Source of Consideration vs. Registered Title in Benami Transactions

ORDER

1. The present appeals have been filed u/s 46 of the Prohibition of Benami Property Transaction Act, 1988 (PBPT Act, 1988) against the common order dated 19.01.2024 of the Ld. Adjudicating Authority (Ld. AA) wherein it was held that Sh. Prabhakar Satpathy was the Benamidar (BD) and Sh. Prasanta Kumar Dash and Sh. Shishir Kumar Sahoo were the Beneficial Owners (BO). The Beneficial Owners are the nephews of the Sh. Prabhakar Satpathy. Immovable Property in form of land measuring Ac. 2.000 dcml at Mouza- Goudakashipur, Khata No- 110, Plot no- 243 (Present Khata No- 166/283, Present Plot No 243/656) was held to be the Benami property.

2. The Impugned Order reveals that the Initiating Officer (IO) had initiated proceedings under the PBPT Act, 1988 on the basis of information received from the Joint Commissioner of the Income Tax (BPU), Bhubaneswar vide letter dated 12.12.2019 to the effect that Sh. Prabhakar Satpathy had purchased a property from Smt. Nirupama Swain and others for a consideration of Rs. 55,00,000/-.

However, the income of Sri Satpathy was not sufficient to cover the cost of purchase. Information were also called from the six land owners for their confirmations of the receipt of sale consideration. In response to the letter dated 29.08.2022, two of the land owners namely, Sri Lalit Kumar Swain and Sri Pradip Kumar Swain submitted their replies wherein they confirmed that the value of the land was Rs.55 lakhs.

3. Information was also called from different banks for furnishing bank statements of Sri Prabhakar Satpathy, Sri Prasant Kumar Dash and Sri Shishir Kumar Sahoo. Information received from the banks was verified and the fact that Sri Prasant Kumar Dash and Sri Shishir Kumar Sahoo had transferred the required amount to the bank account of Sri Prabhakar Satpathy was found correct. Sri Satpathy furnished his reply to the summons wherein he admitted that his two nephews namely Sri Prasant Kumar Dash and Sri Shishir Kumar Sahoo transferred the required amount in his bank account for payment to the land owners and the same was utilized by him for purchase of the impugned property.

3. The proceedings under the PBPTA, 1988 also revealed that Sh. Prashanta Kumar Dash, and Sri Shishir Kumar Sahoo were involved in the deal even before the purchase of the impugned land by Sri Prabhakar Satpathy. Initially one sale agreement was executed on 31.12.2008 between Sh. Pradip Kumar Swain, Sh. Lalit Kumar Swain, Sh. Prabin Kumar Swain as First Party Members and Sh. Prabhakara Satpathy as Second Party, wherein it was agreed upon that the impugned land will be registered against the names of Sri Prabhakar Satpathy, Sri Prasant Kumar Dash and Sh. Sishir Kumar Sahoo. It was also agreed upon that major investment will be done by Sh. Prasant Kumar Dash and Sh. Sishir Kumar Sahoo. Sh. Dash and Sh. Sahoo provided the money for the said transaction.

4. Another sale agreement was made with Sh. Prabin Kumar Swain one of the legal heir and son of Late Kunjabihari Swain on 26th October, 2009 by Sh. Prabhakar Satpathy to purchase the same land measuring Ac 2.00 Acres at a consideration of Rs 27,50,000/-. Further it was claimed by Sh. Prabhakar Satpathy that he had paid an amount of Rs. 2,25,000/- in cash as an advance token money for the said deal. However, no documentary evidence could be furnished by Shri Prabhakar Satpathy regarding the payment of such advance amount. From the circumstantial evidence as well as the records it was construed that Shri Prabhakar Satpathy did not have the financial resources to pay for the said amount as he was working as Subedar Major (Technical) in the Ministry of Defense and had retired on 31.03.2004. He has already stated in his statement that he had received approximately Rs. 13 lakhs as his full retirement benefit. After his retirement he had built his residential house at Subudhipur, Khordha and for this purpose he had taken house loan. As can be seen from his Income Tax returns for the AY 2010-2011 pertaining to Financial Year 2009-2010 that he had a total income of only Rs. 2,42,270/-. Thus, the claim of Shri Prabhakar Satpathy that he had paid an amount of Rs. 2,25,000/- as advance money and made further payment of Rs. 5,50,000/- towards construction of boundary walls and development of roads totaling Rs. 8,75,000/- out of his own sources could not be proved.

