2025 (11) TMI 1046 - AT - Benami Property

Order set aside for relying on recalled precedent; property not declared benami without proof, right to seek review restored

The DCIT (BPU), Kolkata Versus M/s Anku Nivesh Niryat Pvt. Ltd. Ors.

AT held the impugned order could not stand because it relied on a previously recalled SC judgment; the tribunal found the attachment decision denying ... Validity of Impugned Order denying the confirmation of the Provisional Attachment Order u/s 24 (4) (b) (i) - Purchase of the property - bona fide commercial transaction funded entirely through the Respondent Company’s own disclosed sources, reflected in its audited balance sheets - fundamental ingredients of a 'Benami Property' u/s 2(8) - Ld. Counsel for the Respondents contended that the Appellant had failed to produce any cogent evidence proving that the property was held for the benefit of any other person. Since the Respondent Company had purchased and held the property in its own name, for its own business purposes, the fundamental ingredients of a “Benami transaction” were not satisfied, and the burden of proof, which rested with the Appellant, remained undischarged. HELD THAT:- The Hon’ble Supreme Court in UNION OF INDIA & ANR VERSUS M/S GANPATI DEALCOM PVT. LTD. [2024 (10) TMI 1120 - SC ORDER (LB)] has recalled its earlier Judgment dated 23.08.2022 and has granted liberty to the aggrieved party to seek a review where a matter has been disposed of relying upon the Judgment UNION OF INDIA & ANR. VERSUS M/S. GANPATI DEALCOM PVT. LTD. [2022 (8) TMI 1047 - SUPREME COURT] We therefore find that the Impugned Order has relied upon the Judgment dated 23.08.2022 (supra) to disallow the Reference, not to confirm the PAO dated 01.06.2023 and not to hold the impugned property as Benami. Thus, we are unable to agree with the Impugned Order and cause an intervention. ISSUES PRESENTED AND CONSIDERED 1. Whether the impugned property falls within the definition of 'Benami Property' under Section 2(8) of the Prohibition of Benami Property Transactions Act, 1988 (PBPTA), having regard to the mode, source and chronology of payments made for acquisition. 2. Whether transactions constituting the sources of payment that occurred prior to 01.11.2016 (date of Amended Act coming into force) can be brought within the purview of the Amended PBPTA or are excluded by non-retrospectivity. 3. Whether the Adjudicating Authority erred in concluding that the company was not a 'shell' or 'paper' company and that the burden of proof to establish a benami transaction was not discharged by the Initiating Authority. 4. Whether reliance by the Adjudicating Authority on a precedent later recalled by the Supreme Court warranted setting aside the Impugned Order and remanding the matter for de-novo proceedings. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Whether the impugned property is 'Benami Property' under Section 2(8) PBPTA Legal framework: Section 2(8) PBPTA defines 'Benami Property' by reference to the name in which property is held, the consideration, and the person for whose benefit the property is held; Section 24 (1)-(4) deals with show cause notice and provisional attachment; general burden on Initiating Authority to prove benami elements. Precedent treatment: The Adjudicating Authority applied established tests concerning ownership, beneficial enjoyment, source of consideration and financial capacity of the ostensible purchaser; it relied on prior higher-court reasoning (including earlier Supreme Court pronouncement) regarding temporal scope of Amended Act. Interpretation and reasoning: The Appellant's case rested on (a) asserted incongruity between company's declared financials and ability to fund the acquisition, (b) payment trail through several companies alleged to be paper/shell entities, and (c) payments being routed as share-capital/premia and inter-company transfers. The Respondent contended payments were from disclosed, audited company reserves, routed through banking channels, supported by statutory filings, and the property was acquired and used for company's own business. The Adjudicating Authority accepted that the bulk of payments (circa 90%) preceded 01.11.2016 and treated those transactions as outside the scope of the Amended Act; it further treated the single post-2016 tranche as part of a continuing transaction and did not treat it as establishing a benami transaction. Ratio vs. Obiter: The Court's determination that, on the material placed before the Adjudicating Authority, the elements of benami transaction were not established (insofar as the Adjudicating Authority relied on temporal non-applicability) is dispositive of outcome at the stage under review. However, where the Appellate Tribunal intervenes on the correctness of reliance on recalled precedent, its direction to remand for de-novo consideration is procedural-ratio for further adjudication rather than a final factual finding on benami ingredients. Conclusions: The Tribunal found that the Impugned Order's factual conclusion (no benami) flowed from reliance on inapposite temporal exclusion and therefore intervention was warranted; the Tribunal did not itself adjudicate afresh on whether the property is benami on merits but remanded for fresh determination. Issue 2 - Temporal scope: Applicability of Amended PBPTA to transactions before 01.11.2016 