Failure to Prove Source of Consideration Confirms Transactions as Benami; Attachment Upheld.
Issue
Whether property transactions can be classified as “benami transactions” under Section 2(9)(D) of the Prohibition of Benami Property Transactions Act, 1988, when the appellant, in whose name the properties are held, fails to provide any evidence to explain who provided the consideration for the purchase.
Facts
The appellant had purchased two immovable properties.
The Initiating Officer passed a provisional attachment order, which was later confirmed by the Adjudicating Authority.
The appellant challenged these orders but failed to state or show any evidence as to who actually provided the money for the two purchases.
In one transaction, the consideration was allegedly paid in cash, which the appellant attributed to “agricultural income” but provided no corroborating evidence to prove this source.
In the other transaction, deliberate efforts were made to deposit unexplained cash into the appellant’s bank account first, in an attempt to make it appear that the payment was made by the appellant through legitimate banking channels.
Decision
The court ruled in favour of the revenue and upheld the attachment orders.
It held that the transactions were squarely covered under Section 2(9)(D) (where the person providing the consideration is not traceable or is fictitious) because the appellant completely failed to explain the source of the funds.
The court found that both transactions were indeed Benami:
The claim of “agricultural income” was uncorroborated and thus disbelieved.
The routing of unexplained cash through a bank account was seen as a deliberate attempt to disguise the Benami nature of the transaction.
Key Takeaways
Burden of Proof is on the Titled Owner: The onus is entirely on the person in whose name a property is registered (the appellant) to prove and provide evidence for the source of the consideration used to purchase it.
Vague Explanations are Insufficient: A simple claim of “agricultural income” without any supporting proof (like revenue records, crop sale bills, etc.) is not a valid explanation and will be rejected.
Routing Cash Doesn’t Legitimize: The court will look past superficial attempts to legitimize a transaction. Depositing unexplained cash into an account just before a purchase is a classic indicator of a Benami transaction.
Failure to Explain = Benami: A failure to identify or show evidence of the true source of the consideration is a key trigger for classifying a property as Benami under Section 2(9)(D).
APPELLATE TRIBUNAL SAFEMA, NEW DELHI BENCH
Lal Mohammad Molla
v.
Initiating Officer, BPU*
BALESH KUMAR and Rajesh Malhotra, Member
FPA-PBPT-696 & 697/KOL/2019
OCTOBER 29, 2025
Arun Kr. Agarwal and Shubham Kr. Agarwal, Advs. for the Appellant. Manmeet S. Arora, Adv. for the Respondent.
ORDER
1. This Order disposes of the Appeal Nos. FPA-PBPT-696/ KOL/2019 and FPA-PBPT-697/KOL/2019, both filed by Shri Lal Mohammad Molla against the Orders dated 25.03.2019 (Impugned Orders) under Section 26 (3) of the Prohibition of Benami Property Transaction Act, 1988 (PBPTA) whereby the Reference Nos. R-742/2018 and R-743/2018 were allowed and the Attachment Orders dated 21.03.2018 passed under Section 24 (4) (b) (i) of PBPTA, 1988 by the Initiating Officer (IO) were confirmed. Thus, vide the Impugned Orders land property of 1 Decimal at the Address of R.S. Dag No. 1084 of District North 24 Parganas, PS Rajarhat, Gram Panchayat-Rajarhat Bishnupur-I, Mouza-Jagdishpur, purchased through registered Sale Deed No.07063/2017 and land property of 1.65 Decimal at the Address of R.S. Dag No. 5967 of District North 24 Parganas, PS Rajarhat, Gram Panchayat-Rajarhat Bishnupur-I, Mouza-Jagdishpur, purchased through registered Sale Deed No.07833/2017 were attached.
2. Ld. Counsel for the Appellant stated that the Appellant and his family were engaged in agriculture, poultry, pisciculture, dairy and allied activities. The Appellant is very lowly educated person and had also sold his agricultural land. It is from these sources that the Appellant had generated funds to buy land for agricultural purposes from time to time. He alleged that the Appellant had been receiving threats from certain influential persons. Ld. Counsel stated that the Appellant was issued 15 Show Cause Notices (SCN) on 22.12.2017 for the purchase of parcels of agricultural land. However, the Appeals relating to only two aforementioned references are being argued to be taken up for decision by the Tribunal as the matters relating to other 13 SCNs are for the purchase of land before November, 2016, which need to be looked into in terms of decisions of the Apex Court in Ganpati Dealcom Case.
