Surendra Agrawal Vs Initiating Officer (Appellate Tribunal under SAFEMA, New Delhi)
Flat Purchased in Relative’s Name but Loan Repaid and Property Used by Another Constitutes Benami Property: SAFEMA Tribunal
Summary: The Appellate Tribunal under SAFEMA has held that a flat registered in the name of a person having no financial capacity to purchase it was a benami property where the purchase negotiations, cash payments, housing-loan repayments and beneficial use of the property were attributable to his brother-in-law.
The Tribunal rejected the explanation that the payments represented financial assistance extended in good faith during a financial crisis. It upheld the attachment after finding that the alleged owner was unaware of basic details of the flat, the loan was substantially repaid by the alleged beneficial owner and the property was utilised as collateral for the beneficial owner’s company.
Facts of the case
A residential flat in Blue Berry Apartment, DB City, Gwalior, measuring approximately 1,262 sq. ft., was registered in the name of Shri Surendra Agrawal.
During an Income-tax search, the authorities found the property’s registration documents, chain documents, purchase agreement and receipts at premises connected with Shri Sandeep Mangal, the brother-in-law of the registered owner.
The investigation revealed that the flat had initially been booked in the name of Sonu Mangal, alias Sandeep Mangal, who had negotiated its purchase. A cash-payment receipt of ₹6,79,320 was also issued in his name.
The final agreement and sale deed were, however, executed in the name of Shri Surendra Agrawal.
Surendra Agrawal stated that he was employed in a shop and earned only around ₹5,000 to ₹7,000 per month. Despite this limited income, the flat had allegedly been purchased for approximately ₹29 lakh, comprising a housing loan of ₹22 lakh and cash contribution of ₹7 lakh.
Housing loan substantially repaid by brother-in-law
The housing loan was obtained from Canara Bank in Surendra Agrawal’s name. However, the investigation disclosed that approximately ₹16.01 lakh was transferred directly to the housing-loan account from the bank account of Prabha Jewellers, a proprietary concern of Sandeep Mangal.
The closing loan balance of approximately ₹13.31 lakh was also cleared through funds transferred from Sandeep Mangal’s account.
Surendra Agrawal initially claimed that the entire housing loan had been repaid by him in cash instalments. This statement was inconsistent with the bank records showing substantial direct transfers from Sandeep Mangal’s account.
The parties also gave contradictory explanations. Sandeep Mangal described certain transfers as loans advanced to Surendra Agrawal, whereas Surendra Agrawal denied having received such a loan. He instead referred to having received cash from a company in which Sandeep Mangal was a director.
The Tribunal considered these inconsistencies as evidence that the registered owner was unaware of how the property was financed.
Registered owner unaware of basic property details
The Tribunal noticed that Surendra Agrawal could not correctly state the flat number, floor, number of rooms or area of the property. He initially denied having executed an agreement, but admitted his signature when the agreement was shown to him.
He also claimed ignorance of M/s Agrawal Traders, the proprietary concern whose financial statements and audit report had been submitted to the bank for obtaining the housing loan in his name.
According to the Tribunal, these facts indicated that the loan and property documentation had been managed by someone else and that Surendra Agrawal had merely signed the documents placed before him.
Beneficial use established ownership in substance
The flat was used as collateral security for securing a term loan of approximately ₹2.28 crore for a hotel business operated by a company in which Sandeep Mangal was a director and key person.
The property was also allowed to be occupied by a person politically acquainted with Sandeep Mangal. In his original statement, Surendra Agrawal admitted that the flat had been given to that person by Sandeep Mangal and that no rent was being collected.
Subsequently, an affidavit and income-tax returns were relied upon to claim that monthly rent of ₹6,000 was received from the occupant. The Tribunal rejected this explanation as an afterthought because it contradicted the earlier sworn statement. The relevant returns and affidavit were also prepared after the search or commencement of proceedings.
The ability of Sandeep Mangal to mortgage the flat for his company’s borrowing and permit another person to occupy it demonstrated that he exercised the real benefits and control associated with ownership.
Cash book treated as fabricated
To explain the cash component and loan instalments, Surendra Agrawal produced a cash book covering the period from 01.04.2008 onwards.
The cash book showed an opening balance of over ₹7 lakh, though no source for such cash was established. This was considered improbable in view of his monthly income of only ₹5,000 to ₹7,000.
The Tribunal also noticed several unusual features:
- substantial cash was shown as continuously available for nearly seven years;
- small bank withdrawals were made despite the alleged availability of large cash-in-hand;
- a cash receipt of ₹4 lakh was suddenly shown on 06.11.2016, just two days before demonetisation;
- no corresponding business expenses such as purchases, salaries, wages or freight were recorded; and
- household drawings were recorded as year-end lump sums rather than day-to-day expenditure.
The Tribunal concluded that the cash book had been created after the event to explain the cash payment and housing-loan instalments.
Financial help defence rejected
The appellants argued that Sandeep Mangal had merely helped his brother-in-law during a period of financial difficulty and that repayment of another person’s loan would not, by itself, establish beneficial ownership.
The Tribunal held that the case involved much more than isolated financial assistance. Sandeep Mangal had negotiated the purchase, paid part of the consideration, substantially repaid the loan, retained the property documents, controlled its occupation and used the property as collateral for his own company.
These cumulative circumstances established that Surendra Agrawal was the benamidar and Sandeep Mangal was the beneficial owner.
Pre-2016 transaction could still face confiscation
The flat was purchased in July 2015, before the 2016 amendment to the Benami Act.
Relying on the Supreme Court’s decision in Manjula and Others v. D.A. Srinivas, the Tribunal held that the procedural, declaratory, curative and machinery provisions introduced in 2016 can operate retrospectively or retroactively.
Consequently, attachment, adjudication and confiscation proceedings could be applied to the earlier transaction. However, penal provisions creating a new offence or enhancing punishment could not be applied retrospectively.
No statutory requirement to furnish reasons recorded
The appellants also contended that the Initiating Officer had failed to record and furnish the “reasons to believe” before issuing the notice under Section 24(1).
The Tribunal found that the reasons had, in fact, been recorded before issuance of the notice. It further held that the Act did not contain any specific requirement compelling the Initiating Officer to separately furnish a copy of the recorded reasons. The material facts and basis of the proceedings had been sufficiently disclosed in the show-cause notice and attachment order.
The appeals were consequently dismissed and the attachment was upheld.
Author’s comments
The decision illustrates that benami ownership is determined from the source of consideration, control, possession, enjoyment and surrounding conduct, and not merely from the name appearing in the registered deed.
Financial help from a relative does not automatically make a property benami. But the defence becomes difficult where the alleged lender negotiates the purchase, makes the down payment, repays most of the loan, controls possession and mortgages the property for his own business.
The ruling also cautions against creating belated cash books, rental affidavits or revised explanations after a search. Such documents may weaken rather than strengthen the defence when they contradict earlier statements and objective banking records.
The central principle is clear: registration establishes apparent title, but the financial trail and beneficial enjoyment may reveal the real owner.
Cases Discussed
- Niharika Jain & Ors Vs. Union of India & Ors. — Rajasthan High Court decision discussed on prospective operation of the 2016 amendment.
- Jaydayal Poddar (Deceased) Vs Mst. Bibi Hazra And Ors. — Supreme Court precedent on burden of proving a benami transaction and relevant indicia.
- Mangathai Ammal (Died) through LRs and Others Vs. Rajeswari & Others — Supreme Court precedent on financial contribution not being, by itself, conclusive of a benami transaction.
- Manjula and Others v. D.A. Srinivas — Supreme Court decision relied upon on retrospective operation of declaratory, procedural, curative and machinery provisions of the 2016 amendments.
- Bengal Immunity Company Limited v. State of Bihar and others — Mischief rule of statutory construction referred to in the discussion on retrospectivity.
- Shyam Sunder and others v. Ram Kumar and another — Declaratory legislation and retrospective operation.
- Zile Singh v. State of Haryana and others — Principles governing prospective and retrospective operation of amendments.
- Attorney General v. Pougett — Illustration concerning an explanatory amendment and relation back.
