2026 (2) TMI 1352 - AT - Benami Property

Benami Transactions confirmed; provisional attachment upheld while beneficial owner identity is referred for limited reinvestigation.

Benami character of the transaction was upheld: the benamidar failed to prove sources of funds and the lease deed evidence was unreliable, so provisional ... Benami transaction - definition of benami property within the meaning of Section 2(9)(A) - Provisional attachment confirmed - sources of funds for acquiring the property - Evidence and production of documents - Adverse inference for non production of evidence - Beneficial owner - requirement of conclusive material - non- application of mind by the Adjudicating Authority - Power of Appellate Tribunal to affirm, vary or reverse under Section 46(4)(e) - If there is no beneficial owner, in the present case, then whether the property needs to released being not covered under Section 2(9)(A) of the PBPT Act, or, alternatively, the said property is covered under Section 2(9)(D) of the PBPT Act? - Evidence and production of documents - Adverse inference for non production of evidence - HELD THAT:- There is nothing on record as to when the company M/s Rajasalvam was incorporated and commenced its business and the initial office/business address at the time when it was incorporated. The appellant has also not filed her bank statement to show that she used to get monthly rent of Rs. 80,000, before she took the advance of Rs. 9,09,000/- for purchasing the impugned property vide sale deed dated 03.05.2017. Further, any person in possession of any material/evidence in his possession is duty bound to produce the same, otherwise an adverse inference can be taken against him, as per Section 103 of the Indian Evidence Act, (now Section 106 of the Bharatiya Sakshya Adhiniyam) as only the concerned persons are aware of the special and particular facts on the said aspects. This corroborates the version of the IO regarding fabrication of the lease deed, in absence of corroborative evidence and we are satisfied with the said conclusion. Moreover, it is mandatory for registration of any lease deed for period of more than 11 months as per Section17(1) Indian Registration Act, 1908. However, without going into the in-depth discussion, it is pertinent to mention here that the IO has specifically stated that so called rented property claimed by the appellant Smt. Radhamani is also one of the benami property of Mr. MK Rajendran Pillai and hence, the question of leasing the said property by the appellant does not arise. Ld. Counsel for the respondent department also pointed out that Smt. Radhamani is the benamidar of 16 properties purchased by the beneficial owner in her name, however, issue of retrospective application of PBPT Act is involved qua the said properties. We are satisfied with the contention of the Ld. Counsel for the respondent department. Hence, issues are decided against the appellant, as she has not explained the sources of funds for acquiring the impugned property; the ITRs of 5 years were filed 30.11.2017 as an afterthought strategy; original lease deed not produced; and the copy of the lease deed is a forged document, in absence of any corroborative evidence like her bank statement showing receiving the monthly rent of Rs. 80,000/-, before taking the alleged advance rent of Rs. 9,09,000/-. Benami transaction - Section 2(9)(A) of the Prohibition of Benami Property Transactions Act, 1988 - Beneficial owner - HELD THAT:- As per the investigation conducted by the IO, the beneficial owner Sh. MK Rajendran Pillai amassed the huge wealth while working as Additional Superintendent of police in State of Nagaland and after retirement, he obtained the large number of contracts through the benamidars i.e.; local naga persons in order to procure contract, as only Nagas were entitled for the same. Technically, not only Sh. MK Rajendran Pillai is the beneficial owner, but his son and his company are also joint beneficial owners in the present transaction pertaining to impugned property, as the sale consideration was tendered by the appellant through M/s Rajavalsam Motors Pvt. Ltd. Therefore, we leave this aspect to the IO for independent re- investigation and filing the limited reference on this aspect before the AA. Hence, issue regarding the beneficial owner is still open for investigation and it cannot be presumed in vacuum that there is no beneficial owner in the present case and make a wrong conclusion that Section-2(9)(A) of the PBPT Act is not attracted in any manner. Provisional attachment confirmed - Benami transaction - HELD THAT:- The transaction is fully covered under Section 2(9)(A) of the PBPT Act even though the investigation qua the actual beneficial owner is still open for removal of doubts whether Sh. MK Rajendran Pillai, his son Arun Pillai, his company M/s Rajasalvam Motors Pvt. Ltd. or all of them are beneficial owners or not. Hence, question of releasing the property at this stage does not arise. Accordingly, the citation of this Appellate Tribunal in FPA-PBPT-206/MUM/2018 are not applicable to the facts of the present case. Issue are decided accordingly in favour of Respondent department and against the appellant. Power of Appellate Tribunal to affirm, vary or reverse under Section 46(4)(e) - HELD THAT:- We are of the view that in view of Section 46(4)(e) of the PBPT Act, any modifications, variations can