TaxTMI 
TaxTMI 
2025 (12) TMI 258
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.... Office Unit No.-21, 21st Floor, Sunshine Tower, Senapati Bapat Road, Dadar (West), Mumbai - 400013 along with five parking spaces. 28.12.2012 M/s Dhanrishi Commosales Pvt. Ltd. (PAN: AAECD2567N) 2. As per the facts of the case, Provisional Attachment Order (PAO) was passed by the Initiating Officer with approval of the Approving Authority u/s 24(4)(a)(ii) of the PBPTA, 1988 on the basis of following materials: I. Income-tax Returns of M/s Dhanrishi Commosales Private Limited from AY 2013-14 to AY 2018-19 II. Documents available on the database of Ministry of Corporate Affairs. III. Statement of Shri Ashok Jha recorded on oath under the Income-tax Act, 1961, IV. Reference received from the DDIT (Inv.), Unit - 7(3), Mumbai dated 15.05.2019. As per the I.O., M/s Dhanrishi Commosales Pvt. Ltd. the alleged benamidar was incorporated on 14.05.2012. The registered address of this company at the time of incorporation was 52, Weston Street, 4th Floor, Kolkata - 700012, West Bengal. As per the returns of income, the benamidar has shown a different nature of business for every assessment year. An immovable property was purchased in the ben....
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....is amount only. Further, as per the returns of income from AY 2014-15 to 2018-19, the share application money is shown as nil and loans amounting to Rs. 10,36,00,000/- are shown outstanding. There is no change in the quantum of outstanding loan amount indicating that either the loans have not been repaid or that they have been replaced. Further, as the same amount of loans have been shown outstanding for the last five years, it shows that the benamidar has no intention of repaying the same or that it intends to evergreen the same. As per the balance sheet as on 31.03.2016, the benamidar has shown that the loan of Rs. 10,36,00,000/- has been received from M/s Rudrapriya Dealers Pvt. Ltd. Further, as per the statutory returns for FYs 2015-16, 2016-17 and 2017-18, the auditor has made the following remarks regarding the loan: "a. Terms of repayment: In absence of any agreement, the terms of the repayment of the unsecured loan are not ascertainable. But as per the management representation, the same would not be repaid in the next 12 months. b. The company does not have any continuing default in repayment of loans and interest on the balance sheet date." The above ....
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.... Kolkata, till date. Further, it is also seen that soon after the acquisition of benami properties, the shareholding of the benamidar got changed and Shri Nagin Meghraj Parekh and Shri Pradip Shantilal Shah became the shareholders of the benamidar. This transfer took place at face value even though an immovable property worth crore of Rupees was in the name of the benamidar with no actual liabilities on the date of transfer of shares. This suggests that the acquisition of the benami properties in the name of the benamidar is nothing but a well-planned arrangement where unaccounted income was introduced in the books of the benamidar as share application money/loans from various shell entities to purchase the benami properties. Thus, it is evident from the above facts and observations: (i) That the benamidar is not conducting any business and therefore has no channel of any actual business revenue. Any revenue earned by the benamidar is nothing but passive income from the benami property itself. (ii) That, the benamidar was newly incorporated. Nevertheless, the benamidar had received huge amounts as share application money. (iii) That the financials of the ....
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....ion under section 2(9) of PBPTA, 1988 as all the events required to purchase the said immovable property were carried out as per the desire and instruction of someone other than benamidar and the sources of funds used for the purchase of the benami property do not belong to it. Accordingly, the Initiating Officer concluded that the benamidar and the shareholding companies have purposefully entered into a transaction which is squarely covered u/s 2(9)(A) of PBPTA, 1988 as under: S. N. Particulars Details 1. Benami Property u/s 2(9)(A) of the PBPT Act, 1988 (akin to pre- amended Section 2(a) 'The Benami Transactions (Prohibition) Act, 1988) Money infused as share application money in the benamidar company against the consideration paid by beneficial owner to the entry operation; along with the Immovable property acquired from such benami property which represents benami property in converted from or its proceeds. 2. Benami Transaction Transaction of infusion of share capital along with the premium in the benamidar company against the equivalent consideration paid by beneficial owner to the entry operation; along with the transaction of purchase of immova....
