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 Initiating Officer retains independent power to order provisional attachment; the challenge on this ground was rejected. On the 2016 amendments, the Tribunal held that even if the initial transfer pre-dated the amendment, amended provisions apply where the property continued to be "held" by a benamidar after commencement; the contrary construction would impermissibly rewrite the statute, so the retrospective/prospective objection failed. On facts, the property was found to have been acquired benami for the benefit of an interested party, and any subsequent transfer was void under s. 6; the appeal was dismissed.

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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.

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