TaxTMI 
TaxTMI 
2026 (2) TMI 1352
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....k No. 6, Re-Survey No. 359 Old Survey No. of 58 of Kulanada village, Kozhenchery Taluk, Pandalam, Sub District: Pathanamthitta, District: Kerala'. 2. Facts & circumstances of the case as stated by the IO (from page 2 to 10 of the impugned order) "(A)*: Brief background: This is one of the 7th benami property identified relating to the common beneficial owner, Sri. M K Rajendran Pillai in the name of Smt. Radhamani A. (in whose cases search was conducted in June 2017 by the DDIT (Inv.), Kollam). The present property is recently acquired and registered on May 4th 2017. The details of other properties identified for action under the PBPT Act and already initiated is as under: S. No. Office Ref. No. Land Measuring Document No. Dt. Of Transaction Regd. Value Remarks 1 1 3 Ares and 65 square meters 2301/D/2011 23.12.2011 1460000 Ref.No. by AA. Delhi (204/2017 2 32 24 Ares and 83 square meters & 9 Ares and 89 square meters 4164/2012 13.12.2012 285000 Proceedings are STAYED, (WP orders of Kerala HC) (on issue of transactions being before 1.11.2016- retrospective application of PBPT A....
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....ould gain him further access to the centres of power. c. He is now a business man involved with several business activities in Nagaland. "Business activity" in Nagaland essentially involves the Government at one end- either undertaking construction contracts for Government or procurement and supply of materials to various Government Departments. He would undertake contract in the name of /in partnership with natives of Nagaland who are exempt from Income Tax (for any income earned from within the state) by virtue of section 10(26) of the Income Tax Act. The investment options in Nagaland are quite limited-for socio- political and economic reasons. There is hardly any industry worth the name. Most government contracts are reserved for natives. Mr Pillai garnered most of the lucrative contracts by using natives as mere name lenders. Outsiders are barred from owning landed property in the state. (the motive for benami investments investment in Kerala) d. For all these reasons, surplus income earned by Shri Pillai in Nagaland, was. substantially, brought to Kerala and would take the shape of additional capital in his business concerns, loans under va....
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....m government accounts are credited into the account of M/s Excellence Associates with SBI Lerie. Though the account is seen opened by Shri Rolly, the mobile number linked to this account is that of Shri Pillai. Credits to this account are almost entirely by transfer from Government accounts. Out of total credits of around Rs. 25.5 Crores into the account of M/s Excellence Associates during FY 2015-16, amount to the extent of Rs. 21.5 Crores is debited towards various accounts related to Shri Pillai. There is a cash withdrawal of Rs. 4 Crores and there is hardly a transfer to any account that can be linked to Shri Rolly, in whose name the contract is undertaken and bank account is opened. The pattern is almost same for other years as well. k. Analysis of above mentioned bank account in the name of M/s Excellence Associates with SBI, Lerie (a/c no. 30128111272) (for a brief period of around 80 days, for illustration), would reveal the following pattern. S. No. Date Debit Credit Particulars 1 27.07.15 52,91,150 Govt. bill payment 2 29.07.15 50,00,000 Sunil Kumar, Contractor Sunil Kumar, Contractor 3 04.08.15 ....
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.... BN Venugopal, (land purchase) 37 22.09.15 10,00,056 Kerala Home Interior Designers, Contractor) 38 24.09.15 3,42,686 Otis Elevator Company 39 29.09.15 25,00,000 Ratheesh Vega, (land purchase) 40 03.10.15 35,00,056 Sunil Kumar, (Contractor) 41 05.10.15 70,00,000 Cash withdrawal 42 06.10.15 23,00,000 Suresh E K, (land purchase) 43 07.10.15 20,00,000 Gen Machine Engineers, (Own Concern) 44 08.10.15 30,00,000 Cash withdrawal 45 12.10.15 15,67,170 Apex Motor Enterprise 46 15.10.15 20,00,000 Cash withdrawal self 47 15.10.15 50,00,056 BN Venugopal, (land purchase) l. It can be see that all the four credit entries during the period between 27.07.15 and 15.10.15 were in the form of transfer from Government accounts. Sreevalsam Gold and Diamonds, Sreevalsam Jewellers, Allebasi Builders, Rajavalsam Motors, Gen Machine - all are concerns with Pillai or his family members are Directors/partners. Payments to Sunil Kumar, Kurian, Mini Siji etc. re....
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....ions are also met from funds coming from Nagaland. (Benami investment in the name of Smt. Radhamani) q. Many such properties were purchased in the name of Smt Radhamani (a close associate of Shri Pillai and Manager of Sreevalsam textiles at Haripad). Smt Radhamani in the reply dated has given a list of 16 immovable properties purchased during the FY 2009-10 to 2017-18. Funds were transferred to the bank accounts of the sellers through the bank accounts of the associates of MK Rajendran Pillai, e.g., in the case of purchase of one property in the name of Radhamani, a case of Head master and Social welfare officer, transfer of funds from their respective accounts was preceded by cash deposits of equivalent amount on the same day or the previous day. r. Likewise, most of the persons who sold their property to Pillai or family received the consideration from the accounts of "Nagaland Police Petrol Pump", "Excellence Associates", "TepRengma", "G K Rengma" and several other accounts bearing Naga names. *Since they all received the money due to them, none of them bothered to probe further into the details of the accounts from which funds were received. ....