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....king self-declaratory statements without backing them with concrete evidence. The benamidar has not provided any documentary evidence such as loan agreements, bank statements, confirmation of loans and answers to logical questions as to how the benamidar got in contact with its creditor, how the creditor advanced an interest free loan to the benamidar which was, as per benamidar's own claim, repaid for the first time in part after a lapse of almost 7 years. In absence of such documents and answers, the benamidar has failed to prove that the so-called receipt of loan is a genuine financial transaction and not a farce employed to deceive the authorities and to camouflage the actual origins of money. (iii) M/s Rudrapriya Dealers Private Limited was incorporated on 10.02.2012 at 42, Burtolla Street, Kolkata. Its directors since inception till 2017 were Hiralal Maity and Debrata Naskar. It is seen from the return of income for AY 2012-13 and 2013-14 that the sources of funds available with M/s Rudrapriya Dealers Private Limited come solely from its issued capital and share premium. During FY 2011-12, M/s Rudrapriya Dealers Private Limited has allotted equity shares of face valu....
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....Ltd. 08.04.1988 Prachin Kumar and Harekrushna Sahoo 97,01,18,423 (Almost entirely as share premium) 3 Coolhut Infra Ventures Pvt. Ltd. 27.01.2012 British Rajak and Santosh Kumar Bubna 22,47,10,000 (Almost entirely as share premium) 4 Exotic Commosales Pvt. Ltd. 28.12.2011 Ashok Kumar Jha and Ranjan Kumar Jha 25,90,50,000 (Almost entirely as share premium) 5 Flowtop Trexim Pvt. Ltd. 27.01.2012 Bharat Goenka and Tarak Dey 14,32,00,000 (Almost entirely as share premium) 6 Scorpion Nirman Pvt. Ltd. 11.11.2011 Prabir Bhattacharyay and Naresh Kumar Jain 63,36,50,569 (Almost entirely as share premium) (v) As seen from above, almost all the subscribers were incorporated only a few months ago from the date of allotment and the sources of funds available with them is from external sources only clearly indicating that these are nothing but passing through entities. Further, it is also noticed that Shri Prachin Kumar, director of M/s Baba Iron Industries Pvt. Ltd. is also a director of M/s Amit Auto Credit Company Pvt. Ltd. along with Shri Ashok Jha. It is also noticed that Shri Santosh Kumar Babna, director of M/s C....
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....any which has received share premium. The relevant extracts of the judgment are reproduced below: -"The practice of conversion of un-accounted money through the cloak of Share Capital/Premium must be subjected to careful scrutiny. This would be particularly so in the case of private placement of shares, where a higher onus is required to be placed on the Assessee since the information is within the personal knowledge of the Assessee. The Assessee is under a legal obligation to prove the receipt of share capital/premium to the satisfaction of the AO, failure of which, would justify addition of the said amount to the income of the Assessee." Although the above case law pertains to matters under the Income Tax Act, 1961 and the share premium has been received by an intermediary party, the ratio decidendi of the case with regard to the requirement of proof of the genuineness of loans advanced using share premium received upon subscription of shares via private placement are nonetheless the same. Hence, it is the benamidar who is obligated to prove the genuineness of the transactions with parties from whom it is receiving loans. On the basis of the material placed and the....
