Uttam Kumar Saha Vs Initiating Officer (SAFEMA Delhi)
Conclusion: Benami Act was intentionally drafted with a very broad and inclusive definition of property to ensure that all forms of assets, including cash, could be covered. A person could not be treated as a benamidar if they neither possess the property nor claim ownership of it; A property was considered benami when the purported real owner denies their ownership of it. No prior approval from a higher authority was needed for an inquiry if a show-cause notice had already been issued. An SCN was valid if based on existing material; no fresh, independent inquiry was needed in every case.
Held: In the instant case, a cash amount of ₹70 lakhs was seized from the possession of Appellant 1. His explanation was that he was just a devotee carrying the cash, which he claimed belonged to a spiritual organization called SATSANG and was generated from donations. However, when the authorities made inquiries, the accountant of SATSANG provided an official statement that the seized cash did not belong to them. Authorities concluded that SATSANG were parties to benami transaction within the meaning of section 2 of the Prohibition of Benami Property Transaction Act, 1988. Accordingly, notice under Section 24(1) of the Act was issued. SATSANG, in reply to the said show cause notice has categorically denied that the seized cash belonged to the society and has stated that the said show cause notice was not applicable for the society as the holding of the seized cash by somebody as the benamidar of the society did not arise. SATSANG also stated that it could not be regarded as a party to benami transaction and requested that proceeding may be dropped/cancelled. The issues arose for consideration was whether cash was not property; whether Appellants 2 & 3 could not be proceeded against under PBPT since no cash was recovered and seized from them; whether a property become a “benami property” if the person from whom it was seized claimed it belonged to a specific person or entity, but that named person or entity officially denied owning the property; whether the mandatory statutory approval of the authority u/s 23 of the PBPT Act was compulsory to initiate proceedings u/s 24 of the PBPT Act; whether it was mandatory on the part of the IO to supply the reasons to believe before issuing the Show Cause Notice u/s 24 (1) of the Act? If yes, whether failure to do so vitiated the entire proceedings? It was held that the definition of “property” in Section 2(26) of the Benami Act was extremely broad, covering “assets of any kind, whether movable or immovable, tangible or intangible; Court clarified that physical cash was a tangible movable property and was therefore squarely covered by this definition; unaccounted cash could not escape the purview of the Benami Act. Regarding the second issue, since the purported real owner (SATSANG) had formally denied ownership of the cash, the property squarely fell within the definition of a “benami property” under the Act. Specifically, it met the conditions of Section 2(9)(C) (where the owner was unaware of or denied knowledge of the ownership) and Section 2(9)(D) (where the person who provided the funds was not traceable). Therefore, the person found holding the property, Appellant 1, was correctly proceeded against as the benamidar. Regarding third issue, it referred to an Explanation that was added to Section 23 in 2018. This Explanation clarified that once a show-cause notice had already been issued in a case, the requirement to take prior approval for conducting the inquiry did not arise. The court also held that this Explanation was clarificatory in nature and was therefore effective retrospectively from the year 2016. Regarding fourth issue, it held that while the law requires the existence of “reasons to believe,” the adequacy or sufficiency of those reasons was not subject to judicial review by the Tribunal or a court. It also clarified that the IO was not mandatorily required to conduct a separate independent investigation in every single case. If sufficient credible material to form a belief already exists on the record, the IO can legally proceed to issue a notice based on that existing material.
