2025 (11) TMI 618 - AT - Benami Property

Benami transaction found; evidence gaps and inconsistent claims led to remand for de novo PBPT Act, 1988 adjudication

Shri Gautam Gupta Versus The Initiating Officer, BPU Delhi

AT held that a benami transaction occurred and identified evolving, inconsistent factual assertions and inadequate documentary proof concerning funds and ... Benami transaction - Provisional Attachment Order - provisional attachment of the property is based on the allegation that a sum was received by the appellant from M/s Mac Allied Sales Corp. on 12.11.2016 in lieu of the cash deposited in the account of a Firm of Shri Atul Tyagi. HELD THAT:- We are of the categorical view that a benami transaction did take place. In the first instance, we note that there are significant differences in the version of facts stated in the said written synopsis dated 04.08.2025 vis-à-vis the facts submitted earlier in the appeal paper book. In the appeal paper book, it is stated that Smt. Anju Gupta purchased Second Floor of 176-177, Sector-24, Rohini on 20.02.2017 whereas in the written synopsis the date of purchase is mentioned as March, 2017. In the Statement of Facts there is no mention of ownership by his mother of a DDA flat since 2013 whereas in the written synopsis it is claimed that she was the owner of a DDA Flat purchased in the year 2013. In the Grounds of Appeal, it is mentioned that the appellant had received a loan of Rs. 30 lakhs from his mother on 11.04.2016 whereas in the written synopsis the amount is stated to be Rs. 35 lakhs, for which the source is stated to be the sale proceeds from the DDA flat allotted to his mother in 2013. In the Grounds of Appeal (Ground No. vi), it is categorically asserted that the appellant is the one who paid money from his own pocket to purchase the attached property whereas in the Written Synopsis (para 7), it is stated that this property was purchased by the mother from the funds accumulated in her account. From these observations, it appears that even the factual averments of the appellant have been evolving over time to suit his case. In para 16 above, we have already held that a benami transaction as defined by the Act did occur in the present case. But the further question we are called upon to address is whether the properties which have been attached by the Respondents were acquired out of the proceeds of the original benami property, namely, the cash provided by the appellant to Sh. Atul Tyagi and deposited in the account of M/s Mac Allied Sales Corp. (the proprietorship concern of Sh. Tyagi) on 12.11.2016. In this regard, we find that the key issue raised by the appellant is that after receipt of the amount of Rs. 43,50,000/- in the proprietorship account of the appellant on 12.11.2016 from M/s Mac Allied Sales Corp., an amount of Rs. 40,80,958 (Rs.18,31,858 + 22,49,100) had been paid by him to one M/s Om Associates on 26.11.2016 for purchase of furniture for business purposes of his proprietorship concern, M/s Ajanta Associates, after which the aforesaid amount of Rs. 43,50,000/- stood nearly exhausted so that the same could not have travelled to the properties which have actually been attached. Upon perusal of the impugned order and the reply filed by the respondent department to the appeal, we find that no light has been thrown on the issue. It is not known whether M/s Om Associates is merely a shell entity through which money was routed back to the appellant or to his mother for purchase the immovable property in question. We also find other gaps in information which would have enabled us to take a considered decision in the matter. For instance, the appellant has claimed that Mrs. Anju Gupta had sold the first property (a DDA flat allotted to her in 2013) in the year 2016 for a sum of Rs. 23,50,000/- and the capital gains thereon were duly declared in his mother's ITR. However, we find that the accompanying bank statements which are sought to be relied upon are illegible. Furthermore, the ITR of the appellant's mother referred to has not been filed. The appellant has claimed that the said property was sold on 06.04.2016 whereas the sale deed is dated 31.03.2016. Further, neither the appellant's individual bank account has been filed nor that of his mother to verify various transactions claimed, including advancement of money by the appellant's mother and its subsequent repayment by the appellant. It is not clear from whom the consideration for the purchase of various immovable properties has flowed. Thus, we consider it appropriate to set aside the case to the Ld. Adjudicating Authority under the PBPT Act, 1988 to conduct de novo adjudication addressing our observations as above and to pass a considered order after giving the appellant a reasonable opportunity of being heard. ISSUES PRESENTED AND CONSIDERED 1. Whether the cash transaction routed through a third party during demonetisation, whereby appellant's cash was deposited in the account of another and subsequently transferred back to appellant's proprietary concern, constituted a 'benami transaction' within the meaning of the Prohibition of Benami Property Transactions Act, 1988 (the PBPT Act). 2. Whether the immovable property provisionally attached (Meera Bagh property to the extent of Rs. 34 lakh) and the customs security deposit (Rs. 10 lakh) can be held to be benami property or 'proceeds from such property' traceable to the original benami transaction, permitting attachment under the PBPT Act. 3. Whether the act of re-transfer of funds by the intermediary to the appellant amounted to a contravention of Section 6 of the PBPT Act and the legal consequences thereof. 4. Whether the material on record (statements, bank statements, ITRs, sale deeds and other documents) sufficed to sustain the finding of the Adjudicating Authority that the attached properties were acquired out of proceeds of the benami transaction, or whether defects/gaps warranted de novo adjudication. