Case Law Details
DCIT (BPU) Vs ARC Agrochemical LLP & Ors. (Appellate Tribunal Under SAFEMA Delhi)
The Appellate Tribunal under SAFEMA allowed the Department’s appeals and set aside the order of the Adjudicating Authority which had refused to confirm the Provisional Attachment Orders (PAO) under the Prohibition of Benami Property Transactions Act, 1988. The Tribunal found that the Adjudicating Authority had passed a contradictory and perverse order, ignoring its own earlier findings on identical facts and overlooking crucial material on record.
On merits, the Tribunal held that there was sufficient evidence showing that the ARC group had generated unaccounted cash through online betting and gambling, which was then layered through shell entities and accommodation entries in the form of bogus loans, capital, agriculture income, and other heads before being invested in properties and securities. It emphasized that routing of funds through multiple entities itself establishes the benami nature, and the Adjudicating Authority erred in ignoring this modus operandi.
The Tribunal also clarified that benami proceedings are independent of income-tax assessments and criminal proceedings, and acquittal or discharge in criminal cases does not affect benami action. Further, it held that the Initiating Officer had valid “reason to believe”, and sufficiency of such reasons cannot be questioned.
Accordingly, the Tribunal upheld the Department’s action and confirmed the provisional attachment, restoring the proceedings against the alleged benami properties.
FULL TEXT OF THE JUDGMENT APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI
By a batch of appeals filed under Section 46(3) of the Prohibition of Benami Property Transactions Act, 1988 (in short “the Act of 1988”), a challenge has been made to the order dated 19.03.2025 passed by the Adjudicating Authority denying confirmation of the Provisional Attachment Order (“PAO”) while answering the reference.
Brief facts of the case:
2. It is a case where a search and seizure was made in the premises of Shri Ramesh Chaurasia, Shri Achal Chaurasia and ARC group of companies on 15.02.2022.
3. During the course of Search, credible evidences were allegedly found against Shri Ramesh Chaurasia, Shri Achal Chaurasia and M/s. ARC Agrochemical LLP for their entering into a Benami Transaction. The ARC group is controlled and managed by the father and Son(s) trio – Shri Ramesh Chaurasia, Shri Achal Chaurasia and Shri Adesh Chaurasia. The group is engaged in running online betting and gambling business spread over the entire country and abroad. The group was operating its business in a clandestine manner by hiding its real activities. It has floated many entities to bring unaccounted cash into the books of accounts of the group entities through various means. The group was mainly operating from Mumbai and Delhi. It was engaged in online gambling and betting through its multiple websites such as www.gamekingindia.co.in, www.planetgonline.com and others under the garb of gaming sites, video game portals, gaming centres and cyber cafes. The huge unaccounted fund generated by the group from online gambling and betting activities was routed into the books of accounts by way of bogus security premium, bogus partner’s capital, bogus unsecured loan, bogus agriculture income, bogus commission income, bogus trading and bogus capital gain making out a case of benami transaction.
4. The betting and gambling activities is being run under the brand name of “GAME KING” by the ARC group. The business operation at the field level is organized through workforce at five different levels. The group has appointed Super Area Managers (SAM) in different regions. These are close confidants or loyal employees of the group who are in charge of the territory. These SAMs in turn appoint Area Managers (AMs) under them in the region they control or are assigned by the group. The AM then appoint Shopkeepers/Agents who solicit customers, commonly called as ‘Clients’ or ‘Child ID’. Everyone in the hierarchy is given a unique ID starting with prefix GK that stands for Game King. The authority to create these IDs and passwords were controlled by the two promoters namely Shri Ramesh Chaurasia and Shri Achal Chaurasia. Once a person is appointed at a particular level, the group creates IDs and allots passwords to him. These persons appoint people below them and get the IDs and passwords allotted to them by the group. As players/clients need points to bet/gamble, they would transfer the money to the Agents or AM/s The Agents and AMs transfer the cash to the group directly or through SAM/s Thereafter, points are credited in the IDs of persons starting from SAMs and are transferred subsequently to AMs, Agents and finally to the clients/players. This way points are credited in the accounts of clients/players against the cash they have transferred.
5. On the basis of the demand for the points from the players, persons at each hierarchy collect cash from persons below their hierarchy and credit their accounts with points. Shri Vinod Chhatre working for Shri Ramesh Chaurasia and Shri Achal Chaurasia for more than 20 years was a Super Area Manager in betting and gambling operation. Vinod Chhatre, accepted in his statement that he was receiving commission of 2-3% for the business done through him by area managers and agents under him.