- National Agricultural Coop. Mktg. Federation of India Ltd. v. Union of India — Touchstones for determining legislative intent to give retrospectivity.
- Commissioner of Income Tax I, Ahmedabad v. Gold Coin Health Food Private Limited — Nature of an amendment and whether it is clarificatory or substantive.
- Commissioner of Income Tax (Central)-I, New Delhi v. Vatika Township Private Limited — Declaratory and clarificatory statutes and retrospective operation.
- Indian Performing Rights Society Limited v. Sanjay Dalia and another — Mischief rule and purposive construction.
- State Bank of India v. V. Ramakrishnan and another — Clarificatory amendments and retrospective operation.
- Ghanashyam Mishra and Sons Private Limited v. Edelweiss Asset Reconstruction Company Limited and others — Legislative intent and relation back of an amendment supplying an omission or explaining former law.
FULL TEXT OF THE JUDGMENT/ORDER OF APPELLATE TRIBUNAL UNDER SAFEMA
The present appeal has been preferred under section 46 of the Prohibition of Benami Transaction Act, 1988(PBPT), against the Confirmation Order under section 26(3) dated 27.05.2019 passed by the Hon’ble Adjudicating Authority, New Delhi in Reference No. R-815/2018, whereby the Adjudicating Authority had confirmed the Provisional Attachment Order dated 27.04.2018 passed by the initiating officer/respondent u/s 24(4)(a)(i) of the PBPT Act 1988, w.r.t. an immovable property i.e. a flat bearing no. B-304, 3rd Floor, Blue Berry Apartment, DB City, Village Mehra, Ward number 60, Gwalior
2. As per facts of the case, an immovable property i.e. a flat number B- 304, 3rd floor, Blue Berry Apartment, DB City, Village Mehra, Ward number 60, Gwalior admeasuring 1262 sq. ft. that is 117.28 sq meter super built up area was purchased in the name of Shri Surendra Kumar Agrawal S/o Shri Ramesh Chand Agrawal.
Consequent upon search action by the Income Tax Department, certain documents containing registry and chain documents of one flat including purchased conversion related documents, receipt of cash payment of Rs. 6,79,320/- issued in the name of Shri Sonu Mangal (alias Shri Sandeep Mangal), agreement for flat, etc. were seized. From the seized documents, it was found that initially the impugned flat i.e B- 304, 3rd floor, Blue Berry Apartment, DB City, Village Mehra, Ward number 60, Gwalior (hereinafter referred as impugned flat) was booked in the name of Shri Sonu Mangal alias Sandeep Mangal and entire negotiations for the purchase of flat was done by Shri Sandeep Mangal. Further it was also found that the receipts of booking the flat were also issued in the name of Shri Sonu Mangal. However, an agreement was found which showed that the impugned flat was purchased in the name of Shri Surendra Agrawal a relative of Shri Sandeep Mangal (brother in law).
In the agreement and sale deed, the address of Surendra Kumar Agrawal was mentioned as M/s Rajesh Enterprises, Bhaskar Lane, Jayendra Ganj, Lashkar Gwalior. Shri Surendra Agrawal in his statement before the DDIT (Investigation) stated that he is an employee in a shop named M/s Narendra Enterprises, Datia for last 5-6 years and earns Rs. 5-7 thousand per month. As such he (Surendra Kumar Agrawal) has no capacity to purchase the impugned property.
The flat (B-304, 3rd floor, Blue Berry Apartment, DB City, Village Mehra, Ward number 60, Gwalior) was kept as collateral security with SBI Rambagh Colony, Gwalior by the hotel ‘The Prabha International’ a unit of M/s Maa Kaila Devi Developers and Hotels Pvt. Ltd. in which Shri Sandeep
Mangal is a Director and key person. Further, this flat was rented out by Shri Sandeep Mangal to his known person without any rent which shows the beneficial ownership of Shri Sandeep Mangal on the said flat.
A housing loan was also taken from bank on this property (B-304, 3rd floor, Blue Berry Apartment, DB City, Village Mehra, Ward number 60, Gwalior) in which the repayments have been made by Shri Sandeep Mangal, the beneficial owner. Shri Surendra Agrawal earns Rs. 5-7 thousand per month and as such he has no capacity to pay the installment of loan on the impugned property.
Shri Sandeep Mangal has paid cash towards the cost of the impugned property (B-304, 3rd floor, Blue Berry Apartment, DB City, Village Mehra, Ward number 60, Gwalior) and has also transferred Rs. 7.5 lakhs from his bank account to the housing loan account of the said property. A payment of Rs. 6,79,320/- was made in cash to M/s Divine Housing Development Co. Pvt. Ltd. and the receipt was issued in the name of Sonu Mangal alias Sandeep Mangal. An another payment of Rs. 10,78,000/- was made in cash. Shri Surendra Kumar Agrawal in his statement before the DDIT (Investigation) denied to have made such payments.
Further enquiries were conducted and the details of which are as under:-
a) Summons were issued to Shri Surendra Agrawal and Shri Sandeep Mangal alias Shri Sonu Mangal and their statements on oath were recorded u/s 19(1) of the PBPT Act, 1988.
b) In his statement Shri Surendra Kumar Agarwal stated that he has purchased the Flat-304, DB City, Gwalior, for Rs 29,00,000/- by taking a loan of Rs. 22,00,000/- from Canara Bank, Branch-Gwalior and by paying cash of Rs. 7,00,000/-. He stated that he has no idea about how the loan was passed by the Canara Bank and this loan was get sanctioned through the broker Shri Kailash Soni whom he does not know personally. He further stated that he has not kept any security or mortgage for availing the above said loan of Rs. 22 lakhs from Canara Bank. Even there was no explicit intent of purchasing the flat at Gwalior by Shri Surendra Agarwal as he belongs, resides and works at Seoda, Dist.-Datia, MP.
Further he stated that he has repaid the total loan amount of Rs. 22,00,000,/- in cash only in installments during the period of 21 months i.e. from Feb, 2015 to Nov, 2016. But it was found that Shri Sandeep Mangal has transferred amounts from his Canara Bank A/c No. 3910261000011 (Prabha Jewellers, Proprietor Shri Sandeep Mangal) to the housing loan A/c no. 3910619000010 of Shri Surendra Kumar Agrawal as under:-
| Date | Amount |
|---|---|
| 16.07.2016 | 20,000/- |
| 14.12.2016 | 1,50,000/- |
| 26.12.2016 | 1,00,000/- |
| 29.12.2016 | 13,31,361/- |
| Total | 16,01,361 |
A total of Rs. 25,61,749/- was paid in the said loan account of Canara Bank out of which Rs. 16,01,361 was transferred from Canara Bank A/c No. 3910261000011 (Prabha Jewellers, Proprietor Shri Sandeep Mangal) and the remaining balance amount deposited in cash for which Shri Surendra Agrawal could not substantiate the sources of fund. As in his statement Shri Surendra Agrawal stated that he has repaid the total loan amount of Rs. 2200000/-in Cash, but as the above amounts of Rs. 16,01,361/- have been transferred from the A/c no. of Shri Sandeep Mangal, it proves that Shri Surendra Agrawal has no idea about the repayment of loan and the same has been executed by Shri Sandeep Mangal.