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....Rs. 10.36 Crores received from M/s Rudrapriya Dealers Pvt. Ltd., instead of share application money, or premium. The said interest free loan had never been serviced, as per Auditors remarks pertaining to financial year 2015-16, 2016-17 & 2017-18 (three consecutive years). He contended that lender M/s Rudrapriya Dealers Pvt. Ltd. had allotted the equity shares and the total amount received as share capital and premium was Rs. 11,48,85,000/- from six different entities, out of which five had been incorporated around same time, when M/s Rudrapriya Dealers Pvt. Ltd. came into existence. Since the consideration for benami property is Rs.9.60 crores, all of which comes as loan (previously treated as share application money) from M/s Rudrapriya Dealers Private Limited, it points towards a direction that the origin of the consideration is through the said share premium. On perusal of the records of M/s Rudrapriya Dealers Private Limited available with the MCA, it is seen that it has received share premium from various companies, which were incorporated only a few months ago from the date of allotment of the shared of M/s RDPL and the sources of funds available with them is from external so....
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....m and thereafter the said share premium was duly applied for acquisition of immoveable property, soon after the shares were transferred at face value. He contended that in view of the above facts, it is clear that the benami properties were purchased from the bogus share premium subsequently treated as loan. The benamidar did not have any other source of funds for purchase of the benami properties. The benamidar company is a shell corporation that has been incorporated at the behest and instance of an entry operator, Sh. Ashok Jha, and thereafter, used as SPV by the beneficial owners no.1 & 2 to park funds in immoveable property through high magnitude of share premium/loan entry in benamidar company which had no intrinsic worth. As a result, the purchase of the benami properties by M/s Dhanrishi Commosales Private Limited is a benami transaction as per clause 2(9)(A) of the PBPT Act, 1988 and the beneficial owners are Shri Nagin Parekh and Shri Pradip Shantilal Shah. Ld. counsel for the appellant submitted that without prejudice to what is stated before, alternatively this can also be covered as a benami transaction as per clause 2(9)(D) Of the PBPT Act, 1988, in case of any dou....
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....nd presented facts in a cogent manner tracing the funds into M/s Rudrapriya and from M/s Rudrapriya to the benamidar M/s Dhanrishi. The IO is not required to record statement u/s 19 of the PBPT Act, if the facts that have been marshaled speak for themselves, being based on the documentary evidence. Recording of statements u/s 19 is not a sine qua non to hold a property/transaction as benami, if the facts speak otherwise, or are inspiring. Ld. Counsel for the Appellant pointed out that the Adjudicating Authority has stated in para 6 of the order as below: - "Admittedly, the consideration for buying of the property was made by D-1, the benamidar. The benamidar company is very much in existence and is not a fictitious company. In fact, the benamidar has adduced the evidence by way of the audited accounts that benamidar is earning substantial rent from the said premises after its acquisition". The Adjudicating Authority has erred in reading the facts presented by the IO. It is clear that benamidar M/s Dhanrishi has paid to buy the property. This fact was never in dispute. Ld. Counsel for the Appellant stressed that the question is from where and how did the benamidar rec....
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.... the benamidar, and therefore, either of the two events will be sufficient to hold that funds have been received from beneficial owner. Be as it may, in all probabilities, the alternative application of Section 2(9)(D) has been wrongly discarded. Assuming the reason of "strict requirement to establish flow of funds from coffers of BO" to refute the contentions of the IO/BPU are true, then the Ld. Adjudicating Authority has gone on a tangent to discard the applicability of Section 2(9) (D). Ld. Counsel for the Appellant argued that the IO without any prejudice had made a proposition to treat the transaction, as benami transaction u/s 2(9)(D). The same ought not to be held contradictory to section 2(9)(A). The IO had brought on record the nature and the way the funds have flown from the entities operated by an accommodation entry provider. The very nature of the accommodation entry provider is to use name-lenders and benamidar. The name-lenders are indeed fictitious persons. Since the funds flowing into benamidar M/s Dhanrishi are routed through fictitious entities, the provisions of section 2(9)(D) can be applied. This is a benami transaction as per clause 2(9)(D) of the PBPT Act....
