Common Business Premises Not Enough to Prove Benami Dealings Under Prohibition of Benami Property Transactions Act, 1988
Background of the Dispute
In DCIT (BPU) Vs Sara Company (Appellate Tribunal Under Safema At New Delhi), the Appellate Tribunal was called upon to examine whether certain business and office-use arrangements between two entities could be treated as benami transactions under the Prohibition of Benami Property Transactions Act, 1988 (“Act of 1988”).
The appeals were preferred under Section 46(1) of the Act of 1988 by DCIT (BPU), Lucknow, assailing the order dated 30.07.2024 passed by the Adjudicating Authority. The Adjudicating Authority had declined to confirm the provisional attachment ordered by the Initiating Officer and held that no “benami transaction” was made out on the facts of the case.
The core controversy centred on whether the respondent concern, M/s Sara Company, Prop. Sahil Siddiqui & Anr., was merely a benamidar for an alleged beneficial owner, or whether the relationship between them was only a legitimate commercial arrangement for supply of goods.
Procedural History
- The Initiating Officer provisionally attached certain property, alleging it was involved in a benami transaction.
- A reference was made to the Adjudicating Authority to confirm this provisional attachment.
- The Adjudicating Authority, after evaluating documents, statements, and legal submissions from both sides, refused to confirm the attachment and held that no benami transaction existed.
- Aggrieved, the appellant (DCIT (BPU), Lucknow) invoked
Section 46(1)of the Act of 1988 and filed appeals before the Appellate Tribunal Under Safema at New Delhi.
The Tribunal’s task was to determine whether the Adjudicating Authority had erred in concluding that the transaction in question did not fall within the definition of “benami transaction” under Section 2(9)(A).
Grounds of Challenge by the Appellant
The appellant’s challenge to the impugned order was broadly founded on three factual assertions, all pointing towards a benami relationship:
1. Business From Premises of Alleged Beneficial Owner
The first grievance was that the alleged benamidar entity was conducting its commercial activities from the office premises of the supposed beneficial owner. According to the appellant, this common use of premises indicated that the respondent was not an independent entity but was effectively controlled for the benefit of the beneficial owner.
2. No Documentary Proof of Tenancy or Rent Payment
The second contention was linked directly to the first. The respondent’s stance before the Adjudicating Authority was that it was using the premises as a tenant on rent. However, according to the appellant:
- No lease deed or rent agreement was produced; and
- No supporting evidence such as rent receipts, bank transfers, or accounting entries of rent payment was furnished.
The appellant sought to draw an adverse inference from this absence of rent documentation, arguing that this strengthened the allegation of a benami arrangement rather than a genuine tenancy.
3. Maintenance of Accounts at Beneficial Owner’s Office
The third allegation was that the books of account and financial records of the alleged benamidar, namely M/s Sara Company, Prop. Sahil Siddiqui & Anr., were being maintained from the office of the purported beneficial owner. This, in the appellant’s view, indicated a lack of real independence and showed that the entity was effectively functioning as a front.
In addition to these circumstances, the appellant relied on the statements of two individuals, Nitish Kumar and Ashish Khare, to suggest that the factual matrix was indicative of a benami transaction.