Bank Account Transfers from Shell Entities Devoid of Genuine Business and Unexplained Goods Supply Constitute Benami Transactions Under PBPT Act

ORDER

1. This appeal has been preferred under Section 46 of the Prohibition of Benami Transactions Act, 1988 (in short “the Act of 1988”), to challenge the order dated 28.03.2024 passed by the Adjudicating Authority confirming the Provisional Attachment Order dated 28.02.2023 while answering the reference.

2. The proceedings under the Act of 1988 emanate from information received pursuant to a search conducted under Section 132 of Income Tax Act, 1961 in case of Shri Atul Tyagi and his associated entities. The search revealed that Shri Atul Tyagi was engaged in providing accommodation entries by routing unaccounted cash through a network of entities controlled and managed by him

3. During investigation, M/s Besties Trading Private Limited was-identified as one of the alleged beneficial entities. Analysis of the bank accounts of the entities controlled by Shri Atul Tyagi revealed that, during the demonetisation of currency notes of 500 and 1000 in the year 2016, an amount aggregating Rs. 1,20,00,000/-was deposited in demonetised currency in the accounts of M/s Sahil Tradewell Marketing Pvt. Ltd. (Rs. 82,50,000/-) and M/s Daksh Tradewell Pvt. Ltd. (Rs. 37,50,000/-), whereafter corresponding amounts were remitted to M/s Besties Trading Private Limited through RTGS/NEFT, allegedly after deduction of commission

4. It was noticed that on 15.11.2016, cash aggregating to Rs 1.76.00000/- (Rs. 90,00,000/- in the bank account of M/s Sahil Tradewell Marketing Pvt. Ltd. and Rs. 86,00,000/- in the account of M/s Daksh Tradewell Pvt. Ltd.) was deposited. On the very same day, Rs. 82,50,000/- and Rs. 37,50,000/- were transferred from those entities to M/s Besties Trading Private Limited through banking channels.

5. The financial credentials of M/s Sahil Tradewell Marketing Pvt. Ltd. and M/s Daksh Tradewell Pvt. Ltd. were also examined. It was found that both companies had been incorporated in January 2011 with an authorised paid-up share capital of merely Rs. 1,00,000/- each. Their income-tax records reflected filing of returns only up to AY 2015-16, while the MCA records showed that both companies had subsequently attained “Struck Off status. The statement of Shri Atul Tyagi was recorded under Section 131(1A) of the Income Tax Act. 1961 on 10.04.2017, wherein he admitted that the aforesaid entities and their bank accounts were under his control and management. The entities were not engaged in any genuine business activity, and since the year 2012, he had been providing accommodation entries by issuing bogus sale and purchase bills and routing unaccounted money of beneficiaries. He further stated that no books of account were maintained by such entities and that statutory compliances such as VAT and TDS were undertaken in certain cases merely to impart an appearance of genuineness of the transactions.

6. On the basis of the aforesaid material, the I.O recorded reasons to believe and issued a show cause notice under Section 24(1) of the Prohibition of Benami Property Transactions Act, 1988 on 30.11.2022. Summons were also issued to the directors of M/s Besties Trading Private Limited who were associated with the company during the relevant financial year. Shri Atul Tyagi, however, remained untraceable throughout the proceedings and did not file any response to the show cause notice. M/s Besties Trading Private Limited submitted that it was engaged in agency, wholesale trading and distribution business. It was asserted that the receipts represent genuine sale consideration received through banking channels. It was specifically contended that goods worth Rs. 82,50,000/ – had been sold to M/s Sahil Tradewell Marketing Pvt. Ltd. and goods worth Rs. 37,50,000/- had been sold to M/s Daksh Tradewell Pvt. Ltd., against which payments were received through RTGS/NEFT in the ordinary course of business.