3. Ld. Counsel for the Appellant contended that the SCNs have been issued just because the name of the Appellant was reflected in the BPL (Below Poverty Line) list of the West Bengal Government and the Appellant had not filed Income Tax Returns (ITRs). Ld. Counsel stated that there were no Income Tax proceedings which had been initiated before the present proceedings. The Respondent had not supplied copy of material in his possession at the time of recording reasons. Moreover, copy of approval under Section 23 of PBPTA was also not supplied. Ld. Counsel contended that the documents relied upon and filed in the Reference were collected after the issue of SCN. Since, the documents were received by the Initiating Officer (IO) after the issuance of SCN, it is clear that the SCN was issued without relying upon the relevant documents. The direction to the Sub-Registrar prohibiting to transfer the properties made the SCN illegal. The SCN is illegal and void as the specific clause of A, B, C or D of Section 2 (9) of the PBPTA was not mentioned. In the reply and affidavit filed by the Appellant before the IO, it was clarified that the parcels of land were purchased from his own sources. He had explained that his name was not being reflected in the BPL. Moreover, his main sources of income were from agriculture and allied activities. Therefore, he did not file the ITRs. Further his income was largely in cash. He also did not, bank as the bank branch was far away. He denied that anyone provided consideration for the purchase of the impugned properties. Ld. Counsel mentioned that the two statements of the Appellant under Section 19 (1) of PBPTA confirms the aforementioned facts. Ld. Counsel stated that the sellers of the impugned properties Shri Dilip Kumar Ghosh and Smt. Supriya Sarkar had in their statements confirmed having sold the two impugned properties for Rs. 2 lakhs in cash and Rs. 3 lakhs through Draft respectively. Ld. Counsel contended that the Approval Note dated 21.03.2018 by the Approving Authority shows that he had recorded his approval in a purely mechanical manner without application of independent mind.
4. Ld. Counsel for the Appellant contended that the Provisional Attachment Order (PAO) is purely based on assumptions and presumptions. In fact, the ‘source information’ reveals that most of the transactions were executed by the unidentified land mediators. Ld. Counsel argued that there is no provision under PBPTA of the onus being on the Appellant to discharge the burden of proof. The Respondent has failed to establish the charge against the Appellant. Ld. Counsel alleged contravention of the principle of natural justice as the plea of the Appellant to be heard was turned down on the ground that the Order was already reserved on 24.10.2018, when in fact it was passed after five months on 25.03.2019. Ld. Counsel contended that that Impugned Orders were passed beyond the limitation period prescribed for the same. He stated that the Orders under Section 26 (3) of PBPTA are to be passed within a period of one year from the end of the month in which the reference under Section 24 (5) of the Act was received. However, this did not happen. Ld. Counsel cited the Judgment dated 20.04.1999 of the Hon’ble Supreme Court in the case of Pawan Kumar Gupta v. Rochiram Nagdeo 1999 (4) SCC 243. Ld. Counsel contended that in accordance with the Judgment (supra) where the consideration had been paid by the purchaser of the property, the words provided would not have any application. In the present case the consideration towards purchases of the properties had been paid by the Appellant. Hence, the words provided would not have any applicability.
