Black Money Act : Provisional attachment order cannot be confirmed if the funds were not transferred by the alleged beneficial owner.

By | March 15, 2025
0 Comment

Provisional attachment order cannot be confirmed if the funds were not transferred by the alleged beneficial owner.

 Provisional Attachment Order Not Confirmed; Lack of Evidence of Benami Transaction

Issue: Whether a provisional attachment order under Section 5 of the Prevention of Money Laundering Act, 2002 (PMLA), should be confirmed when there is a lack of evidence to show that the alleged beneficial owner infused or deposited the attached amounts into their accounts, and when the Enforcement Directorate has attached the same property under the PMLA.

Facts:

  • A provisional attachment order under Section 5 of the PMLA was passed, attaching Rs. 80 lakhs received from ‘Y’ in the accounts of ‘RC’ in the names of ‘R’ and ‘V’, and subsequently transferred to ‘RKE’ (a proprietorship concern of RK).
  • The Initiating Officer held the Rs. 80 lakhs as Benami Property under Section 2(8) of the Prohibition of Benami Property Transactions Act, 1988.
  • The Adjudicating Authority did not confirm the Provisional Attachment Order.
  • No evidence was placed to show that the amounts transferred by ‘Y’ to the accounts maintained by ‘RC’ in the names of ‘R’ and ‘V’ were infused or deposited into bank accounts by RK, the alleged Beneficial Owner.
  • The alleged Benami Property of Rs. 80 lakhs had been attached by the Enforcement Directorate under the provisions of the PMLA.
  • In criminal prosecutions, no action had been initiated against RK, the Proprietor of RKE.
  • RK had also not been prosecuted as an accused under the PMLA.
  • The parameters of classifying a transaction as either Benami or Money Laundering are separate.

Decision:

  • The court held that since the investigation itself revealed that the funds were not transferred by the alleged Beneficial Owner (RK), the Adjudicating Authority had rightly not confirmed the Provisional Attachment Order.

Key Takeaways:

  • Lack of Evidence: A provisional attachment order cannot be confirmed without sufficient evidence linking the alleged beneficial owner to the property.
  • Benami vs. Money Laundering: The parameters for classifying a transaction as Benami or Money Laundering are distinct.
  • Burden of Proof: The burden of proof lies with the authorities to establish that a transaction is Benami.
  • Infusion of Funds: The authorities must prove that the alleged beneficial owner infused or deposited the funds into their accounts.
  • Parallel Proceedings: The existence of parallel proceedings under the PMLA by the Enforcement Directorate must be considered.
  • Criminal Prosecution: The absence of criminal prosecution against the alleged beneficial owner weakens the case for confirming the attachment order.
  • The court is reinforcing the need for sufficient evidence to prove a Benami transaction, and that the authorities must demonstrate the beneficial owner’s involvement in the funds.
APPELLATE TRIBUNAL SAFEMA, NEW DELHI
Initiating officer
v.
Ramesh Chand Sharma
G.C. Mishra and BALESH KUMAR, Member
FPA-PBPT No.589 (DLI) of 2019
MP-PBPT No.482 (DLI) of 2019 Stay
JANUARY  30, 2025
Manmeet S. Arora, Adv. for the Appellant. Ashwani Taneja, Ms. Pranika Kaushik, Harnoor Verdi and Abhisekh Sethi, Advs. for the Respondent.
ORDER
1. This Order disposes of the Appeal No. FPA-PBPT-589/DLI/2019 which has been filed by Assistant Commissioner of Income Tax, Benami Prohibition Unit-2, New Delhi (“Appellant”) under Section 46 of the Prohibition of Benami Property Transactions Act, 1988 (“PBPTA”) challenging Order dated 25.03.2019 (“Impugned Order”) of the Ld. Adjudicating Authority in Reference No R-592/2018. Shri Ramesh Chanda Sharma (“Benamidar”) is the Respondent No. 1 and Shri Ravindra Kumar, Proprietor, M/s R K Emporium (“Beneficial Owner”) is the Respondent No. 2 before us.
2. Ld. Counsel for the Appellant has summarised that the present appeal has been preferred to challenge the Impugned Order dated 25.03.2019, whereby, the Ld. Adjudicating Authority had not confirmed the Provisional Attachment Order (“PAO”) dated 27.02.2018. The PAO attached an amount of Rs. 80,00,000/- which formed part of the total deposits of Rs. 86,84,095/-, received from M/s Yashawini Exports on 08.11.2016 in the accounts maintained by Shri Ramesh Chand Sharma, in the name and style of M/s R K International and M/s Virgo International. The said amount of Rs. 80,00,000/- was subsequently transferred on 12.11.2016. to M/s R K Emporium (Proprietorship concern of Shri Ravindra Kumar). The said sum of money, i.e., Rs. 80,00,000/- was held as Benami Property under Section 2(8) of the PBPTA by the Initiating Officer (IO).
3. Ld. Counsel for the Appellant pleaded that the Ld. Adjudicating Authority had erred in not confirming the PAO on an erroneous interpretation of law and facts. Ld. Counsel argued that based on the surrounding facts and circumstances of the case, the only reasonable inference which could have been drawn is that the Beneficial Owner, Shri Ravindra Kumar, Proprietor, M/s R K Emporium had engaged in Benami Transactions as defined under Section 2(9)(A) of the PBPTA.
4. Ld. Counsel for the Appellant argued that the Ld. Adjudicating Authority failed to take into consideration the surrounding circumstances of the present case, whereby the transactions were undertaken during the period of demonetization of 2016. Ld. Counsel argued that by looking at the entire series of transactions, it can be inferred that Shri Ramesh Chand, Respondent No. 1, used his bank accounts in the name and style of M/s R K International and M/s Virgo International to channelise benami demonetised currency of the denomination of Rs. 1000/- and Rs. 500/-. Ld. Counsel further argued that based on the investigations conducted by the Enforcement Directorate under the provisions of the Prevention of Money Laundering Act, 2002 (“PMLA”), it emerged that the source of the said sum of Rs. 80,00,000/- was M/s Yashwini Exports, which is a shell entity maintained by one Shri Yogesh Mittal.
5. Ld. Counsel for the Appellant argued that the copies of bilties cannot be relied upon to prove the contentions of the Respondent(s) that they were engaged in a legitimate and genuine transaction for sale and purchase of goods. The Respondent(s) submitted copies of bilties and claimed that the goods were transported by M/s Rammat Transport Corporation, Delhi. Ld. Counsel for the Appellant pleaded that the conveyances were not fit to be plied on the road based on the relevant provisions of The Motor Vehicles Act, 1988. Ld. Counsel argued that since the transport vehicles did not possess the requisite fitness certificate issued by the relevant authorities for the purpose of inter-state travel, it is not possible that the goods were transported from Ludhiana, Punjab to National Capital Territory (NCT) of Delhi. In fact, the registration number of one of the vehicle supposedly to have been used for carrying the goods, on verification was found to be a motorcycle.
6. Ld. Counsel for the Appellant argued that the Respondent No. 2, Shri Ravindra Kumar, Proprietor, M/s R K Emporium was not engaged in genuine and legitimate transaction for purchase and sale of goods, as is evident from the fact that the Benamidar, that is Respondent No. 1 had not appeared before the Ld. Adjudicating Authority to plead his case.
7. Ld. Counsel for the Appellant pleaded to allow the appeal and set aside the orders of the Ld. Adjudicating Authority whereby, the Provisional Attachment Order dated 27.02.2018 was not confirmed.
