TaxTMI 
TaxTMI 
TaxTMI 
2024 (1) TMI 203
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....0 & FPA-PBPT-1085/MUM/2020 These appeals have been filed under section 46 of Prohibition of Benami Property Transactions Act, 1988 (in short, the Act of 1988). It is to challenge the order dated 11.05.2020 passed by the Adjudicating Authority on a reference. The Adjudicating Authority has confirmed the Provisional Attachment Order dated 01.04.2019. By the order of provisional attachment, demat and bank accounts of two Companies, namely M/s Prism Scan Express Pvt. Ltd. and M/s Futurage Corporate Care Private Limited were attached. 2. It is stated that one of the appellants Suresh Bhageria, is a promoter and Director of M/s Bhageria Industries Limited (In short "BIL") and part of Bhageria Group of Companies. A survey was conducted under section 133 A of the Income Tax Act, 1961 on Bhageria Industries Ltd. It was alleged that there is benami purchase of shares of B.I.L. by Benamidars, M/s Prism Scan Express Pvt. Ltd. and M/s Futurage Corporate Care Private Limited. 3. It was also alleged that the financials of M/s Prism Scan Express Pvt. Ltd. and M/s Futurage Corporate Care Private Limited are not administered with the credentials of their Directors. It is also found that Directors....
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....e two companies were inducted in 2014. (iii) Thereafter, huge funds were infused in the two companies by way of share capital on huge premium. (iv) These funds were used for investments in shares, mainly of listed companies such as BIL (v) There was no evidence of conduct of business by Prism and Futurage (vi) One of the directors of Prism - Sh. Rohit Lohiya, and one of the directors of Futurage- Sh. Murarilal Gupta - work as Managers in BIL. (vii) The contact email ID in one of the bank accounts of Prism and Futurage is "[email protected]". (viii) The Headquarters of the Bhageria Group were located in the same geographical area as a bank accounts of Prism and Futurage. 8. On a show cause notice, the appellants submitted their response. The provisional attachment order was, however, confirmed and is being challenged by these appeals. Before going further into the facts, it would be relevant to refer the only issue raised by the counsel for the appellant to challenge the order of Adjudicating Authority. It was in reference to the Judgement of the Apex Court in the case of Ganpati Dealcom Private Limited Versus Union of India, 2020 SCC online SC 10....
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.... respondents. It was submitted that the benami transactions involved in the present case are not only of the period prior to 01.11.2016, (Date from which Amending Act 2016 was given effect) but are even of the period subsequent to it. 16. Elaborating the arguments, it was submitted that transfer of shares may be prior to the amendment by the Amending Act 2016, but they were held by the two companies M/s Prism Scan Express Pvt. Ltd. and M/s Futurage Corporate Care Private Limited even subsequent to the amendment. 17. In the light of the aforesaid, they were involved in the benami transactions even subsequent to the amendment. A reference of the definition of "Benami Transaction" under section 2 (9) of the Act of Amending Act of 2016 was given and is quoted hereunder:- Section 2. Definitions.- In this Act, unless the context otherwise requires,- (9) "benami transaction" means,- (A) a transaction or an arrangement- (a) where a property is transferred to, or is held by, a person, and the consideration for such property has been provided, or paid by, another person; and (b) the property is held for the immediate or future benefit, direct or indirect, of the person who has....
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....finition quoted above, the benami transaction means a transaction or an arrangement where a property is transferred to or is held by a person and the consideration of such property has been provided or paid by another person. The aforesaid definition is applicable to this case. According to the definition, "benami transaction" does not mean only transfer of property, but include even its holding by a person without payment of consideration rather it was paid or provided by another person. Since it has come on record that on the date of survey, subsequent to amendment by the Amending Act 2016 and even show cause notice, the shares were held by the appellant Companies, it would fall in the definition of "Benami Transaction" under the Amending Act of 2016. 19. The aforesaid issue was not argued by the counsel for the appellant in reference to word "held" rather they prayed for quashing of the orders in the light of the Judgement in the case of Ganpati Dealcom Private Limited (Supra). 20. The reference of paragraph nos. "69, 90, 91, 92, 93, 96, 98, 117, 120, 127, and 130" were given to support the arguments. 21. Those paras are quoted hereunder for ready reference:- 69. From the a....