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....lear that: • The property held benami was recently acquired, and registered on May 4th 2017. The transaction falls clearly under the purview of the PBPT Act. 1988. • This transaction was not an isolated transaction of mt. Radhamani, but just 1 of the transaction of the SV group of Sri MK Rajendran Pillai. • The DDIT(Inv), Kollam, has made a finding that: the SV group has purchased a property measuring 43.58 Ares located at Kulanada was purchased from Fr. Abraham Thomas, the seller of the property, and the property was regd. as 6 documents, and the seller has confirmed that a total amount of Rs. 2,02,95000/ was transferred to his bank account, SBH, Chengannur branch and Federal Bank, Kulanada branch. This clearly shows that the transaction was a single transaction, the transaction was arranged as single transaction as the seller sold the plots of land to the SV group. The consideration is provided through accounts of 3 nagas and Arun-son of the Sri Pillai and paid directly to account. TABLE "A" Seller Purchaser Document No. & Date Area, Sy. No. and SRO Consideration Fr. Abraham Thomas Arun Raj 784/17 da....
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....fect. But this is a deviation from the lease rent agreed upon by the lessor and lessee. • Although several opportunities were provided for furnishing the details of all the loans taken/repaid, etc., the benamidar has not substantiated/explained satisfactorily till date. No supporting documents/the details of the terms and conditions, rate of interest, interest due/paid, sources, etc... have been furnished, except the confirmation letter from Arun raj and Rajavalsam Motors which is an associated concern of Sri Rajendran Pillai. • It is stated that the ledger entries submitted now are proof of loans and adjustments from rent towards loans. But it is apparent from the ledger entries, 26AS certificate, etc. submitted are all after-thoughts. arrangements, to give a color of legality / explanation to the unaccounted surplus receipts of the beneficial owner and to escape from the rigours of the statute. • Further it is verified that the adjacent properties are also transacted or held by relatives/associates of Sri Rajendran Pillai, this clearly indicates that all these properties are for the benefit of Sri Rajendran Pillai and his associate concerns.....
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....520 - 69632 1032652 10000 1022652 135749 30.11.17 AY Salary income House property income Normal business income GTI Total deduction Chap VI-A TI Income @ Normal rate 2009-10 0 0 1,03,576 1,03,576 0 1,03,576 0 2010-11 0 0 1,61,380 1,61,380 0 1,61,380 0 • The sources of all the transactions, whether of Radhamani, or the family of Sri Pillai, sons-Varun and Arun, or wife -Smt. Valsalaraj, the sources are the proceeds of benami transactions of the beneficial owner, Sh. M K Rajendran Pillai. Conclusion (By I.O.): In view of the above, it is held and concluded that the transaction/s/ is/are benami transaction/s, and Smt. Radhamani is held as the benamidar: The properties are held in the benami/ name of person other than those who have paid the consideration, these properties are benami property of Sri M K Rajendran Pillai. The transaction is an arrangement of Sri M K Rajendra Pillai, is a benami transaction. a. Section 2(9)(A) transaction. The transaction above is held as a Benami transaction u/s. 2(9)(A) as it fulfills all the conditions laid in ....
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....aid discussion and having considered the facts and circumstances of the case we hold D-1 to be the benamdiar of the property transacted. 19. The contention of the I.O. for holding D-2 as beneficial as under:- "The claim of Advance Lease rent & unregistered Lease Deed dated 12.07.2012 has not been supported by the third-party material evidence. It is pertinent to note that the Benamidar Smt. Radhamani has not disclosed this alleged lease income in her return of income for the AYs. AYs. 2012-13 to 2017-18 till 30-11-2017. Further, D1 was asked to furnish the original Lease Deed dated 12.07.2012 and other relevant documents relating to the alleged lease through letter dated 03.05.2018, she has not furnished the same. On perusal of the xerox copy of the lease deed dated 12.07.2012, the following contradictions / discrepancies were noted: a. The stamp paper was purchased on 24.02.2011 and the same was used on 20.07.2012. b. The first line of the deed states -"This deed of Lease is made this twentieth day of July 2012 [20.07.2012]. c. In seventh para of the deed states - "In witness whereof the said Lessor and the said Lessee have put their re....
