Benami Act, 1988, would not extend to properties purchased by the company

Kalyan Buildmart Pvt. Ltd. Vs Initiating Officer (Rajasthan High Court)

Conclusion: In present facts of the case the Hon’ble High Court have allowed the writ petition filed by the Company, wherein it was held that so far as the ownership of land is concerned, each company has right to purchase property and the Benami Act, 1988, would not extend to properties purchased by the company.

Facts: The petitioner Company was incorporated with two shareholders and Directors – Madan Mohan Gupta and Shashikala Gupta on 21.08.2006. The agricultural land was purchased by the company in its name by executing four identical registered sale deeds.

A reference was received from the Assistant Commissioner of Income Tax on 15.09.2017 with relation to information regarding Benami property transaction in the case of Rajendra Kumar Jain and others. The necessary enquiries were initiated under Section 23 of the Benami Act, 1988 with reference to the aforesaid land and the IO has stated that a search under Section 132 of the Income Tax Act, 1961 was carried out on Rajendra Jain/Rajendra Bardiya group on 23.05.2013. During the course of search at the residence of one Madan Mohan Gupta, the incriminating documents including a pocket diary were seized. In the aforesaid diary, details of transactions relating to land located near Entertainment Paradise, Jaipur were found to have been recorded. It revealed that huge payments were made by Rajendra Kumar Jain, Navrattan Kothari, Vimal Chand Surana and Kushal Chand Surana for purchase of said land in the name of M/s. Shri Kalyan Buildmart Pvt. Ltd. The statement of Madan Mohan Gupta was recorded under Section 131 of the Income Tax Act, 1961 and cross-examination was also done. Madan Mohan Gupta has deposed that there was some dispute between Navrattan Kothari and Vimal Chand Surana on one hand and the owner farmers of this land on the other hand. The farmers did not want to sell the land to Navrattan Kothari and Vimal Chand Surana and therefore, they approached Rajendra Kumar Jain to purchase the said land from the farmers. Since Madan Mohan Gupta was closely known to farmers as well as Rajendra Kumar Jain, Navrattan Kothari and Vimal Chand Surana and was therefore engaged to arrange and execute a deal on their behalf as their “Benamidar” and for this purpose, the company-M/s. Shri Kalyan Buildmart Pvt. Ltd. was incorporated.

The Initiating Officer (“IO”) has further alleged that the company was incorporated only for the said purpose and Madan Mohan Gupta and his wife, Shashikala Gupta were made dummy Directors of the company by Rajendra Kumar Jain. The current account was opened of the company and another account of Madan Mohan Gupta was also opened in Allahabad Bank. Similarly, the accounts were opened of the company by Madan Mohan Gupta by Vimal Chand Surana and Navrattan Kothari in the Bank of Rajasthan (now ICICI Bank). These accounts were not operated by Madan Mohan Gupta but were operated by Rajendra Kumar Jain and Navrattan Kothari and Vimal Chand Surana respectively for which the introducers were their employees and themselves.

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