6. Statements of employees and key persons of the ARC group including Lal Ramakar Singh alias Guddu and Vinod Chhatre, close associates and directly involved in betting and gambling activities were recorded. The statements of employees like accountant Purvi Ashara who kept the “Hisab” of movement of cash in lieu of accommodation entries in the books of the group entities and the persons who were dealing with cash or were arranging accommodation of the cash transactions; associates like Tax Auditor and CA Sameer Choudhary were also recorded. The other key persons like Sanjay Shah and others who facilitated deposit of betting and gambling cash showed that the modus and scale of online betting and gambling activities being controlled and operated by Sh. Ramesh Chaurasia and Sh. Achal Chaurasia. In their statements, several facilitators and entry providers had accepted that they earned commission on the business of betting and gambling done through them.
7. Shri Shivbhai Chaurasia, key employee of the ARC Group, was the main cash handler in Mumbai. He was looking after the delivery and collection of the cash from online betting and gambling activities. He was also handling cash which is required to be delivered to various locations and persons for taking accommodation entries into the books of ARC group concerns. He was having various persons under him to assist in this work. From the evidence gathered during the Search and Seizure Operation, it was found that the ARC group is engaged in the online betting and gambling business. However, it is important to note that no income from such activity has ever been disclosed in the returns of income filed by the individuals or entities of the group. From the said business, it was generating huge amount of cash regularly. This cash is being introduced in the books of accounts of the ARC group concerns, by taking accommodation entries in the form of bogus share premium, unsecured loan, partner’s capital, commission and consultancy income, trading income, capital gain and agriculture income with the help of various intermediaries who were sourcing or arranging the accommodation entries for the group in exchange of cash and were being paid commission in cash, one such entity being M/s ARC Agrochemical LLP i.e. the “Benamidar” M/s ARC Agrochemical LLP has not shown any business activity or income from betting and gambling business.
8. It was also observed that M/s ARC Agrochemical LLP did not have any actual business. The cash was generated from the business of online betting & gambling being operated & controlled by Ramesh Chaurasia and Achal Chaurasia i.e. the ‘Beneficial Owners’, and such illicit funds were routed into books of accounts of M/s ARC Agrochemical LLP through accommodation entries making out a case of benami transaction. As per the Income Tax Returns, M/s ARC Agrochemical LLP, instead of showing income from online gambling business, claims to be involved only in the business of Agriculture and Animal Husbandry Services. M/s ARC Agrochemical LLP had received unsecured loans and bogus partner’s capital which is nothing but routing of cash generated from the business of online betting & gambling being operated & controlled by Ramesh Chaurasia and Achal Chaurasia from various entities over the years. These funds were used to purchase listed securities and mutual funds and to purchase agricultural land at Dhanaura, Uttar Pradesh.
9. Inquiry was conducted u/s 19 of the Act of 1988 with Banks/Depositories/Brokers and the statements received in response to the same were analyzed by the Initiating Officer under the Act of 1988. M/s ARC Agrochemical LLP is a Limited Liability Partnership firm incorporated on 07 October 2014. It is registered with Registrar of Companies, Mumbai at its registered office at A-1602, Floor 16, Plot FP 616 (PT), Naman Midtown, Senapati Baput Marg, Near India Bulls, Dadar West, Mumbai, Maharashtra 400028. As per the Income Tax Returns, the partners/ shareholders of the LLP were Shri Achal Chourasia, Shri Ramesh Chaurasia, Shri Shyameshwar Tyagi, Shri Amit Surana and Authentic Finance Pvt. Ltd. having 44-44-1-1-10% shareholding respectively. Authentic Finance Pvt. Ltd. is an ENSO group entity having 10% share capital in M/s ARC Agrochemical LLP. Shri Hanuman Tatar, is the Director in Authentic Finance Pvt. Ltd. who was involved in providing accommodation entries through CA Sameer Chaudhary to ARC Group concerns. On perusal of the Income Tax Returns of M/s ARC Agrochemical LLP, it was found that there was no agriculture Income received in the said LLP except i.e F. Y. 2017-18. The agricultural income was declared in the revised Income Tax Returns for F. Y. 2018-19, 2019-20 and F.Y. 2020 21 only after issuance of notices u/s 148 of the IT. Act, 1951 and PAO u/s 24(4) of the Act of 1988 dated 17.04.2023.