5. It can be further seen that impugned land measuring 2 acres was finally registered in the name of Shri Prabhakar Satpathy on 10.06.2018 against the sale consideration of Rs. 50,00,000/- which was fully funded out of the money received from his nephews Shri Prasanta Kumar Dash and Shri Sishir Kumar Sahoo. The entire consideration was funded through banking channels wherein Shri Prasanta Kumar Das has paid an amount of Rs. 30,00,000/- and Shri Sishir Kumar Sahoo paying an amount of Rs. 29,63,000/- It can be mentioned that in the earlier agreement dated 26.10.2009, it was agreed upon by the parties that the sale consideration of the said land would be Rs. 27,50,000/-, however, an enhanced value of Rs. 50,00,000/- had to be made in the year 2018 due to enhanced value of the land which would have naturally increased in 9 years’ time. As per the statement of Shri Prabhakar Satpathy when the land was finally registered in his name, a stamp duty of Rs. 2,75,000/-and a registration charge of Rs. 1,10,407/- was also paid out of the money received from his nephews Shri Prasanta Kumar Dash and Shri Sishir Kumar Sahoo and the balance amount of Rs. 5,77,593 was spent towards miscellaneous expenses such as mutation of land, development of plot, construction of the out-house and well etc.

6. The alleged Beneficial Owner, Sri Prasant Kumar Dash stated that he had paid Rs 30,00,000/- to his uncle Sri Prabhakar Satapthy between 11th June 2018 to 17th June 2019 towards advance against purchase of land measuring area. Ac. 0.900 dec out of Ac 2.00, Plot No 243/656, Mouza Goudakashipur, Dist.-Khorda. For which he had executed a registered sale agreement no. 11121805552 dated 22.12.2018 wherein the sale consideration was agreed upon Rs 24,75,000/-. However, he had paid Rs 30,00,000/- to Sri Prabhakar Satpathy which includes Rs.24,75,000/-towards land cost, development cost of Rs 1,87,500/- and registration cost of Rs 3,37,500/- aggregating to Rs 30,00,000/-Finally he had registered the land in his name vide sale deed no 11121905613 on 23.12.2019 where the benchmark valuation of the property was Rs. 67,50,000/-and stamp duty paid on bench mark value and he had also deposited Rs. 67,500/- as TDS u/s 194IA of the Income Tax Act 1961 accordingly.

7. Sri Prabhakar Satpathy had also executed a Sale Agreement with his nephew Sri Shishir Kumar Sahoo, on 8th November 2018 who had agreed to purchase Ac. 0.900 Decimals of land out of Ac. 2.00 Acres at agreed Sale consideration of Rs. 29,63,000/-which was paid to Sri Satpathy during the period from 4th March 2017 to 24th September 2019. But, the registration in the name of Mr. Shishir Kumar Sahoo has not been done till now on the request of Mr. Shishir Kumar Sahoo because he was having some financial constraints and was immediately not in a position to pay the registration and other related charges.

8. The Ld. AA held that Sh. Prabhakar Satpathy accepted the fact that the source of purchase consideration of 2 acres of land is out of the funds provided by Sri Dash and Sri Sahoo which makes it clear that Sri Satpathy did not have the financial strength to make an investment of Rs.50 lakhs. Sri Dash and Sri Sahoo were involved in the impugned transaction from the very beginning and apparently, they planned to keep their involvement hidden. Accordingly, the fund towards purchase consideration was provided by them and the property was registered in the name of Sri Prabhakar Satpathy, the benamidar for the future benefit of the beneficial owners.

