2025 (9) TMI 208 - AT - Benami Property

Appeals dismissed; finding of benami transaction upheld where beneficial owner funded and possessed property, documentary evidence prevailed

AT dismissed the appeals and upheld the Adjudicating Authority's finding of a benami transaction. The tribunal found respondents failed to show the ... Prohibition of Benami Property Transactions - notice initially u/s 23 of the Act of 1988 followed by provisional attachment of the properties - Mandatory requirements to fulfill benami transaction under Section 2(9)(A) - Burden of proof - respondents failed to satisfy that the land parcel in this case was purchased for the future benefit of the beneficial owner - No material could be produced to indicate payment of consideration by him for purchase of land in question - No opportunity of cross-examination of the witnesses - Whether appellant Anand Singh Rathiya was having capability to pay the amount of consideration for purchase the property of value of Rs. 3.47 Crores though purchased on consideration of Rs. 30 Lakhs. Appellants conspired for purchase of the property in the name of Benamidar Anand Singh Rathiya. Sanjay Agrawal stood beneficial owner for purchase of the property worth of Rs. 3.47 Crores against the consideration of Rs. 30 Lakhs - Benamidar Anand Singh Rathiya having no means to purchase the land being a BPL Card Holder with yearly income out of agriculture was between Rs. 60,000/- to Rs. 70,000/- land was purchased from Radha Bai for which consideration was paid by the beneficial owner Sanjay Agrawal. HELD THAT:- Section 2(9)(A) of the Act of 1988 - As per the statements of witnesses and documents on record, the respondents could bring out a case that for the purchase of the land parcel, the money was transferred by the beneficial owner. He was using Moti Lal Yadav, Smt. Vimla Yadav and Gopal Das Namdeo, who were not having means to transfer huge amount to benamidar Anand Singh Rathiya. Anand Singh Rathiya was not knowing three persons named above. Those three persons were in close connection with the beneficial owner who was managing their accounts after keeping the cheque book of bank accounts. Those three persons were not having source of income to pass on it to the appellant Anand Singh Rathiya. In fact, for the deal of the land, Sunil Agrawal and Sanjay Agrawal met the owner of the land, namely, Radha Bai and even the documents were prepared for purchase of land by Sunil Agrawal and Sanjay Agrawal but ultimately it was registered in the name of Anand Singh Rathiya who was not having any means to purchase the property. The possession of property was also found with the beneficial owner at one point of time but looking to the initiation of the proceeding by the respondents, the possession of benamidar was shown. In any case, the benamidar was not having means to purchase the property. It was purchased at the instance of beneficial owner for future benefit. We are unable to accept the argument of the counsel for the appellants that a case of benami transaction is not made out. The finding recorded by us is after making discussion based on the statements of witnesses and documents available on record which shows a benami transaction in the hands of the appellants where one stood benamidar and other beneficial owner. seeking cross-examination - The appellant did not ask for the cross-examination of a witness whose statements were recorded and has been relied along with the reasons to seek cross-examination of the said witness. If the facts of this case are taken into consideration, the impugned order has been passed not only based on the statements of witness but the documentary evidence available on record to prove the case of benami transaction. It is in the light of the fact that an agreement to sell was found for purchase of the property by the beneficial owner and the benamidar was not having source to purchase the property. The relevant documents were relied by the respondents and has been discussed by us. We do not find any illegality in the order of Adjudicating Authority to deny cross-examination of the witness. We do not find any error in the order passed by the Adjudicating Authority for doing so. Income generated by the benamidar subsequent to the purchase of the land in question - It has been elaborately discussed by the Adjudicating Authority which has not only referred to the communication of the appellant Anand Singh Rathiya to be a BPL Card holder and beneficiaries of various Government Schemes. To create the income though it was much subsequent to the purchase of the property and otherwise if the appellant was earning and became income tax payee, he could not have ignorance about the PAN Card and no reason for the address in one PAN Card of Sanjay Agrawal. The detailed discussion in that regard has been made by the Adjudicating Authority and is reproduced hereunder for ready reference: So far as Sanjay Agrawal is concerned, he has been held to be beneficial owner. It is not only that for purchase of the property