2025 (12) TMI 1268 - AT - Benami Property

Benami property purchase and continued holding after 2016 amendments-provisional attachment upheld; later transfers void under s. 6

CBDT instructions were held not to override the Benami Transactions (Prohibition) Act, 1988, as they operate administratively and the statutorily defined ... Provisional attachment - Benami transaction - Scope and ambit of provision of Section 2(9)(A) - Interpretation to the word “transfer” - retrospective and prospective application of the Amending Act of 2016 - Whether the provisions of the Act of 1988 can be controlled by the Income Tax Act of 1961 or on the instruction of CBDT. - HELD THAT:- We do not find that instructions of CBDT are offending the Act of 1988 rather the exercise of the power is in the administrative side. The Initiating Officer is defined under the Act of 1988 has been clothed with the power to cause provisional attachment of the property. The act of CBDT cannot be construed to be overriding the provisions of 1988 Act, thus, argument aforesaid cannot be accepted. We find that initially Apex Court dealt with the issue of retrospective and prospective application of the Amending Act of 2016 in the case of Union of India v/s M/s Ganpati Dealcom [2024 (10) TMI 1120 - SC ORDER (LB)] holding that Amending Act would not apply retrospectively. The judgement aforesaid has been recalled by the Apex Court vide its order [supra]. The issue was otherwise dealt with by this Tribunal by giving interpretation to the word “transfer” and also the word “held”. Therefore we are unable to accept the arguments of the appellant that if the property was transferred prior to the Amending Act of 2016, then amended provisions should not apply even if it is “held” by the benamidar subsequent to the amendment. Such an interpretation would amount to rewriting the provisions of the Amending Act of 2016 which is not permissible. We find that the initial transaction was between Mr. Babu Singh and Mr. Bidya Dhar Mallick. The reason aforesaid is coming out from the pleadings and arguments of the appellant. The purchase of the property in the name of Bidya Dhar Mallick was for the reason that it could not have been conveyed other than to a member of SC as per the prevalent local laws. After purchase of the property in the name of benamidar, the further transaction was made to the benefit of the company controlled by beneficial owner and therefore the appellant was rightly taken to be an interested party. The fact aforesaid has been analysed at length by the Adjudicating Authority. In fact, the purchase of the property by way of benami transaction is to benefit the interested party i.e. the appellant company which was controlled by the beneficial owner. The money transaction to purchase the property by the appellant company was in furtherance to the benami transaction and if the property is found to be involved in benami transaction, its further transfer is governed by Section 6 of the Act of 1988. In fact, after involvement in a benami transaction, further transfers are held to be null and void; otherwise, immediately after entering into benami transaction, the efforts of the beneficial owner and even benamidar would be to retransfer the property, which has been saved by Section 6 of the Act of 1988. Thus, we do not find any ground to cause interference in the Impugned Order. The appeal fails and is accordingly dismissed. 1. ISSUES PRESENTED AND CONSIDERED (i) Whether the provisional attachment and allied steps under Section 24 were invalid because the order was passed by an officer promoted as Joint Commissioner, although the Act contemplates action by an 'Initiating Officer' up to the level of Deputy Commissioner/Assistant Commissioner. (ii) Whether Section 2(9)(A) (as amended) could be applied where the alleged benami acquisition/transfer occurred prior to the 2016 amendment, but the property continued to be 'held' thereafter. (iii) Whether, on the admitted facts regarding payment of consideration and acquisition in another's name due to local restrictions, the transaction fell within an exception (including fiduciary capacity) so as to negate benami character; and whether subsequent transfer to a company controlled by the beneficial owner insulated the property from attachment. 2. ISSUE-WISE DETAILED ANALYSIS Issue (i): Competence of the officer issuing notice/ordering provisional attachment under Section 24 Legal framework: The Tribunal examined Section 24(1) and Section 24(3) (notice and provisional attachment) and the statutory definition of 'Initiating Officer' (Assistant Commissioner or Deputy Commissioner). It also considered the argument founded on Section 59 (Central Government directions) and the meaning of 'Board' under the Act. Interpretation and reasoning: The Tribunal found that although the concerned officer had been promoted to Joint Commissioner, he was directed by the Board to discharge the duties of the post of Deputy Commissioner and passed the attachment order while exercising the powers of that lower post. The Tribunal held that Section 59 (Central Government directions) did not govern this administrative assignment; the direction was treated as an administrative matter within the Board's competence. The Tribunal further held that such Board instructions did not 'override' the 1988 Act, because the statutory power remained that of the 'Initiating Officer' and the officer acted while discharging that role. Conclusion: The provisional attachment was not invalid on the ground of lack of jurisdiction/competence; the officer was treated as acting as an 'Initiating Officer' while discharging Deputy Commissioner functions pursuant to competent administrative directions. Issue (ii): Applicability of amended Section 2(9)(A) to pre-amendment transfer when property is 'held' post-amendment Legal framework: The Tribunal addressed the definition of 'benami transaction' under Section 2(9)(A) and specifically the significance of the words 'transfer' and 'held' as used in the provision. Interpretation and reasoning: The Tribunal held that Section 2(9)(A) must be read giving effect to both 'transfer' and 'held'. It rejected the contention that a pre-amendment transfer automatically excluded application of the amended definition even where the property continued to be held by the benamidar after the amendment. The Tribunal accepted the interpretive approach that if a property, though transferred earlier, is 'held' by the person in whose name it stands even on/after the amendment while consideration was provided by another, the transaction falls within the amended definition. The Tribunal reasoned that ignoring the word 'held' would amount to rewriting the statutory definition and defeating the object of the amendment. Conclusion: The amended definition could apply notwithstanding that the transfer occurred prior to the 2016 amendment, provided the property continued to be 'held' thereafter in the manner contemplated by Section 2(9)(A). Issue (iii): Benami character, claimed exception (fiduciary), and effect of subsequent transfer to the company Legal framework: The Tribunal evaluated the facts against Section 2(9)(A) (benami transaction) and applied Section 6 (consequences for further transfer of property involved in a benami transaction), as expressly relied upon in its reasoning. Interpretation and reasoning: On facts, the Tribunal treated it as admitted that consideration for the purchase was paid by another person while the property was acquired in the name of a different person because it could not be registered in the payer's name due to local restrictions, with an intention to later benefit the payer. The Tribunal found that the later transfer was to a company controlled by the beneficial owner, making the company an 'interested party' and the later payment/transactions as being in furtherance of the benami arrangement. The Tribunal did not accept the attempt to bring the case within an exception such as fiduciary capacity, given the stated reason for purchase in another's name and the intended benefit to the beneficial owner and the controlled company. It further held that once property is involved in a benami transaction, subsequent transfers are governed by Section 6; the Tribunal applied the principle stated in its reasoning that such transfers are null and void so that the statutory scheme is not defeated by immediate re-transfer after entering a benami arrangement. Conclusion: The transaction was treated as benami on the admitted consideration-and-name mismatch and intended benefit; the subsequent transfer to the controlled company did not cleanse the taint, and Section 6 was applied to hold that further transfers could not defeat the attachment. The order confirming provisional attachment required no interference.