7. The request was made to drop the summons issued in the name of Shri Vineet Chauhan, on account of his demise in September 2022. During the course of investigation, the statement of Shri Vivek Chauhan was recorded under Section 19(1)(b) of the PBPT Act. He stated that Shri Vineet Chauhan had been exclusively managing the affairs of company. Owing to his demise, he is not conversant with the transactions undertaken during the relevant period. He was granted time to furnish supporting documents and subsequently produced copies of VAT records, invoices, stock summaries and other relevant documents pertaining to the period from October 2016 to March 2017. However, when his statement was recorded again, he expressed his inability to explain the actual delivery of goods or identify the persons to whom the goods had allegedly been supplied, reiterating that such affairs had been exclusively handled by the late Shri Vineet Chauhan. Upon consideration of the material available on record. the Adjudicating Authority rejected the explanation furnished by M/s Besties Trading Private Limited and concluded that the RTGS receipts represented accommodation entries arranged through entities controlled by Shri Atul Tyagi rather than genuine business transactions.

8. Consequently, the transactions between M/s Sahil Tradewell Marketing Pvt. Ltd., M/s Daksh Tradewell Pvt. Ltd. and M/s Besties Trading Private Limited were held to be benami transactions within the meaning of Section 2(9)(A) of the PBPT Act, 1988. M/s Sahil Tradewell Marketing Pvt. Ltd. and M/s Daksh Tradewell Pvt. Ltd. were treated as benamidars under Section 2(10). while M/s Besties Trading Private Limited was held to be the beneficial owner under Section 2(12) of the Act.

9. The Provisional Attachment Order under Section 24(4)(b)(i) was passed on 28.02.2023. which was subsequently corrected by a corrigendum dated 26.06.2023 clarifying that the reference to Section 24(4)(a)(i) in the original order was inadvertent and ought to be read as Section 24(4)(b)(i). The aforesaid reference was confirmed by the Ld. Adjudicating Authority vide its Order dated 28.03.2024. Aggrieved by the same, the appellant has preferred this appeal u/s 46(1) of the PBPT Act. 1988 before this Tribunal.

10. The learned counsel for the appellant submitted that the provisional attachment of Rs.1.20 crores lying in the bank account of Union Bank of India is not a benami property but represents genuine sale consideration received against actual business transactions. The Appellant was engaged in agency business/wholesale trading and distribution and sold consumer goods to (DTPL) and (STMPL) between 03.10.2016 to 02.12.2016. Payments of Rs.82,50,000/- from M/s Sahil Tradewell and Rs.37,50,000/- from M/s Daksh Tradewell were received on 15.11.2016. The sales were supported by sale bills, purchase bills, stock records, VAT returns and transport/delivery documents.

11. The learned counsel for the appellant further submitted that the sale transactions were duly recorded in its audited books and stock register and reported in VAT returns. The transport delivery challans and acknowledgements establish actual movement and receipt of goods. The Appellant relied upon the sale invoices raised on DTPL and STMPL between October and December 2016 and submitted that the CIT(A), by order dated 31.05.2023, accepted the relevant sale transaction as genuine and deleted the addition made by the Income Tax Officer in respect of the Rs.82.50 lakh received from M/s Sahil Tradewell.

12. The learned counsel further submitted that the person who was managing its affairs and had knowledge of the disputed transactions, late Shri Vineet Chauhan, died on 16.09.2022 due to COVID-19, and consequently the appellant could not furnish details of the persons who had negotiated the transactions on behalf of DTPL and STMPL. The appellant relies upon the sale bills bearing Shri Vineet Chauhan’s signatures, matching with the audited balance sheet, his digital signed ITR, email address reflected in the ITR, the email address appearing in the bank records. The statement of Shri Vivek Chauhan on oath confirmed that Shri Vineet Chauhan was managing the appellant company’s affairs until his death.

13. The learned counsel for the appellant disputed the reliance on the alleged strike-off of the name of benamidar entities. It was submitted that the impugned transactions occurred during 2016, whereas the ROC notice for striking off STMPL was issued on 30.06.2017. Thus, the reference about “strike-off” status of the entities is not made out. The entities were in-existent during October–December 2016, when the disputed sales took place.

14. On merits, the appellant submitted that the essential ingredients of Section 2(9)(A) of the PBPT Act are not made out. The IO has alleged that the Appellant sold bogus goods to DTPL and STMPL and that the Appellant itself deposited Rs.1.76 crore in cash in the bank accounts and thereafter received Rs.1.20 crore back. The appellant denied the allegation and submitted that it received genuine sale consideration against goods actually sold.

