2025 (12) TMI 1686 - AT - Benami Property

Demonetization cash deposits and RTGS transfers alleged as benami property; s.24(1) 'reasons to believe' upheld, appeal dismissed.

The dominant issue was whether the provisional attachment and s.24(1) show-cause notice were invalid for want of prior recording and disclosure of ... Benami transactions - Provisional attachment - conversion of demonetized money - survey conducted u/s 133A - Cash received from different middlemen/beneficiaries and after depositing, transferred through RTGS to the beneficiaries - requirement of recording 'reasons to believe' - ignorance of the notice to show cause under section 24(1) - HELD THAT:- The allegation is that the “reasons to believe” has to be recorded prior to the issuance of the notice, as only after recording “reasons to believe” a notice can be issued. We find that the reasons were recorded in writing and therefore they were incorporated in the show cause notice. There is no mandate to send a separate copy of reasons to believe. The reasons to believe have been disclosed in the show cause notice which shows that required exercise was undertaken and for that the IO had carefully analyzed the statement recorded apart from the bank statements. It is after analyzing the aforesaid, the show cause notice was issued. Thus, it cannot be said that reasons to believe were not recorded by the IO and was conveyed to the appellant even though there is no mandate for it under section 24(1) of the Act. The receipt of the money in the bank account of the appellant was again a clinching evidence to show a case of benami transaction, particularly when it was the time of demonetization of money and therefore it was not accepted in general as a valid tender after the expiry of the period and thereby to circulate the money, appellant along with Angadia and the benamidar got involved in benami transaction. The justification for receipt has been given by the appellant out of the earth-filling work but failed to substantiate the fact aforesaid and thereby the appellant could not support the receipt in its bank account. Thus, we do not find any merit in the case so as to cause interference in the impugned order. Appeal, accordingly fails and is dismissed. Issues: (i) Whether the Initiating Officer complied with the requirement to record 'reasons to believe' in writing before issuing notice under section 24(1) of the Prohibition of Benami Property Transactions Act, 1988; (ii) Whether the notice and provisional attachment were invalid because they were based on material borrowed from the Income Tax Department without independent application of mind by the Initiating Officer; (iii) Whether the appellant's explanation that receipt of Rs.50 lakhs was consideration for earth-filling work, paid by RTGS, rebutted the finding of a benami transaction; (iv) Whether there was insufficient evidence to link the appellant to the source and deposit of cash into the benami account so as to invalidate the provisional attachment.Issue (i): Whether the Initiating Officer complied with the requirement to record 'reasons to believe' in writing before issuance of notice under section 24(1).Analysis: The show cause notice itself incorporated written reasons describing the material analyzed (statements and bank records) and set out the basis for the belief that the transactions constituted benami transfers. The record shows reasons were framed prior to issuance and were disclosed in the notice; there is no statutory mandate requiring a separate communication of reasons apart from the notice.Conclusion: In favour of Respondent.Issue (ii): Whether initiation was invalid because it relied on material supplied by the Income Tax Department without independent application of mind by the Initiating Officer.Analysis: The notice contained specific paras wherein the Initiating Officer recorded examination of the available material, including sworn statements and bank statements, and articulated his own analysis and reasons. The material from the Income Tax Department was considered but the record demonstrates application of mind by the Initiating Officer rather than mere adoption of borrowed material.Conclusion: In favour of Respondent.Issue (iii): Whether the appellant's plea that Rs.50 lakhs was paid for earth-filling work and received by RTGS sufficed to rebut the benami finding.Analysis: The appellant failed to produce contract documents, identify the payer firm, or provide corroborative evidence of the claimed transaction. The explanation was unsupported by documentary proof and contradicted by surrounding facts including the context of demonetization and the pattern of deposits.Conclusion: In favour of Respondent.Issue (iv): Whether there was insufficient evidence to link the appellant to the source and deposit of cash so as to invalidate the provisional attachment.Analysis: Statements recorded under the Act and section 131 of the Income-tax Act, bank records showing transfer from the benami account to the appellant's account, and the absence of inquiry by the appellant as to source constituted evidentiary links. The Tribunal found these materials sufficient to establish transmission of funds and the appellant's involvement.Conclusion: In favour of Respondent.Final Conclusion: The substantive challenges to the provisional attachment and reference under the Prohibition of Benami Property Transactions Act, 1988 are without merit and the impugned order confirming provisional attachment is upheld.Ratio Decidendi: Disclosure of written 'reasons to believe' within the show cause notice satisfies section 24(1) where the Initiating Officer independently records analysis of available material; proving a benami transaction can rest on contemporaneous sworn statements and bank records which, absent credible documentary rebuttal, justify provisional attachment and referral to the Adjudicating Authority.