2025 (10) TMI 928 - AT - Benami Property

Benami character of 57 sale deeds established under Section 6 PBPT Act; nominal transferee used for indirect acquisition

M/s Gurushree Minerals Pvt. Ltd. Versus The Deputy Commissioner of Income Tax (Initiating Officer), Raipur

AT dismissed the appeal, holding the transactions benami. The tribunal found the appellant made indirect investments through a nominal transferee to ... Benami character of transactions - Acquisition of tribal lands - sale of lands to a non-tribal person - benami property for the benefit of the beneficial owner - Validity of loan transactions - amounts utilized for purchasing the large number of land pieces vide 57 sale deeds - Appellant company has taken the plea that it has only given the loan to Shri Ratan Singh without going into the purpose of borrowing of loan by him. On the other hand, Ld. Counsel for the respondent contended that the finance to Shri Ratan Singh is technically not a loan amount, but an indirect investment by Appellant Company for purchase of lands through Shri Ratan Singh, as the appellant company was legally not entitled to purchase the tribal land, as per Chhattisgarh Land Revenue Code, 1959. HELD THAT:- We are satisfied with the contention of Ld. Counsel for the Respondent Department in this regard that the appellant company made an indirect investment through Ratan Singh & his family members for purchasing the tribal lands. This fact is also corroborated with the statement of Shri Ratan Singh, wherein he clearly expressed his ignorance about the land transactions and took the plea that he simply signed the documents at the instance of Shri Mukesh Bansal, the Director of the Appellant Company. Moreover, his bank account was operated by the Appellant Company and not by benamidar Ratan Singh and his family members. Appellant company has not produced any loan agreement with Ratan Singh for tendering the heavy loan amount. There is nothing on record that appellant company took any personal or collateral surety from Ratan Singh for giving the alleged loan. Hence, purchase of land by Appellant Company in the name of Ratan Singh through 57 sale deeds are clearly the benami transactions. This fact is also corroborated with the fact that within the short span of purchase, the appellant company got transferred the said lands in its own name by way of three sale deeds mentioned at serial no. 58 to 60 in the Show Cause Notice at page 94 & 95 of the Appeal paper book. Ratan Singh was working with the appellant company as driver since last 17 years and was receiving salary of Rs. 15,000/- per month. With such a meagre monthly income, one cannot be expected to have courage and resources to buy large chunks of lands by obtaining loan from the appellant company, as tried to be explained by the appellant company. We are also satisfied with the contention of Ld. Counsel for the Respondent Department that Ratan Singh and his family members were not in a financial position to repay the alleged loan amount along with interest amounting to Rs.5.23 Cr. during the period 17.8.2021 to 26.08.2021 and the same is also apparently the paper transactions, in absence of any source of income/finance with Ratan Singh. Ld. Counsels for both the sides admitted the fact that the issue of the attached properties as benami is not pending with the Hon’ble High Court of Chhattisgarh in Writ Petition, as same pertains to only the review orders passed by the District Collector whereby it revoked the permission granted to the parties for transfer of tribal land in favor of non-tribal, i.e. the appellant company. Accordingly, we are of the considered view that grant of permission or its cancellation, does not help the appellant company to protect its ownership over the land pieces vide the three sale deeds, as all the 57 sale deeds in favour of Ratan Singh & his family members are benami transactions. We also fortify our view in this regard in view of Section 6 of PBPT Act (as reproduced in para no. 4 above in the arguments of Respondent Department). Appeal Dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether the acquisition of tribal lands, effected by transfers into the names of tribal persons but funded and controlled by a non-tribal company, constitutes a 'benami transaction' within the meaning of Section 2(9)(A) of the Benami Transactions (Prohibition) Act, 1988 (PBPTA). 2. Whether the subsequent execution of registered sale deeds from the benamidars to the funding company and the District Collector's grant or later withdrawal of permission under Section 165(6) of the Chhattisgarh Land Revenue Code affect the determination of benami character under PBPTA (including the effect of stay of the Collector's review order by the High Court). 3. Whether the alleged 'loans' advanced by the company to the tribal persons, and alleged repayments recorded, defeat the conclusion of benami transaction in the absence of documentary loan agreements, collateral/security, and independent source of funds of the benamidars. 4. Whether re-transfer of the properties by the benamidars to the company falls foul of Section 6 of PBPTA and, if so, whether such re-transfer is void. ISSUE-WISE DETAILED ANALYSIS - Issue 1: Benami character of transactions Legal framework: Section 2(9)(A) PBPTA defines 'benami transaction' where property is held by one person but consideration is provided by another and the property is held for the immediate or future benefit, direct or indirect, of the person providing consideration. The Initiating Officer invoked Section 24 (show cause and provisional attachment) and concluded benami. Precedent treatment: No judicial precedent was applied or distinguished in the text; the Tribunal relied on statutory ingredients and facts to apply the definition. Interpretation and reasoning: The Tribunal analysed the flow of funds into the benamidars' bank account (numerous RTGS/cheque credits from the company aggregating large sums contemporaneous with purchases), the meagre declared income of the tribal benamidars, absence of independent means, the benamidars' statements admitting lack of knowledge and that documents were signed at the director's instance, absence of formal loan agreements or collateral, and