15. The appellant specifically disputed the allegation that it deposited Rs.1.76 crore cash in the bank accounts of DTPL and STMPL. It was submitted that the allegation is based solely on the statement of Shri Atul Tyagi. The relevant portions of his statements indicate that the beneficiaries deposited cash in the bank accounts of firms/companies controlled by him and those parties thereafter transferred funds to their own accounts, for which he received commission of 10 paise. According to the Appellant, there is no independent evidence connecting the Appellant with the alleged cash deposits.

16. The learned counsel for the appellant pointed out that although the PAO alleges that Rs.90 lakh was deposited in M/s Sahil Tradewell’s account and Rs.86 lakh in M/s Daksh Tradewell’s account on 15.11.2016, followed by transfer of Rs.82.50 lakh and Rs.37.50 lakh respectively to the Appellant. The IO did not produce any cheque, bank application, voucher, deposit slip, CCTV footage or other corroborative material showing that the Appellant itself deposited the alleged cash. The Appellant, therefore, submitted that the fundamental factual premise of the benami allegation could not be proved.

17. The counsel further submitted that if appellant had deposited the entire Rs.1.76 crore, there is no logical reason for transfer of only Rs.1.20 crores, leaving Rs.56 lakh in the accounts of DTPL and STMPL. It also relies upon the bank statement of M/s Sahil Tradewell showing that, before payment of Rs.82.50 lakh on 15.11.2016, there were already bank transfers of Rs.11.85 lakh and Rs.38.15 lakh, which, according to the Appellant, contradict IO’s allegation that the Rs.82.50 lakh was originated from the alleged cash deposit of Rs.90 lakhs. With respect to M/s Daksh Tradewell, the Appellant relied upon the bank statement showing that, after the alleged Rs.86 lakh cash deposit, Rs.47.50 lakh was transferred to M/s R K Enterprises, rather than to the Appellant. It was submitted that if the Appellant had deposited the Rs.86 lakh, the movement of Rs.47.50 lakh to another entity requires explanation and itself undermines the alleged cash-to-Appellant nexus.

18. The Appellant also relies upon RBI Circular dated 08.11.2016, under which credit of specified bank notes into a third-party account was permissible subject to specific authorisation by the third party and production of valid identity proof. The IO failed to produce any material establishing that the cash deposits were made by the Appellant.

19. The Appellant challenged reliance on the statement of Shri Atul Tyagi. It was submitted that no material was found during the search of Shri Atul Tyagi showing that the Appellant had contacted him for obtaining accommodation entries, and that Shri Atul Tyagi never stated that the Appellant had approached him for accommodation entries. The Appellant, therefore, contended that the entire case against it rests upon an uncorroborated statement, which is false and contradictory. It does not establish that the Appellant was a beneficiary of a benami transaction.

20. The Appellant further submitted that Shri Atul Tyagi was not a director of DTPL or STMPL during the relevant period. According to the Appellant, he ceased to be a director on 06.09.2016, and his wife Smt. Vandana Tyagi also ceased to be a director on the same date. The Appellant therefore disputed the correctness of Shri Atul Tyagi’s statement that he and his wife were directors of the concerned entities during the relevant period.

21. The learned counsel urged that Shri Atul Tyagi’s statement cannot be treated as “gospel truth” without corroboration and cross-examination The statement of Shri Atul Tyagi was not recorded under Section 19 of the PBPT Act, and despite specific request, the Appellant was denied an opportunity of cross-examination by the Adjudicating Authority. It consequently seeks exclusion of his statement from consideration for drawing an adverse inference against the Appellant. The Appellant also pointed out that Shri Atul Tyagi was not arrayed as a benamidar despite his alleged involvement in benami transactions. He rather remained untraceable throughout the proceeding.

22. The Appellant submitted that the bank account in which the alleged benami property was attached had an existing balance of Rs.2,09,825/- before receipt of Rs.1.20 crore on 15.11.2016, and the balance as on the date of the attachment order on 28.02.2023 was Rs.2,09,672/-. It is therefore contended that the attached amount had no continuing nexus with the alleged benami property of Rs.1.20 crore rather represents old balance in the account.