Sanjay Agrawal and Sunil Agrawal, they met the seller Radha Bai followed by the Agreement to Sell. The property documents after its purchase in the name of benamidar Anand Singh Rathiya were also found in their possession without any justification or reason. It is coupled with the fact that even the PAN Card of Anand Singh Rathiya was having address of Sanjay Agrawal and no explanation could be given. The appellant Anand Singh Rathiya otherwise pleaded ignorance about the PAN Card. The story would not end here, rather the three witnesses, namely, Moti Lal Yadav, Smt. Vimla Yadav and Gopal Dass Namdeo have also deposed about involvement of the beneficial owner and, in fact, he was one who was managing the accounts of those three persons and having cheque book with him. Those three witnesses had denied their relation or knowledge about the benamidar Anand Singh Rathiya to whom the money was transferred from their bank accounts. Thus, we do not find any merit in any of the arguments raised by the counsel for the appellants and, therefore, the appeals fail and are dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether the facts and material on record establish a 'benami transaction' within the meaning of Section 2(9)(A) of the Prohibition of Benami Property Transactions Act, 1988 as amended. 2. Whether the respondents discharged the burden of proving that consideration for the property was provided by a person other than the registered owner and that the property was held for the immediate or future benefit of that other person (i.e., proof of beneficial ownership and passing of consideration). 3. Whether documentary and testimonial material (bank statements, PANs, ITRs, agreements, possession and custody of documents) suffice to infer orchestration of the transaction by the alleged beneficial owner rather than requiring direct evidence of payment by him. 4. Whether denial of formal cross-examination of witnesses relied upon by the Initiating Officer/Adjudicating Authority amounted to breach of principles of natural justice and, if so, whether it vitiates the adjudicatory order. 5. Whether post-transaction income tax filings, PAN cards and subsequent bank transactions can be used as circumstantial evidence to test the credibility of the benamidar's claimed source of funds and the genuineness of claimed loans. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Applicability of Section 2(9)(A) (Legal framework) Legal framework: Section 2(9)(A) defines 'benami transaction' as a transaction where property is transferred to/held by person A but consideration is provided/paid by person B and property is held for the immediate/future benefit (direct/indirect) of B, subject to enumerated exceptions. Interpretation and reasoning: The Tribunal analyzed whether both ingredients-(a) consideration provided by another person, and (b) property held for immediate or future benefit of the person providing consideration-are satisfied by the evidence (statements, bank records, seller's testimony, possession of documents). Ratio: The Court held that the statutory ingredients are satisfied where circumstantial and documentary evidence link financial inputs and control to the beneficial owner, even if direct contemporaneous admission by the beneficial owner is absent, provided the inference is compelling and consistent with the material. Conclusion: The Tribunal concluded that Section 2(9)(A) applies on the facts: consideration for the land was arranged/paid by the beneficial owner through manipulated bank accounts and intermediaries, and the registered owner lacked means to make the payment, so the transaction is benami. Issue 2 - Burden of proof as to passing of consideration and beneficial ownership Legal framework: The party alleging a benami transaction must prove elements of Section 2(9)(A); burden lies on the alleging authority to demonstrate the payment/arrangement of consideration by another and the benefit to that person. Precedent treatment: The Tribunal applied standard that documentary and testimonial evidence may discharge that burden by establishing the chain of transactions and control; it treated testimonial admissions and bank records as admissible under Section 19(1) statements. Interpretation and reasoning: The Tribunal relied on seller's statement (that negotiations and deal were conducted by alleged beneficial actors), statements of alleged lenders denying genuine loans and describing cheques/accounts operated by others, bank transfer entries, custody of original documents and PAN/ITR anomalies to infer passing of consideration by the beneficial owner through front accounts. Ratio vs. Obiter: Ratio - circumstantial proof (bank credits, signatures, possession of documents, witness testimony showing lack of genuine lender-borrower relationship) can satisfy the burden of proof for passing of consideration and beneficial ownership. Obiter - observations on signature forgery and motives to procure PANs and accounts to evade detection are explanatory. Conclusion: The Tribunal