TaxTMI 
TaxTMI 
2025 (11) TMI 1743
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....operty Transactions Act, 1988 as amended by the Finance Act 2021 (in short 'the Benami Act'). 2. This petition has been filed with the following prayer(s): "1. Issue a writ of CERTIORARI or any other appropriate writ, order or direction quashing the Impugned Show Cause Notice u/s 24(1) vide dated 21.03.2025, impugned Provisional Attachment Order u/s 24(3) dated 21.03.2025, and impugned Provisional Attachment Order u/s 24(4)(a)(i) dated 30.07.2025 and the consequent Notice u/s 26(1) dated 29.08.2025 of the Prohibition Of Benami Property Transactions Act, 1988, and other Consequential proceedings; 2. Issue a writ of CERTIORARI or any other appropriate writ, order or direction to defreeze all the bank accounts of the Petitioner in the interest of Justice attached/frozen by the Respondent No. 1; 3. Issue a writ of Prohibition or any other appropriate writ, order or direction to prohibit/retraining the Adjudicating authority and any other authority to initiate further proceedings u/s 26(1) dated 29.08.2025, of the Prohibition Of Benami Property Transactions Act, 1988, or to initiate any consequential proceedings; and 4. Rule NISI in terms of prayer....
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....ash. The Excel sheet titled "Bogus Expenses Employee-Wise" discovered in a pen drive also listed "Shyamsundar Choudhary", receiving bogus payments from FY18-19 till FY 22-23. 7. During post-search investigation, on analysis of the cloned data excel sheets titled as 'Bogus Expense Employee-wise', a delineated party-wise breakdown of transactions was found linked to bogus expenses under categories such as 'Marketing Expenses,' 'Business Promotion Expenses', 'Services,' and 'Bonus/Commission'. The evidence corroborated the statements given by Directors and employees of the company. The excel sheet contained a list of parties which were arranged by various employees. The contents of excel sheet are reproduced here: Party Name Amount (In Rs.) FY Sone Enterprise 2,15,59,765.00 2022-23 Sone Enterprise 1,18,22,103.00 2021-22 Sone Enterprise 52,65,674.00 2020-21 Devendra Enterprises 2,15,22,546.00 2022-23 Devendra Enterprises 1,23,47,799.00 2021-22 Devendra Enterprises 72,69,434.00 2020-21 Golden Ent 30,09,944.00 2022-23 Haryana Traders 31,51,563.00 2021-22 NK Traders 18,88,732.00 20....
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....f the view that concerned parties including the petitioner were Benamidars of bogus transactions by VPML and consequently issued impugned Show Cause Notice to them. The Show Cause Notice called upon the petitioner to explain as to why said property should not be treated as Benami Property and action should not be taken against him. Relevant portion of Show Cause Notice is extracted as under: 6. Accordingly, on the basis of the material in possession and discussion above, I have reasons to believe that M/s Devendra Enterprises, M/s Shyam Sundar, M/s August Financial Services Pvt. Ltd., M/s Designbea Infrastructures, M/s Garv Enterprises, M/s Star Infra Design Private Ltd., M/s Axiom Landbase Pvt. Ltd., M/s Chawla Enterprise, M/s Gurunanak Marketing, M/s Mesh Education Pvt. Ltd., M/s Bencher Enterprises, M/s Kumar Enterprises, M/s Humble Service are Benamidar(s) within the meaning of section 2(10) of the PBPT Act. Payment made to the bank accounts of Benamidars for the bogus services/expenses amounting to Rs. 84,25,41,217/- is Benami property u/s 2(8) of the PBPT Act, and the Beneficial Owner(s) u/s 2(12) of the PBPT Act are M/s Vestige Marketing Pvt. Ltd., Sh. Gautam Bali, ....
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....000 (FY 2021-22) Rs. 16,40,000 (FY 2020-21) Rs. 16,40,000 (FY 2019-20), and Rs. 16,40,000(FY 2018-19) in an Excel sheet titled "Bogus Expense Employee-wise," indicating these were fictitious transactions. ii. Further, the Show Cause Notice records Sh. Kanwar Bir Singh's admission under oath u/s 132(4) of the Income-tax Act, 1961, on 21/09/2023, that VMPL claimed expenses for bogus services, directly contradicting the claim of genuine transactions. Sh. Gautam Bali, another promoter, corroborated this, admitting that promoters, including himself, received cash from vendors, including Shyam Air Courier, in lieu of payments for bogus expenses. Sh. Deepak Sood admitted to receiving unaccounted cash of Rs. 57 to 63 Crores from FY 2013-14 to FY 2020-21 through bogus billing, implicating vendors like Shyam Air Courier. Sh. Deepak Choudhury, VMPL's CA/Auditor, admitted under oath to arranging bogus bills through vendors, including Shyam Air Courier, to generate cash after a 2-3% commission, further contradicting the claim of legitimate services. iii. The Show Cause Notice details the modus operandi where VMPL paid vendors like Shyam Air Courier via cheque/RTGS, receiving c....
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.... Officer passed an order attaching four bank accounts of the petitioner. Thereafter he drew up a statement of the case and referred it to the Adjudicating Authority. 13. On 29.08.2025, the Adjudicating Authority issued a notice under Section 26 to the Petitioner, to which an adjournment letter was moved by the petitioner and instead of contesting the matter there, they filed the present writ petition. CONTENTIONS OF THE PETITIONER 14. Mr. Nitin Kanwar, learned counsel appearing on behalf of the petitioner, while denying all the allegations of bogus or fraudulent transaction raised in the Show Cause Notice, submits that all the transactions with VMPL are genuine and against the services supplied by him by way of transportations/ courier services. 15. In response to the Excel sheets recovered during the search of premises of VMPL, Mr. Kanwar submits that, as per the contents of Excel Sheets, the payment was made to one Mr. Shyam Sunder Choudhary, whereas his client's name is Mr. Shyam Sunder Sharma and his business/ trade name is M/s Shyam Air Courier, not M/s Shyam Sunder. 16. Further he submits that the transaction between his client and VMPL were not for the amounts....