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.... purchased property received by M/s Dhanrishi is being utilized for discharge of loan liability, and never passed on to the alleged beneficial owners. He pointed out that the alleged beneficial owners were inducted as Directors on 18.12.2012, whereas the under-construction property was purchased thereafter vide agreement dated 27.12.2012 for total sale consideration of Rs. 9.60 crores. The said amount was out of the loans taken from M/s Rudrapriya Dealers Pvt Ltd. The alleged beneficial owner had no role in the management of M/s Rudrapriya Dealers Pvt. Ltd. He pointed out that after taking the possession in 2015, the property was given on rent from time to time and the rental income was utilized for incurring expenditure. He contended that in order to repay the loans to the lender M/s Rudrapriya, M/s Dhanrishi has taken OD facility from Kotak Mahindra Bank to the extent of 3 crores, which was paid to the lender. Subsequently, the rental income was utilized for the repayment of OD facility. This falsify the contention of the appellant that the loan taken from Rudrapriya was not repayable. He pointed out that one of the alleged beneficial owners Sh. Pradip Shantilal Shah has resigned....
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....ners. In support of the same, he cited the judgment of Hon'ble Supreme Court of India in the case of Jaydayal Poddar v. Mst. Bibi Hazra and Ors., 1973 SCC Online SC 318. He further argued that the amendments made in the PBPTA,1988 will not be applicable retrospectively for the past transactions. In support of his contention, he relied upon the judgments namely, R. Rajagopal Reddy v. Padmini Chandrasekhran 1995 213 ITR 340 ; Star India v. Commissioner of Central Excise 2005 (7) SCC 203 and Union of India v. Ganpati Dealcom Pvt. Ltd., 1 (2023) 3 SCC 315. Prayer is accordingly made to dismiss the present appeal being devoid of any merits. 5. After hearing the rival submissions, we have given our thoughtful consideration to the same. The submissions made by Ld. counsel for Respondent No. 1 to 3 appears to be logical. However, for reaching the truth of the case, it will be necessary to analyze the facts of the case in correct perspective. The directors of the alleged benamidar M/s Dhanrishi Commosales Pvt. Ltd. at various times is tabulated as under: DIN Director Name Appointment date Cessation date 03611869 Subhankar Maje 14.05.2012 16.08.2012 03578389 ....
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....ures reflect that DCPL received sum of Rs. 9.02 Crores up-to 28.12.2012. On 16.04.2013 Rs. 2 lakhs and Rs. 22 lakhs; on 05.02.2014 Rs. 32 lakhs Rs. 25 lakhs and Rs. 18 lakhs; on 06.02.2014 Rs. 35 lakhs. Thus, DCPL received sum of Rs. 1.34 Crores from April 2013 to Feb 2014. The said amounts are also reflected in the bank account statement of RDPL which is at page 138 to 147 of the reply and the same is also summarized by RDPL at page 136 of the reply. Thus, DCPL received total sum of Rs. 10.36 Crores from RDPL. 6. As per the case of appellant Department, the Income Tax Returns of DCPL were analyzed by Deputy Director of Income Tax for the AY 2013-14 to 2017-18, which revealed that the said company had not earned any substantial income in any of the previous years. The source of funds, as per balance sheet on 31.03.2013 is in the form of 'share application money pending allotment' amounting to Rs. 9.02 Crores. Now coming to the source of money with M/s RDPL, Ld. Counsel for the Appellant Department pointed out that this company was incorporated in the year 2012 and collected the share premium from six constituents @ share premium vale of Rs. 999 per share on 27.03.2012 a....