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Benami character of the cash transaction routed through third party Legal framework: The PBPT Act defines 'benami transaction' (Section 2(9)) and seeks to prohibit holding of property for the benefit of another. The concept includes transactions where property is held by one person for the benefit of another; admissions and contemporaneous documentary and oral evidence can be relevant. Precedent treatment: No specific precedent decision was applied by the Court in the judgment; the Tribunal relied on statutory definitions and contemporaneous statements recorded under the Income-tax Act. Interpretation and reasoning: The Tribunal placed weight on the appellant's own sworn statements recorded under Section 131(1A) of the Income-tax Act admitting provision of unaccounted cash to the intermediary who deposited it in his firm account and transferred it back to the appellant through banking channels during demonetisation. The intermediary's statement corroborated that he had no genuine business dealings with the appellant and that the deposits/transfers were accommodation entries. The Tribunal found that the cash was 'transferred to' and 'held by' the intermediary for the appellant's benefit, even if only for a short period, satisfying the statutory elements of a benami transaction. Ratio vs. Obiter: Ratio - An admission by the putative beneficiary, corroborated by the intermediary, that cash was deposited and routed as accommodation entries establishes a benami transaction where the cash was held by the intermediary for the beneficiary's benefit. Conclusion: The Tribunal held as a matter of law and fact that a benami transaction occurred with respect to the cash routed through the intermediary. Issue 2 - Whether the attached immovable property and customs deposit are benami property/proceeds Legal framework: The PBPT Act includes 'proceeds from such property' within the definition of benami property (Section 2(8)). Unlike the PMLA, the PBPT Act lacks an express provision for attachment of 'value of such property' when the benami property is not directly available; tracing of proceeds and a causal connection between original benami property and subsequent immovable property is therefore necessary. Precedent treatment: No judicial authorities were relied upon for tracing rules; the Tribunal applied statutory construction and factual tracing principles. Interpretation and reasoning: The Adjudicating Authority found a chronological flow: (a) Rs. 43.5 lakh infused into appellant's proprietorship on 12.11.2016; (b) Rs. 35 lakh out of that used to purchase a Rohini property on 20.02.2017; (c) Rohini property sold on 15.02.2018; and (d) proceeds used on 28.02.2018 to acquire Meera Bagh property - hence Meera Bagh property held to be acquired out of proceeds of the original benami cash. The customs deposit was attached on the basis that part of proceeds had been utilised as business infusion and thereafter for payment of security deposit. However, the Tribunal identified evidentiary gaps: large payments to a vendor (M/s Om Associates) shortly after infusion, claimed as purchases of furniture, potentially exhausting the funds; lack of clarity whether that vendor functioned as a shell to route funds back; inconsistent and evolving factual narratives by appellant; illegible/absent bank statements and ITRs of the mother; and absence of clear documentary trail proving that the funds actually reached the attached properties. Ratio vs. Obiter: Mixed. Ratio - Proceeds of a benami transaction may be traceable to later acquisitions and support attachment where a clear, documented causal trail exists. Obiter - Noting lacunae in PBPT Act vis-à-vis attachment of value as compared to PMLA (observational and comparative, not necessary to disposition). Conclusion: While the Adjudicating Authority reached a prima facie conclusion of tracing from the original benami cash to the attached properties and thus treated those properties as benami or proceeds thereof, the Tribunal found material gaps and inadequacies in the evidentiary record on tracing and therefore set aside the adjudication for de novo consideration limited to whether the properties were acquired from proceeds of the benami transaction (see Issue 4 for remedial disposition). Issue 3 - Legal effect of re-transfer and contravention of Section 6 Legal framework: Section 6 of the PBPT Act renders a re-transfer of benami property to the beneficial owner or person acting on his behalf void and treats such re-transfer as in contravention of the Act. Precedent treatment: The Tribunal did not cite authority overruling or distinguishing the statutory prohibition; it applied the statute to the facts. Interpretation and reasoning: The Tribunal observed that the intermediary's act of transferring the money back to the appellant through banking channels was inconsistent with the statutory prohibition and indicated an unlawful re-transfer of proceeds. That conduct reinforced the finding that the intermediary was holding funds for the appellant's benefit and supported characterization as benami dealings. Ratio vs. Obiter: Ratio - Re-transfer of benami property to the beneficial owner, even if effected through banking channels, falls foul of Section 6 and is a material circumstance supporting benami characterization. Conclusion: The Tribunal regarded the intermediary's re-transfer as a contravention of Section 6 and as confirmatory evidence of the benami nature of the underlying transaction. Issue 4 - Sufficiency of evidence and requirement for de novo adjudication Legal framework: Administrative adjudication under the PBPT Act requires fact-finding supported by admissible evidence; where documentary gaps or contradictory pleadings exist, principles of fair hearing and need for comprehensive reasoned orders apply. Precedent treatment: No specific precedents invoked; Tribunal relied on general adjudicatory norms and statutory demands for reasoned findings. Interpretation and reasoning: The Tribunal identified significant weaknesses in appellant's documentary support (illegible bank statements, missing ITRs of the mother, inconsistent dates and versions across pleadings), which undermined the ability to conclusively trace funds. The respondent's pleadings and the impugned order also failed to clarify whether the vendor payments were genuine or a conduit for re-routing funds. Given these lacunae, the Tribunal concluded that a fresh, de novo adjudication by the Adjudicating Authority was necessary to properly address the tracing of proceeds, examine documents (bank statements, ITRs, sale deeds), assess credibility and motive, and make reasoned findings after giving the appellant further opportunity to be heard and to produce documents. Ratio vs. Obiter: Ratio - Where material evidentiary gaps, inconsistent versions, or missing documents prevent a considered conclusion on tracing of proceeds and acquisition of property from benami funds, the proper course is remand for de novo adjudication with directions to consider specified lacunae and to provide reasonable opportunity to the affected party. Conclusion: The Tribunal set aside the Adjudicating Authority's order insofar as it confirmed provisional attachment on the basis that the record did not sufficiently establish that the attached properties were acquired out of proceeds of the benami transaction. The matter was remitted for de novo adjudication within a prescribed time frame, with directions for full cooperation and production of documents by the appellant.