2025 (11) TMI 394 - AT - Benami Property

Appeals dismissed; provisional attachment and orders valid under s.26(7) PBPTA; cash payments and unexplained deposits indicate non-agricultural funds

Shri Lal Mohammad Molla and Shri Lal Mohammad Molla Versus The Initiating Officer, BPU, Kolkata

AT dismissed the two appeals, upholding the Provisional Attachment Orders and Adjudicating Authority's orders as valid and within the one-year limitation ... Benami transactions - purchase of the two properties - Provisional Attachment Order (PAO) based on assumptions and presumptions - without application of independent mind - beyond the limitation period stipulated in sub-Section 26(7) of the PBPTA - transactions executed by the unidentified land mediators - agricultural income without any corroboration - unexplained cash - burden of proof - HELD THAT:- We find that the available record and materials were perused by the Approving Authority. Moreover, it is clear from the note dated 21.03.2018 of the Approving Authority that he examined the evidence gathered during the enquires conducted by the IO. In the face of the overwhelming evidence in the form of the two notes, we observe that the contentions made with regard to the alleged procedural flaws are nothing, but surmises based on presumptions. We do not agree that the impugned Orders are time barred since the References were filed on 28.03.2018 and the Adjudicating Authority issued the impugned Orders on 25.03.2019. The Orders were thus issued well within the limitation period stipulated in sub-Section 26(7) of the PBPTA. The said sub- Section is as follows: “No order under sub-section (3) shall be passed after the expiry of one year from the end of the month in which the reference under Sub-section (5) of Section 24 was received.” The apprehensions and contentions of the Appellant are unjustified without any corroborative evidence. Payment was made in cash directly in one case and indirectly in the second case where cash was deposited in the bank account of the Appellant under the deposit slip on which the signature is not of the Appellant. It is also not disputed that the Appellant had not filed the ITRs. We also note that often after the cash deposits of high denominations, withdrawal cheques have been issued on the same account. In the absence of any explanation about high amount transactions reflected in the said bank account, the inference that the Appellant was dealing with money arising not only from agriculture and allied activities is inescapable. The Appellant failed to state and show evidence as to who provided the consideration for the purchase of the two impugned properties. While for the property of 1 Decimal at R.S. Dag No. 1084 directly cash was paid attributing it to agricultural income without any corroboration, for the other property of 1.65 Decimal at R.S. Dag No. 5967 deliberate efforts were made to deposit unexplained cash in the bank account of the Appellant, so as to make it appear that payment was made by the Appellant through the Banking Channel. Thus, we dismiss the two Appeals. ISSUES PRESENTED AND CONSIDERED 1. Whether there were 'reasons to believe' and sufficient material to lawfully issue Provisional Attachment Orders under Section 24(4)(b)(i) of the PBPTA. 2. Whether the Approving Authority applied independent mind before approving provisional attachment or acted mechanically. 3. Whether the Adjudicating Authority's confirmation of provisional attachment under Section 26(3) of PBPTA was time-barred under the limitation in sub-section 26(7). 4. Whether the transactions in question were benami within the meaning of Section 2(8) read with Section 2(9) of PBPTA, in particular Section 2(9)(D) (consideration provided by untraceable/fictitious person), and whether the burden of proof lay on the Initiating/Respondent or on the person in whose name property stands. 5. Whether alleged procedural flaws and denial of opportunity to be heard (natural justice) vitiate the impugned orders. 6. Whether the distinction between 'consideration paid' and 'consideration provided' (as articulated in Pawan Kumar Gupta) excludes application of Section 2(9)(D) where purchaser paid consideration. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Sufficiency of reasons/material to issue PAOs (Section 24(4)(b)(i)) Legal framework: Section 24(1)-(5) (initiation and provisional attachment), requirement of 'reasons to believe' and material/evidence to justify provisional attachment; Section 2(8)/2(9) definitions of benami. Precedent Treatment: The Tribunal considered the general standard that an IO must have material on record to form belief; previous authorities referenced by parties (including Valliammal and Pawan Kumar Gupta) addressed tests for benami and relevance of source of purchase money. Interpretation and reasoning: The Court examined the IO's contemporaneous note showing issuance of notice, inquiries, reminders, and specific findings that circumstantial evidence pointed to use of the appellant as a conduit and that consideration was cash or deposited by unidentified persons. The material included bank records, cash-deposit patterns, seller statements (cash/draft), and the IO's enquiries; the IO recorded inability to trace persons who provided consideration. The Tribunal held that these materials constituted sufficient reasons to believe and supported provisional attachment. Ratio vs. Obiter: Ratio - contemporaneous record of inquiries and material sufficed to constitute 'reasons to believe' for provisional attachment. Obiter - none beyond application to facts. Conclusion: The PAOs were lawfully issued; the IO had material to form reasons to believe and proceeded within mandate. Issue 2 - Whether Approving Authority applied independent mind Legal framework: Approval under Section 24(4)(b)(i) requires the Approving Authority to examine record and evidence rather than rubber-stamp IO's draft. Precedent Treatment: Authorities require demonstration that approving officer considered material and reached satisfaction. Interpretation and reasoning: The Approving Authority's noting recorded perusal of records, outcome of