Provisionally attaching funds in appellant’s account is justified as unexplained RTGS credits constitute benami transactions

ORDER

1. This Order disposes of the Appeal No. FPA-PBPT-178/MUM/ 2018 filed by M/s Raksha Bullion, against the Order dated 27.09.2018 (Impugned Order) passed by the Ld. Adjudicating Authority under Section 26 (3) of the Prohibition of Benami Property Transaction Act, 1988 (PBPTA), New Delhi in Reference Nos. R-148/2017 whereby the Ld. Adjudicating Authority (AA) confirmed the Provisional Attachment Order dated 19.06.2017 (PAO) passed by the Initiating Officer, BPU, Mumbai under Section 24(4)(a)(i) of PBPTA. Rs. 1,00,00,000/- in the accounts in the Kotak Mahindra Bank, Shaikh Memon Street, Jhaveri Bazar, Kalbadevi, Mumbai in the name of M/s Raksha Bullion were provisionally attached.

2. Ld. Counsel for the Appellant submitted that the allegation is purely on the basis of the statement of Shri Asit B Doshi, the alleged Benamidar in the matter. No evidence has been provided to prove that the alleged illegitimate and ill-gotten cash belonged to the Appellant. The Initiating Officer (IO) did not allow any opportunity of cross examination of Shri Asit B Doshi or that of Shri Mangilal, who had allegedly contacted Shri Ashit B. Doshi, for depositing the old currency notes, as stated by Shri Ashit B. Doshi in his statement under Section 131 of the Income Tax Act, 1961. Thus, the PAO has been passed without proper inquiry or verification and without allowing any opportunity of being heard or cross-examinations of other parties alleged to have been involved and therefore, the Order is bad in law.

3. Ld. Counsel for the Appellant argued that the two entities viz M/s Aman Trading and M/s Marina Trading controlled by Shri Ashit B Doshi, which had purchased gold from M/s Raksha Bullion, had actually transferred Rs. 60,00,000/- and Rs. 35,00,000/- to the bank account of the Appellant. Ld. Counsel argued that the IO failed to appreciate the point that Shri Ashit B. Doshi had not provided any evidences in support of his statement recorded under Section 131 of the Income Tax Act, 1961. It was emphasized that the Appellant was not given an opportunity to cross examine Shri Asit B Doshi. Ld. Counsel stated that neither of the two limbs of the definition of Benami property are satisfied in the present case and accordingly, the allegation made is bad in the eye of law. As regards the first limb that property is transferred for the benefit of the Appellant, it is evident that the transaction entered into by the two Firms was for sale consideration of Rs. 95,00,000/-, which accrued no benefit to the Appellant. The consideration received by the Appellant was not a unilateral consideration as, against the amount received, the Appellant had sold gold of equivalent worth.

4. Ld. Counsel for the Appellant further submitted that the Impugned Order has been issued ignoring that the Appellant had acted in normal course of its business and the sale of gold bars was genuine. The Appellant had stock in hand to make the sale which were duly accounted for in the books of accounts. The gold was duly delivered and the payment was received through banking channel.

5. Ld. Counsel for the Appellant submitted that there is a difference between reason to believe and reason to suspect. In the present case the Initiating Officer (IO) has borrowed the belief from the Investigation Wing of the Income Tax Department. The allegation that the cash deposited by Shri Asit B Doshi was given by the Appellant is without any supporting material.

6. Ld. Counsel submitted that the statement of the Respondent No. 2 recorded on 01.12.2016 does not contain the Appellant’s name nor any direct allegation of receiving cash directly or indirectly from the Appellant or even a claim or whisper that cash was received from the Appellant. This issue itself is very vital because neither does Shri Asit Doshi (Respondent No. 2) states that he got the cash from the Appellant nor does Shri Mangilal states so (in fact his statement was not recorded by the IO) and the Appellant also does not state that he gave any cash to Shri Asit Doshi or to any Shri Mangilal at any time. In blatant violation of the rules of natural justice, the IO did not provide the Appellant cross examination of Shri Asit B Doshi or Shri Mangilal.

7. Ld. Counsel for the Appellant submitted that the Ld. AA held that the sale of Rs. 1,00,00,000/- of gold as huge amount, which is not correct. It is submitted that Gold rates are published by many authorities and IBJA (Indian Bullion and Jewellers Association) is just one of them. Many other rates are available in the public domain, hence the price of gold taken by the Appellant cannot be rejected as true value. He further argued that the fact the Respondent No.2 (Benamidar) does not appear before the IO/AA nor makes any submissions nor retracts his submission, the same cannot be used adversely against the Appellant. He therefore prayed for allowing the Appeal.

