TaxTMI 
TaxTMI 
2021 (10) TMI 343
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....the facts of the case as has come on record in brief. 2.1 The petitioner No.1-company M/s. Shri Kalyan Buildmart Pvt. Ltd. was incorporated with two shareholders and Directors - Madan Mohan Gupta and Shashikala Gupta on 21.08.2006. The agricultural land comprising Khasra Nos.406/148, 141/1 and 142 situated at Village Chainpura, Tehsil Sanganer, District Jaipur ad- measuring 0.99 hectares was purchased by the company in its name by executing four identical registered sale deeds. 2.2 A reference was received from the Assistant Commissioner of Income Tax, Central Circle-1, Jaipur on 15.09.2017 with relation to information regarding Benami property transaction in the case of Rajendra Kumar Jain and others. The necessary enquiries were initiated under Section 23 of the Benami Act, 1988 with reference to the aforesaid land and the IO has stated that a search under Section 132 of the Income Tax Act, 1961 was carried out on Rajendra Jain/Rajendra Bardiya group on 23.05.2013. During the course of search at the residence of one Madan Mohan Gupta, the incriminating documents including a pocket diary were seized. In the aforesaid diary, details of transactions relating to land located near Ent....
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....and therefore was liable for confiscation under the Benami Act, 1988. 2.5 It was further submitted that subsequently shares of the company were transferred by Madan Mohan Gupta and Shashikala Gupta to petitioner Nos.2 to 4 which reflected that the property by the company was benami and was actually bought by petitioner nos.2 to 4. 3. Learned counsel for the petitioners submitted that the company purchased the land in its name while the Directors of the company at that time were Madan Mohan Gupta and Shashikala Gupta, who obtained loan from one Rajendra Kumar Jain for the purpose of purchase of the agricultural land in 2006. The shares of the company were transferred to the petitioner Nos.2 to 4, who purchased their shares in 2008. 4. The proceedings under Section 90B of the Rajasthan Land Revenue Act, 1956 were undertaken and the Authorised Officer passed an order under Section 90B on 04.04.2007 whereby the land was vested with the JDA. The company further purchased an agricultural land comprising Khasra Nos.403/148 and 404/148 ad- measuring 0.58 hectares. For this land also, the recommendation for conversion of land from agricultural to commercial purposes was made on 05.11.200....
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....Mohan Gupta under the Income Tax Act, it is apparent that the money used for purchasing property was of Navrattan Kothari and Vimal Chand Surana and the property was thus a benami property and the said persons were the beneficiaries. The respondents further submitted that the attachment has been done in order to protect the part of property being alienated and the department does not propose to confiscate or auction the property. Thereafter, the case was heard finally. 9. Learned counsel for the petitioners submits that the impugned orders holding the petitioner-company No.1 is 'benamidar' and the petitioner Nos.2 to 4 as 'beneficial owners', on the ground that they are shareholders of petitioner No.1-company, are wholly erroneous. It is submitted that the company has its own separate identification in law as a juristic person and the relation between the shareholders and the company cannot be said to be benamidar and beneficial owners as shareholders. It is stated that the company has throughout owned the property and mere change of shareholding would not make the property of the company as 'benami'. Learned counsel submits that the entire premise of the c....
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....ttached property is a benami property. 14. Learned counsel further submitted that there is an inordinate delay of 10 years for issuing show cause notice under Section 24(1) of the Benami Act, 1988 and the proceedings suffer from laches and delay and are outside the purview of reasonability. 15. Learned counsel relied on the judgments in the cases of Joint Collector Ranga Reddy District Vs. D. Narsing Rao reported in 2015 (3) SCC 695, Nedungadi Bank Ltd Vs. K.P. Madha Vankutty reported in 2000 (2) SCC 455, U.P.S.R.T.C. Vs. Ram Singh reported in 2008 (17) SCC 627, Santoshkumar Shivgonda Patil Vs. Balasaheb Tukaram Shevale reported in 2009 (9) SCC 352, Mohamad Kavi Mohamad Amin Vs. Fatmabai Ibrahim reported in 1997 (6) SCC 71 and in State of Gujarat Vs. Patil Raghav Natha reported in 1969 (2) SCC 187. 16. Learned counsel submitted that the orders have been passed without giving any opportunity of hearing to the petitioner-company. It is stated that the respondents issued provisional attachment orders on 23.10.2017 to which preliminary objections were raised by the petitioner No.1-company and the documents were sought for by the petitioner-company vide their letters dated 02.11.2017....
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....d not have a retrospective effect. 21. Learned counsel appearing for the respondent/s also submitted written statements and stated that two plots of land were adjacent to each other, one of them was owned by a company called 'Paradise Complex Ltd." in which the petitioner Nos.2, 3 and 4 were shareholders. Another plot was owned by native farmers which the petitioners wanted to buy so that these plots of land can be combined into a large land and combined patta can be obtained from JDA. So, the petitioners took help of one Rajendra Jain to execute the entire transaction through company - M/s. Kalyan Buildmart Pvt. Ltd. through its dummy Directors namely, Madan Mohan Gupta and Shashikala Gupta as have been mentioned and noticed above. 22. Learned counsel further submitted that 'benami transaction' would include such a transaction and the property can be treated as benami property while the company would be termed as 'benamidar' and the petitioner nos.2 to 4 are beneficial owners. It is submitted that consideration was made by Rajendra Jain for the benefit and on behalf of Vimal Chand Surana and Navrattan Kothari and Kushal Chand Surana while the property was acq....