10. Though M/s ARC Agrochemical LLP had declared that it was in the business of Agriculture and Animal Husbandry Services, however, on the perusal of original returns filed by M/s ARC Agrochemical LLP, it was found that there was no receipt except meagre income of Rs. 17,62,220/- in the F.Y. 2017-18, that too has been shown from “sale of services”. It was also found that the said LLP drastically revised its income in response to the notices u/s 148 issued by the Central Circle-5(2), Income Tax Department subsequent to the selection of the case for assessment on the basis of search conducted by the Investigation Wing of the Income Tax Department. Further, the said returns were filed in September, 2023 i.e. and after initiation of proceeding under the Act of 1988 by issuing show cause notice us. 24(1) of the Act by the IO, BPU-1, Mumbai to certain other ARC Group entities i.e. M/s Adesh Ventures LLP (29-09-2022) and M/s ARC Vastu Nirman Pvt. Lai. (11-11 2022). In the revised returns, M/s ARC Agrochemical LLP had shown the receipt of agricultural income for F.Y. 2017-18, F.Y. 2018-19, 2019-20 and 2020-21 to the tune of Rs.17,62,220/-, Rs.32,72,700/-, Rs.26,50,000/- and Rs.27,15,000/-respectively and claimed the same as “exempt”. Such revised returns were submitted after notices u/s 148 of the IT Act, 1961 to the said LLP after the search conducted on 15.02.2022 and the order were passed u/s 24(4) by BPU-1, Mumbai. This showed that M/s ARC Agrochemical LLP did not have any actual business from Agriculture and Animal Husbandry Services and is only trying to do a mop up exercise to escape the rigour of the Act of 1988. The result of investigation during the proceedings u/s 24 of the Act of 1988 has also revealed that the income declared from agricultural activities by the LLP are nothing but concocted figures.
11. The Initiating Officer also analyzed the physical evidences recovered during search along with the statements of Smt. Purvi Ashara, Head of Accounts of ARC Group, Mr. Sameer Chowdhary, CA and Tax Auditor of ARC Group, Shri Vinod Chhatre working for Shri Ramesh Chaurasia and Shri Achal Chaurasia for more than 20 years as a Super Area Manager in betting and gambling operation; Sh. Hanuman Mal Tater is a Director in ENSO group and the benamidar as entity unearthed the modus operandi as detailed in the impugned provisional attachment order. It was to introduce the unaccounted cash received from illegal gambling and betting in monthly cash (Hisab) for which cheque and bank entries were arranged by Mr. Sameer Chowdhary, CA, Mr. Yogesh Jangid, CA and Mr. Ravi Trithani, CS. Further, a monthly summary of the cash delivered to the entities mentioned in “Hisab” and corresponding cheque/bank entries received in the bank account of M/s ARC Agrochemical LLP were revealed. No entry of cash income is made in the books of accounts. In one of the excel sheets named “Octonwards Final” uploaded on Google drive, found from the residence of Smt. Purvi Ashara during the course of search on 15.02.2022. It was seen that Smt. Purvi Ashara has recorded the transactions where M/s ARC Agrochemical LLP had received funds in the form of partner’s capital from AFPL.
12. The Income Tax Returns of M/s ARC Agrochemical LLP, as verified by the IO, shows that AFPL is introduced as a partner in the firm in the F.Y. 2021-22 whereas as per the above data, the said entity started transferring funds into the accounts of the M/s ARC Agrochemical LLP in F.Y. 2020-21 itself i.e. even before AFPL being declared as a partner in the ITRs of M/s ARC Agrochemical LLP. Further, the shareholding of AFPL in M/s ARC Agrochemical LLP was only 10%. Thus, 10% of Rs. 25 crores is merely Rs.2.5 crores, however, as discussed above, AFPL had transferred Rs. 19.9 crores (11.25+ 8.65 19.05-0.401) to Μ/s ARC Agrochemical LLP as on the end of F.Y. 2021-22 which is 17.8 crores more than its shareholding percentage. Hence, the introduction of such huge funds by Authentic Finance Private Limited as partner in the firm having mere 10% shareholding is nothing but accommodation entries.
13. Further M/s ARC Agrochemical LLP had received bogus unsecured loans from various entities over the years. Shri Ramesh and Shri Achal Chaurasia floated shell/front entities including M/s ARC Agrochemical LLP to bring the unaccounted cash into books of accounts through unsecured loans. Majority of all such entities are LLP’s which do not have active business and are not filing audit report, like in the case of M/s ARC Agrochemical LLP. These entities have huge outstanding unsecured loans from unrelated parties in their books.
