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TMI Blog2018 (12) TMI 273X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Impugned order dated 27.3.2018 in all three appeals is set-aside. The attached properties are released forthwith. X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 from the Initiating Office (I.O.), but the said show cause notice was not accompanied with any relied upon documents as per the case of appellants. The show cause mentions as under: "The list of persons to whom the said cash of ₹ 8.18 crores was distributed contains your name Shri/Smt. Shri K. Renuga which shows that you have received the cash amount of ₹ 1,00,000/-. You also under sworn statement taken on 28/11/2016 has stated that you have received the cash amount of ₹ 1,00,000/-. This clearly establishes the fact that you have held the cash amount and also lent your name." 6. It was alleged that the contents of the above show cause are contrary to the factual position. In her reply dated 30/12/2016 to the show cause notice, the appellant unequivocally clarified that the amount of ₹ 1 Lakh was received by her as advance on 15/11/2016, out of which she had used ₹ 95,000/- to repay her debts and returned the remaining amount of ₹ 5,000/- to the Management on 24/11/2016 upon the insistence of Income tax Authorities. Therefore, out of money received from the Trust, it is stated by her that she did not deposit any amount whatsoever in her ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, stating that the sum received by cash from through Shri Babu Manoharan, (beneficial owner) are his salary advance. His reply is not acceptable, because in the sworn statement recorded before the Assistant/Deputy Director of Income tax (Inv.), during the course of the search, it has been stated by him that he has received the said amount as loan." c. It was stated by the appellant that I.O has given a false finding that „the statement before DDIT (Inv) and the submissions made before Initiating Authority are contradictory. Hence their reply in response to the show cause notice issued is only an afterthought. d. Finally, entirely on non-existing facts, the I.O has held as under: "This shows that Thiru Babu Manoharan has forced his employees to distribute, deposit and retain his own money in demonetized currency in the guise of loan received, which has to be repaid after some time in new currency as per his convenience." 11. The main case of the appellant is that the order passed by the I.O under sub-section (4) of Section 24 of the Act dated 13.03.2017 is wrong as it relates to a property which does not exist at all. Thus, the Approving Authority has also failed in hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advance of ₹ 95,000/- was returned back by her to the Trust on 30.3.2017. ii. Shri S. Tamilmani in his affidavit has mentioned that he is employed as Students-In-Charge in St. Joseph's College of Engineering since 1995 and drawing salary of ₹ 42,465/- per month. The college is run by St. Joseph's Institute of Science and Technology Trust. The appellant received an amount of ₹ 2,00,000/- as salary advance from the Trust on 14.11.2016 , out of which, upon the insistence of Income Tax authorities, he returned back ₹ 1,50,000/- to the Trust on 22.11.2016. The remaining salary advance of ₹ 50,000/- was returned back by him to the Trust on 31.3.2017 by bank transfer. iii. Shri S. Vijaykumar has mentioned in his affidavit that he is employed as Associate Professor in St. Joseph's Institute of Technology since 2012 and drawing salary of ₹ 69,375/- per month. The college is run by St. Joseph's Educational Trust. The appellant received an amount of ₹ 2,00,000/- as salary advance from the Trust on 14.11.2016, out of which, on the insistence of Income Tax authorities, he returned back ₹ 1,00,000/- to the Trust on 24.11.2016. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly devoid of the facts as: a. there is no mention of facts contained in the show cause notice under sub-section (1) of section 24 of the Act issued to the appellant; b. there is no mention of the facts contain in the order passed under section 24(4)(a)(i) by the IO. c. even in the facts contained in the Rejoinder dated 10.07.2017 filed by the IO before the Adjudicating Authority have not been mentioned. d. A Table containing the facts of the individual cases was submitted before the Authority, and each case should have been considered separately, but there is no mention of it anywhere in the order. e. There is not even a whisper or murmur in the order of any of the submissions made by the Counsels representing the IO and the Appellant. f. Benami Transaction has not been identified. The transaction in question is a genuine transaction wherein the cash was received by the appellant from her employer as a salary advance and it was never held by the Appellant for the benefit of the alleged beneficial owner. g. Benami Property has not been identified. In the show cause notice, the alleged property is the cash received. Whereas the IO has attached the bank account of the Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the adjudication were contrary to the mandatory provisions stipulated under the Prohibition of Benami Property Transactions Act, 1988. iii. The provisions of the Act must be interpreted in a manner so that it is in conformity with not only its legislative intent but also with settled constitutional principles. The validity of the provisions might have received constitutional protection, but when stringent laws become applicable as a result where of some persons are to be deprived of his/her right in a property, scrupulous compliance of the statutory requirements is imperative. 20. The definition of Section 2(5), 2(9) and 2(10) of the Benami Act is read as under: 2(5) "attachment " means the prohibition of transfer, conversion, disposition or movement of property, by an order issued under this Act; 2(9) "benami transaction" means, - (A) a transaction or an arrangement- (a) where a property is transferred to, or is held by, a person, and the consideration for such property has been provided, or paid by, another person; and (b) the property is held for the immediate or future benefit, direct or indirect, of the person who has provided the consideration, except when the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n whose name the benami property is transferred or held and includes a person who lends his name; 21. Every cash transaction cannot be termed as a "benami" transaction. As per section 2(9) A of the Act, the following twin conditions need to be satisfied- 1) the property being held by a person who has not provided the consideration, 2) the property is held by that person for the immediate or future benefit, direct or indirect of the person who has provided the said consideration. 