23. The Appellant further submitted that if the IO had reason to believe that a person is a benamidar in respect of property, notice under Section 24(1) must be issued to such a person and, where the identity of the beneficial owner is known, a copy of notice must be issued to the beneficial owner under Section 24(2). In the present case, according to the respondent, DTPL and STMPL were the alleged benamidars, and therefore notices under Section 24(1) ought to have been issued to both entities. The Appellant submitted that instead of issuing notice to the alleged benamidars, the notice dated 30.11.2022 was issued to the alleged beneficial owner, M/s Besties Trading Pvt. Ltd. It contends that no notice under Section 24(1) was ever issued to DTPL or STMPL. The Appellant further disputed IO’s subsequent description of mere a typographical error, submitting that the notice is system-generated, bears DIN & Notice No. ITBA/COM/F/17/2022-23/1047742382(1), and specifically contains the name, address and PAN of the beneficial owner. According to the Appellant, there is no typographical mistake.

24. The Appellant consequently contended that the notice issued under Section 24(1) is in complete violation of the statutory scheme and that the proceedings founded upon such defective initiation are illegal, null, void and unsustainable.

25. The counsel for the Appellant did not raise any other argument despite an opportunity for it. The counsel for the appellant was rather called upon to raise any other legal or factual issue to press the appeal. However, the learned counsel closed his arguments with a prayer that appeal be allowed in reference to the arguments raised by him and otherwise he is not required to raise any further arguments.

26. The learned counsel for the respondent contested the case on all the issues raised by the appellant. It was submitted that the Appellant’s reliance on the CIT(A) order dated 31.05.2023 is misplaced because the Income Tax Act and the PBPT Act operate in distinct fields. Income-tax proceedings principally concern assessment of taxable income, whereas the PBPT Act concerns identification of benami property and the nature of the underlying transaction/arrangement. Acceptance of books of account or receipt of consideration through banking channels in Income Tax proceedings does not determine whether an arrangement is benami or not. Further, Section 67 of the PBPT Act gives the Act overriding effect over inconsistent provisions of other laws.

27. The Respondent submitted that the material gathered during the investigation demonstrates that the alleged sales aggregating to Rs.1.20 crore were accommodation transactions. On 15.11.2016, during the demonetisation period, aggregate cash of Rs.1.76 crore was deposited—Rs.90 lakh in STMPL’s bank account and Rs.86 lakh in DTPL’s account—after which Rs.82.50 lakh and Rs.37.50 lakh, respectively, were transferred to the Appellant’s bank account through RTGS/NEFT/cheque. The transactions surfaced during search and seizure proceedings under Section 132 of the Income Tax Act in the case of Shri Atul Tyagi and associated concerns.

28. The statement of Shri Atul Tyagi has been relied, who admitted his involvement in operating large-scale accommodation-entry racket and de facto owner/controller of STMPL and DTPL. He stated that the entities had been used since 2012 for providing accommodation entries through bogus sale and purchase bills. The unaccounted cash received from beneficiaries used to be deposited in bank accounts of entities controlled by him, after which equivalent amount is to be transferred through banking channels after deduction of commission of approximately 10–12 paise per rupee. He further stated that the entities did not carry on genuine business and that statutory compliances such as Sales Tax and TDS were, in certain cases, undertaken merely to create an appearance of authenticity.

29. The counsel for the Respondent submitted that the bank-account analysis corroborates the modus operandi. The accounts of STMPL and DTPL show substantial cash deposits followed by corresponding transfers to beneficiary entities. Field verification also revealed no genuine business activity or commercial infrastructure at the registered addresses of the entities. According to the Respondent, the entities were merely conduit/smoke-screen entities used for routing unaccounted funds and creating an artificial appearance of legitimate commercial transactions.

30. The learned counsel for the Respondent further submitted that ingredients of Section 2(9)(A) of the PBPT Act are fully satisfied. The benami property is of Rs. 1.20 crores, unaccounted cash routed through STMPL and DTPL into the Appellant’s account. The STMPL and DTPL are the benamidars while M/s Besties Trading Pvt. Ltd. is the beneficial owner; and Shri Atul Tyagi is alleged to be the abettor.

