A transaction is benami if the purchase price is paid by a third party.

Issue

Does a property transaction qualify as a “benami transaction” when a third person (‘M’) pays the entire purchase price for a property that is then registered in the name of another person (‘R’), especially when the claim that the payment was a “loan” is not supported by any evidence?

Facts

A piece of land belonging to a member of a Scheduled Caste (SC) was sold. To comply with local laws, the property was registered in the name of ‘R’, who was also from the SC community.
However, an investigation revealed that the entire payment for the land was made by a different person, ‘M’, who paid the money directly into the seller’s bank account.
Based on this, the authorities treated it as a classic benami transaction, with ‘M’ being the real (beneficial) owner and ‘R’ being the frontman (benamidar). The property was then provisionally attached.
The defense put forward by ‘R’ was that the money from ‘M’ was not the purchase price but was simply a loan that ‘R’ had taken to buy the land.
This “loan” story was found to be completely unsubstantiated. There was no loan agreement, no tripartite agreement to justify the direct payment, and, most importantly, it was an admitted fact that the so-called loan had never been repaid.

Decision

The court ruled in favour of the revenue.

It upheld the Adjudicating Authority’s decision to confirm the attachment of the property as “benami.”
The court found that the “loan” explanation was not credible at all. The fact that the amount was never repaid made it clear that it was not a genuine loan. Instead, it was the actual purchase price paid by the beneficial owner (‘M’) to acquire the property in the name of the benamidar (‘R’) for ‘M’s own future benefit.

Key Takeways

Follow the Money: The most critical test in identifying a benami transaction is to find out who actually paid for the property. If the person whose name is on the title did not provide the funds, it’s a major red flag.
A “Loan” Defense Needs Solid Proof: Claiming that the funds from a third party were a loan is a very common defense in these cases. However, to be successful, this claim must be backed by strong evidence like a formal loan agreement, proof of interest payments, and, most importantly, evidence of repayment.
Non-Repayment Kills the Loan Theory: The failure to repay a so-called “loan” that was used for a major property purchase is extremely strong evidence that it was never a loan to begin with, but was the beneficial owner’s own money.
The Law Looks at Substance, Not Just Form: The Benami Act is designed to look through the legal paperwork to find the real substance of the transaction. Even though the sale deed was legally in ‘R’s name, the financial reality was that ‘M’ paid for and effectively owned the property.

APPELLATE TRIBUNAL SAFEMA, NEW DELHI BENCH

Ramlal Nangalia

The Initiating Officer

Justice MUNISHWAR NATH BHANDARI, Chairman
and G.C. Mishra, Member

MP-PBPT-297 and 298 (JP) OF 2024 (stay)
FPA-PBPT- 90 to 93 (JP) OF 2024

SEPTEMBER 8, 2025

Manan Gupta, Vinod Gehlot and Rohil Pandit, Advs. for the Appellant. Manmeet Singh Arora, SPP, Yash Batra, Jasman and Camran Iqbal, Advs. for the Respondent.

ORDER

1. This batch of appeals have been preferred under Section 46 of the Prohibition of Benami Property Transactions Act, 1988 (in short ‘the Act of 1988) to challenge the order dated 26.03.2024 passed by the Adjudicating Authority confirming the Provisional Attachment Order dated 14.03.2023 and answering the three references.

Brief facts of the case:

2. The case pertains to a land measuring 0.99 hectare which was sold by Shri Ranjeet Gaurav, Power of Attorney holder of Smt. Kamla Devi, and his wife Smt. Suman Rai to Shri Ramlal Nangalia for a total consideration of Rs.16,20,000/- (Rs.6,65,000/- + Rs.4,10,000/- + Rs.5,45,000/-) vide Sale Deed dated 28.05.2018. Out of the sale consideration of Rs.16,20,000/-, Rs.15,10,000/-was paid through various cheques and remaining Rs.1,10,000/-was paid in cash. It was found that the payment of Rs.15,10,000/- was made directly by Smt. Madhu Soni in the bank account of seller and thereby the payment of consideration was not made by Shri Ramlal Nangalia in whose favour registered Sale Deed was executed. It was thus taken to be a case of benami transaction and after causing investigation, notice was issued.

