2025 (9) TMI 774 - AT - Benami Property

Attachment of seized cash valid as benami property; appellant liable under ss.2(9)(C) and 2(9)(D), s.23 approval unnecessary

Shri Uttam Kumar Saha, Shri Nishit Ranjan Bhattacharjee and Shri Narayan Das Versus The Initiating Officer, DCIT, BPU, Guwahati

AT upheld attachment of seized cash as benami property, holding cash falls within the PBPT definition of property. The first appellant was properly ... Prohibition of Benami Property Transaction - attachment of seized cash was confirmed as benami property - Whether cash is not property? - HELD THAT:- cash is a property. The definition of property under the benami act is very wide and also includes cash. Hence such a transaction would also be termed as a benami transaction. Issue no.1 is accordingly answered in affirmative. Whether Appellants 2 & 3 cannot be proceeded against under PBPT since no cash was recovered and seized from them? - Appellants 2 & 3 have not claimed any ownership over the cash and the said cash was not recovered and seized from them by the authorities, but from the appellant no.1 and they were merely accompanying him. Hence, they cannot be proceeded against as the benamidars, or as the beneficial owner, per the provisions of the PBPT. This issue is thereby decided in favour of the Appellants 2& 3 and against the Respondent. Whether Section 2(9)(C) and 2(9)(D) cannot be invoked in the present case, since the appellant no.1 has declared himself as the owner of the seized cash? - The entire cash amount of Rs. 70 lakhs fall within the definition of ‘benami property’, which defines “a transaction or an arrangement in respect of a property where the owner of the property is not aware of, or, denies knowledge of, such ownership” as a benami transaction, if SATSANG is considered the owner of property as had been claimed earlier by Shri Uttam Kumar Saha, Shri Naryan Das and Shri Nishith Ranjan Bhattacharjee and SATSANG had denied the ownership of the same. Thus, we are of the view that appellant no.1 is rightly proceeded against as a benamidar under section 2(9)(C) and 2(9)(D) of the PBPT and there is no illegality by attracting both the provisions, being equally applicable. Hence, this issue is decided against the appellant no.1 and in favour of the respondent. Whether the mandatory statutory approval of the authority u/s 23 of the PBPT Act is compulsory to initiate proceedings u/s 24 of the PBPT Act? - As per the Explanation of Section 23, which was added in the year 2018, when a show cause notice has been already issued, then the requirement of prior approval of the Approving Authority does not arise and the same is effective retrospectively since the year 2016. In the present case, the SCN has already been issued, and thus, the contention of the appellant regarding failure of proceedings in absence of any prior approval does not stand good. Hence, this issue stands decided against the appellant and in favour of the respondent. Whether it is mandatory on the part of the IO to supply the reasons to believe before issuing the Show Cause Notice u/s 24 (1) of the Act? If yes, whether failure to do so vitiates the entire proceedings? Whether the provisions of PBPT Act are not attracted, seeing the fact that no independent investigation was carried out by the authority under PBPT Act? - Section 24(1) of the PBPT contemplates a show-cause notice and the very expression 'show cause' implicitly contains a right of the noticee to give a reply in writing disclosing his version of the matter. In the present case, the petitioner got such opportunity and he even filed replies to the said show-cause notice. Thus, it cannot be said that the petitioner was deprived of such opportunity. In the present case, the documents on record are sufficient for the IO to proceed with the PBPT proceedings against the appellants and thus, the fact of not carrying out independent investigation will not vitiate the proceedings carried out against the appellants. Since the impugned cash was already being transferred to some other place and was caught in middle, the chances of it being disposed of by the appellants were quite high and that called for taking steps for immediate attachment of the same, hence, the IO had relevant materials, statements of the appellants and the SATSANG, to form reason to believe in the present matter and any independent inquiry not been carried out by him, does not call for any illegality. Hence, issues 4 & 6 are also decided against the appellants and in favour of the respondent. ISSUES PRESENTED AND CONSIDERED 1. Whether cash (physical currency) constitutes 'property' within the meaning of the PBPT Act. 2. Whether persons from whose possession cash was not seized can be proceeded against under the PBPT Act as benamidars. 