2025 (11) TMI 884 - AT - Benami Property

Provisional attachment upheld where transaction found benami: payment from beneficial owner, sham loan, nominee registration masked ownership

Shri Anil Bhojwani, Shri Rakesh Jethani, M/s Oneness Farm and Resorts and Shri Suresh Kumar Uikey Versus The Initiating Officer, BPU, Bhopal

AT upheld provisional attachment, finding the transaction benami and dismissing the appeals. The tribunal held the payment originated from the beneficial ... Benami Transactions - provisional attachment of the properties - absence of documentary proof - plea for defence based on loan taken by the benamidar, commercial venture between the parties - benami transaction u/s 2(9) (A) - property in question was acquired in the name of benamidar, who was a low profile tribal person - Beneficial owner was intended to purchase the land but he was not belonging to the Tribal community therefore, the land was purchased in the name of benamidar, a member of Tribal community. The benamidar was not having sufficient means to purchase the property yet it was registered in his name on the payment of consideration provided by the beneficial owner. The payment was first made to the benamidar, who in turn made the payment to the seller of the land. The beneficial owner purchased the land for their future benefits through its firm M/s Oneness Farm and Resorts. HELD THAT:- It was not found that the alleged loan taken by the benamidar was not reflected in the income-tax return or elsewhere and it is not even by the firm which landed the loan thus the story of loan for purchase of the property could not be made out. No collaboration agreement has been produced or referred by the counsel for the appellants, rather what was shown is an old partnership which was not involving the son of beneficial owner, rather he was inducted lately in the month of June, 2022 just before purchase of the land to give shape to the transaction. It is to avoid transaction to be benami in nature. Instead of collaboration agreement, it was stated that a partnership firm was created involving benamidar’s son. In the instant case, all the conditions of the definition have been satisfied and as a consequence, a case of benami transaction is made out which can be explained otherwise again. The first step was to transfer the amount of consideration in the account of benamidar and the material on record shows it to be out of pocket of the beneficial owner. Thus, first limb of benami transaction is made out and for ready reference, the definition of benami transaction under Section 2 (9) of the Act of 1988, as was amended by the Notification dated 25.10.2016. In the case in hand, the purchase of property is in the name of benamidar and thereby even second limb of benami transaction is made out. The third limb is purchase of property for future benefits of beneficial owner which is also made out in this case. It is for the reason that after registration of the land, the Partnership was for future benefit. Thus, even the third limb of definition is made out. The series of events indicated above and even if the date of entry of the benamidar’s son in Partnership is also taken note of, it was subsequent to the transfer of consideration in the bank account of the benamidar and just before entering into the Sale Deed. The Partnership Firm was amended to make room for the bemamidar’s son. Thereby, even the third limb of definition was found available by the Adjudicating Authority. The land exists in the name of benamidar having no means to purchase the land. The facts available on record would show that all the ingredients of the definition have been made out to hold a case of benami transaction. Accordingly, we do not find any error in action of the respondents to provisionally attach the property of the appellants. The commercial transaction may also be benami in nature and merely entering into commercial transaction cannot mean that even if the transaction is benami in nature, it should be ignored. We find no error in the impugned order so as to cause interference. The appeals accordingly fail and are dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether the transactions concerning the listed immovable and movable properties fall within the definition of 'benami transaction' under Section 2(9) of the Prohibition of Benami Property Transactions Act, 1988 as amended (hereinafter 'the Act'). 2. Whether the provisional attachment of the properties by the Initiating Officer and its confirmation by the Adjudicating Authority were legally sustainable. 3. Whether allegations of loan, commercial collaboration, or partnership (including post hoc induction of a tribal partner/beneficiary) rebut the presumption of benami transaction or otherwise negate ingredients of the definition in issue (i.e., payment of consideration by another, holding for immediate/future benefit of the payer). 4. Whether the fact that the land lies in a tribal area and was therefore purchased in the name of a tribal person to comply with the state land revenue law negates the finding of a benami transaction or, conversely, supports it as a device to circumvent statutory restrictions. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Whether the transactions constitute a 'benami transaction' under Section 2(9) (A) of the Act Legal framework: The Tribunal applied the definition of 'benami transaction' under Section 2(9) of the Act as amended (Notification dated 25.10.2016), which requires (A) that consideration for a property transferred to or held by a person is provided/paid by another person; (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 earlier judicial authority or precedent was relied upon or distinguished in the reasons; the Tribunal based its conclusion on statutory language and factual matrix. Interpretation and reasoning: The Tribunal found (i) the payer (beneficial owner) transferred substantial consideration by RTGS and cash into the bank account opened in the name of the named owner (benamidar); (ii) the sale deed was executed in the benamidar's name after those transfers; and (iii) the material showed no independent means of the benamidar to acquire the property. The Tribunal treated the tripartite sequence - transfer of funds by beneficial owner into benamidar's account, purchase registered in benamidar's name, and arrangements for future benefit (partnership/amendment to involve benamidar's son and profit-sharing) - as satisfying the three limbs of the statutory definition: (a) consideration provided by another, (b) property held by the benamidar, and (c) property held for the immediate or future benefit of the person providing consideration. Ratio vs. Obiter: Ratio - the Tribunal's finding that the statutory ingredients of Section 2(9)(A) were satisfied by the proved sequence of transfers, registration in the benamidar's name, and post-transaction arrangements for the payer's benefit. Conclusion: The Tribunal held that the transactions constituted a benami transaction under the Act and that the first limb (consideration provided by another), second limb (property in benamidar's name), and third limb (future benefit to payer) were all made out on the record. Issue 2 - Validity of provisional attachment and its confirmation Legal framework: Provisional attachment is maintainable where prima facie case of benami transaction exists and the statutory definition is engaged; the Adjudicating Authority may confirm provisional attachment upon satisfaction of the material. Precedent treatment: No precedent was invoked to alter or qualify the statutory standard for provisional attachment; the Tribunal accepted the Adjudicating Authority's application of the statutory test. Interpretation and reasoning: Because the Tribunal concluded that the statutory ingredients were satisfied on the material (bank transfers from the beneficial owner into the benamidar's account, registration in benamidar's name, lack of independent means of benamidar, and subsequent arrangements evidencing benefit to the payer), it found no error in the Initiating Officer's provisional attachment or the Adjudicating Authority's confirmation. The Tribunal rejected alternative narratives unsupported by documentary proof. Ratio vs. Obiter: Ratio - confirmation of provisional attachment was warranted where statutory ingredients were prima facie established by contemporaneous banking and registration records and surrounding facts. Conclusion: The provisional attachment and its confirmation were legally sustainable; appeals against them were dismissed. Issue 3 - Sufficiency of defence based on alleged loan, commercial venture or partnership to negate benami character Legal framework: A genuine loan, collaboration agreement, or bona fide commercial transaction documented and demonstrably independent may rebut a finding of benami transaction; the statute excludes specified familial/ fiduciary exceptions but does not exempt commercial arrangements per se from scrutiny. Precedent treatment: No precedents were cited; the Tribunal applied ordinary evidentiary principles (documentary proof) and statutory interpretation. Interpretation and reasoning: The Tribunal evaluated the appellants' claims: (a) alleged loan - no loan agreement, repayment evidence, or tax/firm records evidencing loan reflected on record; (b) alleged collaboration or partnership pre-existing the transactions - no collaboration agreement or contemporaneous documented partnership contribution shown at the time of transfer; (c) induction of the benamidar's son into partnership occurred subsequent to or contemporaneous with the registration and therefore could not negate the transactional sequence that satisfied the statutory ingredients. The Tribunal held that oral assertions without documentary support failed to rebut the presumption created by the material showing transfer of consideration and registration in another's name. The Tribunal further observed that a commercial venture may be benami in nature and commercial character alone does not prevent benami characterization. Ratio vs. Obiter: Ratio - absence of contemporaneous/documentary proof of loan or a pre-existing commercial collaboration that directly financed the purchase meant those defences failed to rebut the statutory elements of benami transaction. Conclusion: Defences based on loan, commercial venture or partnership, not substantiated by documents (loan agreement, proof of firm contribution, collaboration agreement), did not negate benami character; these defences were rejected. Issue 4 - Effect of tribal-area land restrictions on characterization of transaction Legal framework: State land law restrictions (Madhya Pradesh Land Revenue Code, 1959, including Section 165(6)) may affect who may lawfully acquire tribal land; use of third-party names to comply with statutory eligibility can be relevant to determining intent and the nature of the transaction. Precedent treatment: No judicial authorities were invoked to delineate impact of statutory restrictions on benami findings; the Tribunal treated statutory restriction as contextual fact. Interpretation and reasoning: The Tribunal accepted that the land lay in a tribal area and that a non-tribal could not lawfully purchase the land; it construed the involvement of a tribal person in whose name the land was registered as a circumvention of that restriction. That circumstance, coupled with the payment trail from the beneficial owner to the benamidar's account and absence of independent means, supported the conclusion that the transaction was structured to overcome the land law restriction and to secure future benefit to the payer. The Tribunal declined to treat compliance with land law as a defence; rather, it treated the restriction as evidence of an arrangement designed to effectuate the payer's objective through a benamidar. Ratio vs. Obiter: Ratio - where land-law eligibility drove the choice of nominal purchaser and contemporaneous material shows the payer provided consideration and retained benefit, statutory land eligibility does not negate a benami finding but may corroborate circumvention intent. Conclusion: The tribal-land restriction, and registration in a tribal person's name to meet that restriction, reinforced the Tribunal's conclusion of a benami transaction rather than negated it. Cross-reference and final outcome All the above issues are interlinked: the payment trail (Issue 1) and absence of documentary proof for alternative explanations (Issue 3), read with the tribal-land context (Issue 4), supported confirmation of provisional attachment (Issue 2). The Tribunal found no error in the Adjudicating Authority's conclusion, held that the statutory ingredients of a benami transaction were satisfied, and dismissed the appeals.