9. The Ld. Counsel for the Appellants submitted that Ld. AA failed to consider the fact that the appellant no. 2 herein is registered owner of part i.e. 900 decimals of the subject property which has been purchased by him for valid consideration vide Sale Deed dated 23.12.2019. Sh. Dash being a registered owner of the part of the subject property cannot be considered to be a beneficial owner of the same. Moreover, it was also submitted that appellant no. 2 &3 herein paid the stamp duty for the purchase of.900 decimal out of the subject property, further TDS of Rs. 67,500/- u/s 194 -IA of the Income Tax Act has also been deposited for the said transaction, which has been reflected in the Income Tax Returns and accepted by the Income Tax Department. A registered owner cannot be considered to be a beneficial owner of the same property under the PBPT Act, 1988. The Alleged Benamidar i.e. Sri Prabhakar Satpathy had acquired the property out of his own resources and not from the money paid by the appellant No. 2 and 3 and the subject property was not held for the benefit of the appellant no. 2 and 3. The registered Agreement to Sale dated 22.12.2018, and Sale Deed dated 23.12.2019, clearly establishes that the subject property was purchased by the appellant no. 2 and 3 from the appellant no. 1 for a valid consideration. The Ld. AA is in clear violation of the principles of Law of Evidence as enshrined in section 91 and 92, which clearly establish that documents are to be given precedence over oral statements. In the present case, in the presence of registered documents w.r.t. property, the Ld. AA wrongly inferred that benami transaction have been executed for the subject property. The beneficial interest of the subject property was always with the Appellant no. 1 which is evident from the fact that advance money against the sale of the property from Sh. Sahoo and Sh. Dash has been received by the Appellant herein, therefore, he is also the beneficiary of the said property and not a benamidar. The Section 2(9)(A) of the PBPT Act, 1988, clearly provides that for the property to be subject of a benami transaction, the consideration has to be paid by a person other than the registered owner of the property and the beneficial interest of the property shall also be enjoyed by such person paying the consideration, however, in the present case the consideration has been paid by the Appellant no. 1 and the beneficial interest has also been enjoyed by him, therefore, the subject property cannot be in any manner termed to be a benami property. The section 2(9)(A) itself provides for exception to the definition of benami property where property purchased in the name of a lineal ascendant or descendant. Appellant no. 2 & 3 being the lineal descendant of the Appellant no. 1, even otherwise falls into such exception and as such the subject property cannot be termed to be subject of a benami transaction. The purchase of the subject property by the Appellant was a bona-fide transaction. where he had purchased the same from his own sources for a valid consideration and was the de-facto and de-jure owner of the property. The possession of the title deeds with the Appellant no. 1 is a clear indication of the fact that the Appellant herein is the real owner. The respondent had not followed/complied with the Rule 5 of the PBPT Rules, which put a mandate on the Respondent/IO for attachment of any property.

10. The appeal was contested by the respondents and submitted that the appellant no. 1 was the benamidar and appellant no. 2 & 3 are the beneficial owners since the requirement under section 2(9)(A) of the PBPTA, 1988 has been fulfilled. The elaborate arguments were made by the respondent and would be considered while dealing with the issues raised by the appellant and thus would be referred while recording finding on each issue to avoid repetition of the same facts.

11. We have heard the arguments and perused the documents on record.

12. The present appeals concern Sh. Prabhakar Satpathy who is the alleged benamidar and Sh. Prasanta Kumar Dash and Sh. Shishir Kumar Sahoo who are the alleged beneficial owners. Sh. Prasanta Kumar Dash is represented via his legal representative Ajaya Kumar Dash. The property in question was held to be the benami property by the Ld. AA. It was held that the property had been purchased in the name of Sh. Satpathy and the consideration for the same was paid by Sh. Dash and Sh. Sahoo to the original land owners through Sri Satpathy and held by Sri Satpathy for the future benefit of Sh. Dash and Sh. Sahoo. The Ld. Counsel for the appellants argued on the contrary prayed for setting aside the order of the Ld. AA.

