SAFEMA Tribunal Ruling: Pre-2016 Properties 'Held' Post-Amendment Fall Under Benami Law Despite Stalled Construction

The intersection of real estate investments and anti-benami legislation has frequently been a subject of intense judicial scrutiny in India. A landmark ruling by the Appellate Tribunal Under SAFEMA in New Delhi has recently clarified the boundaries of retrospective and prospective application of the amended benami laws. In the pivotal case of Jagdish Kumar M. Gupta Vs Initiating Officer, the Tribunal delivered a comprehensive judgment regarding properties acquired prior to the Benami Transactions (Prohibition) Amendment Act 2016.

The core of the dispute revolved around whether a property transaction initiated in 2002-2003 could be subjected to provisional attachment under the amended legal framework, especially when the physical construction of the property was stalled and incomplete. The Tribunal's decision to uphold the Provisional Attachment Order (PAO) dated 11 September 2024 sets a critical precedent. It underscores that the mere act of "holding" a benami property after the 2016 amendment came into effect is sufficient to trigger the stringent provisions of the law, regardless of when the initial transfer or financial transaction occurred.

Factual Matrix of the Case

The Initial Real Estate Investment

The factual background of the case reveals that the assessee intended to acquire four residential flats in a proposed real estate project named "Prathamesh Galaxy." The project was being developed by M/s Sailee Developers. Formal allotment letters for these four units were issued in favor of the assessee on two distinct dates: 24 July 2002 and 26 January 2003.

However, the formal agreements to sell were not registered in the name of the assessee. Instead, they were executed and registered in the names of four distinct third parties: Shri Devendrasingh Rajput, Shri Rajesh S. Chhaparia, Shri Vijay S. Chhaparia, and Shri Shailendra R. Gupta. Despite the registration in these third-party names, it was an undisputed fact that the financial consideration for the acquisition of these flats was entirely funded by the assessee.

Disclosures Under the Income-tax Act

The financial mechanics of this arrangement came to light during a survey operation conducted by the revenue authorities under Section 133A of the Income-tax Act. During this survey, the assessee voluntarily declared an additional income amounting to ₹1.71 crore, which was spread across multiple financial years.

Out of this total declared income, a specific sum of ₹49.51 lakh was explicitly earmarked and disclosed as the payment made toward the consideration for the four flats. Furthermore, an additional amount of ₹5.71 lakh was disclosed as the expenditure incurred for the payment of stamp duty. The assessee's primary contention was that since these transactions had been formally disclosed to the Income Tax Department and the corresponding tax liabilities had been settled, the initiation of parallel proceedings under the Prohibition of Benami Property Transactions Act 1988 was unwarranted.