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. Issues: (i) Whether the officer who issued notice under Section 24(1) and ordered provisional attachment under Section 24(3) was competent where the order was passed by an officer promoted to JCIT but discharging duties of DCIT; (ii) Whether the Amending Act, 2016 to the PBPT Act applies to transactions where transfer occurred prior to the amendment but the property was held by the benamidar subsequent to the amendment; (iii) Whether facts established a benami transaction and justified provisional attachment and treating the appellant as an interested party.Issue (i): Whether the officer who issued notice under Section 24(1) and ordered provisional attachment under Section 24(3) was competent where the order was passed by an officer promoted to JCIT but discharging duties of DCIT.Analysis: The Tribunal examined the statutory definition of 'Initiating Officer' and the powers conferred under Section 24(1) and Section 24(3) of the PBPT Act, 1988, together with Section 59 concerning directions for administration. It accepted that the officer who passed the provisional attachment order was discharging the duties of Deputy Commissioner (DCIT) pursuant to administrative directions of the Board (CBDT) and that such administrative directions relate to proper administration of the scheme rather than overriding substantive statutory provisions.Conclusion: The officer was competent to issue the notice and pass the provisional attachment order while discharging the duties of DCIT; this ground does not merit interference with the impugned order.Issue (ii): Whether the Amending Act, 2016 applies to transactions where transfer occurred prior to the amendment but the property was held by the benamidar subsequent to the amendment.Analysis: The Tribunal relied on earlier Tribunal reasoning distinguishing the words 'transfer' and 'held' in Section 2(9)(A). It explained that if a property transferred before the amendment continued to be held by the benamidar after the amendment, the amended definition captures such transactions. The Tribunal noted that the earlier Apex Court position was reconsidered and applied the interpretative approach that both the date of transfer and the subsequent holding are relevant.Conclusion: The Amending Act, 2016 applies where a property transferred prior to the amendment continued to be held by the benamidar subsequent to the amendment; the amended provisions can therefore govern such transactions.Issue (iii): Whether the facts establish a benami transaction and justify provisional attachment and treating the appellant as an interested party.Analysis: The Tribunal reviewed recorded statements and factual findings that the original purchase was effected in the name of an intermediary due to local constraints and that consideration was paid by the beneficial owner, with subsequent transfer benefitting the company controlled by the beneficial owner. It applied Section 6 regarding nullity of further transfers following benami involvement and found the appellant to be an interested party engaged in transactions forming part of the benami arrangement.Conclusion: The facts establish a benami transaction and justify provisional attachment; the appellant was correctly treated as an interested party and the impugned order requires no interference.Final Conclusion: The Tribunal dismissed the appeal, upholding the provisional attachment and the adjudicating authority's confirmation that the property was involved in a benami transaction; administrative directions permitting an officer promoted to JCIT to discharge DCIT duties do not vitiate the competency to issue notices or attach property under the PBPT Act.Ratio Decidendi: Administrative directions by the Board to have an officer promoted to JCIT discharge the duties of DCIT do not render actions taken in that capacity incompetent under Sections 24(1) and 24(3) of the PBPT Act, 1988; further, where a property transferred before the 2016 amendment continues to be held by the benamidar after the amendment, the amended definition of 'benami transaction' applies and permits provisional attachment and treatment of subsequent transferees as interested parties.