TMI Blog2018 (12) TMI 273X X X X Extracts X X X X X X X X Extracts X X X X ..... 008 (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. - FPA/PBPT/28, 40, 51/CHN/2018 - - - Dated:- 31-10-2018 - MR MANMOHAN SINGH, CHAIRMAN For The Appellant : Anirudh Bakhru and Sudhir Chandra, Advs. For The Respondent : Anish Dhingra, SPP for Initiating Officer JUDGMENT 1. By this Order, I propose to decide the above-mentioned three appeals filed by the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as 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 bank account and thus she was not holding any benami property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anoharan, (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 his duties to do justice with the Appellant. 12. The Adjud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same lines, the affidavits have been filed by the appellants stating that - i. In her affidavit, Ms. K. Renuga has stated that she is employed as Assistant Professor in St. Joseph's Institute of Technology since 2013 and drawing salary of ₹ 55,084/- per month. The said college is run by St. Joseph's Educational Trust. The appellant had received an amount of ₹ 1,00,000/- as salary advance from the Trust on 15.11.2016, out of which, upon the insistence of Income Tax authorities, she returned back to the Trust ₹ 5,000/- on 24.11.2016. The remaining salary 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ority is perverse, illegal and completely not sustainable for the following reasons: i. The Authority has not considered any of the Appellant's written submission filed on 15-05-2017 and 23-06-2017 and also not considered the arguments made by the Appellant's Senior Legal Counsel during course of the final hearing on 13.09.2017. ii. Furthermore, the order of the Adjudicating Authority has brought into consideration entirely non-existent and outright imaginary facts, which were not even alleged anywhere by the Initiating Officer (IO). iii. Order of the Adjudicating Authority is completely 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 95,000/- for clearing her debts and returned back the remaining amount of ₹ 5,000/- to the Management. Ground 7 : Order passed by the Authority is not in conformity with the Benami Law and hence liable to be set aside. i. The provisions of the Benami Act clearly show that every cash transaction is not a benami transaction. There has to be a beneficial interest which is sin quo non for the existence of a transaction prohibited under the Act. ii. The order of the Adjudicating Authority is completely void, illegal and unjust as all the references made and proceedings conducted by them during the course of 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 requireme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... include any transaction involving the allowing of possession of any property to be taken or retained in part performance of a contract referred to in section 53-A of the Transfer of Property Act, 1882 (4 of 1882), if, under any law for the time being in force,- (i) consideration for such property has been provided by the person to whom possession of property has been allowed but the person who has granted possession thereof continues to hold ownership of such property; (ii) stamp duty on such transaction or arrangement has been paid; and (iii) the contract has been registered. 2(10) benamidar means a person or a fictitious person, as the case may be, in 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellate mechanism against an action taken by the authorities under the Act, while barring the jurisdiction of a civil court; (iii) confer the powers of the civil court upon the authorities for its implementation; and (iv) provide for adequate enabling rule making powers. Thus, the Act should be interpreted in a manner so as to punish only transactions that have mere lending of name without any intention to benefit the person in whose name it is made. 24. 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. 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 activiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ikewise knowledge will be slightly on a higher plane than reason to believe . A person can be supposed to know where there is a direct appeal to his senses and a person is presumed to have a reason to believe if he has sufficient cause to believe the same. (iii) Actually involved: If there is no direct/indirect involvement of any person or property with the proceeds of the crime nor there is any aspect of knowledge in any person with respect to involvement or assistance nor the said person is party to the said transaction., cannot be penalized for no fault of his. Therefore, it cannot be the Scheme of the Act whereby bona fide person without having any direct/indirect involvement in the crime. 27. 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 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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confusion of the jury. This has in fact occurred. (b) In R.M.D. Chamarbaugwalla v. Union of India AIR 1957 SC 628, a Constitution Bench of the Apex Court held: 6. If the question whether the Act applies also to prize competitions in which success depends to a substantial degree on skill is to be answered solely on a literal construction of Section 2 (d), it will be difficult to resist the contention of the petitioners that it does. The definition of prize competition in Section 2(d) is wide and unqualified in its terms. There is nothing in the wording of it, which limits it to competitions in which success does not depend to any substantial extent on skill but on chance. It is argued by Mr Palkhivala that the language of 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 shou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... slature of Bombay passed Act 30 of 1952 extending the provisions of the Act of 1948 to competitions conducted outside the State of Bombay but operating inside it, the tax however being limited to the amounts remitted or due on the entries sent from the State of Bombay. The validity of this enactment was impugned by a number of promoters of prize competitions in proceedings by way of writ in the High Court of Bombay, and dealing with the contentions raised by them, Chagla, C.J. and Dixit, J. who heard the appeals arising from those proceedings, held that the competitions in question were gambling in character, and that the licensing provisions were accordingly valid, but that the taxes imposed by Sections 12 and 12-A of the Act were really 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to clearly indicate that it was only competitions of the character dealt with in the Bombay judgment, that were within the contemplation of the legislature. 35. In jurisprudence, the thumb rule is that the basic law on the subject to be applied for violation of the statute. No doubt, in the interest of the public and welfare of the society, the state is always welcome to bring the amendment in the existing law. New legislature can be brought which may have stringent provisions to cure the system which can be applied against the violators of the law. However, at the same time, when the stringent provisions are to be applied, it is the duty of the Authority to apply the said provisions very carefully. The investigation has to be carried out as per 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the department. 42. 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] 7 SCC 716). 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. 43. 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. 44. 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. 45. Under these circumstances, the impugned order dated 27.3.2018 in all three appeals is set-aside. The attached properties are released forthwith. The appeal and pending application are disposed of. 46. No costs. - - TaxTMI - TMITax - Benami Property/ Transac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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