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....was purchased by Benamidar Smt. Radhamani using the fund provided by Shri Arun Raj, son of Shri Rajendran Pillai (Beneficial Owner). Shri Arun Raj is MD of Rajavalsam Motors P Ltd., and one of the Directors of Sreevalsam Group." 20. Although we have held that the transactions in relation to the property under reference as benami property and have confirmed the attachment order, the IO has not made out a case conclusively for holding D-2, as beneficial owner as evident from the perusal of contents of the reference and rejoinder discussed above. The contention of the 10 that D-2 is beneficial owner cannot be accepted for want of conclusive material brought on record. The discrepancy pointed out in the lease deed submitted combined with the fact that son and father being a stake holder in the same group of the company alone do not make D-2 beneficial owner. Either the IO should have proved that the fund had gone from D-2 or his son had paid the consideration out the fund made available by D-2 and benefit derived from it. The IO need to further make out a case as to who out of the two is the beneficial owner. As of now there is not sufficient material to confirm D-2 as benefic....
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....r future, direct or indirect for any other person. Hence the question of labelling her as benamidar does not arise. He strongly argued that the burden of proof to establish the transaction as a benami transaction and the land as a benami property lies on the Initiating Officer. The Initiating Officer miserably failed to discharge the said burden, but even then, the appellant is labelled as benamidar without any basis. He pointed out that the Adjudicating Authority wrongly concluded that the benamidar did not have source to buy/invest in the property, as she is receiving monthly salary of Rs. 40,000/- from Shri M.K. Rajendran Pillai. He submitted that said conclusion reflects the total non- application of mind by the Adjudicating Authority. He submitted that ITRs filed by the appellant Smt. Radhamani A. were not considered on account of delay in filing the same, whereas Income Tax Department and its Assessing Officer has not raised any objection in the said ITRs. Ld. Counsel for appellant also pointed out the lease deed dated 20.07.2012 executed by Smt. Radhamani A. in favour of lessee Shri Arjun Raj Pillai, which reflects that since July 2012 she was receiving monthly lease of Rs. ....
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....v) Whether the finding qua the benamidar Smt. Radhamani A. W/o Late Sh. P.M. Krishnan needs to be set aside? vi) Whether the order passed by the AA can be modified qua the finding pertaining to the beneficial owner, in absence of any appeal filed by the department? Now, we will analyse the above issues in following paras. 6. Coming to issue no. i) & ii), the Appellant admitted that the sale consideration of Rs. 9,09,000/- for purchase of the land in question was paid from the bank account of M/s. Rajavalsam Motors Pvt. Ltd. taken from its Managing Director, Sh. Arun Raj, son of Shri MK Rajendran Pillai. It is pertinent to mention here that the Appellant has not filed any ITRs for the AYs prior to 2013-14. However, for the first time on 30.11.2017, she filed the ITRs for the 5 years i.e.; for AY 2013-14; 2014-15; 2015-16; 2016-17; 2017-18, as reflected in para no. 02 above in Tabular form. The said ITRs were filed by the appellant only after the search proceedings were undertaken in the case of Shri MK Rajendran Pillai. The contention of the Appellant that the amount of sale consideration of Rs. 9,09,000/- was paid directly by Shri Arun Raj, the MD of M....
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....h, she claimed that TDS has been deducted on the Lease rent for the AYs 2017-18 & 2018-19, she has filed the return of income for the said AYs only on 30.11.2017 (i.e., after the search & seizure proceedings and the Benami proceedings in the case of Shri Rajendran Pillai), for the purpose of creating evidence. She has not at all produced any evidence in respect of the receipt of Lease Income for the period from the FY 2012-13 to 2015-16. Moreover, the delay in filing returns of income by the Appellant further corroborates the case of the Respondent that the property in question is benami in nature and the belated ITRs were filed only to manufacture false evidence and to create defence. Fact remains that the Benamidar Smt. Radhamani has not disclosed this alleged lease income in her return of income for the AYs. 2012-13 to 2017-18, till 30-11-2017. Though, she claimed that TDS has been deducted on the Lease rent for the AYs 2017-18 & 2018-19, she has filed the return of income for the said AYs only on 30.11.2017 (i.e., after the search & seizure proceedings and the Benami proceedings in the case of Shri MK Rajendran Pillai). She has not at all produced any evidence in respect of ....
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....ent 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 no. i) & ii) 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/-. 7. Coming to issues no. iii), the AA had reproduced the contention of the IO made in the rejoinder in sub para g) to i) of para 19 of the discussion part of the impugned order at Page 35 & 36 as under:- g. Further, the contention of the Defendant no-2 that he is not connected with the said benami property in any manner is not correct. Sale consideration for the said property was not paid fro....
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....nsactions. Provisional Attachment Order is hereby confirmed. However, the contention of the IO that D-2 is beneficial owner cannot be accepted for want of conclusive material brought on record." However, we are not inclined to accept the observations recorded by Ld. AA regarding the doubt on the beneficial owner. 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. Thereafter, Sh. MK Rajendran Pillai, diverted the funds from the said Naga benamidars to his family members, friends and their companies/firms in the State of Kerala and other States, for building his empire and making the investments in various business activities including the company managed by his son Sh. Arun Pillai, MD of M/s Rajavalsam Motors Pvt. Ltd. (as mentioned in detail in para no.2 above). Therefore, technically, not only Sh. MK Rajendran Pillai is the beneficial owner, but his son and his ....