2026 (1) TMI 735 - AT - Benami Property

Validity of s.24(1) show-cause notice with written reasons; notice valid, appellant failed to prove seized cash ownership

Dominant issue: Whether the show-cause notice under s.24(1) was validly issued with 'reasons to believe.' The tribunal held that s.24(1) does not mandate ... Provisional attachment - Validity of show cause notice u/s 24(1), issued by the Initiating Officer without independent application of mind and satisfaction - “reasons to believe” - mandate under section 24(1) - recorded prior to the issuance of the notice - Burden of proof as to ownership - failed to establish either the ownership or the source of the entire cash - reason to believe - survey under section 133A of the Income Tax Act, 1961 - HELD THAT:- The examination of the show cause notice under section 24(1) of the Act of 1988 reveals that “reasons to believe” were duly recorded in writing and were conveyed to the appellant. The reasons were framed prior to the issuance of the notice and were thereafter incorporated in the notice. 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. There is no mandate under section 24(1) to separately record reasons to believe rather it has to be given in the notice. Thus, it cannot be said that reasons to believe were not recorded by the IO rather it was conveyed to the appellant even though there is no mandate for it under section 24(1) of the Act. Even before the CIT(A), the appellant did not come forward with a clear and consistent explanation regarding the ownership of the cash, which is the central requirement under the PBPT Act. It is also pertinent to note that the appellant has failed to furnish conclusive evidence regarding the ownership of the cash allegedly belonging to third parties and cash in hand. The explanations furnished were limited to incomplete names, Aadhaar cards, mobile numbers, and temporary handwritten chits prepared by its employees, which do not constitute reliable or legally admissible proof of ownership. No books of account was shown to establish cash in hand. No explanation whatsoever has been furnished in respect of Rs. 1,00,000/- claimed to be belonging to Shri Vinod Atmaram Kambli. The appellant has merely referred to an entry without providing any supporting material or justification to establish ownership of the said amount. The appellant failed to disclose the name of the aforesaid persons when he was asked to disclose where about of the customers with address. It was thus taken to be an after-thought. It is evident that the appellant has failed to establish cogent and credible evidence, the real ownership of the cash found during the search. Mere partial relief granted under the Income Tax Act does not absolve the appellant from discharging the burden cast upon it under the PBPT Act. The explanations offered are inconsistent, unsupported, and unreliable. Taking the overall facts into consideration, we do not find any merit in the case so as to cause interference in the impugned order. Issues: Whether the order passed under section 26(3) of the Prohibition of Benami Property Transactions Act, 1988 treating M/s P. Maganlal & Sons as benamidar and provisionally attaching Rs. 13,00,400/- was valid and whether the appeal against that order merits interference.Analysis: The Initiating Officer recorded reasons in writing and issued a show cause notice under section 24(1) based on materials gathered during search and investigation, including seizure of cash and statements; the notice incorporated the reasons. The respondent demonstrated that the appellant did not maintain regular books of account, failed to produce reliable documentary evidence identifying owners of the seized cash, and could not substantiate claims of third-party ownership which were supported only by incomplete particulars and handwritten chits. The relevance of the CIT(A) and ITAT findings under the Income-tax Act was considered but distinguished on the ground that income-tax proceedings and PBPT Act proceedings address different statutory questions; a favourable or partial finding under the Income-tax Act does not automatically negate the requirements under the PBPT Act. The record showed absence of required records and unreliable claimant evidence, and the Initiating Officer's notice and satisfaction were found to be based on material and an independent application of mind.Conclusion: The order under the Prohibition of Benami Property Transactions Act, 1988 treating the appellant as benamidar and provisionally attaching Rs. 13,00,400/- is valid; the appeal is dismissed and the decision is against the appellant.