5. Ld. Counsel for the Respondent stated that the Appellant has not disputed the purchase of the two impugned properties. He further stated that there are number of cash deposits in the bank accounts of the Appellant, which he has failed to explain. At the time of registration date of the sale deeds of the impugned properties, the bank balance of the Appellant was so small that the possibility of withdrawing the cash of Rs. 2 lakhs therefrom was not there. In so far as the second transaction is concerned, it is evident from the bank account of the Appellant that cash of Rs. 3 lakhs was deposited in his bank account No. 0145010224918 to make the bank draft. The cash deposit slip was examined and found not to bear the signature of the Appellant. Since, neither the person who actually provided the cash of Rs. 2 lakhs nor the person, who deposited Rs. 3 lakhs in the bank account could be identified, the transactions were held to be benami under Section 2 (9) (D) of the PBPTA. Ld. Counsel for the Respondent cited the Judgment dated 31.08.2014 of the Hon’ble Supreme Court in the case Valliammal Lrs v. Subramianm [Civil appeal No. 5142 of 1998], wherein it has been stated the following:
“Nevertheless, the source from where purchase money came and the motive why the property was purchased by Benami are by far the mostly important test for determining whether the sale standing in the name of one person, is in reality for the benefit of another.”
6. Ld. Counsel for the Respondent stated that the Appellant in his reply dated 16.03.2018 claimed that he already had some properties having inherited these from his parents. He further claimed that he had purchased the impugned properties from the agricultural income. Ld. Counsel contended that no evidence/record was produced in support of his claim. During the said financial year, properties worth Rs. 5 lakhs had been acquired by the Appellant, which did not match his income profile. Ld. Counsel alleged that for the acquisition of the two impugned properties consideration was provided by someone else with the motive to avoid paying taxes and prosecution under the Income Tax Act 1961, as well as to enjoy financial benefit and security from such acquisition. Ld. Counsel confirmed that the Orders were put up for approval under Section 24 (4) (b) (i) of PBPTA on 20.03.2018 to the Approving Authority, for making the provisional attachment. He further contended that the Approving Authority had given his approval on 21.03.2018. The IO thereafter filed the references under Section 24 (5) of PBPTA on 28.03.2018. The Adjudicating Authority issued the SCN on 20.04.2018. Ld. Counsel for the Respondent stated that irrespective of the technical flaws alleged by the Appellant, what is needed to be determined is the fact whether the transactions are Benami or not. Ld. Counsel stated that the Adjudicating Authority had fixed the hearing on 12.07.2018, however, the Appellant sought an adjournment. The matter was re-fixed on 24.10.2018, but none appeared. Ld. Counsel stated that the Appellant had not even given response to the SCN. Ld. Counsel further stated that the Adjudicating Authority found that most of the transactions were carried out in cash. Moreover, even his son Shri Nizamuddin Molla, though having filed ITRs did not have income profile as to provide the consideration for the two impugned properties. In any case the Appellant also could not show enough income, so as to be able to purchase the two impugned properties. Therefore, the Ld. Adjudicating Authority confirmed the PAO dated 21.03.2018 and allowed the two References No. 742/2018 and 743/2018, through the Impugned Orders dated 25.03.2019 under Section 26 (3) of the PBPTA.
7. We have considered the rival submissions and the material on record. It is on record that vide note dated 20.03.2018, the IO sought approval of Order under Section 24 (4) (b) (i) of the PBPTA. This note brings out that a notice dated 22.12.2017 under Section 24 (1) of the PBPTA was issued and served through speed post to the Appellant in connection with the two impugned properties. The IO has categorically stated in the note, “On the basis of material available on record with the Department, proceedings under Section 24 (1) of PBPTA was initiated in the case of various immovable properties in the form of land around the North 24 Parganas, District in the State of West Bengal.” The IO has gone on to record that the Appellant failed to comply with the notice dated 22.12.2017 and the reminders dated 05.02.2018 and 06.03.2018. The Appellant acknowledged the notice vide his letter dated 15.03.2018. The IO made his findings, “I have made necessary inquiry, called for reports and evidences within the time frame available as deemed fit. Circumstantial evidence confirms that Sri Lal Mohammad Molla was used as a conduit to liquidate the unaccounted cash to acquire the property mentioned in notice dated 22.12.2017 issued u/s 24 (1) of the PBPTA 1988 which is in the nature of Benami property as per the Section 2 (8) read with Section 2 (9) of the PBPTA 1988.”
8. We find that the Approving Authority noted on 21.03.2018 the following, “I have gone through the available records and material brought into records by the IO in the case of Sh. Lal Mohammad Molla. I have also perused the outcome of enquires conducted by him and examined the evidence gathered. The draft order prepared by the IO contains details of such findings and due analysis of evidence which lead to a definitive conclusion.” The Approving Authority has gone on to express satisfaction that the two impugned properties are fit cases to do provisional attachment.