3. The transaction for purchase of the property is said to be at the instance of Smt. Madhu Soni for the reason that the seller of the land was a Scheduled Caste (SC) and as per the Rajasthan Tenancy Law, it could not have been sold to a member of any other caste and accordingly to make a transaction for Smt. Madhu Soni, Ramlal Nangalia was involved. However, consideration was not paid by him but the sale deed was registered in his name. The property was provisionally attached by the Initiating Officer (IO) with the previous approval of the approving authority and accordingly sent it for confirmation to the Adjudicating Authority. The Adjudicating Authority found a case of benami transaction and accordingly Provisional Attachment Order was confirmed while answering the references.

Arguments of counsel for the appellants:

4. The learned counsel for the appellants submitted that the purchase of land vide Sale Deed dated 28.05.2018 does not involve a benami transaction. It was purchased by Shri Ramlal Nangalia. However, for purchase of the land, he borrowed money from Smt. Madhu Soni. The amount of consideration was taken by benamidar Shri Ramlal Nangalia as loan thus could not have been considered to be a case of benami transaction because benamidar got the amount by means provided under the law. If somebody takes a loan for purchase of the property, it cannot be considered to be a benami transaction only for the reason that loan was taken from third party for purchase of the property. The respondents failed to take note of the aforesaid while holding the case of benami transaction. It was a case of the appellants that the seller of the land was not willing to accept the cheques from Shri Ramlal Nangalia and, therefore, payment was arranged through Smt. Madhu Soni. The payment of consideration was directly paid by Smt. Madhu Soni to the seller through banking transaction for a sum of Rs.15,10,000/- out of the consideration of Rs.16,20,000/-. The amount of Rs.1,10,000/- was paid in cash and, therefore, a genuine transaction could not have been treated to be benami.

5. The learned counsel for the appellants has referred to the stand taken by Smt. Madhu Soni to the effect that she had given loan of Rs.15,10,000/- to Shri Ramlal Nangalia and filed balance sheet and capital account to support her claim. When the matter was investigated, it was found that the amount of consideration to the extent of Rs.15,10,000/- was directly paid to the seller. However, copy of the capital account and balance sheet makes out a case of advancement of loan to Shri Ramlal Nangalia and in view of the above, a case of benami transaction has not been made out.

6. The learned counsel for the appellants submitted that the transaction for purchase of the land took place through three Sale Deeds dated 28.05.2018. Subsequently, it was transferred to Shri Divesh Soni and Shri Chitranjan Soni sons of Smt. Madhu Soni vide Sale Agreement dated 16.09.2020 for the consideration of Rs.21,00,000/- paid through RTGS. The order has been challenged on the aforesaid ground because, according to the appellants, the transaction does not fall in the definition of benami transaction.

7. The learned counsel for the beneficial owner further submitted that it is the family of Smt. Madhu Soni, who decided to purchase the property but without Shri Ramlal Nangalia, it could not have been registered in their name because the land was belonging to a Scheduled Caste person thus could have been sold to the Scheduled Caste category person only. The involvement of Shri Ramlal Nangalia was only for that reason because in the year 2014 itself, an application was filed to convert the land from agriculture to non-agriculture. If the agriculture land is converted to non-agriculture, then the rigor of the sale by the SC candidate to the same caste member is lifted. The land can be sold to anyone. However, the conversion of land could not take place till execution of Sale Deed in the name of Shri Ramlal Nangalia otherwise intention to purchase the land was very clear. It was to be purchased in the name of Smt. Madhu Soni and her family members and thus for the reason aforesaid, the impugned order deserves to be set aside.

8. The learned counsel for the appellants did not raise any other argument than referred to above and accordingly concluded his argument. It is despite the fact that he was having liberty to raise any other legal or factual issue but the counsel shown his satisfaction to conclude the arguments in reference to the arguments aforesaid.

Arguments of counsel for the respondents:

9. The learned counsel for the respondents vehemently contested the arguments which would be taken while recording the finding in reference to the arguments of the appellants. It is to avoid repetition of the same facts and for the sake of brevity.

Finding of the Tribunal:

10. We have considered the rival submissions of the parties and perused the record carefully.

11. The undisputed facts on record shows a sale transaction of land measuring 0.99 hectare between Shri Ranjeet Gaurav, Power of Attorney holder of Smt. Kamla Devi, and his wife Smt. Suman Rai to Shri Ramlal Nangalia for a total consideration of Rs.16,20,000/-vide Sale Deed dated 28.05.2018. Out of the sale consideration of Rs.16,20,000/-, Rs.15,10,000/- was paid through various cheques by the beneficial owner Smt. Madhu Soni to the seller and remaining amount of Rs.1,10,000/- was paid in cash.