14. As discussed, the investment made by M/s. ARC Agrochemical LLP in Listed Securities and Mutual Funds amounting to Rs. 99,95,29,791.54/- (as per Statement of Holdings in CDSL as on 22.01.2004). In addition to the partner’s capital, the source of the funds obtained by M/s ARC Agrochemical LLP to purchase shares/ mutual funds was through bogus unsecured loans. Further, in the F.Y. 2017-18, M/s ARC Agrochemical LLP purchased agricultural land in Dhanaura, Uttar Pradesh amounting to Rs. 31,50,000/- as on 06.04.2017. The source of such investments is actually cash of BOs routed in the books of accounts of BD.
15. The appellants herein caused provisional attachment of the properties finding a case of benami transaction and accordingly impugned order was passed on a reference to the Adjudicating Authority with the request to confirm the Provisional Attachment Order and answer the reference. The Adjudicating Authority refused to confirm the PAO while answering the reference. Aggrieved by the order, the appeals have been preferred by the department.
Arguments of the parties and findings:
16. Elaborate arguments were made by both the parties and accordingly we would deal with each issue raised by the appellants and contested by the respondent. However, after recording of the fact that the same Adjudicating Authority earlier took a different view in regard to the benami transaction and accordingly confirmed the PAO while answering the reference. The contradictory and even divergent view has been taken which alleged to be in contradiction to the earlier findings recorded by the Adjudicating Authority in its order dated 14.11.2023 confirming the earlier PAO.
17. The allegation against the respondents is about their involvement in online betting and gambling resulting in generation of huge cash which was routed through the Shell companies for purchase of shares/mutual funds and landed properties. The company purchased the property has been taken to be the benamidar while the promoter/shareholder to be the beneficial owner.
18. Ld. Counsel for the respondent submitted that the allegation of illegal online betting and gambling does not survive in view of the order passed by the various Courts in favour of the accused and accordingly, they were discharged/ acquitted from all charges in the respective trials and accordingly prayer was made not to cause interference in the impugned order. We find that the Adjudicating Authority has decided the issue in favour of the appellant and adverse to the respondent. It is with the finding that conviction or acquittal related to the crime would not have direct bearing on the proceedings under the Act of 1988 and otherwise the basic element is not in regard to illegal betting and gambling but generation of cash used for benami transaction. Since the issue has been decided adverse to the respondent and there is no cross-appeal or cross-objection, the finding cannot be interfered. However, we may clarify that the order passed by the Court discharging or acquitting the accused would depend on the evidence led before the Court in the Criminal cases where charge has to be proved beyond doubt while the same parameters are not applicable in the Civil proceedings though burden of proof for benami transactions remains on the person alleging such transaction which would be addressed subsequently while addressing other arguments. However, in the Criminal case, if adequate evidence was not led to prosecute, it may result in discharge or acquittal while in the proceedings under the Act of 1988 enough material was available with the Initiating Officer. The finding may sustain despite an order of the Court discharging the accused from the allegation of online betting and gambling. In any case, this argument was rejected by the Adjudicating Authority itself and there is challenge to it by way of cross-objection or appeal.
19. The next issue was in regard to the recording of reasons to believe by the Initiating Officer. It is said to be not clear, rather, vague and based on presumptions. The issue aforesaid was taken up by the Adjudicating Authority and decided adverse to the respondent. It is with the finding that issue of sufficiency of the reasons cannot be evaluated by the Adjudicating Authority. The only requirement is for existence of reasons to believe with the Initiating Officer for causing PAO. The reference of the judgment of the Supreme Court in the case of Joti Prasad vs. State of Haryana reported in AIR 1993 SC 1167 was given and relevant para of the said judgment is quoted hereunder:-
“In substance, what it means is that a person must have reasons to believe if the circumstances are such that a reasonable man would by probable reasoning, conclude or infer regarding the nature of the thing concerned. Such circumstances need not necessarily be capable of absolute conviction or inference; but it is sufficient if the circumstances are such creating a cause to believe by chain of probable reasoning leading to the conclusion or Inference about the nature of the thing.”