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.... of construction of the 2016 Act as retroactive qua the penal provisions under Sections 3 or 53, does not arise. 96. This brings us to the last aspect as to the retroactive operation of confiscation (forfeiture) under Section 5 read with Chapter IV of the 2016 Act. It is the argument of the Union of India that civil forfeiture being in the domain of civil law is not punitive in nature. Therefore, it does not attract the prohibition contained under Article 20(1) of the Constitution. Meaning thereby, that if this Court holds that the civil forfeiture prescribed under the 2016 Act is punitive, only then will the prohibition under Article 20(1) apply. If not, then the prohibition does not apply. 98 It is well settled that the legislature has power to enact retroactive/retrospective civil legislations under the Constitution. However, Article 20(1) mandates that no law mandating a punitive provision can be enacted retrospectively. Further, a punitive provision cannot be couched as a civil provision to bypass the mandate under Article 20(1) of the Constitution which follows the settled legal principle that "what cannot be done directly, cannot be done indirectly ". 117 From the a....
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....itive, if such confiscation is allowed retroactively. Usually, when confiscation is enforced retroactively, the logical reason for accepting such an action would be that the continuation of such a property or instrument, would be dangerous for the community to be left free in circulation. InR (on the appln of the Director of the Assets Recovery Agency) v Jia Jin He and Dan Dan Chen, [2004] EWHC Admin 3021, where Collins, J. had stated thus: "52. In Mudie, at page 1254, in the judgment of Laws LJ, who gave the only reasoned judgment, there is set out the citation from Butler which reads, so far as material, as follows: "It is the applicant's contention that the forfeiture of his money in reality represented a severe criminal sanction, handed down in the absence of the procedural guarantees afforded to him under article 6 of the Convention, in particular his right to be presumed innocence [sic]. The court does not accept that view. In its opinion, the forfeiture order was a preventive measure and cannot be compared to a criminal sanction, since it was designed to take out of circulation money which was presumed to be bound up with the international trade in illicit drugs. I....
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....to reiterate the definition of "Benami Transaction." It not only refers in the transfer of property but also its holding and thereby, if somebody is holding the benami properties subsequent to the amendment, it would come in the sweep of "benami transaction". 25. If it is a case of transfer of property prior to the amendment in the definition of "Benami Transaction" and such property is not held by the benamidar as on the date of the amendment or subsequent to it, then the Amending Act of 2016 would not be applicable to such a transaction. 26. In other case, where though transfer of the property is prior to the Amending Act 2016, but it is still held by the benamidar even subsequent to the amendment, it would be a "benami transaction" under the Amending Act, 2016. 27. The clarity of the issue has been made in the light of the contest by the respondents for the first time and accordingly, we hold that the Judgement of Apex court in the case of Ganpati Dealcom Private Limited (Supra) would apply taking into consideration whether the benami transaction falling under section 2 (9) is of a period prior to the Amending Act, 2016 or it is even subsequent to it. 28. The learned counsel....
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....n favour of Companies, M/s Prism Scan Express Pvt. Ltd. and M/s Futurage Corporate Care Private Limited started after the year 2013. The fact, however, remains that those shares are still held by the appellant Companies and it was not only on the date of amendment by the Amending Act of 2016 but even at the time of survey by the Income Tax Department for the year 2018.-19. 36. The appellants were holding the shares on the date of initiation of action and it could not be disputed by the appellants. The perusal of the definition of "Benami Transaction" not only makes a reference of transfer of property to fall in the definition of "Benami Transaction" but even its holding section 2 (9) (A) of Amending Act, 2016 has two parts to consider a transaction to fall within the purview of Benami Transaction, as defined under section 2 (9) (A) of the Act. The first is about the transfer of the property to a person of which consideration was paid or provided by another person. The second part has been separated from first part by putting word "or" in between. Under the second part of definition, if the property is held by a person whose consideration has been provided or paid by another person....