9. In view of the noting’s cited in the preceding paragraphs 7 and 8 of this Order, we are unable to sustain the apprehension of the Appellant that there were no reasons to believe to issue the PAOs. It is also incorrect to state that action was taken without proper application of mind by the Approving Authority. In fact, the IO has categorically recorded that the opportunity was given to the Appellant through notice and its reminders to explain the acquisition of the two impugned properties which he failed to do other than having acknowledged the notice on 15.03.2018. We are not convinced by the contention made by the Appellant that the IO did not have any material before him to issue the notice to the Appellant. The note itself shows that the IO had the material available with him, which enabled him to issue notice, and make enquiry calling for reports and evidence within the available time frame. We find that the available record and materials were perused by the Approving Authority. Moreover, it is clear from the note dated 21.03.2018 of the Approving Authority that he examined the evidence gathered during the enquires conducted by the IO. In the face of the overwhelming evidence in the form of the two notes, we observe that the contentions made with regard to the alleged procedural flaws are nothing, but surmises based on presumptions. We do not agree that the impugned Orders are time barred since the References were filed on 28.03.2018 and the Adjudicating Authority issued the impugned Orders on 25.03.2019. The Orders were thus issued well within the limitation period stipulated in sub-Section 26(7) of the PBPTA. The said subSection is as follows: “No order under sub-section (3) shall be passed after the expiry of one year from the end of the month in which the reference under Sub -section (5) of Section 24 was received.” The apprehensions and contentions of the Appellant are unjustified without any corroborative evidence.
10. We find that certain facts particularly relating to purchase of the two impugned properties are undisputed. Payment was made in cash directly in one case and indirectly in the second case where cash was deposited in the bank account of the Appellant under the deposit slip on which the signature is not of the Appellant. It is also not disputed that the Appellant had not filed the ITRs. The contention of the Appellant that payments were made in cash because he did not do much banking is not supported by the evidence particularly when we look at his bank account statement for his accounts in the State Bank of India and in the Axis Bank. There are frequent entries relating to cash deposits in his bank account in the State Bank of India. We also note that often after the cash deposits of high denominations, withdrawal cheques have been issued on the same account. The Appellant has maintained ATM cards for the two accounts. His explanation for the necessity of indulging in cash transactions is not convincing. In the absence of any explanation about high amount transactions reflected in the said bank account, the inference that the Appellant was dealing with money arising not only from agriculture and allied activities is inescapable.
11. Ld. Counsel for the Appellant has relied upon the Judgment in the matter of Pawan Kumar Gupta (supra) to make distinction between the consideration paid and consideration provided. While agreeing with the distinction made in the cited Judgment, we are unable to agree with the contention of the Appellant that the present two matters fall within the category of consideration paid and hence the word provided does not have any applicability. In view of the observations and findings made by us in the preceding paragraphs of this Order, we find that on one hand no corroborative evidence has been placed to sustain the arguments of the Appellant, on the other hand the Respondent has with corroboration been able to support its findings about the transactions being Benami. We also do not agree that merely not specifying the transactions as falling under Section 2 (9) (D) in the SCN is fatal. We find that the PAO specifically has brought out that the said transactions are covered under Section 2 (9) (D) of the Act, since the person who provided the consideration were either not traceable or were fictious. The Appellant failed to state and show evidence as to who provided the consideration for the purchase of the two impugned properties. While for the property of 1 Decimal at R.S. Dag No. 1084 directly cash was paid attributing it to agricultural income without any corroboration, for the other property of 1.65 Decimal at R.S. Dag No. 5967 deliberate efforts were made to deposit unexplained cash in the bank account of the Appellant, so as to make it appear that payment was made by the Appellant through the Banking Channel.
12. In view of the aforementioned discussions and assessment of the evidence, we dismiss the two Appeals Nos. FPA-PBPT-696/ KOL/2019 and FPA-PBPT-697/KOL/2019 as being devoid of merit. Applications, if any, are accordingly disposed of.