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.... on which the Initiating Officer has relied cannot be termed as evidence without compliance of certificate under section 65B of the Indian Evidence Act,1872. To contend this, he relied upon the judgment dated 28.01.2025 of Supreme Court in Chandrabhan Sudam Sanap Versus The State Of Maharashtra Criminal Appeal No. 879 Of 2019. 21. Further, it is argued that before issuing Show Cause Notice, no hearing was given to petitioner nor he was afforded opportunity to cross-examine witnesses. In nutshell, it is argued that there is no material to connect the petitioner to the Benami transaction, and the IO had no material before him and had no reason to believe that the Petitioner held the property as Benamidar. CONTENTIONS ON BEHALF OF RESPONDENTS 22. Learned Senior Standing Counsel, Mr. Shlok Chandra, appearing on behalf of the Revenue, submits that VMPL operates a direct-selling, multi-level marketing structure in which distributor payouts primarily depend on enrolments, resulting in substantial expenditure towards commissions. Pursuant to a search under Section 132 of the Income Tax Act 1961 on 20.09.2023, conducted on the VMPL Group, its directors, and auditor, incriminating m....
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....enamidar. ANALYSIS AND CONCLUSION 28. First we would like to reproduce Section 24 of the Benami Act as under: "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-....
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.....] 29. Perusal of the above Section would show that for the purpose of issuing Show Cause Notice to a person under Section 24(1) of the Benami Act, following are the preconditions: (1) There should be material in the possession of Initiating Officer indicating Benami transactions; (2) On the basis of such material, the Initiating Officer must have reasons to believe that any person is a Benamidar in respect of a property. 30. If above preconditions are fulfilled, the Initiating Officer is required to record reasons in writing for issuing a show cause notice under Section 24(1) of the Benami Act. 31. Whenever a notice issued by Initiating Officer under Section 24(1) of the Benami Act is challenged, the Court will direct its attention to the material in possession of the Initiating Officer. This would be an objective inquiry and Court can ask as to what is the material in possession of the Initiating Officer. However, while entering into this inquiry, the Court would not go into the question of sufficiency or quality of the material in possession of the Initiating Officer. 32. In the present case, the Initiating Officer was having in his possession Excel....
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....the Benami Act than the belief under BNS and BNSS (earlier IPC and Cr.P.C.) but it falls short of 'prima-facie case' which is a standard for a Judicial or Quashi Judicial Authority for proceeding against a person under respective laws. Therefore, Section 24(1) of the Benami Act does not burden an Initiating Officer to first work out a prima-facie case before issuing a show cause notice or give opportunity of hearing and cross examining the witnesses to notice. This is a reason that under Section 24(4), the Initiating Officer is empowered either to continue with the provisional attachment made under Section 24(3) of the Benami Act or revoke such provisional attachment with prior approval of the Approving Authority. The Initiating Officer, under Section 24(5) of the Benami Act may thereafter draw up a statement of the case and refer it to the Adjudicating Authority. On receipt of reference under Section 24(5), the Adjudicating Authority shall issue a notice to the Benamidar and after considering his reply and making the necessary enquiries and calling for evidence, provide for an opportunity of being heard to the Benamidar as well as the Initiating Officer. 34. As we are consideri....
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.... conclusive. Therefore, para 28 of the aforesaid judgment favours more to the respondent than the petitioner. Learned Counsel for the petitioner has read in detail Directorate of Enforcement through Deputy Director Vs. Poonam Malik (Supra) of this court. We are of the opinion that in the said case bank accounts of a party were freezed only on suspicion and not on basis of some material. On the contrary, in the present case after initial attachment, the Initiating Officer considered the reply of the petitioner herein and duly dealt with the same in detail. The relevant portion of attachment order has already been reproduced. The reasons in the same are self speaking and need no further elaboration. We have also considered Central Bureau of Investigation Vs. V.C. Shukla and Ors. (Supra), which casts onus on the department to prove that business transaction are Benami. This judgment refers to principles of evidence which are not required to be considered at the stage of issuing show cause notice or passing attachment order. The law laid down on Section 65 B of Indian Evidence Act in Chandrabhan Sudam Sanap (Supra) is clear but is not relevant at this point of time. 39. During argum....
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.... b. Where the comprehensive reply dated 24.03.2025 was not considered by the Department? (x) Whether issuance of vague SCN without having any specific allegations and without classification of alleged property, can be called a proper SCN? Whether there were only two parties in place of three parties as per the mandate of Section 2 (9) (A) of the PBPT Act, 2016 and this so called alleged transactions can only be termed information for reopening Income Tax Cases and cannot be termed as reason to believe for issuing show cause notice under Section 24(1) and consequently passing provisional attachment order under Section 24(3)? (xi) Whether the order under Section 24(3), so as to make provisional attachment of four Bank Accounts, has to passed with proper application of mind by the Initiating Officer, as to how it were related with M/s. Devender Enterprises and Sh. Shyam Sunder Choudhary, as the section contains the word "is of opinion" and thus in absence of the same, it is in violation of Article 300A of the Constitution? 40. In question no.1, the petitioner has raised doubt as to whether the case of petitioner falls within the definition of Benami transactio....