31. Reliance was placed on the judgment of the Hon’ble Supreme Court in the case of Valliammal v. Subramaniam AIR 2004 SC 4187 . It was particularly the circumstances relevant to determining a benami transaction, including the source of consideration, nature and possession of property, relationship and conduct of parties, custody of title deeds and surrounding circumstances. Applying these tests, the Respondent submitted that the source of funds, control of the intermediary entities, immediate routing of funds, lack of genuine business activity and conduct of the concerned parties establish a benami arrangement.

32. On the issue of cross-examination, the Respondent submitted that the principles of natural justice/audi alteram partem require a fair opportunity to know, answer and rebut the material relied upon, but do not confer an automatic or absolute right to cross-examine every witness. The Respondent urged that the Appellant was furnished relied- upon material, afforded opportunities to file replies and produce evidence, and participated in the proceedings. The burden remained upon the Appellant to satisfactorily explain matters within its knowledge. The Respondent relied upon the judgment in the case of Harivallabh Mohanlal Joshi v. Union Of India [2018] 98  (Madhya Pradesh)/(W.P. No.16633/2018), and Marg Realities Ltd. v. Deputy Commissioner of Income-tax, (Benami Prohibition) [2022] 134  448 ITR 574 (Madras), to submit that cross-examination is not an absolute statutory right under the PBPT Act. It is further submitted that the Appellant was given adequate opportunity to rebut the material and no prejudice has been demonstrated. It is otherwise a fact that Shri Atul Tyagi was found unavailable after initial statements under Section 132 of the Income Tax Act. He did not respond to the notice thus cross-examination was not even possible.

33. The Respondent distinguished the Supreme Court judgment in TState of Karnataka v. Ecom Gill Coffee Trading (P.) Ltd. [2023] 148  72 GSTL 134 (SC)/(Civil Appeal No.230 of 2023), decided on 13.03.2023. According to the Respondent, the judgment (supra) is in the context of taxation proceedings concerning proof of genuine sales, whereas the present proceedings concern whether the arrangement falls within the ambit of Section 2(9) of the PBPT Act. The issue is therefore not merely whether invoices and bank payments exist, but whether the entire arrangement, considered in the investigation and surrounding circumstances, makes a case of benami transaction.

34. The learned counsel for the Respondent further questioned the authenticity/reliability of the Balance Sheet relied upon by the Appellant because it appears to contain a handwritten date while other portions were printed. It also relies upon the fact that Shri Vineet Chauhan, who was admittedly involved in managing the company’s affairs, had died, while Shri Vivek Chauhan was unable to explain the relevant transactions. The Respondent therefore submitted that the Appellant failed to produce a person having personal knowledge of the impugned transactions to establish their genuineness.

35. The Respondent pointed out that, for the financial year ending 31.03.2016, the Appellant’s financial statements disclosed nil sales, nil opening stock, nil purchases and nil closing stock, whereas for the immediately succeeding year ending 31.03.2017, it reported sales of Rs.5,12,73,106/- and purchases of Rs.4,89,43,485/-. No satisfactory explanation was furnished for commencement of such substantial business without opening stock or preceding purchases. The Respondent submitted that these unexplained inconsistencies substantially diminish the evidentiary value of the accounts.

36. The Respondent further submitted that, with regard to the DTPL sales invoices, the invoices relied upon by the Appellant lack material particulars ordinarily expected in genuine commercial documentation, including Buyer’s Order Number, Delivery Note Date, Destination and Terms of Delivery. They are unsupported by independent proof of delivery or contemporaneous commercial records. The invoices dated 03.10.2016, 14.10.2016, 01.11.2016 and 02.11.2016 pre-date the cash deposit of 15.11.2016, yet no satisfactory nexus between the invoices and subsequent cash/bank transactions has been demonstrated.