Legal framework: The Amended PBPTA, effective 01.11.2016, expands enforcement provisions; general constitutional principle that statutes are not retrospective unless expressly or necessarily so made; role of judicial interpretation on retroactivity. Precedent treatment (followed/distinguished/overruled): The Adjudicating Authority applied an earlier Supreme Court judgment that held the Amended Act cannot be applied retrospectively to transactions completed before 01.11.2016. Subsequently, that earlier Supreme Court judgment was recalled by the Supreme Court (order of 18.10.2024), which stipulated recall and restoration to file for fresh adjudication and granted liberty to challenge orders that relied upon the earlier decision. Interpretation and reasoning: The Tribunal observed that the Impugned Order explicitly relied upon the earlier precedent to exclude pre-2016 transactions from being considered under the Amended Act. Given the subsequent recall of that precedent, the legal foundation for excluding those pre-2016 transactions has been undermined, creating an impermissible basis for the Impugned Order's conclusion. The Tribunal therefore held that the Adjudicating Authority must reconsider the temporal categorization and its consequences in light of the recalled precedent. Ratio vs. Obiter: The Tribunal's holding that reliance on a recalled authoritative precedent vitiates the Impugned Order's reasoning is ratio in relation to the question of whether the matter requires fresh adjudication; observations about general principles of retrospectivity are explanatory. Conclusions: Transactions earlier treated as outside the scope of the Amended Act cannot be conclusively excluded without fresh adjudication; the matter must be remitted for de-novo consideration of temporal applicability and attendant consequences. Issue 3 - Sufficiency of evidence: characterization of the company as 'shell'/'paper' and burden of proof Legal framework: Under PBPTA the Initiating Authority bears the onus of establishing that a transaction is benami by demonstrating lack of beneficial ownership, sources of consideration, and beneficial enjoyment; assessment involves scrutinizing financial records, audited accounts, source of funds, and contemporaneous documents. Precedent treatment: The Adjudicating Authority assessed financial analysis indicators (revenue, profits, creditworthiness), inter-company payments, unregistered PANs, and the nature of associated companies to question the genuineness of sources. The Respondent relied on audited accounts, statutory filings, banking channel payments and declared use of the property. Interpretation and reasoning: The Tribunal did not finally assess credibility of the competing factual inferences but identified that the Adjudicating Authority's negative finding relied materially on the temporal exclusion derived from precedent rather than an exhaustive evaluation of the probative value of the financial and transactional evidence. Where the legal foundation for excluding certain transactions is displaced, the evidentiary contest about shell company character and beneficial ownership requires fresh fact-finding. Ratio vs. Obiter: The Tribunal's direction that questions of shell-company character and burden of proof be re-examined afresh is ratio to the remand decision; commentary on evidentiary indicia is obiter but practical guidance for re-adjudication. Conclusions: The issue of whether the company functioned as a conduit/shell and whether the Initiating Authority discharged the burden of proof was left open; Adjudicating Authority is directed to reassess these matters on the full evidence in de-novo proceedings without relying on the recalled precedent. Issue 4 - Whether remand for de-novo proceedings is warranted due to recalled precedent Legal framework: Where a decision rests on a precedent subsequently recalled or set aside by a higher court, fairness and proper application of law may require reconsideration of decisions that materially relied upon that precedent; appellate or supervisory authority has power to set aside and remand for fresh adjudication. Precedent treatment: The Tribunal noted the Supreme Court's order recalling its prior judgment and granting liberty to aggrieved parties to seek review where orders had relied on the earlier judgment. Interpretation and reasoning: The Impugned Order's central rationale disallowing the Reference and not confirming the PAO depended on exclusion of pre-2016 transactions pursuant to the recalled precedent. Because the legal footing for that exclusion no longer stands, the Tribunal concluded that the Adjudicating Authority should re-examine all material facts and legal questions in the light of governing law as presently extant, through de-novo proceedings. Ratio vs. Obiter: The Tribunal's setting aside of the Impugned Order and remand for de-novo proceedings is ratio and dispositive of the appeal; ancillary observations about scope of reassessment are guidance. Conclusions: The Tribunal set aside the Impugned Order and remanded the matter to the Adjudicating Authority for fresh adjudication on merits, directing de-novo proceedings to reconsider temporal applicability, source and genuineness of funds, beneficial ownership, and whether the property is benami, in light of the recall of the earlier Supreme Court judgment.