Kanhaiya Lal Agarawal Vs Initiating Officer (Appellate Tribunal Under SAFEMA Delhi)
SAFEMA Tribunal Upholds Benami Attachment of ₹65 Lakh Hawala Cash; Delayed Retraction of Statement Held to Be an Afterthought
The Appellate Tribunal under SAFEMA dismissed the appeal filed by Kanhaiya Lal Agarawal, upholding the provisional attachment of ₹65 lakh in cash under the Prohibition of Benami Property Transactions Act, 1988. The cash had been seized by the police during an interception in Gonda in connection with investigations into an alleged hawala network. In his statement recorded under Section 131(1A) of the Income-tax Act, the appellant admitted that he worked as a cash handler, earned commission for transporting cash, and stated that the seized cash belonged to one Sita Ram, though he failed to furnish any details or documentary evidence regarding the alleged owner.
The Tribunal held that the appellant’s subsequent retraction before the Adjudicating Authority, claiming that the cash actually belonged to him, was belated and an afterthought. It observed that no explanation was offered for not retracting the statement immediately after it was recorded. The Tribunal found that the original statement, coupled with the recovery of ₹65 lakh and the appellant’s inability to disclose any legitimate source or identify the alleged real owner, sufficiently established a prima facie benami transaction. Once the authorities discharged the initial burden, the burden shifted to the appellant to substantiate his defence, which he failed to do.
The Tribunal also rejected the argument that the Income-tax assessment accepting the appellant’s returned income precluded proceedings under the PBPT Act. It noted that the appellant’s declared income was only ₹3.52 lakh, whereas the seized cash was ₹65 lakh, and emphasised that subsequent assessment or payment of tax cannot defeat the object of the Benami Act. Accepting such a plea would frustrate the very purpose of the legislation. Holding that provisional attachment was necessary to prevent the cash from being dissipated, the Tribunal dismissed the appeal and upheld the attachment.
FULL TEXT OF THE JUDGMENT APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI
The appeal has been preferred under Section 46 of the Prohibition of Benami Property Transactions Act, 1988 (in short “the Act of 1988”) to challenge the order dated 31.01.2024 passed by the Adjudicating Authority confirming the provisional attachment of the property while answering the reference.
Brief facts of the case:
2. The office of the respondents received a reference from the Deputy Director of Income-Tax (Inv.)-1, Lucknow in regard to the cash seized during the search operation on HOL Group. It was informed that the Group is indulged in Hawala Business and other financial activities. The substantial amount of cash was found and seized during the search. It was recovered from the possession of various Hawala Operators. The appellant is one of them from whom cash of Rs.65 Lakhs was recovered by the police on interception made on 21.01.2022 under Thana Colonerganj, Gonda.
3. The statement of the appellant Kanhaiya Lal Agarawal was recorded under Section 131(1A) of the Income Tax Act, 1961 where he had admitted himself to be a cash handler and earns commission out of moving the cash. It was with the further statement that the cash recovered from his possession was given to him by one Sita Ram but he failed to provide any detail or documentary evidence in that regard. In the light of the statement made by the appellant, it was found that the cash seized from his possession does not belong to him but is of other person for his immediate or future benefit. The proceeding under the Act of 1988 was thereupon initiated and finding a prima facie case of benami transaction, Provisional Attachment Order was caused under Section 24(3) of the Act of 1988. The matter was referred to the Adjudicating Authority. It passed the impugned order dated 31.01.2024 confirming the Provisional Attachment Order while answering the reference.
Case framed by the appellant:
4. The appellant challenged the order passed by the IO so as the Adjudicating Authority confirming the Provisional Attachment Order mainly on the ground that a case of benami transaction was not made out yet the cash of Rs.65 Lakhs recovered from the appellant was provisionally attached. It was, in fact, recovered by the police on interception made on 21.01.2022. The appellant’s statement was recorded under Section 131 (1A) of the Act of 1961 when he categorically stated that he is the cash handler and earns commission out of it. It was with further statement that the cash recovered from him was given by one Sita Ram but failed to provide any document or detail and it is only based on the aforesaid, the order for provisional attachment was passed.
5. The Adjudicating Authority confirmed the Provisional Attachment Order ignoring the fact that the appellant had retracted his statement recorded under Section 131(1A) of the Income Tax Act of 1961 during the proceedings before the Adjudicating Authority. The retracted statement could not have been relied upon by the respondents and other than the statement of the appellant, there was no evidence to make out a case of benami transaction under the Act of 1988. It is despite the fact that burden of proof lies on the person alleging benami transaction. In the instant case, the respondents utterly failed to make out a case of benami transaction and thus the impugned order is not sustainable.