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....roperty is held for his benefit or benefit of other members in the family and the consideration for such property has been provided or paid out of the known sources of the Hindu undivided family; (ii) a person standing in a fiduciary capacity for the benefit of another person towards whom he stands in such capacity and includes a trustee, executor, partner, director of a company, a depository or a participant as an agent of a depository under the Depositories Act, 1996 (22 of 1996) and any other person as may be notified by the Central Government for this purpose; (iii) any person being an individual in the name of his spouse or in the name of any child of such individual and the consideration for such property has been provided or paid out of the known sources of the individual; (iv) any person in the name of his brother or sister or lineal ascendant or descendant, where the names of brother or sister or lineal ascendant or descendant and the individual appear as joint- owners in any document, and the consideration for such property has been provided or paid out of the known sources of the individual; or (B) a transaction or an arrangement in respect of a property carried....
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....24. Notice and attachment of property involved in benami transaction (1) Where the Initiating Officer, on the basis of material in his possession, has reason to believe that any person is a benamidar in respect of a property, he may, after recording reasons in writing, issue a notice to the person to show cause within such time as may be specified in the notice why the property should not be treated as benami property. (2) Where a notice under sub-section (1) specifies any property as being held by a benamidar referred to in that sub-section, a copy of the notice shall also be issued to the beneficial owner if his identity is known. (3) Where the Initiating Officer is of the opinion that the person in possession of the property held benami may alienate the property during the period specified in the notice, he may, with the previous approval of the Approving Authority, by order in writing, attach provisionally the property in the manner as may be prescribed, for a period not exceeding ninety days from the date of issue of notice under sub-section (1). (4) The Initiating Officer, after making such inquires and calling for such reports or evidence as he deems fit and taking in....
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....the Benami Act, 1988 and brought into force w.e.f. 01.11.2016 is left open to be adjudicated only by the Supreme Court. Suffice it to notice that in some of the judgments i.e. Mangathai Ammal (supra) and Joseph Isharat (supra), the Supreme Court has observed benami transactions not to be applicable retrospectively. However, as SLP No.2784/2020, Union of India & Anr. Vs. M/s. Ganpati Dealcom Pvt. Ltd. is pending wherein the order of High Court has been stayed, this Court would refrain from making any observation with regard to applicability of the Act retrospectively or prospectively. 31. This Court would therefore only limit its adjudication to the facts of the present case and examine whether the transaction can be said to be benami transaction under the provisions of the Benami Act, 1988. 32. The first aspect is whether the company incorporated under the Companies Act and holding any property in its name can be said to be a benamidar on the basis that funds which were taken by the Directors and invested in the company by way of shareholders which have been utilised for purchasing of the property of the company can be treated as a benami transaction and shareholders to be the ac....
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....his name while the real title vests in another person who actually purchased the property and he is the beneficial owner essentially as mentioned in the introduction. It used to evade law of perpetuity because of parda system, to avoid annoyance, Zamindar's desire to avoid indignity and legal disability, mysterious desire etc. Such benami transactions abused and defrauded public revenues and creditors. 37. The Parliament for the first time intervened in 1976 when it introduced section 281A in the Income Tax Act, 1961 barring the institution of suit in relation to benami transactions. But this too did not stop benami transactions and made it an offence also, prohibiting all suits, claims and actions based upon benami transaction. The Parliament also in order to stop the abuse and fraud by the benami transaction property without compensation repealed section 82 of Indian Trusts Act and section 281A of the Income Tax Act alongwith other consequential repeal. The Law Commission was requested to examine the subject on benami transactions in all its ramifications. The Law Commission submitted its Fifty-seventh Report. To implement the recommendations of Fifty-seventh Report of the L....
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....amidar and its shareholders cannot be said to be beneficial owners within the meaning of the Benami Act, 1988. 41. The entire fulcrum of this case, therefore, rests on misinterpretation of the provisions of the Benami Act, 1988. All the transactions in the corporate world made by the company would become benami transaction if the interpretation of definition as understood by the respondents is accepted by this Court. In view of the aforesaid, the entire proceedings initiated under the Benami Act, 1988 deserve to be quashed and set aside. 42. This Court also finds that that the proceedings initiated after 10 years of the said purchase made in 2007 are highly belated. Ordinarily, any proceeding relating to benami transactions ought to be taken up immediately or atleast within reasonable period of limitation of three years as generally provided under the Limitation Act, 1963. 43. The proceedings initiated under the Benami Act, 1988 are found to be based on income tax proceedings initiated and the statement recorded of one Madan Mohan Gupta. As per record, it is noticed that statement of Madan Mohan Gupta has not been accepted by the Income Tax Authorities for initiating any proceed....