8. Ld. Counsel for the Respondent submitted that the office of Initiating Officer received information from the Investigation Directorate of Mumbai, related to benami transactions of M/s. Raksha Bullion (PAN:AAHFR2224C). According to the information received, the cash was deposited in the bank account of Shri Ashit B Doshi after 08.11.2016 in the form of old denomination notes of Rs. 1,00,00,000/- and the same was transferred to M/s Raksha Bullion, through banking channel. It is pertinent to mention here that in his statement dated 01.12.2016, Shri Ashit Balwant Doshi S/o Shri Balwant Pitamberdas Doshi (PAN:AACPD8921F) admitted that cash was deposited in the bank account of entities managed and controlled by him. He further stated that he received total cash amount of Rs.1,00,00,000/- from Shri Mangilal for giving RTGS entries to M/s. Raksha Bullion, and after deducting around Rs.5,00,000/- as commission @5%, he gave RTGS entries of around Rs.95,00,000/- to M/s. Raksha Bullion (Rs.60,00,000/-from M/s. Aman Trading and Rs. 35,00,000/- from M/s. Marina Trading.

9. Ld. Counsel for the Respondent stated that on verification of the details filed by the Beneficiary Owner (BO) (M/s Raksha Bullion), it is seen that it submitted two bills bearing Sl. No. 3104 dated 21.11.2016 for sale of gold bar to M/s Aman Trading at the rate of Rs. 2,950 per gm. Further against bill No. 3105 dated 21.11.2016 gold bar weighing 1172.370 gms. was sold to M/s Marina Trading at the same rate. Ld. Counsel argued that from reading of Section 2(9) and 2(26) of PBPTA, it is clear that transaction entered into by Shri Ashit Balwant Doshi with M/s Raksha Bullion is a benami transaction under Section 2(9) of PBPTA, as the cash for such deposit did not belong to Shri Ashit Balwant Doshi and was provided by M/s Raksha Bullion. This cash was deposited into bank accounts of the entities managed and controlled by Shri Ashit Balwant Doshi and transferred back to the bank account of the actual beneficiary i.e. M/s Raksha Bullion. So, in view of the above, Shri Ashit Balwant Doshi was treated as a Benamidar and M/s Raksha Bullion was treated as a beneficiary as the consideration for such transaction was provided by M/s Raksha Bullion through Firms of Shri. Ashit Balwant Doshi, for its future benefit. In the present case the benami transaction has been carried out in a very systematic and planned manner. As per planning, cash of the Appellant was deposited in the bank accounts of Shri Ashit Doshi, entry of sales was made in the books of Appellant and the bills were issued, then, Shri Ashit Doshi routed the money to the bank of the Appellant through RTGS. Ld. Counsel argued that as such, just like in the case of entry operators, the Appellant was also very well equipped with the documentary evidences, which in-fact are not the genuine evidences but are the fabricated entries in the books and papers. Ld. Counsel further argued that the Appellant took 10 to 12 days for delivery. Ld. Counsel also submitted that Shri Girish Sarkaria, through whom the Appellant claimed that it was contacted for sale of gold failed to comply with summons issued by the Department under Section 19 of the PBPTA. Ld. Counsel stated that the reasons for the Appellant to have agreed for the sale without KYC and booking receipt are not clear. Ld. Counsel further argued that it is clear that the rates given by the Appellant on bills dated 21.11.2016 were far different than the prevailing rates in the market on that date. The rate of gold without VAT was worked out at Rs. 29,500/- per 10 grams, which was far below the market rate. The weight of gold bars reflected on the bills was illogical and odd. These facts also establishes that the documents created by the Appellant were not at all reliable and were mere paper entries created to give the colour of genuine business transaction to the benami transaction and to mislead the I.T. Authority.

10. Ld. Counsel for the Respondent submitted that nobody denies the facts that the amount of Rs. 1,00,00,000/- was received by Shri Asit B. Doshi in old demonetised currency. He deposited this amount after deducting 5 percent commissions in his directly controlled & managed entities. It is also not in dispute that he was asked to transfer it by RTGS to the beneficiary account Kotak Mahindra Bank, Shaikh Memon Street, Jhaveri Bazar, Kalbadevi, Mumbai, and accordingly after depositing in his entities, the RTGS was made to the beneficiary account. The entire amount had been given by the Beneficiary through one Shri Mangilal to the Benamidar, Shri Ashit B. Doshi who had deposited the money in his managed and controlled entities. The Beneficiary Owner had projected the receipt of RTGS money in his account against sale of gold to the two parties of Shri Asit B. Doshi and all other formalities of genuine sale were worked out. But it is not clear how could the sale be made to any unknown person for such huge amount of gold. It is also not clear how the rate of gold can be different from the standard rate of gold notified by the IBJA. The Benamidar did not come forward to make any submissions as he did not have any stake in the seized money as he had already taken his 5% share. Therefore, it appears that the contention of the Initiating Officer for treating the transaction as benami under the PBPTA appears to be reasonable and supportable. Ld. Counsel therefore pleaded to dismiss the Appeal.

