2025 (11) TMI 393 - AT - Benami Property

Appeal dismissed upholding benami finding: Section 63 saves provisional attachment despite Section 24(1) notice defect

Mr. Sadanand Kadam and Mr. Anil Dattatreya Parab Versus The Initiating Officer, BPU, Mumbai

Appellate Tribunal (AT) dismissed the appeals, affirming a finding of benami transaction: the beneficial owner funded construction amounting to Rs. 4.13 ... Benami Transactions - purchase of the land - Validity of Provisional Attachment Order (‘PAO’) - non -compliance of the provisions of the Section 24(4) - Prior approval of the Approving Authority - invoked by the Initiating Officer - element of benami transaction as defined under Section 2(9)(A) of the Act of 1988 is missing - previous approval of the provisional attachment of the property taken from the approving authority, which according to the appellant should have been after causing u/s Section 24(1) - Initiating Officer considered it to be a case of benami transaction - payment of consideration on construction by the beneficial owner and the land was then registered in the name of benamidar making out a case of benami transaction under Section 2(9)(a) of the Act of 1988 as amended by the Amending Act of 2016 - HELD THAT:- The appellant has tried to take benefit of the documents to show that money was spent by benamidar for construction of resort in Village Murad. It is without clarifying as to how he was running the business and spending the money on it and apart from that, on the construction of two resorts separately at different places. The source sufficient to prove the fact aforesaid could not be disclosed and proved by the appellant. It is no doubt burden lies on the respondent to prove a case of benami transaction but they remained successful in collecting the evidence to show a case of benami transaction and thus onus was passed on the appellant to defend their case. It cannot be based on the imagination or pleadings but needs to be proved otherwise. There is nothing on record to prove that the complete consideration was passed to the beneficial owner and accordingly respondent has taken it to be a case of benami transaction. The analysis has been made in view of the fact that even according to the appellant, construction of the resorts was undertaken between 2017 and 2018 and thereupon the issue of violation of Coastal Regulation Zone was raised and was broken in the media. The diary makes a reference of payment for resort at Murad but largely involving the period after purchase of the property and Registration of the Sale Deed in favour of the benamidar. The fact, however, remains that a sum of Rs. 4.13 Crore was spent on construction in the year 2017-2018 when the land was existing in the name of beneficial owner. Thus, we find a case of the benami transaction where the consideration of property in the name of the benamidar or held by him was pass on by the beneficial owner to the extent of Rs. 4.13 Crore and even no consideration was taken at the time of execution of Sale Deed on 30.12.2020. It was passed on after six months and that too only a sum of Rs. 1.1 Crore. We find that the appellant was served with notice under Section 24(1) of the Act of 1988. However, previous approval of the provisional attachment of the property was taken from the approving authority on 30.08.2022 which according to the appellant should have been after causing notice under Section 24(1) of the Act of 1988. The objection to that effect could have been raised before the Adjudicating Authority and in any case it is saved by Section 63 of the Act of 1988. Section 63 of the Act of 1988, quoted above, makes it clear that no order or proceeding taken or purported to have been furnished shall be invalid merely for the reason of any mistake, defect or omission in the notice, summons, order, document or other proceeding if the notice, summons, order, document or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act. It is not that the Initiating Officer was not having power to provisionally attach the property, rather, it has to be with the previous approval of the approving authority which has been taken. The only omission or mistake is that it was taken prior to issuance of notice but that is saved by Section 63 of the Act of 1988. Thus, we do not find any substance even in the said argument of the Ld. Counsel for the appellants. We are not inclined to accept the arguments of the Ld. Counsel for the appellants in reference to Section 24(3) of the Act of 1988. Accordingly, appeals fail and are dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether the material on record establishes a 'benami transaction' within the meaning of Section 2(9)(A) of the Prohibition of Benami Property Transactions Act, 1988, where consideration for property was paid by one person and the property was held in the name of another for the immediate or future benefit of the payer. 2. Whether the provisional attachment order (PAO) issued under Section 24(3) of the Act of 1988 was valid where prior approval of the Approving Authority was obtained on a date preceding service of the Section 24(1) notice. 3. Whether the initiating authority and adjudicating process complied with the burden and standard of proof required in benami proceedings, including the proper evaluation and weight to be given to documentary and seizure evidence (notably a diary) relied on by the person alleged to be benamidar. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Existence of a benami transaction under Section 2(9)(A) Legal framework: Section 2(9)(A) defines 'benami transaction' as a transaction where (a) property is transferred to or held by a person, and the consideration is provided or paid by another person; and (b) the property is held for the immediate or future benefit, direct or indirect, of the person who provided the consideration, subject to specified exceptions. Precedent treatment: No direct judicial precedents were relied upon by the Court in the judgment; the Court proceeded by applying statutory tests to the facts. Interpretation and reasoning: The Court arranged facts in seriatim and analyzed timing and quantum of payments, sequence of registration, construction expenditure and subsequent transfer. Key findings included: (a) initial payment of purchase consideration was made by the person ultimately characterized as the beneficial owner; (b) the