2025 (9) TMI 1228 - AT - Benami Property

PBPTA attachment upheld; transactions held benami under s.2(9A), appeal dismissed for lack of evidence amid demonetisation-era suspicions

MJ Gold Pvt. Ltd. Versus The Initiating Officer, BPU, Chandigarh

The AT affirmed the impugned order under PBPTA, holding the transactions involving receipt of ~Rs.51.7 lakh to be benami under s.2(9A). The appellant ... Benami Property and benami transactions - sale of gold bars - sequence of cheque deposits - Beneficial Owner within the meaning of Section 2(12) - Provisional Attachment Order dated 22.12.2017 (“PAO”) passed under Section 24(4)(a)(i) and 24(4)(b)(i) of PBPTA - Appellant failed to produce any evidence, documentary or otherwise to prove the delivery or transportation of the gold bar - HELD THAT:- We observe that the sum of Rs. 51,50,000/- was received by the Appellant through series of cheques deposited on different dates between 30.11.2016 to 07.12.2016. However, the Appellant raised invoice for only Rs 30,20,003/-, while the balance amount of Rs 21,50,000/- was adjusted in the bank account of Sh. Ashwini Kapoor, and Rs 3/- was written off as unrecoverable. The Appellant has failed to provide any justifiable reason as to why the sum of Rs 21,50,000/- which was received from M/s Rishi Hardware had been recorded as a credit entry in the account of Sh. Ashwani Kumar Kapoor in the Books of Account belonging to the Appellant. We further observe that Appellant has failed to advance any reason as to why they received a sum of Rs 20,000 from bank account of M/s Rishi Hardware on 22.12.2016, that is two days after the invoice dated 20.12.2016 was raised. We take note that the entire transactions took place during the period of Demonetization, and the Appellant had not entered into any transaction with M/s Rishi Hardware before November 2016. We further take note that Appellant has not entered into any transaction with M/s Rishi Hardware subsequent to the period of Demonetization, that is 30.12.2016. We find it suspicious that M/s Rishi Traders, based in Parwanoo, Himachal Pradesh would engage in alleged sale of gold bars with the Appellant based in Meerut, Uttar Pradesh. Our observations in the preceding paragraphs are corroborated by the fact that Appellant had failed to establish the true identities of the parties before entering into the alleged transactions. The Appellant has averred that it took PAN Card of M/s Rishi Hardware to ascertain the identity of M/s Rishi Hardware. We observe just because transactions were conducted through the medium of banking channels, i.e., cheques, the same would not absolve the Appellant of its responsibility to conduct due diligence to ascertain the identity of the parties. We take note of the investigations conducted by the DDIT (Inv), wherein it was discovered that the said PAN Card produced by the M/s Rishi Hardware was fraudulent. We further note that actual Sh. Amit Kumar has denied being the proprietor of the M/s Rishi Hardware in his statement recorded under Section 131 of the Income Tax Act, 1961 dated 02.05.2017. We furthermore take note of the statements of Sh. Manish Bagga, employee of Sh. Ashwani Kapoor who in his statements recorded under the oath had stated that the cash in the bank account of M/s Rishi Hardware was deposited by him under the instructions of Sh. Ashwani Kapoor. Sh. Manish further stated that he was not aware of the person called Sh. Amit Kumar Verma. We, therefore, find that failure to undertake due diligence to ascertain the identity of the parties, goes against Appellant herein. We find that the transactions or the arrangements relating to sum of Rs. 51,70,000/- are Benami Transactions within the import of Sub-Section 2(9)(A) of the PBPTA. We, therefore, affirm Impugned Order dated 28.01.2019 and dismiss the Appeal No. FPA-PBPT- as being devoid of merit. ISSUES PRESENTED AND CONSIDERED 1. Whether the Appellant qualifies as a 'Beneficial Owner' within the meaning of Section 2(12) of the PBPTA in respect of the transactions/amounts identified by the Adjudicating Authority. 2. Whether the transactions/arrangements relating to the sum of Rs. 51,70,000/- constitute 'Benami Transactions' within the meaning of Section 2(9)(A) of the PBPTA. 3. Whether confirmation of the Provisional Attachment Order dated 22.12.2017 under Sections 24(4)(a)(i) and 24(4)(b)(i) of the PBPTA by the Adjudicating Authority was legally sustainable on the material on record. 