The loan account was closed on 29.12.2016 and the closing balance of Rs. 13,31,361/- was cleared from the funds transferred from the bank account of proprietorship concern of Shri Sandeep Mandal, which is evidence of his being beneficial owner of the Flat B-304, DB City Gwalior.
c) Further the property (B-304 DB Gwalior) was kept as equitable mortgage as one of the collateral security by Shri Sandeep Mangal (Director M/s Maa Kaila Devi Developers and Hotels Pvt. Ltd.) to obtain a term loan of Rs. 228 Lakh from State Bank of India, Rambagh Colony, Gwalior. This is also evidence that Shri Sandeep Mangal has purchased the property (Flat B-304) from his own funds and has been using it for his own benefit and means.
d) Regarding the payment of Rs. 6,79,320/- made in cash to Divine Housing Development Co. Pvt. Ltd. and the receipt (seized from the residence of Shri Sandeep Mangal during the search and seizure operation of Income Tax Department on 17.02.2017) issued in the name of Sonu Mangal alias Sandeep Mangal, Shri Surendra Agrawal in his statement stated that the payment of this entire amount of Rs. 6,79,320/- was made in cash by his Jija Ji, Shri Sonu Mangal (alias Shri Sandeep Mangal). Whereas Shri Sandeep Mangal alias Sonu Mangal in his statement denied this and stated that the amount of Rs. 6,79,320 was paid in cash by Shri Surendra Agrawal who was accompanied with his Munim (Accountant) Shri Manoj Yadav. This shows that Shri Surendra Agarwal is unaware that who has paid this consideration of Rs. 6,79,320/- for purchasing the said flat B-304.
e) Further, during the course of enquiry, it is found that the flat B- 304 is occupied by Shri Devesh Sharma who has a political acquaintance with Shri Sandeep Mangal. With reference to the discussion made in the above para 2(b) and in this para, it also proves that the property (Fiat B- 304) has been purchased in Benami Name Surendra Agrawal) for the ultimate and future benefit of Shri Sandeep Mangal.
f) Further in his statement, Shri Sandeep Mangal stated that he transferred about Rs. 10,00,000/- to the loan account of Shri Surendra Agrawal as loan and on being questioned about the repayment of this loan, he stated that Shri Surendra Agarwal has not repaid this loan of Rs. 10,00,000/- so far. Further Shri Surendra Kumar Agarwal had completely denied in this statement that he has not taken any such loan from any person and except him no one has deposited any amount in his loan account either in cash or cheque or transfer. And he further stated that he has just taken 05-06 lakhs cash from Maa Kaila Devi Developers & Hotels Pvt. Ltd (Director- Shri Sandeep Mangal) only to repay the said Canara Bank Loan. Further Shri Sandeep Mangal in his statement denied that no amount/loan has been given to Shri Surendra Agarwal from Maa Kaila Devi Developers & Hotels Pvt. Ltd. It is also evident from such contradictory statements that Shri Surendra Kumar has no idea about the repayment of said loan and the same has been paid by Shri Sandeep Mangal.
g) Earlier during the statement Shri Surendra Agrawal stated that no agreement was executed for the flat B-304 DB City, Gwalior, but when he was shown the copy of agreement executed for the flat B-304 DB City, Gwalior then he admitted that the signature made on the said agreement was his only. It shows that Shri Surendra Agarwal is signing documents on the instructions of Shri Sandeep Mangal, who is handling all the procedural and financial affairs and gets benefitted with the said flat B- 304, DB City Gwalior.
h) It was found that in the land documents submitted before the Canara Bank for obtaining the housing loan to purchase the flat B-304, DB City Gwalior, the Audit Report, Profit and Loss Account and Balance sheet of M/s Agarwal Traders was submitted, which was projected as proprietorship concern of Shri Surendra Agrawal. In his statement Shi Surendra Agarwal stated that he is completely unaware about the firm M/s Agarwal Traders and its functions, activity and existence. He further denied about the signature of his name made on the above said documents. The housing loan from Canara Bank was obtained by submitting the audit reports of M/s Agarwal Traders. As Shri Surendra Agrawal has denied about the existence of M/s Agarwal Traders which exhibits that the above said loan has been taken in the name of Shri Surendra Agarwal whereas Shri Surendra Agrawal was not involved in the procedure of taking above said loan. Further as per the Audit Report it is Shri Surendra Agrawal who is the proprietor of M/s Agarwal Traders and the signature of his name are present on the Audit Report, but as he is completely unaware about the firm M/s Agarwal Traders and also denied about the signature of his name present on the Audit Report, it is therefore clearly evident that this transaction (obtaining housing loan form Canara Bank) is itself carried out in the name of a fictitious entity i.e. “M/s Agarwal Traders” and therefore M/s Agarwal Traders is a Benami Entity and thus the above mentioned loan of Rs. 22,00,000/- taken from Canara Bank is also à Benami Transaction and therefore the said Flat B-304 DB City is also a Benami Property in which Shri Surendra Agarwal is the Benamidar and Shri Sandeep Mangal alias Sonu Mangal is the Beneficial Owner.
In view of above it is clear that the benamidar Shri Surendra Agrawal do not have capacity to buy the said property (B- 304, 3rd floor, Blue Berry Apartment, DB City, Village Mehra, Ward number 60, Gwalior) as he has meagre income to explain the investment in the above said immovable property purchased/ held in his name. Therefore, it is clear that Shri Surendra Agrawal has entered into transactions where property is transferred in his name for a consideration paid or provided by another person. Therefore, such transactions are covered under the definition of PBPT Act, 1988 prior to amendment. Also, such transactions are covered under the amended definitions 2(9)(A) of the PBPT act. Therefore, the property is a Benami Property and Show Cause Notice u/s 24(1) of the PBPT Act, 1988 dated 31.01.2018 was sent to the parties.
In view of the above it is held that the property (B-304, 3rd floor, Blue Berry Apartment, DB City, Village, Mehra, Ward number 60, Gwalior) under consideration is a Benami property and Shri Surendra Agrawal is benamidar and Shri Sandeep owner of this property and thus, on the same day, a Provisional Attachment Order U/s 24(3) of the Act was passed by the Initiating Officer, whereby the property of the appellant was attached for a period of 90 days.
Thereafter, summons dated 15.02.2018 was issued to the appellant U/s 19(1) of the PBPT act whereby the appellant appeared and the statement of appellant U/s 19(1) was recorded.
Further, the initiating officer passed a provisional attachment order dated 27.04.2018 U/s 24(4) of the PBPT Act, whereby the property of the appellant was attached provisionally and the reference R-815/2018 was forwarded to Hon’ble Adjudicating Authority for confirmation. The Hon’ble Adjudicating Authority after giving opportunity of hearing confirmed the provisional attachment of the immovable property vide impugned order.
Aggrieved by the same, the appellants have preferred the present appeals.
3. The Ld. Counsel for the appellants contended that the Hon’ble Adjudicating Authority (AA) has completely erred in law and failed to appreciate that the PBPT Amended Act, 1988 is prospective in nature and same cannot be applied retrospectively. The High Court of Judicature for Rajasthan Bench at Jaipur in S.B. Civil Writ Petition No. 2915/2019 titled as Niharika Jain & Ors Vs. Union of India & Ors. delved upon the issue of application of the amended provision of the PBPT Act and after the detailed discussion has held that:
“93. For the reason aforesaid and in the backdrop of the settled legal proposition so also in view of singular factual matrix of the matters herein; this Court has no hesitation to hold that the Benami Amendment Act, 2016, amending the Principal Benami Act, 1988, enacted w.e.f. 1st November, 2016, i.e. the date determined by the Central Government in its wisdom for its enforcement; cannot have retrospective effect.”
He argued that in the present case the alleged benami property was purchased by the appellant on 13.07.2015 which was prior to the coming of the PBPT Amendment Act. The initiating officer had no basis or jurisdiction to initiate proceedings under the PBPT Amended Act and Hon’ble AA has grossly failed to adjudicate upon this issue. Thus, the impugned order dated 27.05.2019 is liable to be set aside on this ground alone.
He submitted that it is the mandatory requirement of law U/s 24(1) of the PBPT Act that the initiating officer is required to have material in his possession and on the basis of reason to believe which should be recorded in writing, the show cause notice is to be issued. The language of S. 24(1) reads as: “(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…”
He stressed that the initiating officer did not fulfill the mandatory requirement of recording of reason and issued the show cause notice without any basis. Thus, in non-compliance of this mandatory requirement, impugned order dated 27.05.2019 needs to be set aside on this ground alone. Further, copy of reason to believe was not supplied to the appellant.
He contended that the initiating officer failed to take the prior approval of the approving authority which is the pre-requisite before provisionally attaching the property U/s 24(3) of the Act.
He stressed that the Hon’ble Adjudicating Authority has erred in relying upon the statement of appellant and Sh. Sandeep Mangal recorded u/s 131 of the IT Act on 21.09.2017 as well as U/s 19 of the PBPT ACT on 09.03.2018 and 16.04.2018, wherein the statement of the appellants were recorded under duress without free mental state. Thus, the same cannot be relied upon in terms of the Indian Evidence Act.