registered title remained in that person's name through a period when substantial construction expenditure (around Rs. 4.13 crores) was incurred; (c) there was no reliable documentary or contemporaneous record proving that the construction expenditure was borne by the registered proprietor who later became benamidar; (d) the final sale to the registered holder was for a comparatively low consideration (Rs. 1.1 crores) and payment was delayed, with the purchaser taking loan and the earlier payer standing as guarantor - circumstances that, on the totality of material, pointed to an arrangement where consideration and benefit diverged from formal title. Ratio vs. Obiter: Ratio - The Court's core ratio is that where evidence shows the consideration and substantial benefit of property ownership were provided by one person while title was held by another, and subsequent transfers and payment patterns are inconsistent with an arm's-length commercial bargain, a benami transaction under Section 2(9)(A) is established. Obiter - Observations on potential valuation expectations and appreciation are ancillary to the primary finding. Conclusions: On the facts and material produced, the Court concluded that a benami transaction was established to the extent found by the Initiating Officer and Adjudicating Authority; the PAO was founded on a legitimate belief of benami holding supported by collected evidence. Issue 2 - Validity of provisional attachment where approving authority's approval preceded service of notice (Section 24(3)) Legal framework: Section 24(3) permits provisional attachment by the Initiating Officer, with previous approval of the Approving Authority, where the Initiating Officer is of the opinion that a person in possession of property held benami may alienate it during the notice period; prior notice under Section 24(1) is otherwise required. Precedent treatment: The Court did not cite precedents nullifying attachments for temporal mismatches between approval and notice; analysis relied on statutory interpretation and the curative provision in Section 63. Interpretation and reasoning: The Court accepted that the approval was obtained on a date prior to issuance of the Section 24(1) notice. It evaluated whether such temporal order vitiated the PAO. The Court held that the Initiating Officer had power to provisionally attach with the Approving Authority's previous approval and that the only procedural defect was the sequence in which approval and notice occurred. The Court invoked Section 63 - a saving provision stating that notices, orders or proceedings shall not be invalid merely by reason of mistake, defect or omission if they are, in substance and effect, in conformity with the Act's intent and purpose - and found the procedural irregularity cured by Section 63 because the substantive prerequisites for provisional attachment had been met and the proceeding conformed with the Act's purpose. Ratio vs. Obiter: Ratio - Temporal irregularity between approval and notice, standing alone, is not fatal where Section 63 applies and the substance of the proceeding conforms with the Act's intent. Obiter - Statements about administrative practice (that approval is ordinarily sought after notice) are observational. Conclusions: The PAO was not rendered invalid by the fact that approval preceded issuance of the Section 24(1) notice; Section 63 saved the proceeding and no interference on this ground was warranted. Issue 3 - Burden and standard of proof; evaluation of diary and other evidence relied upon by the alleged benamidar Legal framework: The Act places an initial onus on the Initiating Officer to have reason to believe a benami holding exists; once sufficient material is gathered, the onus shifts to the person claiming to be benamidar to rebut the inference with cogent evidence of legitimate ownership and sources of consideration. Evidence must be credible, contemporaneous and capable of displacing the statutory inference. Precedent treatment: No authority was relied upon; Court applied general evidentiary principles to statutory proceedings. Interpretation and reasoning: The appellants relied in particular on a diary seized during search purporting to show construction expenditure by the benamidar. The Court examined entries and transaction timings and found the diary largely recorded construction payments for a different location until 2019, and entries referring to the property in question did not conclusively establish that the substantial construction cost (Rs. 4.13 crores) was borne by the registered holder prior to acquisition or that funds originated from known, provable sources of that person. The Court noted inconsistencies: inability to explain how the purported benamidar, earlier claimed to be short of funds for purchase, could fund large construction; delayed and partial payment of sale consideration; and the guarantor linkage for the loan used to pay the consideration. The Court held that the Initiating Officer had collected sufficient material to establish a reasonable basis for belief in a benami transaction, thereby shifting the onus to the appellants to produce reliable evidence - which, on analysis, they failed to do. Ratio vs. Obiter: Ratio - Documentary records seized must be sufficiently specific, contemporaneous and corroborated by source proof to rebut a benami finding; generalized ledger entries or contested diary entries that do not account for timing and source of funds are inadequate. Obiter - Comments on the appellant's business activities and credibility are contextual observations supporting the evidentiary conclusion. Conclusions: The evidence proffered by the appellants, including the diary, did not satisfactorily rebut the material relied upon by the Initiating Officer; therefore the burden-shifted rebuttal failed and the Adjudicating Authority's confirmation of the PAO was sustainable. Overall Disposition The Court, after marshaling evidence and applying the statutory definitions and saving provision, found no ground to interfere with the Adjudicating Authority's confirmation of the provisional attachment or its answer to the reference; the appeals were dismissed. The Court's conclusions on the existence of a benami transaction, the curative reach of Section 63 for procedural irregularity, and the required quantum and quality of rebuttal evidence constitute the operative ratios of the judgment.