2025 (9) TMI 1423 - AT - Benami Property

Benami finding upheld, provisional attachment of land confirmed; nominee purchase and Rs.15,10,000 payment show true beneficial ownership

Shri Ramlal Nangalia, Smt. Madhu Soni, Shri Chitranjan Soni and Shri Divesh Soni Versus The Initiating Officer, BPU, Jaipur

AT upheld the Adjudicating Authority's finding of a benami transaction and confirmed the provisional attachment of the land. The tribunal found that the ... Benami Transactions - loan taken from third party for purchase of the property - application filed to convert the land from agriculture to non-agriculture - HELD THAT:- The reason for taking the property in the name of Shri Ramlal Nangalia has been disclosed by the counsel for the appellant Smt. Madhu Soni by himself. It was due to the restriction/bar under the Rajasthan Revenues law for sale of land by SC/ST to non-SC/ST candidates. It was otherwise a fact that in case of loan advanced even by the individual, it would be transferred to the person taking loan and would not be diverted to a seller without involvement of tripartite agreement. Thus, the Adjudicating Authority answered the reference holding it to be a case of benami transaction and accordingly confirmed the Provisional Attachment Order. It is a fact admitted by the appellants that loan amount of Rs. 15,10,000/- remained unpaid and, therefore, it becomes clear that it was not a loan amount but transfer of the consideration for purchase of the property in the name of benamidar for future benefits of the beneficial owner. The appellants have referred to a capital account and balance sheet for the periods of 2018-19 to 2022-23. It is to show that Ramlal Nangalia was debtor of the loan of Rs. 15,10,000/- till 31.03.2022. The fact aforesaid was not accepted by the Adjudicating Authority finding it to be in conflict to other facts because there was conflict between the balance sheet and details of ITR which was not tallying with each other. In any case, the facts aforesaid were not so relevant once it is found proved that the land was purchased by Shri Ramlal Nangalia for which consideration was paid by the beneficial owner Smt. Madhu Soni for her future benefit. We do not find a case in favour of the appellants to cause interference in the impugned order. The appeals accordingly fail and are dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether the purchase of agricultural land by a registered transferee, where the entire/salient part of consideration was paid directly by a third person, constitutes 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 defense that the registered transferee received the consideration as a loan from the third person (beneficial owner) can defeat a benami finding in the absence of loan documentation (loan agreement, tripartite agreement or contemporaneous evidence of loan disbursement to the transferee). 3. Whether a statutory or customary restriction in local revenue law (restriction on sale by Scheduled Caste vendor to non-SC purchaser) which necessitated transfer in the name of a third person can negate the presumption of benami transactions when the beneficial person admits funding and intent. 4. Whether confirmation of a provisional attachment by the Adjudicating Authority was sustainable on the material before it. ISSUE-WISE DETAILED ANALYSIS - 1. Characterisation under Section 2(9)(A) (benami) Legal framework: The Act defines 'benami transaction' to include transactions where property is transferred to one person but consideration is provided by another and the property is held for the future benefit of the person providing consideration. Precedent Treatment: The Tribunal applied the statutory definition as amended and relied on facts rather than expanding or overruling prior decisions (no contrary precedent was followed or distinguished in the reasoning). Interpretation and reasoning: The Tribunal found undisputed documentary and investigative material showing that the substantial consideration (Rs. 15,10,000/-) was paid directly by the beneficial person into the seller's account while title was vested in the registered transferee. The Tribunal treated such direct payment by the beneficial owner coupled with registration in another's name as satisfying the primary limb of Section 2(9)(A). The beneficial owner's own statements that the purchase was effected for her future benefit (and that the transferee's involvement arose from local caste-transfer restrictions) reinforced the statutory inference of benami. Ratio vs. Obiter: Ratio - where consideration is paid by a person other than the registered transferee and title is in the transferee while the payer admits intention of future benefit, the statutory definition of benami is satisfied absent credible contrary evidence. Conclusion: The Tribunal concluded that the facts satisfied Section 2(9)(A) and that the transaction was a benami transaction. ISSUE-WISE DETAILED ANALYSIS - 2. Loan defence in absence of documentation Legal framework: A transaction paid by a third person may still be genuine if there is compelling evidence that the third person advanced a loan to the registered transferee and the funds were routed in a lawful/transparent manner consistent with such loan (tripartite or documentary proof). Precedent Treatment: The Tribunal treated the absence of contemporaneous loan documentation and the lack of a tripartite agreement as significant evidentiary deficits; no precedent was invoked to relax documentary requirements. Interpretation and reasoning: The Tribunal observed admission by counsel that no loan agreement existed and that had the arrangement been a loan with direct payment to seller, a tripartite document or contemporaneous written understanding would normally exist. The purported balance sheets and capital account were inconsistent with ITR details and other facts, and the alleged loan remained unpaid - factors which undermined the loan defence. The Tribunal held that mere after-the-event assertions of loan, unsupported by credible documentary or transactional evidence, cannot displace the inference of benami. Ratio vs. Obiter: Ratio - where a claimed loan is not evidenced by contemporaneous documents or consistent financial records and the payer retains beneficial interest, the claim of loan will not rebut a benami inference. Conclusion: The loan-defence failed on the record; absence of supporting documentation and inconsistent records rendered the defence insufficient to avoid the benami finding. ISSUE-WISE DETAILED ANALYSIS - 3. Effect of local revenue-law restriction on inference of benami Legal framework: The characterization of a transaction depends on substance and intention; legal impediments or local restrictions may explain why title is taken in another's name, but such explanation must be supported by consistent evidence and not merely asserted to cloak a benami arrangement. Precedent Treatment: The Tribunal accepted that statutory restrictions in revenue law may motivate use of an intermediate transferee, but held that such motive does not automatically negate benami status where the payer admits funding and the surrounding facts indicate beneficial ownership. Interpretation and reasoning: The Tribunal credited the admitted reason (restriction on sale by SC vendor to non-SC buyer) as motive for using the transferee, but found that motive alone, coupled with direct payment by the beneficial person and lack of loan formalities, confirmed that the transferee was a benamidar holding for future benefit of the payer. The Tribunal emphasized that the law looks to actual beneficial ownership and the substance of the transaction rather than formalistic justifications. Ratio vs. Obiter: Ratio - lawful or unlawful constraints that explain use of an ostensible transferee do not, by themselves, displace a benami finding where the payer furnishes consideration and retains beneficial control/interest. Conclusion: The local revenue-law restriction was a contextual motive but did not negate the benami conclusion given the evidence of funding and admitted beneficial intent. ISSUE-WISE DETAILED ANALYSIS - 4. Validity of confirmation of provisional attachment Legal framework: Provisional attachment under the Act may be confirmed by the Adjudicating Authority if material on record establishes a benami transaction as per statutory definition. Precedent Treatment: The Tribunal reviewed the Adjudicating Authority's findings and evidence de novo on the record; no precedent was cited to disturb the findings. Interpretation and reasoning: Given that (a) the substantial consideration was paid by the beneficial owner to the seller, (b) the registered transferee did not receive/comprehensively account for the funds as loan with corroborative documentation, (c) admissions by the beneficial owner and family corroborated beneficial intent, and (d) the alleged subsequent transfers and purported repayments lacked supporting detail, the Tribunal found the Adjudicating Authority's confirmation of the provisional attachment to be supported by material evidence and lawful reasoning. Ratio vs. Obiter: Ratio - where the statutory elements of a benami transaction are made out on evidence, confirmation of provisional attachment by the Adjudicating Authority is sustainable. Conclusion: The Tribunal upheld confirmation of the provisional attachment; the appeals were dismissed for want of merit.