He stated that IO has not fully discharged the burden to prove that the alleged property falls under the category of Benami Transaction. The burden of proving that a particular sale is benami and the apparent purchaser is not the real owner, always rests on the person asserting it to be sold. It is further observed that this burden has to be strictly discharged by adducing legal evidence of a definite character which would either directly prove the fact of the benami transaction or establish circumstances unerringly and reasonably raising an interference. In this regard, he relied upon the judgment of the Hon’ble Apex Court in Jaydayal Poddar (Deceased) Vs Mst. Bibi Hazra And Ors on 19 October, 1973 has set the guidelines and held that:
“6. “It is well-settled that the burden of proving that a particular sale is benami and the apparent purchaser is not the real owner, always rests on the person asserting it to be so. This burden has to strictly discharged by adducing legal evidence of a definite character which would either directly prove the fact of benami or establish circumstances unerringly and reasonably raising an inference of that fact. The essence of a benami is the intention of the party or parties concerned; and not unoften, such intention is shrouded in thick veil which cannot be easily pierced through. But such difficulties do not relieve the person asserting the transaction to be benami of any part of the serious onus that rests on him; nor justify the acceptance of mere conjectures or surmises, as a substitute for proof. The reason is that a deed is a solemn document prepared and executed after considerable deliberation, and the person expressly shown as the purchaser or transferee in the deed, starts with the initial presumption in his favour that the apparent state of affairs is the real state of affairs. Though the question whether 18 a particular sale is benami or not, is largely one of fact, and for determining this question, no absolute formulae or acid tests, uniformly applicable in all situations, can be laid down; yet in weighing the probabilities and for gathering the courts relevant by these indicia, the are usually guided circumstances: (1) the source from which the purchase money came; (2) the nature and possession of the property, after the purchase; (3) motive, if any, for giving the transaction a benami colour; (4) the position of the parties and the relationship if any, between the claimant and the alleged benamidar; (5) the custody of the title deeds after the sale and (6) the conduct of the parties concerned in dealing with the property after the sale.”
He contested that the sale deed dated 13.07.2015 was executed in favor of the appellant and consideration for the same was paid by appellant from his income sources. Further, during the financial crunch, brother in law of the appellant helped him in paying back the loan amount taken for purchasing the immovable property. Sh. Sandeep Mangal helped his brother-in-law in good faith and the Initiating Officer as well as the Adjudicating Authority failed to establish that how Sh. Sandeep Mangal was drawing benefit out of it.
He pointed out that the Hon’ble Adjudicating Authority erred in not appreciating the precedent set by the Hon’ble Supreme Court in Civil Appeal No. 4805 of 2019 (arising out of SLP (C) no.29642 of 2016) titled as Mangathai Ammal (Died) through LRs and Others Vs. Rajeswari & Others whereby the hon’ble apex court delved upon the issue that mere financial assistance to buy property cannot be termed benami transaction. The hon’ble court held that:
“9.1 The first reason which is given by the learned Trial Court while holding the suit properties as benami transactions is that part sale consideration was paid by Narayanasamy Mudaliar at the time of the purchase of the property vide Sale Deed Exh. B3. As held by this Court in catena of decisions referred to hereinabove, the payment of part sale consideration cannot be the sole criteria to hold the sale/transaction as benami. While considering a particular transaction as benami, the intention of the person who contributed the purchase money is determinative of the nature of transaction. The intention of the person, who contributed the purchase money, has to be decided on the basis of the surrounding circumstances; the relationship of the parties; the motives governing their action in bringing about the transaction and their subsequent conduct etc. It is required to be noted that Narayanasamy Mudaliar, who contributed part sale consideration by purchasing property at Exh. B3, might have contributed being the mere contributing the part sale husband therefore by consideration, it cannot be inferred that Sale Deed in favour of the appellant Sh. Surendra Agrawal no.1-wife was benami transaction and for and at behalf of the joint family. Therefore, the Trial Court as well as the High Court have committed a grave error in holding the suit properties benami transactions/ancestral properties on the basis of the document at Exh. B3.”
Likewise, in the case at hand, due to financial crunch, the appellant took help of Sh. Sandeep Mangal who in turn helped the appellant out of concern/in good faith being a brother in law to him.
He submitted that appellant has let out the alleged benami property to Sh. Devesh Sharma and is also drawing rent of Rs. 6000/- p/m. Further, the receipt of the monthly rent being paid by the tenant and the affidavit dated 10.02.2018 in its support has also been overlooked by the Hon’ble AA. Copy of the rent receipt as well as the affidavit dated 10.02.2018 is annexed herewith as Annexure-C(Colly).
He pointed out that the value of the statement of appellant relied upon by the IO is diminished in view of retractory affidavit dated 10.02.2018. Copy of Affidavit is already on the record as Annexure A(Colly).
He submitted that the Hon’ble Adjudicating Authority has erred in facts in holding that the M/s Prabha Jewellers under the proprietorship of Sh. Sandeep Mangal was found running only on transaction mentioned in bank account rather than any actual business being carried out. It is pertinent to mention here that the Adjudicating Authority is contradicting its own finding as at one place it is alleging without any basis that the proprietorship concern is only on papers whereas on the other hand it is stating that one jewellery shop in the name of the M/s Prabha Jewellers was found running. Further, the IO has not placed on record any proof to substantiate his claim and Adjudicating Authority failed to observe the same.
He stated that Hon’ble Adjudicating Authority erred in holding that the cash book of the appellant from 01.04.2008 to 30.04.2017 have been prepared by the appellant after the initiation of proceedings under the PBPT Act as no evidence has been placed on record by the IO as well as the AA to substantiate the same. These are just vague allegations against the appellant without any substance.
He stated that the address i.e. Rajesh Enterprises, Bhaskar Lane, Jayendra Ganj, Lashkar, Gwalior, mentioned in the sale deed of the alleged benami property belongs to the elder brother of the appellant and the same has been used by the appellant as he was required to furnish a local address of Gwalior at the time of purchasing the said property.
He submitted that the appellant was drawing a salary of Rs. 5000/- P/M only on the basis of the statement which was taken under duress. Other than the statement, the IO as well as the AA has not substantiated its claim.
He argued that the instalments towards the purchase of property was deducted from the loan account of the appellant which is reflected in the Income Tax Return filed by the appellant. Copy of the ITRs is annexed herewith as Annexure-D.
He pointed out that due to financial crunch faced by the appellant, Sh. Sandeep Manga helped him to repay the loan in good faith, being his brother-in-law. Further, fund was transferred from the bank account of Sh. Sandeep Mangal in a normal course of routine with bona fide intentions.
Prayer is accordingly made to allow the present appeal and set aside the impugned adjudications order by the Adjudicating Authority (AA).
4. The Ld. Counsel for the respondent countered all the arguments of the appellant and the same is analysed in our discussions and findings in para below.
5. After hearing both the sides, the following issues emerge for analysis:
i) Whether the amendment in the PBPT Act is prospective in nature? ii) Whether the statement of the appellants was taken under duress and whether the same was retracted?
iii) Whether there existed mere financial assistance to buy property in the present case and thus the same cannot be termed benami transaction? Whether the impugned property is not benami property as it is the contention of the appellant that the sale deed dated 13.07.2015 was executed in favor of the appellant and consideration for the same was paid by appellant from his income sources and during the financial crunch, brother-in-law of the appellant helped him in paying back the loan amount taken for purchasing the immovable property?
iv) Whether the cash book of the Surendra Agrawal from 01.04.2008 to 30.04.2017 was prepared before the initiation of proceedings under the PBPT Act as no evidence has been placed on record by the IO as well as the AA to substantiate the same?
v) Whether the Initiating Officer did not fulfil the statutory requirement of recording of reason to believe and issued the show cause notice without any basis and whether it is mandatory to supply the copy of the reason to the noticees?