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.... months before the allotment of shares to the aforesaid six shareholders of M/s RDPL. As per contention of Appellant Department, the sources of funds available with the said shareholders was from external sources only, which indicated that these are nothing, but passing through entities used to layer money. Ld. counsel appellant department contended that the said shell entities are just paper entities with dummy directors incorporated at dummy addresses and are fictitious and untraceable in nature. Perusal of statement of account of M/s Rudrapriya from page 138 onwards annexed with the reply filed by respondent no.1 reflects that the said company received the sum of Rs. 10 lakhs on 27.08.2012 from Pinpoint Vyapar Pvt. Ltd.; Rs. 25 lakhs on 06.09.2012 from Helot Merchants Pvt. Ltd.; Rs. 50 lakhs on 08.10.2012 from Ade sales Pvt. Ltd; Rs. 15 lakhs on 08.10.2012 from Uday Vintrade Pvt. Ltd.; 35 lakhs on 09.10.2012 from FAVEO Marketing Pvt. Ltd.; Rs. 8,00,000 on 09.10.2012 from Glitter Tie Up Pvt. Ltd.; Rs. 6 lakhs on 09.10.2012 from Strong Dealers Pvt. Ltd.; 3 lakhs on 10.10.2012 from glitter Tie Up Pvt. Ltd.; 21 lakhs on 11.10.2012 from Raghupati suppliers Pvt. Ltd.; 20 lakhs on 16.1....
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....edly purchased its shares with share premium of Rs.999 against the face value of Rs.1. Therefore, the pumping of funds in M/s RDPL through large number of shell entities is apparent on record, even in absence of deeper investigation on this aspect by the IO, which may be due to the fact that the said entities are also untraceable to the IO. This fact is also corroborated by Shri Ashok Jha, the accommodation entry provider, who was operating and managing many companies either himself or through his employees, though his statement is silent with respect to the six constituents of RDPL and the companies pumping the funds in RDPL. Moreover, Shri Ashok Jha, the accommodation entry provider is a director in one of the companies providing share premium to M/s. Rudrapriya Dealers Private Limited viz. M/s. Exotic Commosales Private Limited. Thus, there is direct involvement of Shri Ashok Jha in conversion of unaccounted money used as consideration for the benami property and thus his statement is highly relevant and has evidentiary value. The share premium paying companies of RDPL have no ownership over the money since they are nothing but pass through entities. As they have no ownership....
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....it for allotment of shares as per Companies Act 1956, which was replaced by new Companies Act 2013 w.e.f. 29.08.2013, which prescribes the time limit of 60 days for allotment of shares. Section 42 of the Companies Act, 2013 is reproduced as under: "42. Issue of shares on private placement basis.-- (1) A company may, subject to the provisions of this section, make a private placement of securities. (2) A private placement shall be made only to a select group of persons who have been identified by the Board (herein referred to as identified persons), whose number shall not exceed fifty or such higher number as may be prescribed excluding the qualified institutional buyers and employees of the company being offered securities under a scheme of employees stock option in terms of provisions of clause (b) of sub-section (1) of section 62, in a financial year subject to such conditions as may be prescribed. (3) A company making private placement shall issue private placement offer and application in such form and manner as may be prescribed to identified persons, whose names and addresses are recorded by the company in such manner as may be prescribed: ....
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....d if the company is not able to allot the securities within that period, it shall repay the application money to the subscribers within fifteen days from the expiry of sixty days and if the company fails to repay the application money within the aforesaid period, it shall be liable to repay that money with interest at the rate of twelve per cent. per annum from the expiry of the sixtieth day: Provided that monies received on application under this section shall be kept in a separate bank account in a scheduled bank and shall not be utilised for any purpose other than- (a) for adjustment against allotment of securities; or (b) for the repayment of monies where the company is unable to allot securities. (7) No company issuing securities under this section shall release any public advertisements or utilise any media, marketing or distribution channels or agents to inform the public at large about such an issue. (8) A company making any allotment of securities under this section, shall file with the Registrar a return of allotment within fifteen days from the date of the allotment in such manner as may be prescribed, including a complete lis....