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....her the aforesaid definitions can be applied to the above transaction which took place on 14.12.2011? 70. As per Section 2 (9) (A), a benami transaction would mean a transaction or an arrangement - (a) where a property is transferred to or is held by a person and the consideration for such property has been provided or paid by another person; and (b) the property is held for the immediate or future benefit, direct or indirect of the person who has provided the consideration barring the four exceptions carved out with which we may not be concerned. 71. Thus, as per Section 2 (9) (A), there must be a transaction or an arrangement; as per such transaction or arrangement, a property is transferred to or is held by a person; the consideration for such property is provided or paid by another person. Pausing here for a moment, on a comparative analysis of this definition with the definition of benami transaction under the unamended 1988 Act, we find that there is a subtle but significant difference in the later definition even at this stage itself. As per the amended definition, the property need not be transferred by 'another person'. The property can be transferred to by a....
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....e meaning of Section 2 (a) of the unamended 1988 Act. If it is a benami transaction under Section 2 (a) of the unamended 1988 Act, then it would attract the lesser penalty under Section 3(2). But if it is a benami transaction under Sections 2 (9) (A) and 2 (9) (C) of the 1988 Act as amended by the Amendment Act of 2016, then it will attract the stiffer penalty under Section 3 (3). 93. From the conspectus of the discussions made above, it is apparent that Section 2 (9) (A) and Section 2 (9) (C) are substantive provisions creating the offence of benami transaction. These two provisions are significantly and substantially wider than the definition of benami transaction under Section 2 (a) of the unamended 1988 Act. Therefore, Section 2 (9) (A) and Section 2 (9) (C) can only have effect prospectively. Central Government has notified the date of coming into force of the Amendment Act of 2016 as 01.11.2016. Therefore, these two provisions cannot be applied to a transaction which took place prior to 01.11.2016. Admittedly, in the present case, the transaction in question is dated 14.12.2011. That being the position, we have no hesitation to hold that the show cause notice dated 30.12.2....
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....of the date of transfer of the property, its holding would be a "Benami Transaction". 45. We cannot ignore the word, "held" for giving proper interpretation of the definition of "Benami Transaction". Accordingly, while we rely upon the Judgement of Hon'ble Apex Court in the case of Ganpati Dealcom Private Limited (Supra) but with clarity that if a person holds the property even after the amendment then even if transfer was prior to 01.11.2016, such a transaction would be a Benami Transaction under the Amending Act of 2016 and it would apply to such a transaction. 46. In the case of Nexus Feeds Limited & Others, the Division Bench of Telangana High Court has recorded admission of the respondents about the Benami Transactions of a period prior to the Amending Act 2016. 47. The perusal of para 71 otherwise makes it clear that if the property is transferred to any person or held by a person on behalf of any other person of which consideration was provided or paid by another, then it would fall under the definition of "Benami Transaction". The emphasis was made even in regards to the transfer of the property held immediately or for future benefit of the person who has provided the co....
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....udgement in the case of Suresh Seth (Supra) would not apply to the case. 51. The first issue is accordingly decided against the appellant and in the favour of the respondents because property was "held" even after the amendment by the Amending Act of 2016. 52. The learned counsel for the appellant has filed written arguments wherein issues have been raised even in reference to the facts of this case. The learned counsel submitted that no evidence was brought by the respondents to show any Benami Transaction in the hands of the appellant Companies and involvement of Suresh Bhageria, the other appellant. 53. It alleged that side opposite has failed to prove that the finance brought in M/s Prism Scan Express Pvt. Ltd. and also in M/s Futurage Corporate Care Private Limited was by the appellant Suresh Bhageria. 54. The respondent failed to show that the corporate capital brought in the appellant Companies, was at the instance or by Suresh Bhageria. 55. It was also stated that M/s Prism Scan Express Pvt. Ltd. and M/s Futurage Corporate Care Private Limited were not holding majority share of BIL, rather it was only 4% to 5% of the total share of the B.I.L. It is also that they purch....