3. Whether provisions of Section 2(9)(C) and 2(9)(D) of the PBPT Act can be invoked where a person later declares himself owner after earlier asserting the cash belonged to a trust/organization which denies ownership. 4. Whether PBPT proceedings are vitiated because the Initiating Officer did not carry out an independent inquiry under Section 23 before issuing a show-cause notice under Section 24. 5. Whether prior/mandatory approval under Section 23 is a precondition to initiating proceedings under Section 24. 6. Whether the Initiating Officer is required to supply the 'reasons to believe' before issuing a show-cause notice under Section 24(1), and whether failure to do so vitiates proceedings. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Whether cash is 'property' under the PBPT Act Legal framework: The PBPT Act defines 'property' wide-ly (Section 2(26)) to include assets movable or immovable, tangible or intangible, and includes proceeds from property; the Act targets benami transactions and curbing black money. Precedent treatment: No authoritative judicial precedents were cited in the judgment to the contrary; the Tribunal relied on statutory text and legislative purpose. Interpretation and reasoning: Physical currency is a tangible movable asset and thus falls within the statutory definition of 'property.' The Act's object of curbing unaccounted wealth supports treating unaccounted cash as property subject to benami provisions; proceeds and cash are expressly contemplated by the definition. The Tribunal also considered different forms of assets (bank deposits, electronic funds) as within the concept of property but concluded physical cash is plainly covered. Ratio vs. Obiter: Ratio - the statutory definition of property in the PBPT Act includes cash; holding is dispositive for cases involving seized cash. Conclusion: Cash is property under the PBPT Act; Issue 1 answered in the affirmative. Issue 2 - Liability of persons from whose possession cash was not seized Legal framework: PBPT contemplates proceedings against benamidars/parties to benami transactions; liability ordinarily requires some nexus to the property or claim of ownership. Precedent treatment: No contrary authority cited; Tribunal applied fact-based analysis. Interpretation and reasoning: The Tribunal found appellants 2 & 3 neither claimed ownership nor was the cash seized from their possession; they merely accompanied the person from whose possession cash was seized. On these facts, they could not be proceeded against as benamidars or beneficial owners under the PBPT Act. Ratio vs. Obiter: Ratio - absence of possession and absence of claim of ownership disentitles persons to be proceeded against as benamidars on the recorded facts. Conclusion: Appellants 2 & 3 cannot be proceeded against under PBPT on the record; Issue 2 decided for those appellants. Issue 3 - Applicability of Section 2(9)(C) & 2(9)(D) where ownership claims shifted Legal framework: Section 2(9)(C) defines benami transaction where the owner denies or is unaware of ownership; Section 2(9)(D) covers transactions where the person providing consideration is not traceable or is fictitious. Precedent treatment: No precedent directly applied or distinguished; reliance placed on statutory definitions and evidentiary assessment. Interpretation and reasoning: The Tribunal examined contemporaneous statements and documentary material. Initially the person in possession and associates claimed the cash belonged to a trust/organization; subsequently that organization denied ownership and disavowed the cash. Later retractions by the persons in possession (claiming personal ownership, offering implausible explanations, or changing versions without corroboration) were held to be afterthoughts intended to avoid PBPT proceedings. The inconsistency, absence of authorizing documents, denial by the trust/organization, and inability to trace the consideration or donor trail supported application of Section 2(9)(C) (owner denies knowledge) and Section 2(9)(D) (consideration provider not traceable/fictitious). The Tribunal held it is permissible to invoke both clauses where both descriptions of benami transactions fit the factual matrix. Ratio vs. Obiter: Ratio - where recorded statements, documentary material and organizational denial make the