' under Section 2(9) of the Prohibition of Benami Property Transactions Act, 1988 (PBPTA).Whether the property (bank account) held in the name of a fictitious entity, with consideration provided by another person, satisfies the definition of benami property.Whether the mere circulation of money between the alleged benamidar's fictitious account and the beneficial owner negates the existence of a benami transaction.Whether violations under the Income Tax Act automatically imply a benami transaction under PBPTA or vice versa.Whether the burden of verifying the genuineness of a bank account can be shifted to the beneficial owner or third parties.Whether fabricated or forged documents submitted by the beneficial owner affect the characterization of the transaction as benami.Whether the intention of the beneficial owner is relevant in determining the existence of a benami transaction. RULINGS / HOLDINGS: The transactions involving deposits into and withdrawals from a bank account held in the name of a fictitious entity constitute a 'benami transaction' as defined under Section 2(9) of PBPTA, since the property (bank account) was held by one person and the consideration was provided by another.The bank account of M/s Rishi Hardware, a fictitious entity, qualifies as benami property because it was held for the immediate or future benefit of the person who provided the consideration, fulfilling all elements of Section 2(9)(A).The circular movement of money through accommodation entries does not negate the benami nature of the transaction; rather, it exemplifies a classic case of benami transaction.Violation under the Income Tax Act does not preclude the applicability of PBPTA; both statutes operate in distinct legal domains and can apply concurrently where facts warrant.The burden of verifying the genuineness of the bank account cannot be shifted to the beneficial owner or traders, especially where evidence shows knowing participation in sham transactions.Fabricated or forged documents submitted by the beneficial owner do not negate the benami nature of the transactions; rather, they reinforce the finding of collusion and intention to violate PBPTA.The intention of the beneficial owner to violate PBPTA is relevant and is established by the evidence of collusion and use of fictitious entities. RATIONALE: The Court applied the statutory definition of 'benami transaction' as per Section 2(9) of PBPTA, which requires that (a) property is held by one person, (b) consideration is provided by another, and (c) property is held for the benefit of the person providing consideration.The factual matrix showed the bank account was opened in a fictitious name with forged KYC documents, and cash was deposited and withdrawn in a circular manner, constituting accommodation entries.Statements of employees and documentary evidence established that the beneficial owner and the benamidar colluded to route unaccounted money through the fictitious account.The Court rejected the argument that transactions were genuine sales, noting fabricated invoices and lack of actual delivery, undermining the beneficial owner's defense.The Court distinguished the domain of Income Tax Act from PBPTA, affirming that violations under one statute do not exclude the applicability of the other.The Court emphasized that the burden of verifying the authenticity of bank accounts or transactions does not rest solely on the beneficial owner when evidence indicates complicity.The Court found that prior case law cited by the appellant was inapplicable due to differing facts and legal contexts, and that the adjudicating authority had sufficient 'reasons to believe' the transactions were benami.