22. The characteristic of a "benami" transaction is that there must be a mere lending of name without any intention to benefit the person in whose name it is made i.e. a mere name lender. The mischief sought to be punished by the Act are only such transactions which have a name lending element without deriving any benefit therein i.e. "benami" transactions. (Para 1.5 Law Commission Report No. 57 and Statement Object and Reasons of the 1988 Act).The same read as under:- 1.5 Meaning of 'benami transaction'-Purchase or holding of properties in the name of another is known in India, as a benami transaction. This custom has been recognised by Indian Courts for a long time Literally, the word "benami" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llants have never held the movable property or the same was registered in their respective banks. 25. The three appellants are merely employees of the Trust (who is their employer). The statement of Chairman has already been recorded. From the entire record, it has not been established that the appellants had any point of time hatched any conspiracy with the employer in order to conceal any cash amount or they have any link and nexus with the employer pertaining to any criminal activities. It is admitted by the respondent that they were employees with the Trust and highly qualified persons. Even the advance-salary received by them against the services to be provided by them. The same would have to be treated as earned money and disclosed income. It is not a case where they have received the advance salary amount and left the job. In the present cases, there is no direct or indirect evidence available on record to show that they were involved in assisting any crime. They have already paid/adjusted the entire amount towards their salaries. 26. The law in this regard is quite settled:- RE: DIRECT OR INDIRECT ATTEMPT: (i) In State of Maharashtra v. Mohd. Yakub [1980] 3 SCC 57, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impugned order assumes that the object of the disbursement was to bring undisclosed amount into circulation by depositing into 3rd person accounts, who did not own the money legitimately. There is no material on record about any 3rd persons accounts. Furthermore, there is no material on record to show that the lecturers owned the money illegitimately. 28. 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. 29. 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. 30. The Notice would show that it is mechanical in nature and only talks about receipt of cash. In fact all notices are identical except for the amount mentioned in paragraph 5 therein shows a lack of application of mind, thus making the jurisdiction assumed under section 24 invalid. 31. The Respondent could not have formed an opinion that the Appellant would alienate property knowing that the money is with the Income Tax Authorities in the absence of cogent and clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the enactment being clear and unambiguous, it is not open to us to read into it a limitation which is not there, by reference to other and extraneous considerations. Now, when a question arises as to the interpretation to be put on an enactment, what the court has to do is to ascertain "the intent of them that make it", and that must of course be gathered from the words actually used in the statute. That, however, does not mean that the decision should rest on a literal interpretation of the words used in disregard of all other materials. "The literal construction then", says Maxwell on Interpretation of Statutes, 10th Edn., p. 19, "has, in general, but prima facie preference. To arrive at the real meaning, it is always necessary to get an exact conception of the aim, scope and object of the whole Act; to consider, according to Lord Coke: (1) What was the law before the Act was passed; (2) What was the mischief or defect for which the law had not provided; (3) What remedy Parliament has appointed; and (4) The reason of the remedy". The reference here is to Heydon case [(1584) 3 Co. Rep 76 ER 637] .These are principles well settled, and were applied by this Court in Bengal Immunity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxes on the carrying on of the business of running prize competitions, and were hit by Article 301 of the Constitution, and were therefore bad. It is against this decision that Civil Appeal No. 134 of 1956, already referred to, was directed." 34. The position created by this judgment was that though the States could regulate the business of running competitions within their respective borders, to the extent that it had ramifications in other States they could deal with it effectively only by joint and concerted action among themselves. That precisely is the situation for which Article 252(1) provides. Accordingly, following on the judgment of the Bombay High Court, the States of Andhra, Bombay, Madras, Orissa, Uttar Pradesh, Hyderabad, Madhya Bharat, Patiala and East Punjab States Union and Saurashtra passed resolutions under Article 252(1) of the Constitution authorising Parliament to enact the requisite legislation for the control and regulation of prize competitions. Typical of such resolutions is the one passed by the legislature of Bombay, which is in these terms: "This Assembly do resolve that it is desirable that control and regulation of prize puzzle competitions and al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... settled law, the mechanical order under those circumstances cannot be passed. Thus, if the respondent wishes to invoke the amended provision of Benami Act, the respondent has to adhere the provisions strictly as defined and not otherwise against the innocent parties. The respondent has to provide cogent and clear reason to the aggrieved parties. In the facts of present appeals, even otherwise, the appellants have not held any benami property. They cannot be treated as Benamidar. The money has already been returned or adjusted against their salaries. The irony is that the respondent is neither placing on record the reasons to believe nor supplying the copy of the parties concerned. 36. Even the Adjudicating Authority has not considered the reply filed by the appellant properly. The impugned order is unsustainable 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. 37. The impugned order assumes that the object of the disbursement was to bring undisclosed amount into circulation by depositing into 3rd person accounts, who did not own the money legitimately. There is no mater ..... X X X X Extracts X X X X X X X X Extracts X X X X
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