2026 (2) TMI 1292 - AT - Benami Property

Fiduciary exception rejected; provisional attachment under benami law affirmed where transfers were one way unaccounted accommodation entries.

Tribunal reviewed whether transfers qualified as benami and whether the fiduciary exception under Section 2(9)(A) applied; it found the intermediary ... Benami transaction - provisional attachment - accommodation entries - fiduciary capacity under the exception to benami - source of funds - conflicting statements recorded u/s 131 - demonetization-linked routing of cash - credit worthiness and bank account analysis - HELD THAT:- The transaction was one way where the appellant received a huge sum of Rs. 67,50,000/- and there is no element of repayment if it was received in fiduciary capacity hence even the second ground raised by the appellant is not made out. In the instant case, the parties failed to disclose the source for its deposit in the bank account of M/s Veer Trading & Co., rather it was found that demonetized money was deposited at the instance of the appellant to get it monetized. The transaction for illicit purpose cannot be endorsed or be allowed to be taken out of the benami transaction. The Adjudicating Authority rightly recorded finding that the transaction does not involve it to be in fiduciary capacity and looking to the modus operandi, it was rightly taken to be a transaction, benami in nature. It is more so when no source of purchase or sale transaction of gold and silver could be disclosed. The IO could gather evidence that M/s Veer Trading & Co. was not involved in actual business but was providing accommodation entries and it is with further analysis of the Income Tax Return of both the firms, namely, M/s Veer Trading & Co. and M/s Shiva Jewellers. The total income of M/s Veer Trading & Co. during the relevant years was between Rs. 3,89,146/- to Rs. 5,82,544/- other than in one year, it was Rs. 9,55,059/-. The analysis aforesaid was made for the six assessment years starting from 2016 till 2021. The IO did not find credit worthiness of M/s Veer Trading & Co. to deposit cash amount of Rs. 1,47,05,630/-and then to transfer Rs. 67,50,000/- to the appellant. The income tax returns of the appellant were also analyzed. The income was raising from Rs. 2,85,500/- to Rs. 7,43,353/- between the period of six years other than in the year 2018, it was having income of Rs. 9,93,585/-. This was sufficient to show that the firm was not having credit worthiness for deposit of unaccounted cash of Rs. 1,47,05,630/- and, therefore, the Adjudicating Authority found no reason to cause interference in the impugned order. It was more so when the statements of two parties were found to be in conflict. Thus, we find no reason to cause interference in the order. Accordingly, appeal fails and is dismissed. Issues: (i) Whether the Adjudicating Authority was justified in confirming the provisional attachment under Section 24(1) of the Prohibition of Benami Property Transactions Act, 1988 by treating the impugned transfers as benami transactions and rejecting the claim of fiduciary capacity under Section 2(9)(A) of the Act.Analysis: The factual matrix shows large cash deposits in the bank account of an intermediary followed by a transfer of Rs. 67,50,000 to the appellant. The source of the deposited cash was not disclosed. The intermediary's business turnover and income-tax returns were not consistent with the capacity to deposit the said cash. Documentary evidence relied on by the appellant (invoices, TIN) was disowned by the intermediary and signatures and documents were found to be not reliable. The statements of the two proprietors were materially inconsistent. The Tribunal evaluated whether the transactions fell within the fiduciary exception under Section 2(9)(A) and concluded that no material established a two-way fiduciary arrangement or repayment obligation; the transfers were one-way and unaccounted for, matching the modus operandi of accommodation entries and monetisation of demonetised currency.Conclusion: The Adjudicating Authority's confirmation of the provisional attachment under Section 24(1) of the Prohibition of Benami Property Transactions Act, 1988 is affirmed and the appeal is dismissed.