12. The learned counsel for the appellants submitted that the payment of Rs.15,10,000/- to the seller was out of the loan taken by the appellant Shri Ramlal Nangalia. The loan amount was not taken directly by the appellant in his name but sent to the seller of the land directly. It otherwise happens if the loan is taken from the bank and transmitted directly to the seller. On the same pattern, loan was taken by the appellant and consideration was directly paid by the loanee.

13. The learned counsel for the appellants admitted that there exists no loan agreement and if it was with the understanding that the loan amount would be directly paid to the seller, there should have been tripartite agreement between the seller, purchaser and the loanee which does not exist. The direct payment of Rs.15,10,000/- to the seller by beneficial owner satisfies the first part of the definition of benami transaction given under Section 2(9)(A) of the Act of 1988, as amended by the Amending Act of 2016 and thereby it was taken to be a benami transaction because the land was purchased in the name of Shri Ramlal Nangalia while consideration was paid by the beneficial owner Smt. Madhu Soni for her future benefit. The fact aforesaid is fortified in reference to the argument advanced by Smt. Madhu Soni and her son who made statements that the purchase of the land could not have made in the name of Smt. Madhu Soni due to restriction in the Rajasthan Revenues law. The land belonging to Scheduled Caste could not have been transferred to another community and, therefore, Shri Ramlal Nangalia got involved. The statement/argument aforesaid proves the case of benami transanction. It is for the reason that the payment of consideration of the property was made by Smt. Madhu Soni while the property was registered in the name of Shri Ramlal Nangalia. The reason for taking the property in the name of Shri Ramlal Nangalia has been disclosed by the counsel for the appellant Smt. Madhu Soni by himself. It was due to the restriction/bar under the Rajasthan Revenues law for sale of land by SC/ST to non-SC/ST candidates. It was otherwise a fact that in case of loan advanced even by the individual, it would be transferred to the person taking loan and would not be diverted to a seller without involvement of tripartite agreement. In the light of the aforesaid, the Adjudicating Authority answered the reference holding it to be a case of benami transaction and accordingly confirmed the Provisional Attachment Order.

14. The fact in reference to the restriction of the Rajasthan Revenues Law about the sale of the property by the SC to non-SC category fortifies the case of benami transaction. The land was actually purchased for the future benefit of beneficial owner Smt. Madhu Soni and accordingly she made the payment of consideration for transfer of property in the name of benamidar Shri Ramlal Nangalia and it is only for the reason that so called loan amount taken by Shri Ramlal Nangalia was not paid to him, as admitted by the counsel for the appellants. In view of the above, the loan was shown only to save it from the definition of benami transaction but in absence of the evidence, the appellants could not demolish the case initiated by the respondents. The amount of Rs.1,10,000/- was paid in cash and for that also, the appellant has not disclosed the source.

15. A reference of an application submitted to convert the land from agriculture to non-agriculture has been given because application alleged to have been filed in the year 2014 but could not see light of the day till the sale deed was executed for the agriculture land on 28.05.2018. It was otherwise stated that subsequent to the Sale Deed dated 28.05.2018, the land was transferred to Shri Divesh Soni and Shri Chitranjan Soni sons of Smt. Madhu Soni vide Sale Agreement dated 16.09.2020 for the consideration of Rs.21,00,000/-. However, no details or evidence for it could be submitted. It was not even mentioned in the Sale Agreement dated 16.09.2020, which was much subsequent to the benami transaction in the year 2018. The Adjudicating Authority discussed the issue and found it to be a case of benami transaction and confirmed the Provisional Attachment Order. It is a fact admitted by the appellants that loan amount of Rs.15,10,000/- remained unpaid and, therefore, it becomes clear that it was not a loan amount but transfer of the consideration for purchase of the property in the name of benamidar for future benefits of the beneficial owner.

16. The appellants have referred to a capital account and balance sheet for the periods of 2018-19 to 2022-23. It is to show that Ramlal Nangalia was debtor of the loan of Rs.15,10,000/- till 31.03.2022. The fact aforesaid was not accepted by the Adjudicating Authority finding it to be in conflict to other facts because there was conflict between the balance sheet and details of ITR which was not tallying with each other. In any case, the facts aforesaid were not so relevant once it is found proved that the land was purchased by Shri Ramlal Nangalia for which consideration was paid by the beneficial owner Smt. Madhu Soni for her future benefit.

17. In the light of the discussion made above and after considering all the arguments raised by the counsel for the parties, we do not find a case in favour of the appellants to cause interference in the impugned order. The appeals accordingly fail and are dismissed.