be done in the order passed by the AA to meet the end of justice, even in absence of any departmental appeal regarding the same. This Appellate Tribunal can certainly modify the order wrt the findings qua the beneficial owner as per clause (e) of Section 46 of the PBPT Act. But since direction for re-investigation on the aspect of beneficial owner is already given by the AA to the IO, we are not inclined to modify the impugned order on this aspect at this stage. Accordingly, the issue is decided accordingly. The present appeal filed by benamidar Smt. Radhamani is hereby dismissed being devoid of any merits. Issues: (i) Whether the benamidar Smt. Radhamani proved sources of funds for acquiring the property; (ii) Whether the lease deed dated 20.07.2012 is forged; (iii) Who is the beneficial owner of the property; (iv) If no beneficial owner is established, whether the property falls outside Section 2(9)(A) or is covered under Section 2(9)(D) of the PBPT Act; (v) Whether the finding qua the benamidar should be set aside; (vi) Whether the Appellate Tribunal can modify the Adjudicating Authority's finding on beneficial owner in absence of departmental appeal.Issue (i): Whether the benamidar proved sources of funds for acquiring the property.Analysis: The benamidar filed belated income-tax returns and did not produce original bank statements or the original lease deed evidencing receipt of monthly lease prior to the alleged advance; third party corroboration for the claimed lease receipts was absent; timing and manner of filings and documentary gaps were evaluated against documentary material in the reference and post search findings.Conclusion: Issue decided against the benamidar; she failed to prove sources of funds for acquisition.Issue (ii): Whether the lease deed dated 20.07.2012 is forged.Analysis: Material discrepancies in the copy of the lease deed, absence of the original despite specific requests, contradictory seized documents showing a different lease deed and rent amount, and lack of independent bank credits or third party evidence were considered.Conclusion: Issue decided against the benamidar; the lease deed copy is not satisfactorily substantiated and is held to be unreliable.Issue (iii): Who is the beneficial owner of the property.Analysis: Investigation material showed the sale consideration was paid from accounts linked to associates/relations of Shri M K Rajendran Pillai and M/s Rajavalsam Motors Pvt. Ltd.; the Adjudicating Authority confirmed benami nature but did not finally determine which person(s) within the group is/are the beneficial owner(s); the Tribunal assessed the sufficiency of evidence and the need for targeted further inquiry on who among the alleged persons provided consideration.Conclusion: The transaction is benami in nature under Section 2(9)(A), but the precise identity of the beneficial owner requires further investigation; the question of beneficial owner remains open for reinvestigation and a limited reference to the Adjudicating Authority.Issue (iv): Whether, if no beneficial owner is established, the property falls outside Section 2(9)(A) or under Section 2(9)(D).Analysis: Given the confirmed benami character of the transaction on available material, the issue of absence of a beneficial owner was addressed by reference to the investigative findings indicating funds originated from the beneficial owner or his associates; the Tribunal considered applicability of Section 2(9)(A) despite open questions on identity.Conclusion: Issue decided in favour of the department; the property is covered by Section 2(9)(A) and need not be released at this stage.Issue (v): Whether the finding against the benamidar should be set aside.Analysis: The Tribunal reviewed documentary gaps, timing of filings, lack of corroboration, and the Initiating Officer's material as sustained grounds for the Adjudicating Authority's conclusions on benami nature and deficiencies in the benamidar's proof.Conclusion: Issue decided against the benamidar; the Adjudicating Authority's findings confirming provisional attachment are upheld.Issue (vi): Whether the Appellate Tribunal can modify AA's finding on beneficial owner absent a departmental appeal.Analysis: The Appellate Tribunal's statutory powers under Section 46(4) of the PBPT Act permit affirming, varying or reversing AA orders and framing or referring issues for further determination; the Tribunal applied that power and considered whether modification was appropriate given a direction for further investigation.Conclusion: Issue decided in favour of the Tribunal's power to modify; however, modification is not exercised now and limited reinvestigation is directed instead.Final Conclusion: The provisional attachment is confirmed, the benami character of the transaction is upheld, the identity of the precise beneficial owner remains to be established by further investigation, and the appeal by the alleged benamidar is dismissed.Ratio Decidendi: Where consideration for property is provided by one person and the property is held by another for the immediate or future benefit, direct or indirect, of the person who provided consideration, the transaction qualifies as a benami transaction under Section 2(9)(A) of the Prohibition of Benami Property Transactions Act, 1988; provisional attachment may be confirmed while the precise identity of the beneficial owner is further investigated.