enquiries, examination of evidence and expression of satisfaction that properties were fit for provisional attachment. The Tribunal found these entries showed application of mind and review of evidence rather than mere mechanical approval. Ratio vs. Obiter: Ratio - recorded perusal and examination by Approving Authority satisfy requirement of independent application of mind. Conclusion: Approval was not mechanical; Approving Authority applied independent mind. Issue 3 - Limitation for passing orders under Section 26(3) (sub-section 26(7)) Legal framework: Section 26(7) prescribes that no order under sub-section (3) shall be passed after expiry of one year from end of month in which reference under Section 24(5) was received. Precedent Treatment: Parties invoked time-limit principles (Pawan Kumar Gupta relied on by Appellant for other point, but here limitation is statutory). Interpretation and reasoning: The Tribunal compared dates: references filed 28.03.2018; impugned orders passed 25.03.2019. The orders were therefore within the one-year period stipulated by Section 26(7). Allegation of delay based on reservation date was held to be speculative and unsupported. Ratio vs. Obiter: Ratio - impugned orders were within statutory limitation period; procedural timing allegations did not render orders time-barred. Conclusion: Orders under Section 26(3) were not time-barred. Issue 4 - Whether transactions are benami under Section 2(8) read with Section 2(9), particularly 2(9)(D), and burden of proof Legal framework: Definitions of benami; Section 2(9)(D) covers where consideration provided by person untraceable or fictitious; statutory scheme contemplates inquiry into source of consideration and motive. Precedent Treatment: The Tribunal relied on Valliammal (principle that source of purchase money and motive are critical tests) and addressed burden aspects in context of available evidence. Interpretation and reasoning: The Tribunal identified undisputed facts: payment in cash for one property and cash deposited by unidentified person for bank draft in the other; absence of ITRs; bank account entries showing frequent cash deposits and high-value transactions unexplained; seller statements corroborating cash/draft payments; inability to identify persons who furnished consideration. On these facts the Tribunal inferred that consideration was provided by others (untraceable/fictitious) and that appellant failed to prove legitimate source. The Tribunal rejected appellant's generalized claim that burden cannot be on him, finding PBPTA inquiry properly focused on whether transactions were benami and that available corroborative material supported respondent's findings. Ratio vs. Obiter: Ratio - where consideration is paid or arranged by persons who are untraceable or fictitious and the person in whose name property stands cannot satisfactorily explain source, transactions fall within Section 2(9)(D); absence of ITRs and unexplained banking entries are material to draw inference of benami transaction. Obiter - commentary on reliance on circumstantial evidence and patterns of cash deposits. Conclusion: Transactions held to be benami under Section 2(9)(D); appellant failed to discharge evidentiary burden to rebut inference. Issue 5 - Procedural fairness / denial of hearing / natural justice Legal framework: Principles of natural justice require opportunity to be heard before adverse orders; statutory notice and hearing provisions in PBPTA. Precedent Treatment: Tribunal examined record of notices, reminders, and adjournments. Interpretation and reasoning: Record showed notice under Section 24(1) served, reminders issued, and appellant acknowledged notice. Adjudicating Authority had fixed hearings; appellant sought adjournments and at one occasion did not appear. The Tribunal found that appellant had opportunities to be heard, and delay in passing order after reservation did not evidence denial of hearing. Allegation that request to be heard was rejected because order was reserved was unsupported. Ratio vs. Obiter: Ratio - no violation of natural justice where procedural record shows notices, reminders, opportunities and failure by the respondent to effectively engage; mere delay in pronouncing order does not establish denial of hearing absent contrary evidence. Conclusion: No fatal natural justice violation; procedural fairness maintained. Issue 6 - Applicability of 'consideration paid' vs 'consideration provided' distinction (Pawan Kumar Gupta) Legal framework: Distinction that 'provided' may include arrangements by third parties whereas 'paid' may indicate purchaser himself furnished consideration. Precedent Treatment: Appellant relied on Pawan Kumar Gupta to argue inapplicability of 2(9)(D) if consideration was 'paid' by purchaser; Tribunal accepted distinction in principle but applied it to facts. Interpretation and reasoning: Tribunal found evidence showing that in one transaction cash was directly paid but without corroboration of source; in the other cash was funneled into appellant's account by unidentified depositor to create appearance of payment through banking channel. Thus facts supported inference that consideration was 'provided' (by others/untraceable), not bona fide 'paid' out of appellant's own identifiable funds. Absence of corroborative evidence to support appellant's claim of agricultural/own income precluded application of the 'paid' category to bar operation of Section 2(9)(D). Ratio vs. Obiter: Ratio - the paid/provided distinction does not immunize a transaction where evidence shows consideration was actually provided by third/untraceable persons or the purchaser cannot adequately account for source; factual showing controls application. Conclusion: Pawan Kumar Gupta distinction does not aid appellant on these facts; Section 2(9)(D) applies. Overall Conclusion The Tribunal concluded that the provisional attachment and subsequent confirmation were supported by material and lawful; the Approving Authority applied mind; statutory limitation was respected; transactions were benami under Section 2(9)(D); procedural objections failed. The appeals were dismissed as devoid of merit.