20. Another judgment referred by the Adjudicating Authority in the case of Kantamani Venkata Narayana & Sons vs. ITO reported in (1967) 63 ITR 638 SC was given. The relevant para of the said judgment is quoted hereunder:-
“the legal position is that if there are in fact some reasonable grounds for the Income-tax Officer to believe that there had been any non-disclosure as regards any fact, which could have a material bearing on the question of under-assessment that would be sufficient to give jurisdiction to the Income-tax Officer to issue the notice under s. 34. Whether these grounds are adequate or not is not a matter for the Court to investigate. In other words, the sufficiency of the grounds which induced the Income-tax Officer to act is not a justifiable issue. It is of course open for the assesse to contend that the Income-tax Officer did not hold the belief that there had been such non-disclosure. In other words, the existence of the belief can be challenged by the assesse but not the sufficiency of the reasons for the belief. Again, the expression reason to believe in section 34 of the Income-tax Act does not mean a purely subjective satisfaction on the part of the Income-tax Officer The belief must be held in good faith: It cannot be merely pretence. To put it differently it is open to the Court to examine the question whether the reasons for the belief have a rational connection or a relevant bearing to the formation of the belief and are not extraneous or irrelevant to the purpose of the section. To this limited extent, the action of the Income-tax Officer in starting proceedings under s. 34 of the Act is open to challenge in a court of law.”
21. The issue raised regarding reasons to believe has been decided adverse to the respondent and there is no cross-appeal or cross objection to the aforesaid and accordingly it stand concluded adverse to the respondents.
22. The next question was regarding placing reliance of the statements of third-party recorded in coercion, stress and threat and were retracted thereupon, thus could not have been relied. It was further argued by the respondent that there was no corroborative evidence available with the Initiating Officer to cause provisional attachment holding it to be a case of benami transaction. The Adjudicating Authority has considered the issue and recorded its findings that statements were not the sole evidences or material relied upon by the Initiating Officer. The statements were not recorded under pressure or threat, as alleged, as there is no evidence for accepting the said allegations. The retraction of the statement for the sake of it cannot be accepted and otherwise the corroborative evidence was existing, thus, statements were rightly relied upon and accordingly the issue aforesaid was also decided adverse to the respondent.
23. The next question taken up by the Adjudicating Authority was about the field verification with the allegation that it was not only conducted inaccurately but the summons were issued without application of mind.
24. The issue aforesaid was taken into consideration by the Adjudicating Authority after considering the material on record and found that proprietor of Jinendra Exports and Jupiter Exports are different persons with different PAN and they were not the same person. The proprietor of Jitendra Exports was Shri Saurabh Jain and proprietor of Jupiter Exports was Shri Arvind Nagwan. It was confirmed from the GST’s website and accordingly the ground taken by the respondent to contest notice issued by the Adjudicating Authority was not accepted on the ground aforesaid.
25. The Adjudicating Authority has further considered the issue in reference to the argument that the transaction alleged to be benami fall under one of the exceptions given under Section 2(9)(A)(ii) of the Act of 1988. It was with the conclusion that the case in hand would not fall under one of the exception to Section 2(9)(A) of the Act of 1988 for the reasons supplied therein and is not under challenge, thus the present case would not fall under one of the exceptions to Section 2(9)(A) of the Act of 1988 and there is no cross-appeal or objection by the respondent to contest the issue aforesaid.
26. We have referred the issues decided by the Adjudicating Authority adverse to the respondents for the reason that subsequently what opinion has been formed is in conflict to the earlier part of the order.
27. The issue was thereupon taken about the alleged huge unaccounted funds generated by the group of companies out of the online betting and gambling activities and routing in the account of benamidar by way of bogus security premium, bogus capital, bogus unsecured loan, bogus agriculture income, bogus commission income, bogus trading and bogus capital gain etc. making out a case of benami transaction. The Adjudicating Authority analyzed the issue but before that it had taken up the issue in reference to Section 24(4)(b)(i) of the Act of 1988 for the reason that while causing the provisional attachment under Section 24(3) of the Act of 1988, certain properties were not included which were subsequently added while causing an order under Section 24(4)(b)(i) of the Act of 1988. Section 24 of the Act of 1988 is quoted hereunder for ready reference:-
24. Notice and attachment of property involved in benami transaction.—(1) Where the Initiating Officer, on the basis of material in his possession, has reason to believe that any person is a benamidar in respect of a property, he may, after recording reasons in writing, issue a notice to the person to show cause within such time as may be specified in the notice why the property should not be treated as benami property.
