2024 (12) TMI 238 - AT - Benami Property

Benami transactions for the cash - Orders for attachment of the property - benamidars appellant before this Tribunal were holding the cash on trust under fiduciary capacity - on what cases the property held by someone else on trust can be taken to be under fiduciary capacity? HELD THAT - The evidence available on record proves it because the money was channelized through shell companies and for that the accounts were opened so that cash amount of demonetized currency can be deposited in the account and thereupon, through banking channels, it is transferred so as to make it monetized money. The purpose aforesaid is apparent and cannot be accepted that the appellant Nitin Gupta has given the currency notes to three others under trust rather it was for purpose of getting it converted to monetize, thus we do not find that the case in hand would fall under one of exception to section 2(9)(A) of the Act of 1988 and therefore, the judgment of Tribunal in Sivashankari Anr 2024 (9) TMI 130 - APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI and so as the judgment of the Apex court in the case of Sri Marcel Martins (supra) would have no application. In those cases, the property was given to others on trust and not for its use for illegal purpose or any other purpose and therefore, it was found to be a simple case of passing of the property to keep it in fiduciary capacity which is not the case in hand. Thus, we are unable to accept the first argument raised by the counsel for the appellant. Notice was served to Nitin Gupta u/s 24(1) of the Act of 1988 treating him to be benamidar of the cash recovered from Mohit Garg, Raj Kumar Sharma and Devendra Kumar Jha - As at the time of issuance of the notice, the IO had relied on the material available on record at the relevant time. However, during the course of adjudication, there was change in the statement of appellant Nitin Gupta and accordingly the order was passed holding him to be the beneficial owner. The appellant Nitin Gupta in his statement dated 26.09.2018 u/s 19(1)(b) of the Act of 1988 stated that he has made a declaration of his income under the Pradhan Mantri Garib Kalyan Yojana, 2016. The appellant Nitin Gupta thus, changed his stand and stated that the money was belonging to him. In view of the changed stand and the plea raised before the Adjudicating Authority, he was transformed from benamidar to beneficial owner. The appellant is trying to seek benefit of his own default of change in his version and accordingly for that reason also, we are unable to accept the second ground raised by the appellant. Case of the appellant is that demonetized money had no fair market value and thus, could not have been termed to be property - We find no force in the argument because the currency notes of 1000 and 500 were demonetized by the Government of India but with the permission to tender the notes for getting monetized money. The period for it was given and thereby, the demonetized money could have been used for getting it to be monetized. The time was extended by the RBI and if aforesaid is taken into consideration with the date of search and seizure, it would become clear that on the date of search and seizure the demonetized money could have been converted into monetized with its deposit in the bank and could have been by way of tender. It was thus a property with its fair market value. Thus, we are unable to accept the argument of the counsel for the appellant that demonetized money was not having fair market value at the time of its seizure and accordingly even the third argument is rejected. Finding recorded by the IO going contrary to record - The argument was made by the appellant referring to record but we do not find, that the finding recorded by the IO and ultimately by the Adjudicating Authority is contrary to record. In fact IO, caused investigation/inquiry and what was found in the inquiry has been recorded. At the initial stage, appellant Nitin Gupta did not accept the currency notes to be belonging to him rather he disowned the ownership of the currency notes. Accordingly, the case was taken up for causing show cause notice but during the course of adjudicating proceedings, the appellant Nitin Gupta came out with a changed stand and claimed ownership of currency notes. Since there was change in version, the case was adjudicated by the Adjudicating Officer as per the material found available with it. In the light of the aforesaid, we are unable to accept even the last argument of the appellant. Appeal fails.

Summary

Issues Involved:
1. Whether the cash amounting to Rs. 3,70,89,400/- recovered from Mohit Garg, Raj Kumar Sharma, and Devendra Kumar Jha constitutes a benami transaction under the Prohibition of Benami Property Transactions Act, 1988.
2. Whether the notice served to Nitin Gupta under Section 24(1) was sufficient or if a separate notice under Section 24(2) was required for treating him as a beneficial owner.
3. Whether demonetized currency notes can be considered as "property" with "fair market value" under Sections 2(16) and 2(26) of the Act.
4. Whether the findings of the Initiating Officer (IO) and the Adjudicating Authority were contrary to the record.

Detailed Analysis:

1. Benami Transaction:
The primary issue was whether the cash recovered was a benami transaction as per Section 2(9)(A) of the Act of 1988. The appellant argued that the cash was held in a fiduciary capacity by Mohit Garg and others for Nitin Gupta, thus falling under the exceptions to a benami transaction. The Tribunal analyzed the nature of the transaction and found that the cash was intended for conversion from demonetized to monetized money through shell companies, indicating an illegal purpose. Therefore, it did not qualify as a fiduciary capacity holding under the exceptions to Section 2(9)(A). The Tribunal concluded that the transaction did not fall within the exceptions and upheld the adjudicating authority's decision.

2. Notice under Section 24(1) and 24(2):
The appellant contended that he was served a notice under Section 24(1) as a benamidar but was later treated as a beneficial owner without a separate notice under Section 24(2). The Tribunal clarified that Section 24(2) requires a copy of the notice under Section 24(1) to be given to the beneficial owner if known. At the time of notice issuance, the identity of the beneficial owner was unknown, and the notice under Section 24(1) was appropriately served. As the identity of the beneficial owner was revealed during adjudication, a separate notice under Section 24(2) was not necessary. The Tribunal found no illegality in the proceedings and upheld the process followed by the authorities.

3. Demonitized Currency as Property:
The appellant argued that demonetized currency had no fair market value and thus could not be considered "property" under Sections 2(16) and 2(26). The Tribunal rejected this argument, noting that demonetized currency could still be tendered for conversion into monetized money within a specified period. Therefore, it retained value and qualified as property with fair market value at the time of seizure. The Tribunal concluded that the demonetized currency was indeed property under the Act.

4. Findings Contrary to Record:
The appellant alleged that the findings of the IO and Adjudicating Authority were contrary to the record. The Tribunal reviewed the proceedings and found that the IO conducted a thorough investigation, and the findings were based on the evidence available. The appellant's initial disowning of the currency and subsequent claim of ownership were considered, and the adjudication was based on the material presented. The Tribunal found no contradiction in the findings and dismissed this argument.

Conclusion:
The Tribunal dismissed the appeals, upholding the adjudicating authority's decision that the cash was part of a benami transaction, the notice procedures were correctly followed, demonetized currency qualified as property, and the findings were consistent with the record.