alleged owner/consideration-provider untraceable or a fiction, Sections 2(9)(C) and 2(9)(D) properly apply even if a later self-serving claim of ownership is made by the person in possession. Conclusion: Sections 2(9)(C) and 2(9)(D) properly attracted against the person in whose possession the cash was seized; Issue 3 decided against that appellant and in favor of the respondent. Issue 4 - Whether absence of independent PBPT investigation vitiates proceedings Legal framework: Section 23 empowers the Initiating Officer to conduct inquiry with prior approval of Approving Authority; however an Explanation to Section 23 declares the provision inapplicable where a notice under Section 24(1) has been issued. Precedent treatment: No authority cited; the Tribunal interpreted the statutory text and the effect of the Explanation. Interpretation and reasoning: The Tribunal held that an independent inquiry is not mandatory where sufficient material already exists to form a 'reason to believe.' The Initiating Officer may proceed to issue a show-cause notice on available materials; whether further independent inquiry is conducted is discretionary and not a precondition. The Explanation to Section 23 permits issuance of a show-cause notice without prior approval; the purpose of 'reason to believe' is to inform the noticee sufficiently to enable a reply, which occurred here. Ratio vs. Obiter: Ratio - absence of a separate independent inquiry by the Initiating Officer does not vitiate PBPT proceedings where adequate material exists to form reasoned belief and to issue the notice. Conclusion: Lack of independent investigation did not invalidate the proceedings; Issues 4 & 6 (see below) decided against the appellants. Issue 5 - Necessity of prior approval under Section 23 before issuing show-cause notice under Section 24 Legal framework: Section 23 requires prior approval to conduct inquiry but contains an Explanation excluding its application where a Section 24(1) notice has been issued. Precedent treatment: None cited; Tribunal relied on statutory Explanation added in 2018. Interpretation and reasoning: The Tribunal read the Explanation as removing the prior-approval requirement for cases where a show-cause notice under Section 24(1) is already issued. The Explanation was treated as effective retrospectively; in the present case the show-cause notice had been issued, so the absence of prior approval did not render proceedings invalid. Ratio vs. Obiter: Ratio - prior approval under Section 23 is not mandatory before issuing a Section 24(1) notice where the Section 23 Explanation applies. Conclusion: Section 23 prior approval was not a precondition in the facts; Issue 5 decided against the appellants. Issue 6 - Requirement to supply 'reasons to believe' before issuing SCN and effect of any failure Legal framework: Section 24(1) requires issuance of show-cause notice; the show-cause process presupposes the noticee's right to reply to the basis of the allegations. Precedent treatment: Not invoked; Tribunal assessed sufficiency of the SCN on the record. Interpretation and reasoning: The Tribunal found that the Initiating Officer's SCN and accompanying record disclosed the reasons to believe; the function of reasons is to permit a meaningful reply, which occurred (reply filed and considered). Consequently, there was no deprivation of opportunity and no vitiation of proceedings. Whether reasons are 'satisfactory' is a matter for adjudication on merits, not a jurisdictional defect invalidating issuance of the notice. Ratio vs. Obiter: Ratio - a properly framed show-cause notice that discloses the Initiating Officer's reasons satisfies the procedural requirement; failure to provide reasons in the notice would be reviewable for prejudice, but on the facts no such failure occurred. Conclusion: No mandatory separate prior supply of reasons was required beyond the SCN itself; Issue 6 decided against the appellants. OVERALL CONCLUSION On the facts, the Tribunal upheld the Adjudicating Authority's confirmation that the seized cash constituted benami property as against the person from whose possession the cash was seized, dismissed the appeal by that appellant, and allowed appeals insofar as they pertained to the two accompanying persons who neither possessed the cash nor claimed ownership. The Tribunal's conclusions rest on statutory construction of 'property' and the benami definitions, assessment of contemporaneous statements and documentary evidence, and the statutory scheme governing initiation and form of PBPT proceedings.