6. Coming to issue no i), the appellant has contended that the amendment in the PBPT Act in 2016 cannot have retrospective application. However, it is now settled by the Hon’ble Supreme Court of India in the case of Manjula and Others v. D.A. Srinivas CIVIL APPEAL NO. 7370 OF 2026 [Arising out of SLP (C) No. 7924 of 2024], wherein it was held that the amendment can be applied retrospectively, being directory or explanatory in nature. The relevant paras of the said judgment are reproduced as under :-
“(E) PROSPECTIVE OR RETROSPECTIVE OPERATION OF THE 2016
AMENDMENT
22. The next question that falls for consideration is, whether the amended provisions operate prospectively or retrospectively. In this regard, it is necessary to recall the object and reasons underlying the amendment, which can be gathered from the statements made when the amendments were proposed in Parliament. The amendments as is evident, were introduced to cure the mischiefs and omissions in the original enactment, which had failed to curb benami transactions in the manner expected, and effective steps could not be taken for want of adequate procedural provisions.
22.1. It is also noteworthy that certain provisions under the unamended Act were omitted and substituted by new provisions, while several fresh provisions were inserted prescribing the procedure to be followed before confiscation of property and establishing mechanisms of appeal against orders declaring property as benami. At the same time, the foundational provisions prohibiting benami transactions, rendering them offences, extinguishing the right to enforce or defend claims based on benami arrangements, enabling confiscation of benami property, and prohibiting re-transfer, continued substantially in force.
22.2. Ordinarily, every statute is presumed to be prospective unless the statute itself expressly or by necessary implication provides otherwise. Equally, it is well settled that the mere fact that a law is brought into force from a particular date does not necessarily mean that it operates only prospectively. To determine the true temporal operation of a statute, the object of the enactment must be considered. If the purpose of the amendment is to cure a defect, remove an omission, substitute appropriate provisions earlier lacking, effectively implement the original legislative intent, or if the amendment is clarificatory, declaratory or validating in nature, it may legitimately receive retrospective operation.
22.3. It is also apposite to observe that protection against retrospectivity generally extends only to vested or accrued rights. The Act of 1988 had already prohibited benami transactions. Even prior thereto, provisions under the Indian Trusts Act, the Code of Civil Procedure and the Income-tax Act imposed restrictions on such arrangements. Further, after the Forty-Fourth Constitutional Amendment, the right to property ceased to be a fundamental right and remained only a constitutional right. A person, therefore, cannot claim a vested right to enter into transactions designed to defeat or circumvent the law. It is a settled principle that what cannot be done directly cannot be permitted to be done indirectly.
22.4. In this context, it would be useful to refer to the settled principles laid down in Bengal Immunity Company Limited v. State of Bihar and others (1955) 1 SCC 763 wherein the rule in Heydon case MANU/ENRP/0018/1584 : (1584) 3 Co Rep 7a: 76 ER 637 was approved, namely, that the Court must adopt such construction as suppresses the mischief and advances the remedy. The relevant paragraph reads as follows:
“27. It is a sound rule of construction of a statute firmly established in England as far back as 1584 when Heydon case [Heydon case, MANU/ENRP/0018/1584 : (1584) 3 Co Rep 7a: 76 ER 637] was decided that—
“…for the sure and true interpretation of all statutes in general (be they penal or beneficial, restrictive or enlarging of the common law) four things are to be discerned and considered— 1st. What was the common law before the making of the Act. 2nd. What was the mischief and defect for which the common law did not provide.
3rd. What remedy Parliament hath resolved and appointed to cure the disease of the Commonwealth, and
4th. The true reason of the remedy; and then the office of all the Judges is always to make such construction as shall suppress the mischief, and advance the remedy, and to suppress subtle inventions and evasions for continuance of the mischief, and pro privato commodo, and to add force and life to the cure and remedy, according to the true intent of the makers of the Act, pro bono publico.”
22.5. The Constitution Bench in Shyam Sunder and others v. Ram Kumar and another (2001) 8 SCC 24 held that where an enactment declares or explains the previous law, such declaratory legislation ordinarily operates retrospectively, since its purpose is to remove omissions or clarify the earlier statute. The following paragraph is apposite: (SCC p. 49, para 39)
“39.… Ordinarily when an enactment declares the previous law, it requires to be given retroactive effect. The function of a declaratory statute is to supply an omission or to explain a previous statute and when such an Act is passed, it comes into effect when the previous enactment was passed. The legislative power to enact law includes the power to declare what was the previous law and when such a declaratory Act is passed, invariably it has been held to be retrospective. Mere absence of use of the word “declaration” in an Act explaining what was the law before may not appear to be a declaratory Act but if the court finds an Act as declaratory or explanatory, it has to be construed as retrospective…”
22.6. In Zile Singh v. State of Haryana and others (2004) 8 SCC 1 it was reiterated that while statutes are generally prospective, the presumption against retrospectivity does not apply to declaratory or clarificatory enactments. If an amendment is introduced to cure an acknowledged evil, explain the prior law, or supply an obvious omission, retrospective operation may be inferred from legislative intent. The following paragraphs are pertinent: (SCC pp. 8-9, paras 13-15)
“13. It is a cardinal principle of construction that every statute is prima facie prospective unless it is expressly or by necessary implication made to have a retrospective operation. But the rule in general is applicable where the object of the statute is to affect vested rights or to impose new burdens or to impair existing obligations. Unless there are words in the statute sufficient to show the intention of the legislature to affect existing rights, it is deemed to be prospective only–‘nova constitutio futuris formam imponere debet non praeteritis’–a new law ought to regulate what is to follow, not the past. (See Principles of Statutory Interpretation by Justice G.P. Singh, 9th Edn., 2004 at p. 438.) It is not necessary that an express provision be made to make a statute retrospective and the presumption against retrospectivity may be rebutted by necessary implication especially in a case where the new law is made to cure an acknowledged evil for the benefit of the community as a whole (ibid., p. 440).
14. The presumption against retrospective operation is not applicable to declaratory statutes… In determining, therefore, the nature of the Act, regard must be had to the substance rather than to the form. If a new Act is ‘to explain’ an earlier Act, it would be without object unless construed retrospectively. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act. It is well settled that if a statute is curative or merely declaratory of the previous law retrospective operation is generally intended… An amending Act may be purely declaratory to clear a meaning of a provision of the principal Act which was already implicit. A clarificatory amendment of this nature will have retrospective effect (ibid., pp. 468-69).
15. Though retrospectivity is not to be presumed and rather there is presumption against retrospectivity, according to Craies (Statute Law, 7th Edn.), it is open for the legislature to enact laws having retrospective operation. This can be achieved by express enactment or by necessary implication from the language employed. If it is a necessary implication from the language employed that the legislature intended a particular section to have a retrospective operation, the courts will give it such an operation. In the absence of a retrospective operation having been expressly given, the courts may be called upon to construe the provisions and answer the question whether the legislature had sufficiently expressed that intention giving the statute retrospectivity. Four factors are suggested as relevant: (i) general scope and purview of the statute; (ii) the remedy sought to be applied; (iii) the former state of the law; and (iv) what it was the legislature contemplated. (p. 388) The rule against retrospectivity does not extend to protect from the effect of a repeal, a privilege which did not amount to accrued right. (p. 392)
16. Where a statute is passed for the purpose of supplying an obvious omission in a former statute or to “explain” a former statute, the subsequent statute has relation back to the time when the prior Act was passed. The rule against retrospectivity is inapplicable to such legislations as are explanatory and declaratory in nature. A classic illustration is the case of Attorney General v. Pougett [Attorney General v. Pougett, MANU/ENRP/ 0454/1816 : (1816) 2 Price 381 : 146 ER 130] (Price at p. 392). By a Customs Act of 1873 (53 Geo. 3, c. 33) a duty was imposed upon hides of 9s 4d, but the Act omitted to state that it was to be 9s 4d per cwt., and to remedy this omission another Customs Act (53 Geo. 3, c. 105) was passed later in the same year. Between the passing of these two Acts some hides were exported, and it was contended that they were not liable to pay the duty of 9s 4d per cwt., but Thomson, C.B., in giving judgment for the Attorney General, said: (ER p. 134) ‘The duty in this instance was, in fact, imposed by the first Act; but the gross mistake of the omission of the weight, for which the sum expressed was to have been payable, occasioned the amendment made by the subsequent Act: but that had reference to the former statute as soon as it passed, and they must be taken together as if they were one and the same Act;’ (Price at p. 392)
17. Maxwell states in his work on Interpretation of Statutes (12th Edn.) that the rule against retrospective operation is a presumption only, and as such it ‘may be overcome, not only by express words in the Act but also by circumstances sufficiently strong to displace it’ (p. 225). If the dominant intention of the legislature can be clearly and doubtlessly spelt out, the inhibition contained in the rule against perpetuity becomes of doubtful applicability as the “inhibition of the rule” is a matter of degree which would “vary secundum materiam” (p.226). Sometimes, where the sense of the statute demands it or where there has been an obvious mistake in drafting, a court will be prepared to substitute another word or phrase for that which actually appears in the text of the Act (p. 231).
