2018 (12) TMI 273 - AT - Benami Property

Benami transactions - cash is transferred from one person to another, with an object to defeat demonetization - cash paid to person in lieu of a future promise - Held that - The property was never held by the appellants. The amount received by them have returned/adjusted towards salaries. Even the question of any arrangement in the present case does not arise as the appellants have received only advance salary from the employer under oral contract at the asking of the respondent, the same was immediately returned. The said factual position has not been denied by the respondent. This is also not a case where the person providing the consideration was not traceable or fictitious. The admitted position is that the management/employer was very much traceable, his statement was recorded, the money returned by the appellants was dealt by the department. The existence of the benami transaction has to be proved by the authorities i.e. the person who alleges the transaction (Sitaram Agarwal v. Subrata Chandra 2008 (5) TMI 718 - SUPREME COURT). The authorities have failed to discharge the burden of proof. The authority has purely gone on the premise that cash is transferred from one person to another, with an object to defeat ,demonetization. This is insufficient to establish a benami transaction. The transaction where cash is paid to person in lieu of a future promise cannot be a benami transaction as there is no lending of name. There can be no benami transaction if the future benefit is due from the person who is also the holder of property. The impugned order is not sustainable as it punishes the appellants for wanting to defeat the purpose of demonetization, which has no direct nexus with the Act and is beyond the purview of the Act. Impugned order dated 27.3.2018 in all three appeals is set-aside. The attached properties are released forthwith.

Issues Involved:
1. Legality of the Provisional Attachment Order under Section 24(3) of the Prohibition of Benami Property Transactions Act, 1988.
2. Validity of the Adjudicating Authority's order under Section 26(3) of the Act.
3. Determination of whether the transactions in question were "benami" transactions.
4. Compliance with procedural requirements under the Benami Act.
5. Application of the Benami Act in the context of demonetization.

Detailed Analysis:

Issue 1: Legality of the Provisional Attachment Order under Section 24(3)
The Provisional Attachment Order dated 25.01.2017 was issued by the Initiating Officer (I.O.) under Section 24(3) of the Act to attach the appellant’s bank account. The appellant argued that the amount of ?1,00,000 received as salary advance was used to repay debts and the remaining ?5,000 was returned to the Trust. The I.O. ignored the appellant's sworn statement and replies, continuing the attachment under Section 24(4)(a)(i).

Issue 2: Validity of the Adjudicating Authority's Order under Section 26(3)
The Adjudicating Authority upheld the I.O.'s order, concluding that the properties involved were benami properties. The appellant contended that the Authority's order was perverse, illegal, and based on non-existent facts. The Authority failed to consider the appellant's submissions and relied on assumptions without evidence.

Issue 3: Determination of Whether the Transactions Were "Benami"
The appellant argued that the salary advance was a genuine transaction and not a benami transaction. Section 2(9) of the Act defines a benami transaction as one where the property is held by a person who has not provided the consideration and is held for the benefit of the person who provided the consideration. The appellant received the advance for personal purposes and returned it upon the insistence of the Income Tax authorities. The Tribunal found no evidence of conspiracy or criminal activity linking the appellants with the employer.

Issue 4: Compliance with Procedural Requirements
The appellant claimed that the I.O. did not provide relied-upon documents with the show cause notice and the Adjudicating Authority did not consider the appellant's written submissions. The Tribunal noted that the I.O. failed to form a "reason to believe" based on cogent evidence, and the notices issued were mechanical, lacking application of mind.

Issue 5: Application of the Benami Act in the Context of Demonetization
The Tribunal observed that the impugned order assumed the disbursement aimed to bring undisclosed amounts into circulation, which was beyond the purview of the Act. The Tribunal emphasized that the Act should punish only transactions involving mere lending of name without any intention to benefit the name lender.

Conclusion:
The Tribunal set aside the impugned orders dated 27.03.2018 in all three appeals, releasing the attached properties forthwith. The Tribunal found that the appellants did not hold any benami property and were not benamidars. The transactions were genuine salary advances, and the procedural lapses by the I.O. and Adjudicating Authority rendered the attachment orders invalid. The appeals and pending applications were disposed of with no costs.

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