(2) Where a notice under sub-section (1) specifies any property as being held by a benamidar referred to in that sub-section, a copy of the notice shall also be issued to the beneficial owner if his identity is known.
(3) Where the Initiating Officer is of the opinion that the person in possession of the property held benami may alienate the property during the period specified in the notice, he may, with the previous approval of the Approving Authority, by order in writing, attach provisionally the property in the manner as may be prescribed, for a period not exceeding ninety days from the date of issue of notice under sub-section (1).
(4) The Initiating Officer, after making such inquires and calling for such reports or evidence as he deems fit and taking into account all relevant materials, shall, within a period of ninety days from the date of issue of notice under sub-section (1),—
(a) where the provisional attachment has been made under sub-section (3),—
(i) pass an order continuing the provisional attachment of the property with the prior approval of the Approving Authority, till the passing of the order by the Adjudicating Authority under sub-section (3) of section 26; or
(ii) revoke the provisional attachment of the property with the prior approval of the Approving Authority;
(b) where provisional attachment has not been made under sub-section (3),—
(i) pass an order provisionally attaching the property with the prior approval of the Approving Authority, till the passing of the order by the Adjudicating Authority under sub-section (3) of section 26; or
(ii) decide not to attach the property as specified in the notice, with the prior approval of the Approving Authority.
(5) Where the Initiating Officer passes an order continuing the provisional attachment of the property under sub-clause (i) of clause (a) of sub-section (4) or passes an order provisionally attaching the property under sub-clause (i) of clause (b) of that sub-section, he shall, within fifteen days from the date of the attachment, draw up a statement of the case and refer it to the Adjudicating Authority.
28. A perusal of the provisions quoted above shows that at the first instance, the Initiating Officer may issue a notice to the benamidar in respect of a property after recording of reasons in writing, as to why it should not be treated as benami property. Section 24(3) of the Act of 1988 refers to the order, if in the opinion of the Initiating Officer that the person in possession of benami property may alienate the property during the period specified in the notice, would cause provisional attachment for a period not exceeding 90 days from the last day of the month in which notice under sub-section(1) was issued.
29. Sub-section(4) to Section 24 of the Act of 1988 is divided in two parts. First part refers to further action after provisional attachment under sub-section(3) of Section 24 of the Act of 1988. It is for continuance of the PAO but should be with the prior approval of the Approving Authority. Section 24(4)(b)(i) of the Act of 1988 evolve an exception to first part of sub-section(4). It provides that where a provisional attachment had not been made under sub-section(3) then the Initiating Officer would be competent to pass an order to provisionally attach the property with the prior approval of the Approving Authority until the passing of the order by the Adjudicating Authority under Section 26(3) of the Act of 1988. The second part would obviously be for the property which is not part of the order Section 24(3) of the Act of 1988. Section 24(4)(b)(i) of the Act of 1988 allows Initiating Officer to pass a provisional attachment of the property other than for which such an order was caused under Section 24(3) of the Act of 1988. The Adjudicating Authority has made reference of Section 24(1) of the Act of 1988 to stress upon a show cause notice for provisional attachment of the property while Section 24(1) of the Act of 1988 is not for causing provisional attachment but a show-cause notice as to why property should not be treated as benami property. The Adjudicating Authority misconstrued the provisions while recording its findings.
