2018 (12) TMI 905 - AT - Benami Property

Offence under Benami transaction act - Provisional Attachment Order - Cash transferred from one person to another, with an object to defeat demonetization - 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.

Issues Involved:
1. Validity of the Provisional Attachment Order under Section 24(3) of the Prohibition of Benami Property Transactions Act, 1988.
2. Whether the salary advances received by the appellants constituted "benami" transactions.
3. Adequacy of the evidence and findings by the Initiating Officer (I.O) and Adjudicating Authority.
4. Compliance with procedural requirements under the Benami Act.
5. Interpretation and application of the Benami Act provisions.

Detailed Analysis:

1. Validity of the Provisional Attachment Order under Section 24(3):
The Provisional Attachment Order dated 25.01.2017 was issued by the I.O under Section 24(3) of the Benami Act, attaching the bank account of the appellant. The appellant argued that the amount of ?50,000 received as a salary advance was deposited in his bank account and subsequently withdrawn for personal use. The I.O disregarded these facts and issued the attachment order, which was later confirmed by the Adjudicating Authority.

2. Whether the Salary Advances Constituted "Benami" Transactions:
The main contention was whether the salary advances received by the appellants were "benami" transactions. The appellants received salary advances from their employer, which were later returned or adjusted against their salaries. The I.O claimed these transactions were benami, alleging the appellants held the cash for the benefit of the employer. However, the appellants argued that the advances were genuine salary payments and not held for the employer's benefit.

3. Adequacy of Evidence and Findings by the I.O and Adjudicating Authority:
The I.O's findings were based on sworn statements and a list of cash disbursements. The appellants contended that the I.O's findings were factually incorrect and lacked evidence. The Adjudicating Authority upheld the I.O's order without considering the appellants' submissions and evidence, such as bank statements showing the money was withdrawn and used before the attachment date.

4. Compliance with Procedural Requirements:
The appellants argued that the I.O and Adjudicating Authority did not follow procedural requirements under the Benami Act. The show cause notice was not accompanied by relied-upon documents, and the I.O's order contained factual inaccuracies. The Adjudicating Authority also failed to consider the appellants' written submissions and arguments.

5. Interpretation and Application of the Benami Act Provisions:
The judgment emphasized that not every cash transaction is a "benami" transaction. According to Section 2(9) of the Act, a benami transaction involves a property held by a person who has not provided the consideration, for the benefit of another person who has provided the consideration. The appellants were employees who received salary advances, which were not held for the employer's benefit. The judgment also highlighted that the Act aims to punish transactions involving mere lending of names without any intention to benefit the name lender.

Conclusion:
The Tribunal set aside the impugned order dated 27.03.2018, declaring that the salary advances received by the appellants were not "benami" transactions. The attached properties were ordered to be released forthwith. The Tribunal found that the I.O and Adjudicating Authority failed to provide sufficient evidence and did not comply with procedural requirements. The judgment emphasized the need for a careful application of the Benami Act provisions, ensuring that innocent parties are not penalized without clear and cogent evidence.

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