2018 (12) TMI 1057 - AT - Benami Property

Offence under Benami Property Transactions Act - advance salary paid in cash to the appellants - 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. 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 dated 27.03.2018 under Section 26(3) of the Act.
3. Whether the transactions in question qualify as "benami" under the Act.
4. The procedural propriety of the actions taken by the Initiating Officer (I.O) and the Adjudicating Authority.
5. The applicability of the Benami Transactions (Prohibition) Amendment Act, 2016 to the facts of the case.

Issue-wise Detailed Analysis:

1. Legality of the Provisional Attachment Order under Section 24(3) of the Prohibition of Benami Property Transactions Act, 1988:
The Provisional Attachment Order dated 25.01.2017 was issued by the I.O against the appellants, alleging that the sum of ?50,000 received by the appellant was due on account of benami transactions. The appellant argued that this amount was received as a salary advance, deposited in his bank account, and subsequently withdrawn and used for personal purposes. The I.O issued the attachment order disregarding the appellant's sworn statement and reply to the show cause notice, which clearly indicated that the amount was not held for the benefit of any alleged beneficial owner.

2. Validity of the Adjudicating Authority’s Order dated 27.03.2018 under Section 26(3) of the Act:
The Adjudicating Authority upheld the I.O’s order, declaring the properties involved to be benami properties and confirming the attachment order. The appellants contended that the Adjudicating Authority failed to consider their written submissions and arguments, and brought into consideration non-existent and imaginary facts. The Authority's order was deemed perverse and illegal as it did not address the factual inaccuracies and procedural lapses highlighted by the appellants.

3. Whether the transactions in question qualify as "benami" under the Act:
The appellants argued that the transactions were genuine salary advances and did not meet the criteria for benami transactions as defined under Section 2(9) of the Act. The essential characteristics of a benami transaction include the property being held by a person who has not provided the consideration and the property being held for the benefit of the person who provided the consideration. The appellants had received the amounts as salary advances, which were either returned or adjusted against their salaries, negating any element of benami transaction.

4. The procedural propriety of the actions taken by the Initiating Officer (I.O) and the Adjudicating Authority:
The appellants highlighted several procedural lapses, including the failure to provide relied upon documents with the show cause notice, the issuance of a mechanical notice without proper application of mind, and the assumption of jurisdiction under Section 24 based on insufficient evidence. The I.O’s order was based on contradictory statements and factual inaccuracies, and the Adjudicating Authority failed to address these issues adequately.

5. The applicability of the Benami Transactions (Prohibition) Amendment Act, 2016 to the facts of the case:
The appellants argued that the amended provisions of the Benami Act should be applied strictly and not against innocent parties. The transactions in question were genuine salary advances, and the appellants had no involvement in any criminal activities. The Act aims to punish transactions involving mere lending of name without any intention to benefit the person in whose name it is made. The appellants' receipt of salary advances did not fall within this scope.

Conclusion:
The Tribunal found that the impugned orders were unsustainable as they punished the appellants for transactions that did not qualify as benami under the Act. The appellants had received genuine salary advances, which were either returned or adjusted against their salaries. The procedural lapses and factual inaccuracies in the orders of the I.O and the Adjudicating Authority further invalidated the attachment orders. Consequently, the Tribunal set aside the impugned orders and released the attached properties forthwith. The appeals were disposed of with no costs.

← Previous Next →