30. Ld. Counsel for the respondent supported the findings recorded by the Adjudicating Authority. However, we are unable to endorse the aforesaid. The Adjudicating Authority failed to consider Section 24(4)(b)(i) of the Act of 1988. It is an exception to first part and allows provisional attachment of property other than made under Section 24(3) of the Act of 1988. Thus, a conjoint reading of the provisions makes it clear that other than the provisional attachment under Section 24(3) of the Act of 1988, an additional power has been given under sub-section 4(b)(i) of Section 24 of the Act of 1988 for causing provisional attachment of the property not covered under Section 24(3) of the Act of 1988. The provision does not provide for a show-cause notice and we cannot insert any word in the provision, rather, for that no Court is competent to insert or delete any word in the provision, rather, it has to be read without addition or substitution of the word. Therefore, the findings of the Adjudicating Authority in this regard cannot be accepted. The provisional attachment is, otherwise, not final, rather, remains subject to adjudication by the Adjudicating Authority on a reference and accordingly, the provisional attachment is a stopgap arrangement to avoid alienation of the property till the matter is decided by the Adjudicating Authority on a reference. The Adjudicating Authority guided itself by sub-section 4(b)(i) of Section 24 of the Act of 1988 to refer to a notice. It is to decide not to attach the property under notice. It would be notice under sub-section(1) of Section 24 of the Act of 1988 which is followed by Section 24(3) of the Act of 1988 for provisional attachment and if made, it may decide not to attach the property. In fact, Section 24(3) of the Act of 1988 does not talk about a notice. The issue has been decided by High Court of Judicature for Rajasthan at Jodhpur in the case of Alishan Complex Private Limited versus Assistant Commissioner of Income-tax (Benami Prohibition) and Initiating Officer, Rajasthan vide its judgment dated 12.12.2023 in Civil Writ Petition No. 16732/2023, 14527/2023 & 15074/2023. The relevant para of the judgement is quoted hereunder:-
17. So far as argument of the learned counsel for the petitioners to the effect that the provisional attachment order passed by the Initiating Officer under Section 24(3) of the PBPT Act is illegal as the petitioners were asked to submit response/reply to the notice under Section 24(1) and (2) of the PBPT Act up to 15.05.2023 but without waiting for reply, the Initiating Officer passed the provisional attachment order on 01.05.2023 is concerned, from bare perusal of the provisions of Section 24 of the PBPT Act, it is clear that the Initiating Officer is not required to wait or consider the response/reply filed pursuant to the notice under Section 24(1) & (2) of the PBPT Act before passing the provisional attachment order. The only requirement for the Initiating Officer is to seek approval of the approving authority before passing the provisional attachment order under Section 24(3) of the PBPT Act and from the provisional attachment order dated 01.05.2023, it is clear that prior approval of the approving authority was obtained by the Initiating Officer. Hence, the said argument of the learned counsel for the petitioner being bereft of merits is rejected.
31. In the light of the judgement (supra), we are unable to accept the finding of the Adjudicating Authority.
32. The Adjudicating Authority has addressed the issue even touching the facts of the case. The allegation against the beneficial owner was for its involvement in illegal online betting apart from gambling with a proper network resulting in collection of huge cash and therefore, transferred to the benamidars after routing it through the entities engaged in the accommodation entries. The Adjudicating Authority referred to the definition of Section 2(9)(A) given under the Act of 1988, after amendment vide Amending Act of 2016. The Adjudicating Authority took note of the material available on record where the Initiating Officer has alleged that the Income Tax Returns (ITR) were revised to include the agriculture income other than for the financial year 2017-2018. According to the Adjudicating Authority, the information about the revised ITRs for disclosing the agriculture income is incorrect. The finding aforesaid has been recorded in ignorance of the revised ITRs and the initial income return filed by the appellant. The finding of the Adjudicating Authority is totally perverse, rather, it exposes the authority about its conduct because it has passed contradictory order in a span of a period of two years on the same allegations against the parties. It was even in ignorance of the fact that if in the original return itself, the income from agriculture was shown for all the Assessment Years then why the revised return was submitted and how the issue of undisclosed income was treated. It is with the finding that the agriculture income was inadvertently entered in the revised return of income filed under the Section 148 of the Income-tax Act. The finding aforesaid is contrary to the record and even the proceedings taken by the Income Tax Department invoking Section 148 of the Income-tax Act coupled with the revised Assessment Order. It was observed that M/s ARC Agrochemical LLP had declared its business from Agriculture and Animal Husbandry Services, however, on the perusal of returns filed by M/s ARC Agrochemical LLP, it was seen only a meagre income of Rs. 17,62,220/- in the F.Y. 2017-18 was shown and that too from “sale of services” which has been taken to be the income from agriculture. It was also found that the LLP drastically revised its income in response to the notices u/s 148 issued by the Central Circle-5(2), Income Tax Department subsequent to the selection of the case for assessment on the basis of search conducted by the Investigation Wing of the Income Tax Department. Further, the said returns were filed in September, 2023 i.e. after initiation of proceeding under the Act of 1988 by issuing show cause notice u/s 24(1) of the Act of 1988 by the IO, BPU-1, Mumbai in the case of ARC Group entities i.e. M/s Adesh Ventures LLP (29-09-2022) and M/s ARC Vastu Nirman Pvt. Ltd. (11-11-2022). In the revised returns, M/s ARC Agrochemical LLP has shown the receipt of agricultural income for F.Y. 2017 18, F.Y. 2018-19, 2019-20 and 2020-21 to the tune of Rs. 17,62,220/-, Rs. 32,72,700/-, Rs. 26,50,000/- and Rs. 27,15,000/- respectively and claimed the same as exempted. Such revision was done after the notices u/s 148 of the IT. Act, 1961 issued to the LLP as a consequence of the search conducted on 15.02.2022 and order were passed u/s 24(4) of the Act of 1988 to the ARC Group entities by BPU-1, Mumbai.