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....me, the entire amount is treated as a "deposit" under Rule 2(1)(c) of the Companies (Acceptance of Deposits) Rules, 2014, read with Section 73 of the Companies Act, 2013. 9. In the present case the Respondent Nos. 1 to 3 failed to produce any document to show that share application money was ever converted into deposit or loan money, on account of non-allotment of shares to RDPL, though the same was the share application money mis-utilized by DCPL for purchase of under construction property vide agreement for sale dated 28.12.2012. The said the share application money was not kept in any bank account, till the allotment of shares. Even after execution of the sale agreement of the property in favour of DCPL, it received additional sum of Rs. 1.34 crores in the month of April, 2013 to Feb. 2014. There is no explanation how the said additional amount was utilized by DCPL and why the shares were not allotted to RDPL. 10. Now, coming to the provisions under PBPT, Act, Benami Property is defined under Section 2 (8) of PBPT Act, as under: (8) "benami property" means any property which is the subject matter of a benami transaction and also includes the proceeds from such pro....
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....f doubts, it is hereby declared that benami transaction shall not include any transaction involving the allowing of possession of any property to be taken or retained in part performance of a contract referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882), if, under any law for the time being in force,- (i) consideration for such property has been provided by the person to whom possession of property has been allowed but the person who has granted possession thereof continues to hold ownership of such property; (ii) stamp duty on such transaction or arrangement has been paid; and (iii) the contract has been registered. Benamidar is defined under Section 2 (10) of the PBPT Act as under: (10) "benamidar" means a person or a fictitious person, as the case may be, in whose name the benami property is transferred or held and includes a person who lends his name; Beneficial Owner is defined under Section 2 (11) of the PBPT Act as under: "(12) "beneficial owner" means a person, whether his identity is known or not, for whose benefit the benami property is held by a benamidar;" 11. Now, coming to the facts of....
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....o recover the said loan advanced to DCPL. This points towards direction that the amount tendered by RDPL to DCPL is apparently a benami property and the transaction as a benami transaction, which was utilized for purchasing the property as mentioned in para no.1 above. Our view is fortified with the fact that the said amount was tendered for purchase of shares, which were never allotted by DCPL. Later-on the said amount was shown as unsecured interest free loan. Therefore, there is no pecuniary advantage to RDPL in any manner against the investment of Rs. 10.36 Crores in DCPL, rather it caused loss to RDPL on account of depreciation of amount due to inflation. As per record of RDPL, it has not earned any profit for making the investment with DCPL, which was later on shown as loan without interest and without security. 12. Now the issue arises that if the said transaction is a Benami Transaction, then under which clause of section 2(9) it is covered. To analyse this issue, we cannot ignore the fact that RDPL received the share premium from six different entities on 27.03.2012, out of which, five entities were incorporated from Nov. 2011 to Jan. 2012. All the six entities tendered....
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....f DCPL from page 131-133 of the reply of Respondent no.1, though the complete statement is not available on record for deeper scrutiny. It is pertinent to mention here that even the current second director, Sh. Pratik Vira, who stepped into the shoes of Sh. Pradip Shantilal Shah, received Rs.20,000 from DCPL on 02.05.2019 and his another company, M/s Vira Capital Pvt. Ltd. received Rs.1,77,000 on 02.05.2019. It is further interesting to note running page 56 of the reply of respondent no 1, that Nagin Parekh & Associates received sum of Rs. 10 lakhs on 08.12.2015 and 15 lakhs on 21.01.2016 and shown the said entries as repayment. But respondent DCPL has not clarified that when the said payment was received from Nagin Parekh and Associates and the purpose of the same along with the bank statement reflecting the transfer entry. It is also interesting to note that on the same page, there is one entry of Rs. 30 lakhs reflecting loan to Namah Renaissance on 07.09.2016. We fail to understand that a company which is allegedly indebted to RDPL for sum of Rs. 10.36 Crores is giving loan to some other entity, without discharging its own loan liability. This also points towards the fact that D....