11. We have considered the rival submissions and the material on record. First and foremost, we observe that the Impugned Order under consideration, was issued on 27.09.2018 in the Ref. No. R-148/2017. Three other Orders were issued by the Ld. AA on 27.09.2018 in Ref. No. R-146/2017, in Ref. No. R-149/2017 and in Ref. No. R-151/2017. We further observe that in all the four References there are striking similarities in the facts of each case. While the Benamidar in all four cases has been Shri Asit B Doshi, the alleged Beneficial Owners are Firms viz M/s Lakshya Jewels in Ref. No. R-151/2017, M/s Vrajendra Enterprise in Ref. No. R-146/2017, M/s Shree Nakoda Gold in Ref. No. R-149/2017 and M/s Raksha Bullion in Ref. No. 148/2017. We have decided to deal with each of the four References separately because of separate PAO issued by the IO, distinct Impugned Orders issued by the Ld. AA and the Appellants, being the alleged Beneficial Owners, having filed separate Appeals viz Appeals Nos. FPA-PBPT-168/ MUM/2018 filed by Lakshya Jewels v. Initiating Officer, Dy. CIT (BPU  (SAFEMA – New Delhi), FPA-PBPT-169/MUM/ 2018 filed by M/s Vrajendra Enterprise, FPA-PBPT-170/MUM/ 2018 filed by M/s Shree Nakoda Gold and FPA-PBPT-178/MUM/ 2018 filed by M/s Raksha Bullion.

12. We cannot refrain from making the preliminary observations that the facts in each of the four cases relate to allegation of deposit of demonetized currency in the near proximity of the date of 8^th November, 2016 when the Notes of denomination of Rs. 500 and Rs. 1000 were demonetized and were withdrawn out of circulation through the Orders of the Government of India. In each of these four cases, Shri Asit B Doshi was approached through an intermediary for deposit of demonetized currency in the Banking Channel, so as to entail transfer of the said amounts through RTGS to the bank accounts of one of the four Appellants named in the preceding paragraph of this Order. Shri Asit B Doshi identified the names of the Firms in whose bank accounts the demonetized currency had to be deposited, so as to effect the desired RTGS. None of the Appellant in any of the Appeals has denied having been credited the RTGS amount in the bank account of its Firm. However, the Appellants have taken the defence that such amounts were received against payment for sale of gold bullion. We have examined the pleadings in each of the four Appeals made by the Appellants along with the evidence advanced by them as to deny the allegation that they indulged in benami transaction.

13. In the present matter, the Respondent has alleged that cash amounting to Rs. 1,00,00,000/- was deposited in the bank account of entities managed and controlled by Shri Asit B Doshi. It is further alleged that the said cash comprised of the demonetized currency and was deposited through one Shri Mangilal. It is on record that Rs. 95,00,000/- was credited through RTGS in the account of the Appellant in Kotak Mahindra Bank, Shaikh Memon Street, Jhaveri Bazar, Kalbadevi, Mumbai. It is further on record that on 11.11.2016 RTGS was received from M/s Aman Trading of amount Rs. 60,00,000/-. M/s Marina Trading transferred through RTGS on 11.11.2016 Rs. 35,00,000/-. Shri Asit B Doshi in his statement under Section 131 of the Income Tax Act, 1961 tendered before the Investigation Wing of the Income Tax Department confirmed that he had received total cash amount of Rs. 1,00,00,000/- from Shri Mangilal for giving RTGS entry to the Appellant, after deducting Rs. 5,00,000/- as commission at the rate of 5 percent. Therefore, in so far as transfer of Rs. 95,00,000/- as RTGS from the aforementioned two Firms at the behest of Shri Asit B Doshi to the bank account of the Appellant Firm is not in dispute.