rapid re-transfer to the company. The Tribunal found the company had provided the consideration, controlled the bank account, and obtained direct benefit of land acquisition through a tribal front. Ratio vs. Obiter: Ratio - where consideration for acquisition of property is traceable to a third party, the holders lack independent means, accounting records show funding by the third party, and the purported holders disclaim beneficial interest, the transaction satisfies Section 2(9)(A) PBPTA and qualifies as benami. Observations about specific factual manifestations (e.g., bank entries) are factual findings supporting the ratio. Conclusion: The Tribunal concluded the purchases were benami transactions; the tribal purchasers were benamidars and the company was the beneficial owner, justifying provisional attachment and sustaining the Adjudicating Authority's conclusion. ISSUE-WISE DETAILED ANALYSIS - Issue 2: Effect of Collector's permission and its withdrawal on PBPTA proceedings Legal framework: Transferability of tribal land is governed by Section 165 of the Chhattisgarh Land Revenue Code; administrative permission is required for sale of tribal land to non-tribals. PBPTA analysis focuses on beneficial ownership and funding; administrative permissions are relevant factual matrix but do not determine benami character per se. Precedent treatment: None cited in the judgment; Tribunal considered interplay between revenue permission and PBPTA findings. Interpretation and reasoning: The Tribunal noted that the District Collector originally granted permission and later issued a review/withdrawal order following an income-tax department communication, but the High Court stayed the Collector's review order in separate writ proceedings. The Tribunal held that the grant or cancellation of permission does not negate the underlying factual finding that the company funded and controlled acquisition through tribal fronts. The characterization of transactions as benami depends on who provided consideration and who benefited, not solely on the technical validity of revenue permission. Ratio vs. Obiter: Ratio - administrative grant or withdrawal of permission under land revenue law does not, by itself, negate or preclude a finding of benami under PBPTA where the statutory ingredients of benami are otherwise satisfied. The stay of the Collector's order in writ proceedings does not alter the PBPTA factual matrix. Conclusion: The Tribunal held that the pendency or status of the Collector's permission/review did not vitiate the Initiating Officer's and Adjudicating Authority's findings; PBPTA proceedings remained valid and attachment/order sustained. ISSUE-WISE DETAILED ANALYSIS - Issue 3: Validity of alleged loan transactions as defense Legal framework: Parties may assert that payments were bona fide loans by producing documentary evidence (loan agreements, repayment schedules, securities, independent sources of repayment). Absence of documentary backing and presence of indicia of control by the purported lender supports an inference of benami funding rather than genuine loan. Precedent treatment: No authority cited; Tribunal relied on evidentiary standard and factual indicators. Interpretation and reasoning: The Tribunal examined the company's claim of advances/loans and repayments aggregating several crores, but found no documentary loan agreement, no collateral or surety, inconsistency with benamidars' low earnings, and implausibility of the benamidars repaying large sums from their known income. The Tribunal treated the alleged repayments as 'paper transactions' unsupported by independent evidence and inconsistent with the bank/account operation pattern controlled by the company. The swift re-transfer of land to the company further undermined the loan defense. Ratio vs. Obiter: Ratio - assertions of loans that purport to explain source of consideration must be substantiated by contemporaneous documentation and plausible independent sources; without that, such claims cannot defeat a benami inference. Findings on credibility and documentary sufficiency are ratio when applied to determine the true nature of funding. Conclusion: The Tribunal rejected the loan defence as unsubstantiated, accepted the Respondent's position that the company effectively funded acquisitions, and affirmed benami character. ISSUE-WISE DETAILED ANALYSIS - Issue 4: Re-transfer and Section 6 of PBPTA Legal framework: Section 6 PBPTA prohibits re-transfer by a benamidar of benami property to the beneficial owner; such re-transfers are to be treated as void. Precedent treatment: No precedent cited; statutory provision applied directly. Interpretation and reasoning: The Tribunal observed that after the tribal purchasers acquired the land, they re-transferred substantial portions to the company by registered sale deeds within a short period. Given the Tribunal's finding that the initial acquisitions were benami (company-funded) and that re-transfer to the funding company occurred, Section 6 rendered such re-transfers impermissible and void. The prior registration of re-transfer does not cure the benami character; rather, it reinforces the inference of an arrangement to defeat legal prohibition on non-tribal acquisition. Ratio vs. Obiter: Ratio - where property acquired in benami fashion is subsequently re-transferred to the beneficial owner, such re-transfer contravenes Section 6 and is void; this supports sustaining attachment and denial of legal ownership to the beneficial claimant. Conclusion: The Tribunal held that re-transfer contravened Section 6 and could not validate the company's title; this fortified the conclusion that the properties were benami and subject to attachment. OVERALL CONCLUSION Applying the statutory definition of benami, the material facts (funds traced from the company to the tribal purchasers' account, absence of independent means, lack of loan documentation, benamidars' statements of ignorance and signing at the director's direction, rapid re-transfer), and the prohibition on re-transfer in Section 6, the Tribunal concluded that the properties were benami, the company was the beneficial owner, and the appeal against the Adjudicating Authority's order was dismissed as devoid of merits.