PROVISIONAL ATTACHMENT UNDER PROHIBITION OF BENAMI TRANSACTIONS ACT, 1988

[DR.MARIAPPAN GOVINDARAJAN]

Attachment

Section 2(5) of the Prohibition of Benami Transactions Act, 1988 (‘Act’ for short) defines the term ‘attachment’ as the prohibition of transfer, conversion, disposition or movement of property, by an order issued under this Act. 

Provisional attachment

Section 24 of the Act gives powers to the Authorities under this Act to order for provisional attachment of benami properties.  Section 24(1) of the Act provides that where the IO, on the basis of material in his possession, has reason to believe that any person is a benamidar in respect of a property, he may, after recording reasons in writing, issue a notice to the person to show cause within such time as may be specified in the notice why the property should not be treated as benami property.   A copy of the said notice shall be sent to the beneficial owner, if his identify is known. 

Section 24(2A) of this Act provides that the benamidar, the beneficial owner to whom a copy of such notice has been issued, shall furnish the explanation or submissions, if any, within the period specified in the said notice or such period as may be extended by the IO, not exceeding 3 months from the end of the month in which the said notice is issued.

Section 24 (3) of the Act provides that if the IO is of the opinion that the person in possession of the property held benami may alienate the property during the period specified in the notice, he may, with the previous approval of the Approving Authority, by order in writing, attach provisionally the property for a period not exceeding  4 months (before 01.10.2024 the said period is 90 days) from the last day of the month in which the notice is issued. 

Rule 3 provides that the IO shall provisionally attach any property in the manner provided in the Second Schedule of Income-tax Act, 1961.

Revocation

Section 24 (4) (a) of the Act provides that after the provisional attachment has been made under section 24(3), the IO shall pass an order continuing the provisional attachment of the property with the prior approval of the Approving Authority, till the passing of the order by the Adjudicating Authority under section 26(3) or revoke the provisional attachment of the property with the prior approval of the Approving Authority.

Section 24 (4) (b) of the Act provides that if the provisional attachment order has not been made under Section 24(3) the IO shall pass an order provisionally attaching the property with the prior approval of the Approving Authority, till the passing of the order by the Adjudicating Authority under section 26 (3) or decide not to attach the property as specified in the notice, with the prior approval of the Approving Authority.

Statement to Adjudicating Authority

Section 24(5) of the Act provides that if the IO passes an order continuing the provisional attachment of the property under Section 24(a) or passes an order provisionally attaching the property under section 24(4)(b), he shall, within one month from the end of the month in which the said order has been passed, draw up a statement of the case and refer it to the Adjudicating Authority.

Exclusion for limitation

In computing the period of limitation, the period during which the proceeding is stayed by an order or injunction of any court shall be excluded.  Immediately after the exclusion of the aforesaid period, the period of limitation of 4 months available to the Initiating Officer (‘IO’ for short) for passing order of attachment is less than 30 days, such remaining period shall be deemed to be extended to 30 days.

Immediately after the exclusion of the aforesaid period, the period of limitation of one month available to the IO to refer the order of attachment to Adjudicating Authority is less than 7 days, such remaining period shall be deemed to be extended to 7 days.

Case law

In THE INITIATING OFFICER ACIT, BPU, HYDERABAD VERSUS PONNAGANTI KARUNAKARA & ORS. - 2025 (1) TMI 802 - APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI the present appeal has been filed by the  IO, Assistant Commissioner of Income Tax, Benami Prohibition Unit,  Hyderabad against the Order dated 29.08.2019 under Section 26 (3) of Act passed by the Adjudicating Authority.  The IO had received information from Anti-Corruption Bureau, Central Investigation Unit, Hyderabad that one, Rachakonda Srinivas Rao acquired certain immovable properties in the name of 8 alleged Benamidars. He along with all the alleged Benamidars entered into an agreement with ICON Construction. After negotiations, agreements were executed on 27.10.2016. Cash deposits and subsequent bank transfers to ICON Construction took place in case of all the parties in whose name the Beneficial Owner had made the agreement to purchase the said immovable properties. The IO concluded on examination of the materials/document on record, that consideration for properties was provided by Rachakonda in form of cash which was later deposited into the respective bank accounts of the alleged Benamidars and routed to the vendor as consideration. Accordingly, agreements were entered between them for purchasing the properties in the name of these Benamidars for immediate or future benefits of the Beneficial Owner. Moreover, some of the Benamidars, are distant relatives of Rachakonda. Subsequent conduct of Rachakonda such as collecting rent and enjoying the property corroborated that there was motive of the beneficial owner in getting the properties in the name of the Benamidars.

The Appellate Tribunal observed that the Adjudicating Authority has not held the impugned property as Benami as the title therein was yet to be transferred to the alleged Benamidars in view of sale having not been completed due to partial payments made by the alleged Benamidars.

Out of the total sale consideration of Rs.471.54 Lakhs for all the impugned properties only Rs.173.00 Lakhs was paid by the 8 alleged Benamidars. The interested party ICON Constructions has also maintained that none of the Benamidars acquired any rights, interest and title to the impugned properties. Therefore, it was held that ICON Constructions continue to remain owner and in possession of the impugned properties. ICON Constructions maintained that they had rented the commercial units to tenants for which they received the rental income. In view of this, the Appellate Tribunal held that the applicability of Section 2 (9) (A) is doubtful as neither the impugned properties were transferred to the alleged Benamidars nor the impugned properties were held by the alleged Benamidars.

The Appellate Tribunal found that neither the properties which have been provisionally attached are Benami nor the transactions which have occurred with respect to the impugned properties are Benami. The Appellate Tribunal was therefore unable to interfere with the Impugned Order.