18. In a recent decision of this Court in National Agricultural Coop. Mktg. Federation of India Ltd. v. Union of India [MANU/SC/0243/2003 : (2003) 5 SCC 23] it has been held that there is no fixed formula for the expression of legislative intent to give retrospectivity to an enactment. Every legislation whether prospective or retrospective has to be subjected to the question of legislative competence. The retrospectivity is liable to be decided on a few touchstones such as: (i) the words used must expressly provide or clearly imply retrospective operation; (ii) the retrospectivity must be reasonable and not excessive or harsh, otherwise it runs the risk of being struck down as unconstitutional; (iii) where the legislation is introduced to overcome a judicial decision, the power cannot be used to subvert the decision without removing the statutory basis of the decision. There is no fixed formula for the expression of legislative intent to give retrospectivity to an enactment. A validating clause coupled with a substantive statutory change is only one of the methods to leave actions unsustainable under the unamended statute, undisturbed. Consequently, the absence of a validating clause would not by itself affect the retrospective operation of the statutory provision, if such retrospectivity is otherwise apparent.”
22.7. In Commissioner of Income Tax I, Ahmedabad v. Gold Coin Health Food Private Limited, (2008) 9 SCC 622 this Court held that the Court must analyse the true nature of the amendment. The date from which it is brought into force is not conclusive; what is material is whether the amendment is clarificatory or substantive. The following paragraphs are pertinent:
“8. It would be of some relevance to take note of what this Court said in Virtual case [MANU/SC/0879/2007 : (2007) 9 SCC 665]. Pointing out one of the important tests at para 51 it was observed that even if the statute does contain a statement to the effect that the amendment is clarificatory or declaratory, that is not the end of the matter. The court has to analyse the nature of the amendment to come to a conclusion whether it is in reality a clarificatory or declaratory provision. Therefore, the date from which the amendment is made operative does not conclusively decide the question. The court has to examine the scheme of the statute prior to the amendment and subsequent to the amendment to determine whether amendment is clarificatory or substantive.”
“18. As noted by this Court in CIT v. Podar Cement (P) Ltd. [MANU/SC/0649/1997 : (1997) 5 SCC 482] the circumstances under which the amendment was brought in existence and the consequences of the amendment will have to be taken care of while deciding the issue as to whether the amendment was clarificatory or substantive in nature, and whether it will have retrospective effect or it was not so.”
22.8. In Commissioner of Income Tax (Central) -I, New Delhi v. Vatika Township Private Limited (2015) 1 SCC 1 this Court recognised that declaratory or clarificatory statutes may operate retrospectively, particularly when introduced to explain the meaning of an earlier enactment or remove doubts as to its effect. The following paragraph is pertinent: (SCC p. 23, para 32)
“32. ….The circumstances under which provisions can be termed as “declaratory statutes” are explained by Justice G.P. Singh [Principles of Statutory Interpretation, (13th Edn., Lexis Nexis Butterworths Wadhwa, Nagpur, 2012)] in the following manner:
‘Declaratory statutes
The presumption against retrospective operation is not applicable to declaratory statutes. As stated in Craies [W.F. Craies, Craies on Statute Law (7th Edn., Sweet and Maxwell Ltd., 1971)] and approved by the Supreme Court (in Central Bank of India v. Workmen [Central Bank of India v. Workmen, MANU/SC/0142/1959 : AIR 1960 SC 12, p. 27, para 29]):”For modern purposes a declaratory Act may be defined as an Act to remove doubts existing as to the common law, or the meaning or effect of any statute. Such Acts are usually held to be retrospective. The usual reason for passing a declaratory Act is to set aside what Parliament deems to have been a judicial error, whether in the statement of the common law or in the interpretation of statutes. Usually, if not invariably, such an Act contains a Preamble, and also the word “declared” as well as the word “enacted”.” But the use of the words “it is declared” is not conclusive that the Act is declaratory for these words may, at times, be used to introduced new rules of law and the Act in the latter case will only be amending the law and will not necessarily be retrospective. In determining, therefore, the nature of the Act, regard must be had to the substance rather than to the form. If a new Act is “to explain” an earlier Act, it would be without object unless construed retrospective. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act. It is well settled that if a statute is curative or merely declaratory of the previous law retrospective operation is generally intended. The language “shall be deemed always to have meant” is declaratory, and is in plain terms retrospective. In the absence of clear words indicating that the amending Act is declaratory, it would not be so construed when the preamended provision was clear and unambiguous. An amending Act may be purely clarificatory to clear a meaning of a provision of the principal Act which was already implicit. A clarificatory amendment of this nature will have retrospective effect and, therefore, if the principal Act was existing law which the Constitution came into force, the amending Act also will be part of the existing law.’ The above summing up is factually based on the judgments of this Court as well as English decisions.”
“22.9. In Indian Performing Rights Society Limited v. Sanjay Dalia and another (2015) 10 SCC 161 : (2016) 1 SCC (Civ) 55, this Court reaffirmed the mischief rule of interpretation, namely, that statutory construction must suppress the mischief sought to be remedied and advance the legislative object. The following paragraph is pertinent:
“24. … It is settled proposition of law that the interpretation of the provisions has to be such which prevents mischief. The said principle was explained in Heydon’s case [MANU/ENRP/0018/1584 : (1584) 3 Co Rep 7a: 76 ER 637]. According to the mischief rule, four points are required to be taken into consideration. While interpreting a statute, the problem or mischief that the statute was designed to remedy should first be identified and then a construction that suppresses the problem and advances the remedy should be adopted. Heydon’s [MANU/ENRP/0018/1584 : (1584) 3 Co Rep 7a: 76 ER 637], mischief rule has been referred to in Interpretation of Statutes by Justice G.P. Singh, 12th Edn., at pp. 124-25 thus: “(b) Rule in Heydon’s case [MANU/ENRP/0018/1584 : (1584) 3 Co Rep 7a: 76 ER 637]; purposive construction: mischief rule When the material words are capable of bearing two or more constructions the most firmly established rule for construction of such words ‘of all statutes in general (be they penal or beneficial, restrictive or enlarging of the common law)’ is the rule laid down in Heydon’s case [MANU/ENRP/0018/1584 : (1584) 3 Co Rep 7a: 76 ER 637] which has now attained the status of a classic (Kanai Lal Sur v. Paramnidhi Sadhukhan [MANU/SC/0097/1957 : AIR 1957 SC 907]). The rule which is also known as “purposive construction” or “mischief rule” (Anderton v. Ryan [MANU/UKHL/0021/1985 : 1985 AC 560: (1985) 2 WLR 968: (1985) 2 All ER 355 (HL)]), enables consideration of four matters in construing an Act: (i) What was the law before the making of the Act; (ii) What was the mischief or defect for which the law did not provide; (iii) What is the remedy that the Act has provided; and (iv) What is the reason of the remedy. The rule then directs that the courts must adopt that construction which “shall suppress the mischief and advance the remedy”. The rule was explained in Bengal Immunity Co. Ltd. v. State of Bihar [MANU/SC/0083/1955 :AIR 1955 SC 661] by S.R. Das, C.J….”