8. Ld. Counsel for the Respondent argued that the Ld. Adjudicating Authority issued a well-reasoned order based on proper application of not confirmed the PAO dated 27.02.2018. Ld. Adjudicating Authority was correct in concluding that the sum of money, i.e., Rs. 80,00,000, which was received in the accounts maintained by Shri Ramesh Chand Sharma, in the name and style of M/s R K International and M/s Virgo International on 08.11.2016 and subsequently transferred on 12.11.2016 to the bank account of M/s R K Emporium (Proprietorship concern of Shri Ravindra Kumar) was not a Benami Property within the import of Section 2(8) of the PBPTA.
9. Ld. Counsel for the Respondent argued that the Respondent No. 2, Shri Ravindra Kumar, Proprietor, M/s R K emporium was engaged in legitimate transactions with the alleged Benamidar to purchase and sell goods. Ld. Counsel argued that based on the documentary evidences submitted, it is evident that the transactions undertaken by the Respondents were in the regular course of business.
10. Ld. Counsel for the Respondent contended that based on the copies of the Bank Accounts of M/s R K International and M/s Virgo International that were submitted, it is evident that M/s Yashawini Exports was engaged in multiple transactions with them prior to 08.11.2016, i.e., before the announcement of demonetisation. There is nothing on record to show that for the said transfer of money Respondent No. 2 i.e., the alleged Beneficial Owner had infused funds with M/s Yashawini Exports.
11. Ld. Counsel stated that payments were made by Shri Ravindra Kumar, Proprietor, M/s R K Emporium, Respondent No. 2 to the transporter, M/s Rammat Transport Corporation, Delhi through banking channels, and the Tax Deducted at Source (“TDS”) was also done from the same. Ld. Counsel argued that the documentary evidences, that is, bitlies cannot be ignored on the vague ground that vehicles used for transportations were not in possession of the requisite fitness certificates.
12. Based on the facts, circumstances and evidence on record, Ld. Counsel stated there is no proof that the Beneficial Owner was engaged in a Benami Transaction within the import of Section 2(9) of the PBPTA. Ld. Counsel argued that the case of the Appellant Department is based on allegations and surmises, with no evidence to prove that there was an infusion of demonetised cash by the Beneficial Owner in the bank accounts of the M/s R K International and M/s Virgo International, maintained by Shri Ramesh Chand Sharma. Therefore, Ld. Counsel pleaded to dismiss the present appeal and confirm the Impugned Order.
13. We have considered the rival submissions and the material on record. Based on the pleadings, we observe that the main issue for consideration before us, is that, whether the Beneficial Owner was engaged in Benami Transaction(s) within the import of Section 2(9) of the PBPTA.
14. Based on the documents and pleadings raised before us, we note that no evidence has been placed before us as to show that the amounts which were transferred by M/s Yashawini Exports on 08.11.2016 in the accounts maintained by Shri Ramesh Chand Sharma, in the name and style of M/s R K International and M/s Virgo International, were in fact infused/deposited into the bank accounts by Shri Ravindra Kumar, Beneficial Owner. To argue that the motive of the Beneficial Owner in arranging for cash infusion into the accounts of the Benamidars was to legalize the holding of demonetized currency will require evidence, which has not been placed before us.
15. Based on the Bank Accounts statements submitted before us, we note that there were prior transactions between M/s Yashawini Exports and M/s R K International & M/s Virgo International, which predate the beginning of the demonetisation period that is, midnight of 08.11.2016. We observe that the sale and purchase bills, along with the bitlies submitted by the Respondent No. 2, contain certain particulars which do point towards genuine business transactions. The Respondent has also submitted account opening forms along with the Sole Proprietorship Declaration Form of M/s R K International and M/s Virgo International, which are dated 05.09.2016.
16. We have also perused the invoices and the bitlies submitted by the Respondent No. 2. We note that that payments were made by Shri Ravindra Kumar, Proprietor, M/s R K Emporium, Respondent No. 2 to the transporter, M/s Rammat Transport Corporation, Delhi through banking channels, and the TDS was deducted from the same. Even though the Ld. Adjudicating Authority had not recorded its observation on the possession of the requisite fitness certificates for the conveyances which were used for transporting the goods, we observe that it is not binding evidence to rule out the plying of such vehicles on the road. Respondent No. 2 has argued that there was a clerical mistake due to which inadvertently wrong Registration Number of a vehicle was given, which on verification was found to be a motorcycle.
17. We observe that the alleged Benami Property of Rs. 80,00,000/- has been attached by the Enforcement Directorate in O.C. No. 992/2018 under provisions of the Prevention of Money Laundering Act, 2002. However, we note that in the criminal prosecutions undertaken, no action has been initiated against Shri Ravindra Kumar, Proprietor, M/s R K Emporium. Respondent No. 2 has also not been prosecuted as an accused under PMLA. We find that the parameters of classifying a transaction as either Benami or Money Laundering are separate, as is evident from the definition clauses of PBPTA and PMLA. Moreover, the investigation has itself revealed that the funds were transferred from M/s Yashawini Exports, which is owned and controlled by Shri Yogesh Mittal and not By Shri Ravindra Kumar, the alleged Beneficial Owner.
18. In view of the aforementioned discussions and analysis, we dismiss the Appeal No. FPA-PBPT-589/DLI/2019 as being without merit. The applications are accordingly disposed of.