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2024 (6) TMI 1045 - AT - Benami PropertyIssues Involved: 1. Legality of the attachment of properties u/s 46 of the Prohibition of Benami Property Transaction Act, 1988. 2. Determination of whether the transactions in question were benami transactions as defined u/s 2(9)(D) of the Act of 1988. 3. Validity of the Adjudicating Authority's refusal to confirm the attachment of properties. Summary: 1. Legality of the attachment of properties u/s 46 of the Prohibition of Benami Property Transaction Act, 1988: The appeal was filed by the Department against the order dated 28.02.2019 passed by the Adjudicating Authority, which refused to confirm the attachment of the properties of the non-appellants. The appellant argued that the properties in question were acquired through benami transactions facilitated by M/s Danodia Investments and Finance Limited, which acted as a conduit for Square Four Group. 2. Determination of whether the transactions in question were benami transactions as defined u/s 2(9)(D) of the Act of 1988: The appellant provided evidence that M/s Danodia Investments and Finance Limited received funds from 79 shell companies, which were either non-existent or not operational, and these funds were then used to advance loans to 20 entities. The funds were initially generated through the issuance of shares at a premium of Rs. 990/- by a company with no significant business. The investigation revealed that the money was introduced into M/s Danodia Investments and Finance Limited through layering and cash deposits from fictitious entities. 3. Validity of the Adjudicating Authority's refusal to confirm the attachment of properties: The Adjudicating Authority had refused to confirm the attachment on the grounds that the loans were advanced through disclosed sources and proper banking channels, thus not falling under the definition of benami transactions. However, the Tribunal found that the Adjudicating Authority ignored the initial benami nature of the funds and focused only on subsequent transactions. The Tribunal held that the funds in M/s Danodia Investments and Finance Limited were indeed benami property as defined u/s 2(8) of the Act of 1988, and the subsequent use of these funds did not legalize the initial benami transactions. Conclusion: The Tribunal set aside the order of the Adjudicating Authority and confirmed the provisional attachment of the properties, allowing the appeal filed by the Department. The Tribunal emphasized that the transactions were benami as the entities providing the funds were fictitious or non-traceable, thereby falling under the definition of benami transactions u/s 2(9)(D) of the Act of 1988.
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