4. Whether receipt of payments through banking channels, production of an invoice and limited identity documents (PAN/Aadhaar) absolve the Appellant of the duty to undertake further due diligence and preclude a finding of benami transaction. 5. Whether surrounding circumstances (timing during demonetisation, sequence and quantum of bank entries, absence of delivery proof, and fabricated KYC) justify drawing an inference of benami ownership and permitting attachment. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Beneficial Ownership (Section 2(12)) Legal framework: Section 2(12) defines 'Beneficial Owner' and Section 2(8)/2(9)(A) together delineate features of benami property and benami transactions. Attachment provisions under Section 24 permit provisional measures where property is found to be benami. Precedent Treatment: No specific precedents were applied or overruled in the judgment; the Tribunal relied on statutory definitions and investigative material. Interpretation and reasoning: The Tribunal considered the documentary and investigative material - sequence of cheque deposits totalling Rs. 51,50,000/-, delayed invoicing, absence of delivery challan or transport/delivery evidence, contradictions in statements about delivery, fabricated or fraudulent KYC/PAN for the purported purchaser, and the finding that a third person (identified as the actual benamidar) had opened/operated the intermediary accounts. Taken together, these surrounding facts led the Tribunal to conclude that the only reasonable inference is that the Appellant was the beneficial owner of the funds and the underlying transactions were shams to conceal true ownership. Ratio vs. Obiter: Ratio - where circumstantial evidence (timing, banking entries, fabricated KYC, absence of corroborative delivery records, and conduct of intermediary accounts) establishes that the purported purchaser and its accounts were used to funnel funds for the real actor, the person receiving funds may be adjudged the beneficial owner under Section 2(12). Conclusion: The Tribunal held that the Appellant is the Beneficial Owner within the meaning of Section 2(12) of the PBPTA in respect of the impugned amounts. Issue 2 - Benami Transaction (Section 2(9)(A)) Legal framework: Section 2(9)(A) identifies transactions where property is transferred for consideration provided by another person and the ostensible transferee is not the real owner; Section 2(8) defines benami property; the Act permits attachment where benami ownership is established. Precedent Treatment: No earlier authority was cited as determinative; the Tribunal applied statutory definitions to the proved facts. Interpretation and reasoning: The Tribunal found that (a) significant cash deposits in intermediary accounts coincided with demonetisation and resumed activity only for that period; (b) cheques totalling Rs. 51,50,000/- were routed to the Appellant though invoice raised later for a lower amount; (c) Rs.21,50,000/- was credited to an account of the entry-provider rather than reflected as part of the sale consideration; (d) KYC and PAN in support of the intermediary were found to be fabricated and the alleged proprietor denied ownership; (e) the identified entry-provider had no financial capacity to deposit the sums allegedly attributed to him; and (f) the intermediary accounts were essentially accommodation entries operated by the entry-provider. These circumstances, in aggregate, were held to establish that the arrangement fell squarely within Section 2(9)(A). Ratio vs. Obiter: Ratio - when banking records, fabricated identity documents, inconsistent contemporaneous conduct (delayed invoicing, absence of delivery evidence), and the role of an identified entry-provider cohere, they are sufficient to characterize the transaction as benami under Section 2(9)(A). Conclusion: The Tribunal concluded that the transactions/arrangements relating to Rs. 51,70,000/- are benami transactions within the meaning of Section 2(9)(A) and the property is benami under Section 2(8). Issue 3 - Validity of Confirmation of Provisional Attachment (Sections 24(4)(a)(i) & 24(4)(b)(i)) Legal framework: Section 24 permits provisional attachment where property appears to be benami; confirmation requires satisfaction of material facts justifying attachment. Precedent Treatment: No reliance on specific judicial precedents for attachment test; Tribunal