2018 (12) TMI 969 - AT - Benami Property

Benami transactions - receipt of advance salary - attachment orders - Initiating Officer held the chairman to be the beneficial owner and 49 employees of these colleges as benamidars thereafter attaching the salary bank accounts of these employees up to the value of the alleged benami property - Held that - In the present case the property i.e. the money involved in the transaction is mostly with the Income Tax Authorities. The Respondents have admitted that they have attached the value of the amount held as benami property which is impermissible under the Act. The said attachment would amount to double attachment which is an illegal usurpation of property. Such provisions of value thereof are not available in the Benami Act. Every 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. Using a juxtaposition in the definition as per 2 (9) A where the money is transferred to or is held by a lecturer and the consideration for such money has been provided or paid by another person ; In the present case all the appellants have never held the movable property or the same was registered in their respective banks. The attachment in the present appeals are not effected under the PMLA 2002 though the members of Adjudicating Authority PMLA 2002 are also now dealing with the cases under the Benami Act but majority of the cases are being decided by these members under the PML Act 2002. It is an expert authority as claimed. The provision of Section 2(u) of PMLA is not applicable. It was rightly argued by Shri Anirudh Bakhru learned counsel for the appellant that once the entire salary advance was returned back to the Trust the question of Appellant depositing any amount out of it in his bank account did not arise. Therefore there was no benami property lying in the Bank account of the Appellant which has been attached. There is no denial on behalf of respondent that no such amount was ever deposited in the bank the IO went ahead and issued a Provisional Attachment order under sub-section (3) of section 24 of the Act for provisionally attaching the aforesaid Indian bank account of the Appellant by completely disregarding the facts recorded in the sworn statement of the Appellant and his reply to the show cause notice. The only material present with the initiating officer were sworn statements. These statements only disclose a receipt of cash. This is insufficient to construe the existence of a benami transaction.These statements would show that the money in question was no longer with the college staff and was either returned or spent and could not have been attached. Insufficient proof to establish a benami transaction.

Summary

Issues Involved:
1. Legitimacy of salary advances as "benami" transactions.
2. Jurisdiction and validity of attachment orders.
3. Application of legal provisions under the Prohibition of Benami Property Transactions Act, 1988 (Benami Act) and the Prevention of Money Laundering Act, 2002 (PMLA).
4. Burden of proof and procedural fairness.

Issue-wise Detailed Analysis:

1. Legitimacy of Salary Advances as "Benami" Transactions:
The primary issue was whether the salary advances received by the appellants constituted "benami" transactions. The tribunal found that the appellants, who were employees of a trust, received salary advances and returned the amounts within ten days upon the insistence of the Income Tax Authorities. The tribunal emphasized that every cash transaction cannot be termed as a "benami" transaction. According to Section 2(9) of the Benami Act, a transaction is considered "benami" if the property is held by a person who has not provided the consideration, and it is held for the benefit of the person who provided the consideration. In this case, the appellants received the money as salary advances and returned it, indicating no "benami" transaction.

2. Jurisdiction and Validity of Attachment Orders:
The tribunal scrutinized the attachment orders issued by the Initiating Officer (IO) under Section 24 of the Benami Act. The IO had attached the bank accounts of the appellants, considering the salary advances as "benami" property. The tribunal noted that the appellants had already returned the advances to the trust, and no amount was deposited in their bank accounts. The tribunal found that the IO's attachment orders were based on the value of the alleged "benami" property, which is not permissible under the Benami Act. The tribunal highlighted that the Benami Act does not allow for attachment of property in lieu of the value of such property, unlike the PMLA.

3. Application of Legal Provisions:
The tribunal emphasized the distinction between the Benami Act and the PMLA. The Benami Act focuses on property-centric attachment, whereas the PMLA includes provisions for attaching the value of any such property. The tribunal found that the IO and the Adjudicating Authority had wrongly applied the provisions of the PMLA to the Benami Act cases. The tribunal reiterated that the Benami Act does not include provisions for attaching property based on its value, and such an approach was legally impermissible.

4. Burden of Proof and Procedural Fairness:
The tribunal criticized the IO and the Adjudicating Authority for not properly considering the appellants' replies and the factual position. The tribunal noted that the IO had disregarded the appellants' sworn statements and replies, leading to provisional attachment orders packed with factual inaccuracies. The tribunal stressed that the burden of proving a "benami" transaction lies with the authorities alleging it. The tribunal found that the authorities had failed to discharge this burden and had acted on the premise that cash transfers were intended to defeat demonetization, which was insufficient to establish a "benami" transaction.

Conclusion:
The tribunal set aside the impugned orders in all 28 appeals, finding that the salary advances did not constitute "benami" transactions, and the attachment orders were invalid. The tribunal ordered the release of the attached properties and disposed of the appeals and pending applications. No costs were awarded.