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....oved by the respondent. The findings have been recorded based on inferences. The Initiating Officer based on his own imagination found that the benamidar Companies were working at the behest of Shri Suresh Bhageria, promoter of M/s B.I.L. 63. We find that aforesaid factual aspects were considered by the Adjudicating Authority. It was found that the two appellant companies, namely, Prism Scan Express Pvt. Ltd. and M/s Futurage Corporate Care Pvt. Ltd. were not having any funds till 2013-14 and after the companies were acquired, funds have been infused for making investments in financial year 2014-15. The sources of funds in both companies are by way of share capital on high premium. The same was infused by paper companies which were not having any business activity. The Directors of the two appellants were the employees of M/s B.I.L. According to the appellant, finance in the companies was induced after the year 2013-14 but failed to show the source for it. 64. The statements of the Directors of the two companies namely Rohit Vinod Lohiya and Sapna Lohiya were recorded. They had no knowledge of the business activities of the appellant Company and admitted that no benefit from the ....
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....ade Private Limited was also recorded. She was the housewife and having no income. 70. The statement of Rakesh Bhageria, the Sales Head of Bhageria Industries Ltd were also recorded. He did not comment on the statements of Director of M/s Prism Scan Express Pvt. Ltd. and M/s Futurage Corporate Care Private Limited. The same was the position of Suresh Bhageria. Thus, in their statements recorded during the survey, the Directors of the two appellant companies and other connected persons admitted that they were working on the instructions of Shri Suresh Bhageria. The another connecting material was the email I.D. having name of Bhageria Industries though M/s Prism Scan Express Pvt. Ltd. and M/s Futurage Corporate Care Private Limited were shown to be the separate Companies. 71. The Companies were shown to have offices at the residences. The Adjudicating Authority recorded certain facts to show brief financial profiling of Benamidar Companies and following common features were found which are as under :- Both companies are managed and controlled by Shri Suresh Bhageria. Both benamidar companies have directors who are employees of beneficial (employee of Mr. Suresh Bh....
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....her premium. M/s Futurage Corporate Care Private Limited has shown wholesale business but had no activity of purchase and sale for wholesale to carry out the activities. No expenses were shown to have incurred towards salaries/wages, payment of indirect taxes, electricity, rent etc. They were mere paper companies. 75. The clear conclusion from the survey and subsequent investigation was that control over the two appellant companies was acquired in the year 2014-15 and finances were infused into the companies at the instance of Shri Suresh Bhageria for the purpose of engaging in benami transactions in the shares of B.I.L. and other group companies of the Bhageria group. In fact, the two companies had no activity other than investment in B.I.L. and other Bhageria group companies. 76. In view of the above, we do not find the respondent failed to prove Benami transaction as per the provision of PBPT Act. 77. The counsel for the appellant further submitted that inducement of finances in the two Appellant Company could not have been questioned once they were assessed by the Income Tax Department. The Corporate shareholding and share premium on a higher rate was disclosed in the Income....
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....he inducement of funds was itself through Benami Transactions, otherwise Corporate Share would not have been given on higher premium of a Company having no business activity. The money induced therein was used to purchase shares of BIL and other Companies. 84. In the light of the aforesaid, we are unable to accept the argument of the appellant that the inferences have been drawn on extraneous consideration. 85. The another argument pressed while referring to the written arguments was as to whether proceedings could have been initiated for alleged Benami transaction under two sub section (A) and ( C) of Section 2(9) of the Act of 2016. The argument was even that section 2 (9) (A) (C ) are in conflict with each other and therefore entire action became illegal. The argument has been raised without going through the provision and the facts available on the record. Section 2 (9) (A) (a) was attracted in view of holding of shares as on the date of amendment by the Amending Act of 2016 and even subsequent to it and so far as section 2 (9) (C ) is concerned, it would be attracted when the transaction or arrangement in respect of the property is denied by the owner of the property or he d....