applied statutory standard to evidence. Interpretation and reasoning: The Tribunal examined the sufficiency of the investigating agency's material (bank statements, cheque details, investigative findings on KYC and PAN, statements under Section 19(1)(a) and Section 131 IT Act, and absence of corroborative delivery documentation). The Tribunal held that these materials constitute corroborative evidence and attendant circumstances warranting the inference that the Appellant was the beneficial owner and therefore the provisional attachment was appropriately confirmed. Ratio vs. Obiter: Ratio - confirmation of provisional attachment is sustainable where investigative evidence and surrounding circumstances make benami character of property the only reasonable inference. Conclusion: The Tribunal affirmed the Adjudicating Authority's confirmation of the Provisional Attachment Order dated 22.12.2017. Issue 4 - Effect of Banking Channels, Invoice and Limited Identity Documents on Due Diligence Legal framework: There is no statutory immunity conferred by mere use of banking channels; due diligence may be relevant to bona fides. PBPTA contemplates assessment of surrounding facts to determine real ownership. Precedent Treatment: No authorities cited cleansing payments solely because they passed through banking channels or because an invoice was raised. Interpretation and reasoning: The Tribunal rejected the submission that cheque/RTGS receipts, a belated invoice and possession of PAN/Aadhaar suffice to negate benami inference. It emphasized that transactions through banking channels do not absolve an entity from the obligation to verify true identity when surrounding facts are suspicious. The discovery of fabricated PAN/KYC, denial of proprietorship by the purported proprietor, and statements indicating the deposits were made at the instruction of the entry-provider negated the claim of bona fide reliance on banking channels. The absence of contemporaneous supporting documents (delivery challan, transport proof) further undermined the asserted bona fides. Ratio vs. Obiter: Ratio - payments through banking channels and production of invoice/KYC are not conclusive proof of legitimacy where independent investigation reveals fabrication, inconsistencies and absence of corroborative transaction evidence; due diligence cannot be bypassed by formality of banking remittances. Conclusion: The Tribunal held that reliance on banking channel payments and limited identity documents did not absolve the Appellant of responsibility to establish genuineness; such reliance did not preclude a finding of benami transaction. Issue 5 - Weight of Surrounding Circumstances (Demonetisation timing, banking sequence, delivery evidence, fabricated KYC) in Drawing Inference Legal framework: Fact-finding under PBPTA permits drawing inferences from surrounding circumstances to determine benami character; corroborative evidence and attendant circumstances can establish the true nature of transactions. Precedent Treatment: No specific case law applied; the Tribunal applied accepted principles of drawing reasonable inferences from cumulative circumstantial evidence. Interpretation and reasoning: The Tribunal enumerated and relied upon multiple concordant circumstances: (a) deposits into intermediary account resumed only during demonetisation and coincided with the disputed period; (b) serial cheque deposits into the Appellant's account matching the disputed sum; (c) delayed invoice and lack of delivery/transport documentation; (d) adjustments of a large portion of the sum to the account of the entry-provider and unexplained write-off; (e) fabricated KYC and denial by the person whose identity was used; and (f) lack of transactions with the intermediary before/after the demonetisation period. The aggregate effect of these circumstances, rather than any single fact, led the Tribunal to the inescapable conclusion of benami character. Ratio vs. Obiter: Ratio - a constellation of suspicious circumstances (timing, banking pattern, lack of delivery proof, fabricated identity documents and conduct of an entry-provider) when viewed together can justify the finding of benami transaction and support attachment. Conclusion: The Tribunal concluded that the surrounding circumstances justified the inference that the deposits and transfers represented benami arrangements and affirmed attachment and Adjudicating Authority's decision.