This showed that M/s ARC Agrochemical LLP did not have any actual business from Agriculture and Animal Husbandry Services and is only a mop up exercise to escape the rigour of the Act of 1988. The result of investigation during the proceedings u/s 24 of the Act of 1988 has also revealed that the income declared from agricultural activities by the LLP are nothing but concocted figures.
33. The finding of the Adjudicating Authority cannot be accepted contrary to the record, rather, it is a perverse finding and in conflict of the order passed prior in time on 14.11.2023. A conflicting finding by the same officer cannot be accepted, rather, it is to be taken seriously.
34. The further finding about the loan without realizing the contradictory stand taken by the respondent to figure out the amount lying with the entities. It was shown to be towards security premium, partner’s capital, unsecured loan, agriculture income, income from commission, trading and capital gain of which no record could be revealed. The burden then shifted on the appellant to prove it otherwise. The respondent did not find any expenses towards the agriculture or other business.
35. The Adjudicating Authority, further, recorded its finding that the Initiating Officer failed to discharge burden of proof in regard to various amounts received by the appellants towards benami transaction. It is again in ignorance of the fact that in the inquiry, no material was found with the respondent to justify the receipt of the amounts under the heads ‘security premium’, ‘partner’s capital’, ‘unsecured loan’, ‘agriculture income’, ‘income from commission’, ‘trading’ and ‘capital gain’ along with ‘repayment of loan’. Even the source to get security premium, partner’s capital, unsecured loan, agriculture income, income from commission, trading and capital gain could not be established despite being specifically alleged and proved by the appellants. It is quite surprising that the material earlier accepted to establish the case of benami transaction was thereupon disowned by the same Adjudicating Authority in the subsequent proceedings having same allegations and the modus operandi adopted by the respondent to enter into the benami transaction where the beneficial owner routed huge unaccounted cash to other entities for accommodation entries. The benami transaction was made at that itself and continued when it was finally brought in the account of the company otherwise, beneficial owner could have transferred the amount to company directly.
36. The Adjudicating Authority, further, recorded the finding that even Section 2(9)(A) of the Act of 1988 is not attracted in the present case. It is for the reason that the beneficial owner would not invest his money in its own company to make out a case of benami transaction. However, in the present case, the beneficial owners themselves are holding the entities entered into the benami transaction.
37. An erroneous conclusion has been recorded in ignorance of the material available on record and even the modus operandi adopted by the respondent. It is not a transaction where the money was directly transferred by the beneficial owner in his own entity treated as benamidar, rather, money was routed through other companies to transact it further in the companies taken to be the benamidar. No reason was given as to why the beneficial owner, owning the benamidar companies could not be transacted directly. The modus was taken note by the Initiating Officer to make out a case of benami transaction. In the instant case, the huge unaccounted cash generated out of online betting and gambling activities was layered and routed through the accommodation entries involving other companies making out a case of benami transaction at that stage itself and further transaction would be governed by Section 6 of the Act of 1988. The transaction was thereupon routed further and therefore only it is taken to be the case of benami transaction. The Adjudicating Authority lost sight of the fact in recording the perverse findings contrary to its own findings recorded in the earlier order. The Adjudicating Authority could not have ignored the modus and the manner the transaction took place to make out a case of benami transaction and to record finding in ignorance of the route of the funds to conveniently come to the conclusion favourable to the respondent and therefore we have earlier commented in the manner order has been passed. The perverse findings recorded by the Adjudicating Authority in ignorance of the modus and involvement of the companies through which cash was routed cannot be accepted.
38. The issue in regard to acquittal of the accused from the allegation of their involvement in online betting and gambling activities, the Initiating Officer recorded the findings contrary to its own conclusion in this order itself where it was held that the acquittal in the criminal case or any order passed by the Court would not affect the benami proceedings. Thus, the way in which the order has been designed by the Adjudicating Authority speaks volumes against it. There was no occasion for the Adjudicating Authority to take a divergent view in the order itself and accordingly we cannot accept the findings recorded by the Adjudicating Authority.
39. In the light of the discussions made above, we cause interference in the impugned order and is set-aside with confirmation of the Provisional Attachment Order.
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