37. The learned counsel for Respondent further submitted that the DTPL invoices aggregate to approximately to Rs.37,50,048/-, whereas Rs.86 lakh was deposited in DTPL’s bank account on 15.11.2016. The Appellant has not explained the substantial difference or why only part of the amount was routed. The Respondent therefore submitted that the invoices do not establish genuineness of the alleged sales.

38. With respect to STMPL, the Respondent similarly challenged the invoices for want of independent corroboration such as purchase orders, delivery challans, goods-receipt acknowledgements or other evidence establishing actual supply. The invoices include dates such as 21.10.2016, 02.11.2016, 04.11.2016, 09.11.2016, 13.11.2016, 14.11.2016, 18.11.2016, 21.11.2016, 01.12.2016 and 02.12.2016, whereas the relevant cash deposit and transfer occurred on 15.11.2016. The aggregate invoice value is stated to be Rs.1,62,64,235/-, against the Rs.90 lakh cash deposit and Rs.82.50 lakh transfer on 15.11.2016. The Appellant allegedly failed to explain the mismatch.

39. The Respondent also disputed reliance upon the VAT Returns, pointing to alleged inconsistencies including turnover of Rs.2,40,88,447/ – despite nil tax deposited and nil TDS claimed, for which no satisfactory explanation was provided. Further, the declaration and signature of the authorised signatory were allegedly blank. The Respondent therefore submits that the VAT returns, being unauthenticated and containing unexplained inconsistencies, cannot by themselves establish genuine business transactions. The Respondent rejected the Stock Summary for FY 2016-17, stating that it bears neither the authorised signatory’s signature nor the company’s official stamp and is unsupported by evidence demonstrating that it formed part of regularly maintained books. It therefore cannot independently establish the genuineness of the alleged sales.

40. The learned counsel for the Respondent similarly challenged the purchase invoices for October–December 2016, stating that several material particulars normally expected in genuine commercial documents are absent, including Buyer’s Order Number, Order Date, Dispatch Document Number and Destination. The signatures of the authorised signatory allegedly vary materially from invoice to invoice without explanation. In the context of Shri Atul Tyagi’s alleged modus operandi, the Respondent submits that these documents appear to be self-serving documents subsequently produced to give legitimacy to the impugned accommodation transactions.

41. The transport delivery challans relied upon by the Appellant were also disputed. Though printed on the transport company/consignee letterhead, the signatures of the Booking In-charge and Customer/Consignee vary materially from challan to challan. The Respondent submitted that, in the absence of independent corroboration establishing actual transportation and delivery of goods, such challans cannot constitute conclusive proof of genuine sales, particularly when considered against the bank analysis, field verification and other surrounding circumstances.

42. The Respondent rejected Appellant’s reliance on Form STK-7 showing strike-off of STMPL on 07.06.2017. The subsequent strike-off does not invalidate or explain transactions undertaken during FY 2016-17. The counsel for the Respondent further submitted that the fact that STMPL was not found operating during later physical verification is consistent with the investigation material indicating that it was being used as a conduit for accommodation entries rather than carrying on genuine business. The Respondent also rejected reliance on the ITR, computation under Section 143(3) and demand notice for AY 2017-18. Completion of an Income Tax assessment does not determine the existence or otherwise of a benami arrangement under the PBPT Act. The Respondent submits that the present proceedings concern the genuineness and role of STMPL and DTPL as intermediary entities and the routing of funds through their accounts, which is distinct from the question of whether the Appellant’s income-tax return was accepted.

43. Finally, the Respondent submitted that the documents relied upon by the Appellant, including the Section 24(5) reference and RUDs, PAO under Section 24(4)(b)(i), approval of the Approving Authority, Section 24(1) Show Cause Notice, statements+ recorded under Section 19 of the PBPT Act, Shri Atul Tyagi’s statement under Section 131(1A) of the Income Tax Act, corrigendum, Tax Audit Report, bank statements, replies and annexures and the death certificate of Shri Vineet Chauhan already form part of the record and have been considered. No new factual or legal issue, according to the Respondent, warrants reconsideration of the findings.