found the respondents discharged burden: the beneficial owner orchestrated payment via third-party accounts; thus beneficial ownership and passing of consideration were established. Issue 3 - Use of documentary and testimonial evidence to infer orchestration and control (possession of documents, PANs, ITRs, bank accounts) Legal framework: Documentary and testimonial evidence, when consistent and probative, permit inferences about control, possession and conduit arrangements; statements recorded under Section 19(1) are admissible and relevant. Interpretation and reasoning: The Tribunal examined bank transfer tables, dates of deposits/transfers, possession of sale documents by alleged beneficial actors, PAN addresses, and income-tax returns showing atypical entries (unsecured loans, rental receipts inconsistent with factual matrix). The Tribunal found these materials mutually corroborative: (i) funds credited from accounts controlled/operated by beneficial actors; (ii) sellers' contemporaneous belief that beneficial actors negotiated the sale; (iii) benamidar's ignorance of PANs/ITRs and inability to explain sources; (iv) physical custody of original papers with beneficial actors. Ratio: Corroborative documentary chain (bank credits, movement of funds, agreements, custody of documents, PAN/ITR anomalies) can form a coherent basis to infer orchestration by beneficial owner and rebut claimed independent source of funds by the registered owner. Conclusion: Documentary and testimonial material, taken together, established that the property was purchased by persons other than the registered owner and that the registered owner lacked means-supporting benami finding. Issue 4 - Denial of formal cross-examination and principles of natural justice Legal framework: Quasi-judicial/adjudicatory proceedings permit cross-examination in appropriate cases but it is not an absolute right; authorities may refuse cross-examination where not justified by relevance or where fair hearing is not prejudiced. The question is whether refusal caused prejudice requiring annulment. Precedent Treatment: The Tribunal relied on authority holding that cross-examination is not an integral part of natural justice as a matter of right in such proceedings; cross-examination should be allowed when necessary to test veracity and when prejudice would ensue; refusal must be reasoned. Interpretation and reasoning: The Tribunal found the appellants failed to specify relevance or necessity for cross-examination of particular witnesses; the Initiating Officer's statement was not recorded so cross-examination request lacked foundation; the adjudicatory order relied on both documentary and testimonial material and refusal to allow cross-examination did not cause demonstrable prejudice given the robustness of documentary proof. Ratio vs. Obiter: Ratio - cross-examination is discretionary in such proceedings and may be denied if the applicant does not show relevance or potential prejudice; refusal does not vitiate order where documentary evidence independently supports findings. Obiter - discussion of comparative precedents illustrating circumstances where cross-examination may be necessary. Conclusion: Denial of formal cross-examination was not a violation of natural justice on these facts and did not require interference with the order. Issue 5 - Treatment of post-transaction ITRs, PAN anomalies and bank transactions as circumstantial evidence Legal framework: Subsequent conduct, tax filings and PAN usage can be admissible circumstantial indicators bearing on credibility, control and undisclosed benefits; unexplained anomalies may be probative of colorable transactions. Interpretation and reasoning: The Tribunal scrutinized ITRs showing late filings, unsecured loans, rental incomes inconsistent with facts, PANs bearing addresses of the alleged beneficial actor and timing of PAN applications after the transaction. These anomalies undermined the benamidar's claimed source of funds and supported inference of colorable papering to hide true financier. Ratio: Financial filings and PAN/address inconsistencies, when unexplained and viewed with other evidence (bank flows, possession of documents, witness testimony), are admissible to infer a pattern of benami arrangements and manipulation of documentary records. Conclusion: PAN/ITR and bank transaction anomalies corroborated other evidence and justified rejection of the benamidar's claimed independent source of consideration. OVERALL CONCLUSION The Tribunal concluded that the statutory ingredients of a benami transaction under Section 2(9)(A) were proven on the totality of documentary and testimonial evidence: consideration was arranged/paid by the beneficial actor through manipulated/benami bank accounts and intermediaries; the registered owner lacked means to pay; possession and documents were controlled by the beneficial actor. The denial of formal cross-examination did not vitiate the proceedings given the relevance and sufficiency of the materials. The appeals were dismissed.