22.10. In State Bank of India v. V. Ramakrishnan and another (2018) 17 SCC 394: (2019) 2 SCC (Civ) 458, this court held that where an amendment is intended to clarify and set at rest an overbroad interpretation of an earlier provision, such amendment is clarificatory and therefore retrospective in nature.
22.11. In Ghanashyam Mishra and Sons Private Limited v. Edelweiss Asset Reconstruction Company Limited and others (2021) 9 SCC 657: 2021) 4 SCC (Civ) 638, this Court reiterated that if the legislature supplies an obvious omission or explains a former statute, the subsequent amendment relates back to the date of the original enactment and may operate retrospectively. The following paragraphs are pertinent:
“89. It could thus be seen that what is material is to ascertain the legislative intent. If legislature by an amendment supplies an obvious omission in a former statute or explains a former statute, the subsequent statute has a relation back to the time when the prior Act was passed.”
“94. We have no hesitation to say that the words “other stakeholders” would squarely cover the Central Government, any State Government or any local authorities. The legislature noticing that on account of obvious omission certain tax authorities were not abiding by the mandate of the I&B Code and continuing with the proceedings, has brought out the 2019 Amendment so as to cure the said mischief. We therefore hold that the 2019 Amendment is declaratory and clarificatory in nature and therefore retrospective in operation.”
22.12. Applying the above principles, it is clear that the 2016 amendments were enacted to cure the mischiefs and omissions in the original legislation, which had become largely unworkable in practice. The legislative intent to make the statute effective is manifest. The prohibition against benami transactions already existed. No period of limitation was prescribed either under the original Act or under the amended Act for initiating action against benami property or against persons involved in such transactions. Action for confiscation or prosecution may therefore be taken whenever the transaction comes to the notice of the competent authorities.
22.13. Further, when a lis comes before a Court disclosing a benami transaction, the Court is duty-bound to consider the applicability of the Act and enforce the statutory prohibition. The amended provisions merely introduced a complete machinery for attachment, adjudication and appeals. Though attachment and adjudication were elaborately structured for the first time, these provisions are essentially procedural and regulatory, intended to ensure fairness and avoid arbitrary action before confiscation. Unless the amendment is given retroactive operation, the very object of making the legislation workable would be defeated.
22.14. The appellate remedies introduced are beneficial safeguards providing checks against arbitrary exercise of power, and beneficial procedural provisions ordinarily operate retrospectively. So far as penal consequences are concerned, enhanced punishment cannot be retrospectively imposed; however, the machinery provisions enabling adjudication, confiscation and enforcement, being curative and procedural, can apply retrospectively.
22.15. Accordingly, we hold that the 2016 amendments, insofar as they are declaratory, procedural, curative and machinery-oriented, operate retrospectively/retroactively, while penal provisions creating new offences or enhancing punishment can operate only prospectively.
Hence, this issue is decided against the appellants and in favour of the respondent in light of the aforesaid judgment by the Hon’ble Supreme Court in case of Manjula and Others v. D.A. Srinivas (supra).
7. Coming to issue no ii), we are of the view that the claim of the appellant that his statement u/s 131 of the IT Act was recorded under duress, without his consent and he has been made to sign the same without giving the opportunity to read it. is wrong and baseless. The statement of the appellant was recorded in fair way. The recorded statement has evidential value before the law as the same was recorded u/s 131 of the Income Tax Act, 1961. Further, it is on record that:
i) Shri Surendra Agarwal has not taken this plea or not filed retraction of his statement before the Deputy Director of Income Tax (Investigation), Gwalior (who has recorded the statement) and also not before the higher authority of income tax Investigation Wing.
ii) Shri Surendra Agarwal has also admitted in the statement recorded that he has given the statement without any coercion and has given statement in healthy mental condition. In this regard, his declaration is reproduced as under-
“उपरोक्त बयान मेरे द्वारा बिना किसी दबाव या भय के पूरे होशोहवास में स्वच्छ मन से बिना कोई तथ्य छिपाये गये हैं। ये बयान मेरे द्वारा बिना किसी दबाव या भय के पूरी तरह पढ़कर, समझकर हस्ताक्षर किये गये हैं।”
It is relevant to mention here that the above statement of Shri Surendra Agarwal is ‘general informatory’ in nature as in questions of statement information gathered related to his family members, business, flat no., location of flat, no. of rooms in flat, current occupant of the flat, source of purchase of the flat etc. were asked which nowhere makes the sense of any coercion. And even the DDIT Gwalior at the time of recording the statement of Shri Surendra Agarwal was also unknown about the facts of the above asked informatory questions.
Further, Shri Surendra Agrawal has made allegation on two officers i.e. the Dy. Director of Income Tax (Inv.), Gwalior and the Dy. Commissioner of Income Tax (Benami Prohibition), Bhopal of coercion. However, since both the officers are different and hence, no vested interest in the matter. In the statements recorded by both the above officers, various facts were mentioned which were only in the knowledge of Shri Surendra Agrawal and the officers could not incorporate these facts on their own.
Therefore, this issue is decided against the appellant and in favour of the respondent.
8. Coming to issue no. iii), the appellant has claimed that during financial crunch, brother in law of the appellant is helped him in pay back the loan amount taken for purchasing the immovable property. The appellant has further claimed his brother in law helped him in good faith and the IO and Adjudicating Authority failed to establish that how Sandeep Mangal was drawing benefits out of it’. While on the other hand, the counsel for the respondent state that Shri Sandeep Mangal has provided the consideration for purchasing the impugned flat in the name of his brother in law, Shri Surendra Agarwal and it was also proved that the benefit is being derived by Shri Sandeep Mangal by keeping it as collateral security and letting it out on rent to his political acquainted person, Shri Devesh Sharma. Thus, such claims of the appellant are completely misleading and incorrect.
Further, it is also pertinent from the record that the registry, chain documents and agreement for impugned flat etc. with receipt of cash payment of Rs. 6,79,320/- issued in the name of Shri Sonu Mangal (alias Shri Sandeep Mangal) regarding the impugned property were seized. From these seized documents I,t was found that the impugned property (flat) was booked in the name of Shri Sonu Mangal alias Sandeep Mangal and entire negotiations for the purchase of flat was done by Shri Sandeep Mangal. Further, it was also found that the receipts of booking the flat were also in the name of Shri Sonu Mangal. Whereas, from the seized registry of the impugned property it is found that the flat was registered in the name of Shri Surendra Agrawal. But during the post search enquiry, it was found that Shri Surendra Agrawal was completely unaware about the general and simple facts of the impugned property which is evident from his statement dated 21-09-2017 recorded on oath before the Deputy Director of Income Tax (Investigation), Gwalior. He has failed to give the flat no. the floor no. on which it was located, no. of rooms in the flat and area of the said flat. For example, when he was asked about the number of rooms in the flat, then he answered that there are 3 rooms in the flat whereas it was a 2 BHK flat. He has also admitted that the said flat has been given on rent by his brother in law Shri Sandeep Mangal to a person who is known to Shri Sandeep Mangal and in this respect no rent was being taken. Further, the impugned property was mortgaged as collateral security for obtaining credit facility for M/s Maa Kaila Devi Developers and Hotels Pvt. Ltd in which Shri Sandeep Mangal is a key person. Thus, the beneficial use of the property by Shri Sandeep Mangal itself shows absence of any good faith. Hence, claim of the appellant is untenable.
The appellant has also contended that that Shri Surendra Agarwal has let out the alleged benami property to Shri Devesh Sharma and is also drawing rent of Rs. 6000/- per month and the Adjudicating Authority has overlooked the affidavit dated 10.02.2018 and receipt of monthly rent being paid by the tenant. In this regard, we agree with the contention of the respondent that the facts and affidavit mentioned by the appellant has been after thought story and hence not reliable. Shri Surendra Agarwal in his statement dated 21.09.2017 on oath has nowhere mentioned about rent received from flat. As previously mentioned, he even failed to recall flat no., floor at which flat was situated etc.