13. The Ld. Counsel for Appellant No. 2 & 3, submitted that the Ld. Adjudicating Authority failed to appreciate that the Appellants are the registered and lawful owner of Ac. 0.900 decimal of the impugned property, having purchased the same for valid consideration under a registered Sale Deed dated 23.12.2019. It was emphasized that stamp duty for the said transaction was duly paid and TDS of ?67,500/- under Section 194-IA of the Income Tax Act was deposited and duly reflected in the Income Tax Returns of Sh. Dash, which have been accepted by the Income Tax Department, thereby affirming the genuineness of the transaction. This contention of the appellants is rejected as the present case has been filed under the PBPTA, 1988. The registered sale deed dated 23.12.2019, payment of stamp duty as well as the deposit of TDS does establish lawful ownership, however the present proceedings are under the PBPTA, 1988 and therefore the abovementioned documents are legally irrelevant in order to determine a benami transaction. Under section 2(9)(A) of the PBPTA, 1988, in order to determine whether a benami transaction has taken place or not, it is imperative to show the source of consideration for the purchase of the alleged benami transactions as well as the beneficial owner of the property. Thus, the above-mentioned registered documents of the appellants, though maybe authentic, but will not aid in proving that no benami transaction has taken place. The Hon’ble High Courts and Hon’ble Supreme Court have time and again reiterated that registration, stamp duty, banking channels or ITR entries do no negate a benami transaction, if the consideration originated from another person. Hence, this contention of the appellants is rejected.

14. Further, it was argued by the Ld. Counsel for the appellants that that a registered owner cannot simultaneously be treated as a beneficial owner under the PBPT Act, and the allegation that the Appellant acted as a benamidar is wholly misconceived. This contention of the appellant cannot be accepted as section 2 (9)(A) of the PBPTA, 1988 contemplates a situation where the property is held by one person for the benefit of another and consideration is paid by another. Merely the registration of the title is not decisive because it does not disclose the source of funds required to purchase the property as well as the real beneficiary of the property.

The second limb of the statutory definition of a benami transaction also stands satisfied as appellant no. 1 transferred the impugned property to appellant no. 2 & 3, which demonstrates that the property was held for their future benefit.

15. It was also submitted by the Ld. Counsel for the appellant that the alleged Benamidar, namely Shri Satpathy, had acquired the property from his own resources and not from funds of Sh. Dash and Sh. Sahoo, and the property was never held for the benefit of any third party. This claim of the appellant that he purchased the property out of his own funds is contradicted by the documentary evidence on record. The bank statements submitted by the appellants demonstrate that the entire amount of 50,00,000/- used in 2018 for the purchase of the impugned property did not come from Sh. Sathpaty. In fact, it was sourced from his nephews, Sh. Prasanta Kumar Dash and Sh. Shishir Kumar Sahoo. Appellants also paid for the stamp duty, registrations and the development expenses. This satisfies one of the requirements under section 2 (9)(A)(b) where in it is required the consideration be provided by person other than the ostensible owner. Therefore, this claim of the appellant that he purchased the property out of his own sources is contrary to the bank statement, his own admission in his reply and the statement provided by Sh. Dash and Sh. Sahoo, hence, this contention of the appellants is also rejected. Sh. Satapathy retired in 2004 with retirement benefit of only Rs. 13,00,000/- and is income for the Assessment year 2010-2011 was only Rs. 2.42 lakhs. This makes it clear that he could not have paid 2.25 Lakh as advance for the property in the year 2009 or the 5.50 lakh for the boundary wall expense or the eventual Rs. 50 Lakh consideration for the impugned property. Therefore, the fact that the Sh. Prabhakhar Satpathy claimed the property from his own “sources” is factually incorrect and cannot be accepted.