14. The Appellant has furnished the explanation for the aforementioned transfers through the RTGS, as being proceeds from sale of gold. In this regard, the Appellant has referred to the Invoices No. 3104 & 3105 both dated 21.11.2016. The Respondent has alleged manipulation of records in view of the mismatch in the bills submitted by the Appellant. The Respondent has also alleged that the rates given by the Appellant on the said bills are very different from the prevailing rates in the market on that date. The Respondent has further argued that as per the Indian Bullion and Jewellers Association Website, the rates on 21.11.2016 were markedly different from those which are reflected on the bills. Moreover, the weights of gold bars which were supposedly sold were illogical and odd.

15. The Respondent has further argued that in the present case the benami transaction has been carried out in a very systematic and planned manner. As per planning, cash of the Appellant was deposited in the bank accounts of Shri Ashit Doshi, entry of sales was made in the books of Appellant and the bills were issued, then, Shri Ashit Doshi routed the money to the bank of the Appellant through RTGS. Just like in the case of entry operators, the Appellant was also very well equipped with the documentary evidences, which in-fact are not the genuine evidences but are the fabricated entries in the books and papers.

16. The fact that deposit of cash amount of Rs. 1,00,00,000/-with Shri Asit B Doshi has not been denied. Even the RTGS to the bank account of the Appellant from two Firms which are linked to Shri Asit B Doshi is matter of record. There is nothing produced by the Appellant as to show that it had business relationship, from the past, with the two Firms. Occurrence of such transactions within short period of the demonetization of the currency Note of denomination of Rs. 500 and Rs. 1000 cannot be overlooked. Moreover, the Investigation Wing of the Income Tax Department had intelligence to this effect. The statement of Shri Asit B Doshi under Section 131 of the Income Tax Act, 1961 taken under oath is admissible evidence. To challenge the said statement on the grounds that it was not taken in office of the Income Tax Department falls since such ground is frivolous and cannot be accepted. The explanation in terms of bills and other documents like ledger and stock statement suffer from being independent evidence as to substantiate the explanation offered by the Appellant. The bank statements in fact corroborate the transfer through the RTGS from unknown Firms.

17. The Appellant has alleged the violation of the principles of natural justice, in view of denial of opportunity to cross examine Shri Mangilal and Shri Asit B Doshi. We find that there is no statement on record of Shri Mangilal, hence the question of his cross examination cannot arise. In so far as Shri Asit B Doshi is concerned we find that the Appellant has been furnished copy of his statement and in any case Shri Asit B Doshi was summoned for the purpose of cross examination, but he failed to appear. The relevant paragraph in the decision of the Hon’ble Supreme Court in Kanungo & Company v. Collector of Customs [AIR 1972 SC 2136], which has laid down that in all cases cross-examination of a witness may not be necessary may be quoted as follows:

“12. We may first deal with the question of breach of natural justice. On the material on record, in our opinion, there has been no such breach. In the show-cause notice issued on August 21, 1961, all the material on which the Customs Authorities have relied was set out and it was then for the appellant to give a suitable explanation. The complaint of the appellant now is that all the persons from whom enquiries were alleged to have been made by the authorities should have been produced to enable it to cross-examine them. In our-opinion, the principles of natural justice do not require that in matters like this the persons who have given information should be examined in the presence of the appellant or should be allowed to be cross-examined by them on the statements made before the Customs Authorities. Accordingly, we hold that there is no force in the third contention of the appellant.”

18. Another decision of the Hon’ble Supreme Court in Dharampal Satyapal Ltd. v. Deputy CCE 320 ELT 3/51 GST 197/33 GSTR 1 (SC)/(2015) 8 SCC 519 : (2015) 33 GSTR 1: 2015 SCC OnLine SC 489 at page 538, opined that law on natural justice has evolved and every violation of principles of natural justice need not result in setting aside an order, unless and until, prejudice has been established by the aggrieved party. The relevant paragraphs are extracted herein:

“We are not concerned with these aspects in the present case as the issue relates to giving of notice before taking action. While emphasizing that the principles of natural justice cannot be applied in straight-jacket formula, the aforesaid instances are given. We have highlighted the jurisprudential basis of adhering to the principles of natural justice which are grounded on the doctrine of procedural fairness, accuracy of outcome leading to general social goals, etc. Nevertheless, there may be situations wherein for some reason – perhaps because the evidence against the individual is thought to be utterly compelling – it is felt that a fair hearing ‘would make no difference’ -meaning that a hearing would not change the ultimate conclusion reached by the decision-maker – then no legal duty to supply a hearing arises. Such an approach was endorsed by Lord Wilberforce in Malloch v. Aberdeen Corporation [(1971) 2 All ER 1278 (HL)], who said that a ‘breach of procedure cannot give (rise to) a remedy in the courts, unless behind it there is something of substance which has been lost by the failure. The court does not act in vain’. Relying on these comments, Brandon LJ opined in Cinnamond v. British Airports Authority [(1980) 2 All ER 368 (CA)] that ‘no one can complain of not being given an opportunity to make representations if such an opportunity would have availed him nothing’. In such situations, fair procedures appear to serve no purpose since ‘right’ result can be secured without according such treatment to the individual. In this behalf, we need to notice one other exception which has been carved out to the aforesaid principle by the Courts. Even if it is found by the Court that there is a violation of principles of natural justice, the Courts have held that it may not be necessary to strike down the action and refer the matter back to the authorities to take fresh decision after complying with the procedural requirement in those cases where non-grant of hearing has not caused any prejudice to the person against whom the action is taken. Therefore, every violation of a facet of natural justice may not lead to the conclusion that order passed is always null and void. The validity of the order has to be decided on the touchstone of ‘prejudice’. The ultimate test is always the same, viz., the test of prejudice or the test of fair hearing.”

19. The Judgment of the Hon’ble Supreme Court in Telestar Travels (P.) Ltd. v. Special Director of Enforcement [2013]  178 COMP CASE 321/4 COMP. LJ 228/118 SCL 361 (SC)/[2013 AIR SCW 1304], has held that denial of request to cross-examine the witnesses by the Ld. Adjudicating Authority does not violate the principles of Natural Justice.

“20. Coming to the case at hand, the Adjudicating Authority has mainly relied upon the statements of the appellants and the documents seized in the course of the search of their premises. But there is no dispute that apart from what was seized from the business premises of the appellants the Adjudicating Authority also placed reliance upon documents produced by Miss Anita Chotrani and Mr. Raut. These documents were, it is admitted disclosed to the appellants who were permitted to inspect the same. The production of the documents duly confronted to the appellants was in the nature of production in terms of Section 139 of the Evidence Act, where the witness producing the documents is not subjected to cross examination. Such being the case, the refusal of the Adjudicating Authority to permit cross examination of the witnesses producing the documents cannot even on the principles of Evidence Act be found fault with. At any rate, the disclosure of the documents to the appellants and the opportunity given to them to rebut and explain the same was a substantial compliance with the principles of natural justice. That being so, there was and could be no prejudice to the appellants nor was any demonstrated by the appellants before us or before the Courts below. The third limb of the case of the appellants also in that view fails and is rejected.”

20. In this regard, we find support from the three Judge Bench Judgment of the Hon’ble Supreme Court in State of U.P. v. Sudhir Kumar Singh [(2021) 19 SCC 706]. The relevant paragraphs are extracted below:

“42. An analysis of the aforesaid judgments thus reveals:

42.1. Natural justice is a flexible tool in the hands of the judiciary to reach out in fit cases to remedy injustice. The breach of the audi alteram partem rule cannot by itself, without more, lead to the conclusion that prejudice is thereby caused.

42.2. Where procedural and/or substantive provisions of law embody the principles of natural justice, their infraction per se does not lead to invalidity of the orders passed. Here again, prejudice must be caused to the litigant, except in the case of a mandatory provision of law which is conceived not only in individual interest, but also in public interest.

42.3. No prejudice is caused to the person complaining of the breach of natural justice where such person does not dispute the case against him or it. This can happen by reason of estoppel, acquiescence, waiver and by way of non-challenge or non-denial or admission of facts, in cases in which the Court finds on facts that no real prejudice can therefore be said to have been caused to the person complaining of the breach of natural justice.

42.4. In cases where facts can be stated to be admitted or indisputable, and only one conclusion is possible, the Court does not pass futile orders of setting aside or remand when there is, in fact, no prejudice caused. This conclusion must be drawn by the Court on an appraisal of the facts of a case, and not by the authority who denies natural justice to a person.

42.5. The “prejudice” exception must be more than a mere apprehension or even a reasonable suspicion of a litigant. It should exist as a matter of fact, or be based upon a definite inference of likelihood of prejudice flowing from the non-observance of natural justice.”

21. On perusal of these judgments, it would be reasonable to make the following inferences:

22. We observe that under the facts and circumstances of the present case the denial of cross examination has neither resulted in prejudice to the Appellant nor caused violation of principles of natural justice.

23. In view of the aforementioned discussions and analysis, we dismiss the Appeal No. FPA-PBPT-178/MUM/ 2018 filed by M/s Raksha Bullion and uphold the Impugned Order in the Reference No. R-148/2017. Applications pending, if any, are disposed of accordingly.