Further, the appellant Shri Surendra Agrawal is also not earning Rs. 6000/- per month rent from the property, as in his statement given on oath dated 21.09.2017 before the DDIT Gwalior has stated that no rent was taken from Shri Devesh Sharma the occupant. This shows that he was not in receipt of any rental income till the time of recording of statement. However, as stated by the respondent that the appellant Sh. Surendra Agrawal, in his income tax returns claimed to have shown rental income of Rs. 70,000/- and Rs. 72,000/- in Α.Υ. 2016-17 & Α.Υ. 2017-18 respectively. But it is quite contrary that the appellant is claiming rental income in these two years but on 21.09.2017 in his statement he had stated that he was not receiving any rent from the occupant and also these return of income were filed by him was on 29.03.2017 & 23.03.2018 for A.Y. 2016-17 & A.Y. 2017-18 respectively which is after the date of search and seizure action in which the registry of the impugned property was seized from the hotel of Shri Sandeep Mangal i.e. 17.02.2017. Further, in respect of the affidavit dated 10.02.2018 for the rent claimed, it is pertinent that it is an afterthought as the same is prepared after the issuance of the SCN and passing of PAO.
The claim of the appellant that due to the financial crunch faced by appellant, Shri Sandeep Mangar helped him to repay the loan in good faith is incorrect, misleading and afterthought. For the purchase of impugned flat a loan of Rs. 22,00,000/- was also taken from Canara Bank in the name of Shri Surendra Agarwal. However, the said loan was repaid in only 18 months by cash with a total of approx. Rs. 9.5 lakhs (Income as stated by Shri Surendra Agrawal is Rs. 05 to 07 thousands per month) and through direct transfer of funds of approx 16 lacs to the above said loan account from the undisclosed bank account of Shri Sandeep Mangal having A/c no. 3910261000011 of Canara Bank (in which the amounts were also deposited in cash). This bank account is maintained by Shri Sandeep Mangal in the name of M/s Prabha Jewellers under his proprietorship. Whereas, Shri Surendra Agrawal was not aware that his loan account was credited from transfer of funds by Shri Sandeep Mangal. This clearly shows the intent of the transaction that property is benami property and Shri Sandeep Mangal is beneficial owner and Shri Surendra Agarwal is benamidar.
In view of the above, this issue is decided against the appellants and in favour of the respondent and the impugned property is benami.
9. Coming to issue no. iv), we agree with the submission of the respondents that as per income tax returns available with the department, it is found that Shri Surendra Kumar Agrawal has not filed any ITR before the Assessment Year 2011-12. Whereas, he produced the so-called cash book from 01-04-2008 to 30-04-2017 which clearly appears as prepared after the initiation of the proceedings of PBPT Act in order to justify his claim. Some important points in this regard are worth noting-
i) On perusal of cash book produced by the appellant Sh. Surendra Agrawal it was found that he has shown opening balance of Rs. 7,03,123.39/- on 01.04.2008 whereas, no evidence and source for this huge cash in hand balance furnished. This shows that to substantiate or justify his claim of cash payment against the booking of flat and also the cash EMI of loan of the impugned property, the appellant Sh. Surendra Agrawal has prepared the so-called cash book which is completely an afterthought. Shri Surendra Agrawal has himself admitted in his statement dated 21.09.2017 recorded on oath that he used to earn Rs. 5,000/- per month in cash and except this he had no involvement in any activity of income generation. Further, such a meagre cash amount of Rs. 5000/- per month is hardly sufficient for subsistence of the appellant Sh. Surendra Agrawal and his family for day-to-day expenses. Thus, the opening cash balance of Rs. 7,03,123.39/- shown in the so-called cash book cannot be accumulated from such a meagre source of income of Shri Surendra Agarwal. Thus, this cash book is clearly appeared fabricated and afterthought.
ii) Further on perusal of the cash book, it is noticed that one side Shri Surendra Agarwal has shown huge cash amount of Rs. 7,03,123/- cash in hand whereas on the other side he is withdrawing small cash amount from the SBI Account. For instance, the appellant Sh. Surendra Agrawal has made withdrawal of Rs. 5000/- each four times on 02.04.2008 whereas he has available cash balance of Rs. 7,03,123/-. So here the big question arises that when Shri Surendra Agarwal has sufficient cash balance in hand of Rs 7,03,0123/- then why he has withdrawn cash of Rs. 20000/-. And it clearly shows that in actual the appellant Sh. Surendra Agrawal has no cash available with him and that is why he is drawing small cash amounts from the bank.
iii) Shri Sandeep Mangal has made payment of Rs 6,79,320/- against the impugned flat at the time of booking i.e. 30.03.2015. Now the Shri Surendra Agrawal has shown payment of Rs. 6,79,320/- from his so- called cash book. Very surprisingly Shri Surendra Agrawal has maintained huge cash in hand approx. of Rs. 07 Lakhs from 01.04.2008 to 31.03.2015. This shown that Shri Surendra Agrawal has created paper balance in his cash book as on 01.04.2008 of Rs. 7,03,123/- to substantiate the above payment made in cash and also to justify the cash payment of EMIs of housing loan.
iv) It is noticed that Shri Surendra Agrawal has shown cash in hand of Rs. 7,03,123/- as on 01.04.2008 and the almost same cash balance he has maintained but in the cash book except this cash balance no instance of sufficient cash generation is reflected till 06.11.2016.
v) Suddenly on 06.11.2016, Shri Surendra Agrawal has generated cash of Rs. 4 lakhs in his cash book as income from business. The business income is day to day activity and if the same would have generated from any business the same may be reflected on different dates on the debit side of the cash book not in a single day. This four lakhs cash generation was just two days before the announcement of the demonetization (i.e. 08.11.2016) by the Govt. Of India.
vi) For the sake of argument if we accept that the cash of Rs. 04 lakhs shown on 06.11.2016 in cash book is business receipt then it should be substantiated with the sufficient withdrawal from the cash book on the account of various expenditure of a business activity. But in the cash book of Shri Surendra Agrawal no expenses for the expenditure on purchase, labour, wages, salary, freight charges, office expenses etc was shown by the appellant Sh. Surendra Agrawal.
vii) Further, Shri Surendra Agrawal is not showing day to day withdrawal for house hold activities for his livelihood in his cash book. He has shown cumulative withdrawal as drawings at the end of each financial year. For example, on 31.03.2009 he has shown drawing of Rs 96,500/-, on 14.03.2010 drawing of Rs. 74,250, on 31.03.2011 drawing of Rs. 81,200/-, on 31.03.2012 drawing of Rs. 85,716/- etc. It is pertinent that the household expenses are not a single day planned expenditure but it is day to day expenditure which was not reflected in the so-called cash book of the Shri Surendra Agrawal.
Therefore, the Cash book produced is clearly a fabricated document as an afterthought strategy to create defence. Hence, this issue is also decided against the appellants and in favour of the respondent.
10. Coming to the issue no. v), the Ld. Counsel for the appellant argued that that the initiating officer did not fulfill the mandatory requirement of recording of reason and issued the show cause notice without any basis. Thus, in non-compliance of this mandatory requirement, impugned order dated 27.05.2019 needs to be set aside on this ground alone. However, the Ld. Counsel for the respondent countered that to be incorrect as the IO has duly recorded the reasons to believe before the issuance of the SCN as recording of reasons in writing is mandatory and statutory condition before issuance of SCN. Hence, the question of not recording the reason does not exist at all. Also, there is no provision under the Act to provide the copy of reasons to believe. Further, all the pertinent facts, reasons for issuing the SCN and discussions have been made in the SCN and PAO. Thus, this claim of the appellant is untenable and we agree with the submissions of the respondent in this regard. Thus, this issue is also decided against the appellants.
11. In view of the discussions above, the present appeals are hereby dismissed being devoid of any merits and thereby the impugned Confirmation Order dated 27.05.2019 of PAO dated 27.04.2018 is hereby upheld. It is made clear that penal provisions will not be applicable retrospectively under Chapter VII of the PBPT Act, as per judgment of Hon’ble Supreme Court of India in the case of Manjula and Others v. D.A. Srinivas CIVIL APPEAL NO. 7370 OF 2026 [Arising out of SLP (C) No. 7924 of 2024], except the confiscation proceedings as per section 27 to 29 of the PBPT Act.
Appeals Dismissed.
Pronounced on this 10th Day of September, 2026.