44. We have considered the rival submission of the parties and scanned the matter carefully.

45. The present case is arising out of the information received pursuant to a search conducted under Section 132 of the Income Tax Act, 1961 in the case of Shri Atul Tyagi and his associated entities. During investigation, M/s Besties Trading Private Limited was-identified as one of the alleged beneficiary entity. Analysis of the bank accounts of the appellant company was controlled by Shri Atul Tyagi revealed that, during the demonetization period, an amount aggregating to Rs. 1,20,00,000/-was deposited in demonetized currency in the accounts of M/s Sahil Tradewell Marketing Pvt. Ltd. (Rs. 82,50,000/-) and M/s Daksh Tradewell Pvt. Ltd. (Rs. 37,50,000/-), whereafter corresponding amounts were remitted to M/s Besties Trading Private Limited through RTGS/NEFT on the same day, after deduction of commission. The financial credentials of M/s Sahil Tradewell Marketing Pvt. Ltd. and M/s Daksh Tradewell Pvt. Ltd. were also examined. It was found that both companies had been incorporated in January 2011 with an authorized and paid-up share capital of merely Rs. 1,00,000/- each. Their income-tax records reflected filing of returns only up to AY 2015-16, while the MCA records showed that both companies had subsequently attained “Struck Off status”. Appellant was unable to answer why the transaction takes place in the cash, and why the exchange of amount took place on the very same day.

46. The statement of Shri Atul Tyagi recorded under Section 131 of the Income-tax Act, 1961, assumes material significance in the present case. In the statement, Shri Tyagi admitted his involvement in large-scale accommodation-entry racket and de facto owner/controller of STMPL and DTPL. He stated that the entities had been used since 2012 for providing accommodation entries through bogus sale and purchase bills and that unaccounted cash received from beneficiaries was deposited in bank accounts of entities controlled by him and after which equivalent amount is to be transferred through banking channels after deduction of commission of approximately 10–12 paise per rupee.

47. He further stated that the entities did not carry on genuine business and that statutory compliances such as Sales Tax and TDS were, in certain cases, undertaken merely to create an appearance of authenticity. Significantly, the aforesaid admission of Shri Atul Tyagi has not been specifically disputed, but appellant only argued that the statement of Shri Atul Tyagi was not recorded under Section 19 of the PBPT Act, and despite specific request, the Appellant was denied an opportunity to cross-examine by the Adjudicating Authority. The Respondent contended that the Appellant was furnished the relied-upon material, afforded opportunities to file replies and produced evidence, and participated in the proceedings. This Tribunal finds that the principles of natural justice/audi alteram partem require a fair opportunity to know, answer and rebut the material relied upon. It, however, does not confer an automatic or absolute right to cross-examine every witness. In the absence of any cogent material demonstrating that the facts admitted by Shri Tyagi were incorrect or that the transactions represented genuine business dealings, the said admission lends substantial support to the case of the Respondent. At this stage, it would be relevant to mention that summons were issued to Shri Atul Tyagi, time and again but he did not respond to the summons and accordingly did not appear before the Adjudicating Authority. Without the presence of Shri Atul Tyagi, his cross-examination was not even possible. The appellant company has ignored the aforesaid aspect of the matter and non-appearance of Shri Tyagi is to be taken to support the respondent and to avoid any adverse finding being an Abetter.

48. Upon consideration of the material on record, it is observed that the statement of Shri Vivek Chauhan, Director of M/s Besties Trading Pvt. Ltd., recorded under Section 19(1)(b) of the Prohibition of Benami Property Transactions Act, 1988, admit transactions involving deposits of an aggregate amount of Rs. 1,76,00,000/- in the accounts of STMPL and DTPL, followed by transfer of Rs. 1,20,00,000/- to the account of M/s Besties Trading Pvt. Ltd. on 15.11.2016. The subsequent explanation furnished by Shri Vivek Chauhan, that he was not fully aware of the business transactions and that supporting documents would be produced subsequently, does not dislodge the material evidence regarding the flow of funds.

49. Accordingly, in the absence of any cogent material controverting the said admission and the documentary evidence relied upon by the Initiating Officer, the transaction and the nexus between the funds and the beneficiary entity remain duly established on the record. The Appellant has, therefore, failed to discharge the burden of rebutting the material brought on record. Consequently, the grounds raised in the appeal do not merit acceptance.