16. The Ld. counsel of the appellants also submitted that the Ld. AA erred in disregarding registered documents, including the Agreement to Sale dated 22.12.2018 and Sale Deed dated 23.12.2019, which clearly establish that the transaction was supported by lawful consideration payable to the Appellant. The sale agreements dated 31.12.2008 and 26.10.2009 prove that appellant no. 2 & 3, being the nephews of the appellant no. 1, were the real investors in the impugned property. The agreement dated 31.12.2008, expressly records that the property would be purchased in the names of Satpathy, Dash and Sahoo. Even though the agreement dated 26.10.2009 has only appellant no. 1 as the signatory, he had no proof of paying even the alleged token money. Thus, from the very beginning, it is clear that Sh. Prasanta Kumar Dash and Sh. Shishir Kumar Sahoo were the real sponsors. This satisfies the section 2(9)(A)(a).

17. It is also submitted that the property remained in uninterrupted possession of the Sh. Prasanta Kumar Dash and Sh. Shishir Kumar Sahoo since the Agreement to Sale dated 26.10.2009, further reinforcing his de-facto and de-jure ownership. However, we could not find any documentary proof of the same on record showing possession delivered in 2009. In fact, the only possession transfer is after the 2018-2019 same deeds and therefore the possession of the property never shifted before the nephews financing the same, hence, this submission carries no merit.

18. It was also argued that the Ld. AA ignored the mandate of Sections 91 and 92 of the Indian Evidence Act, which require precedence to be given to documentary evidence over oral or inferential allegations. The said mandate of bar on oral evidence only applies between parties to a document and not against the state or in statutory proceedings or in actions involving fraudulent or sham transactions. Multiple courts have held that the PBPTA, 1988 overrides the strict documentary rule where the real ownership differs from legal title.

19. It may be true that all payments relating to the land were routed through banking channels, demonstrating complete transparency. However, the bank statement does not disclose the source of consideration which was used for the purchase of the impugned property.

20. It was also submitted that the statutory exception for lineal ascendants and descendants applies to the transaction in question. The exception under section 2(9)(A) applies only when the property is held for the benefit of the lineal ascendent/descendant and the consideration is paid by the lineal relative. However, in the present case, the nephews paid the consideration and the property was held for their benefit and not for the benefit of Satpathy. Therefore, the statutory exception would not save the appellants from the legal consequences under the PBPTA, 1988

21. With respect to the argument that, the post-registration transactions show the property was always intended for Sh. Prasanta Kumar Dash and Sh. Shishir Kumar Sahoo, The Ld. AA rightly noted after getting the land registered in his name in 2018, Satpathy immediately executed sale agreements with both nephews in 2018-19. Moreover, no fresh consideration was paid during the 2019 transfer which proves that 2019 sale was merely book adjustment of earlier funds paid by the nephews. This demonstrates classic benami layering.

22. With respect to the argument that compliance with Rule 5 PBPT Rules, it is irrelevant when benami elements are proven. Even if minor procedural issues are alleged, they do not override the core statutory violation. The bank statements, agreements, and admissions independently satisfy all ingredients of Section 2(9)(A). Thus, procedural objections cannot invalidate the findings.

23. The Tribunal is unable to accept the contention that the purchase of the subject property by Shri Prabhakar Satpathy was a bona-fide and independent transaction funded entirely from his own resources. Even if certain advance payments or expenditures were allegedly made by Shri Satpathy, it does not by itself, establish his financial independence in the acquisition of the impugned property. The respondent has placed material indicating the financial incapacity of Shri Satpathy vis-a-vis the value of the property and the financial involvement of Sh. Prasanta Kumar Dash and Sh. Shishir Kumar Sahoo. Even though the appellants claim that the beneficial interest remained with Shri Satpathy from 26.10.2009 to 2018, the evidence on record establish the fact that the Sh. Prasanta Kumar Dash and Sh. Shishir Kumar Sahoo were the actual beneficiary and intended owner.

24. In the light of the discussion made above, we do not find merit in the appeal and accordingly, the appeals are dismissed.

25. Pronounced in open court.