50. The Appellant further submitted that the sale transactions were duly recorded in its audited books and stock register. It was reported even in the VAT returns, and that the transport delivery challans and acknowledgements establish actual movement and receipt of goods. The Appellant relied upon the specific sale invoices raised on DTPL and STMPL between October and December 2016 and submitted that the CIT(A), by its order dated 31.05.2023, accepted the relevant sale transaction as genuine and deleted the addition made by the Income Tax Officer in respect of the Rs.82.50 lakh. Respondent, however, points out several discrepancies in the sale invoices, VAT bills etc… authenticity of the Balance Sheet relied upon by the Appellant is disputed because it appears to contain a handwritten date while other portions are printed. The Appellant’s financial statements disclosed nil sales, nil opening stock, nil purchases and closing stock, whereas for the immediately succeeding year ending on 31.03.2017, it reported sales of Rs.5,12,73,106/- and purchases of Rs.4,89,43,485/-. No satisfactory explanation was furnished for substantial business without opening stock or preceding purchases. Respondent further submitted that, with regards to the DTPL sales invoices, the invoices relied upon by the Appellant lack material particulars ordinarily expected in genuine commercial documentation, including Buyer’s Order Number, Delivery Note Date, Destination and Terms of Delivery, and are unsupported by independent proof of delivery or contemporaneous commercial records. The invoices dated 03.10.2016, 14.10.2016, 01.11.2016 and 02.11.2016 pre- date the cash deposit of 15.11.2016, yet no satisfactory nexus between the invoices and subsequent cash/bank transactions has been demonstrated. With respect to M/s STMPL, the Respondent similarly challenges the invoices for want of independent corroboration such as purchase orders, delivery challans, goods-receipt acknowledgements or other evidence establishing actual supply. The invoices include dates such as 21.10.2016, 02.11.2016, 04.11.2016, 09.11.2016, 13.11.2016, 14.11.2016, 18.11.2016, 21.11.2016, 01.12.2016 and 02.12.2016, whereas the relevant cash deposit and transfer occurred on 15.11.2016. The aggregate invoice value is stated to be Rs.1,62,64,235/-, against the Rs.90 lakh cash deposit and Rs.82.50 lakh transfer on 15.11.2016. The Appellant failed to explain the mismatch. After analysing the whole receipts, they appear to be forged and fake generated to make a claim made by respondent. In view of the above, arguments of appellant that invoices and receipts are genuine, cannot be accepted.

51. At this stage, we may further clarify that the effect of the assessment order is to delete the additions in reference to the payment of Rs.82.5 lakh by CIT (Appeals) vide its order dated 31.05.2023. The argument has been made in ignorance of the fact and in relevance of two different statute and otherwise the Income Tax Act of 1961 does not prevail over the Act of 1988, rather the Benami Act have overriding effect on the Act of 1961. It is apart from the fact that the purpose of Income Tax Act is to make assessment of the income to charge tax while the object of the Act of 1988 is to identify benami transactions which may occur even if it involves transfer of legitimate money as consideration to benamidar for purchase of land for future benefit of the beneficial owner. For the aforesaid, we may rely on an illustration where a beneficial owner having disclosed income has transferred the money to benamidar by banking channel to purchase the property for his future benefit and if the ingredients of the definition of benami transaction given under Section 2(9)(A) of the Act of 1988 are not satisfied, it would not be nullified only for the reason that the benami transaction involves disclosed income and out of legitimate money. In the same manner, assessment of the income taking a transaction to be genuine would not nullify element of benami transaction. It is even in view of the fact that the CIT Appeals did not address the issue as to why and how the money was transferred and that too taking the relevant period of demonetization of currency. The authorities under the Income Tax Act of 1961 would concentrate to assess the income to get the tax without going into other aspect whether a case of benami transaction is made out or not and, therefore, the order of CIT Appeals does not show a deep inquiry over the genuineness of the transaction as to whether a case of benami transaction is made out or not.

52. For all the reasons aforesaid, the order of CIT Appeals would not nullify a case of benami transaction in the case in hand. Appeal accordingly fails and is dismissed.