6. The case framed by the appellant is that no inquiry was conducted or evidence collected by the respondents to prove that the cash of Rs.65 Lakhs recovered from the appellant was for the benefit of other person. The impugned order has been passed only on presumption because no supporting document was submitted by the respondents to prove the case of benami transaction.
7. The appellant otherwise submitted that the cash was held by him for his own benefit and, in fact, it was belonging to him and not to any other person. No evidence to controvert the statement aforesaid was submitted by the respondents and thus finding recorded by the Adjudicating Authority is based on surmises and conjectures.
8. The appellant further submitted that assuming the cash was not belonging to him but was of the others, the respondents were under an obligation to find out the beneficial owner to make out a case of benami transaction and appellant to be benamidar as defined under Section 2(10) of the Act of 1988.
9. The appellant made a reference of the letter dated 30.01.2023 submitted before the DCIT on 06.02.2023 to inform that the cash of Rs.65 Lakhs seized by Gonda Police was related to him and is out of his own funds. The similar letter was sent to DCIT/ACIT (Central)-2, Lucknow, who accepted the statement of the appellant and passed the Assessment Order for the Assessment Year 2021-22 on 23.12.2022 under Section 143(3) of the Income Tax Act, 1961 accepting his total income of Rs.3,52,150/- and no addition was made. In the light of the aforesaid also, there was no justification for the Adjudicating Authority to confirm the Provisional Attachment Order. The appellant accordingly prayed for quashing of the order.
Arguments of counsel for the respondents:
10. The appeal was seriously contested by the learned counsel for the respondents. Elaborate arguments were made in reference to each issue raised by the appellant and would be referred while recording finding on each issue to avoid repetition of one and the same facts and for the sake of brevity.
Finding of the Tribunal:
11. We have considered the rival submissions of the parties and perused the record carefully.
12. The brief facts pertaining to seizure of cash of Rs.65 Lakhs from the possession of the appellant on interception of the Gonda Police have been given. The statement of the appellant was recorded under Section 131(1A) of the Income-Tax Act, 1961 where he disclosed that the cash recovered from him belongs to one Sita Ram. However, the appellant failed to give any detail or documentary evidence in that regard so as to reach Shri Sita Ram. The appellant rather made a categorical statement that he is mainly involved in moving cash and, in the process, Rs.65 Lakhs was found with him. The appellant earns commission on moving the cash. It was with categorical statement that the cash does not belong to him but is of other, namely, Sita Ram.
13. The respondents received an information about the recovery and seizure of the cash and accordingly they initiated the proceedings under the Act of 1988. The appellant was served with a show cause notice followed by the order of provisional attachment of the property. The matter was referred to the Adjudicating Authority for answering the reference and for confirmation of the Provisional Attachment Order. The appellant has challenged the orders under the Act of 1988 mainly on the ground that the seizure of cash is not out of the benami transaction, rather it belongs to the appellant himself which was available from his own funds. The submission was in contradiction to the initial statement recorded under Section 131(1A) of the Income Tax Act, 1961. The appellant retracted the statement for the first time before the Adjudicating Authority with an afterthought. No reason was given as to why the appellant could not retract the statement immediately after recording of the statement by the Income Tax Officer. Retraction with delay remains with afterthought and it is not acceptable. It is more so when it was retracted during the proceedings before the Adjudicating Authority and not any time before it. Thus, the respondents have rightly relied on the statement of the appellant to draw their conclusions.
14. The perusal of the statement of the appellant under Section 131(1A) reveals that the cash was belonging to others and was available with the appellant at the time of seizure and, therefore, it is taken to be for the future benefit of others, a case of benami transaction was found. It is more so when the appellant failed to give details or any material regarding Sita Ram who is said to be the real owner of the cash. Even in the appeal, no fact or detail of Sita Ram has been given. Rather, in contradiction, a new stand has been taken by the appellant. The contradictory stand of the appellant is sufficient to make out a case against him. It is more so when his statement was rightly relied upon by the respondents. It is coupled with the recovery of the cash of Rs.65 Lakhs on the interception of Gonda Police and no source for the cash was disclosed. Thus, the argument of the appellant that a case of benami transaction is not made out cannot be accepted. It is not only in the light of the statement of the appellant and if he changed the version showing the cash belonging to him, no source has been disclosed to possess the amount of Rs.65 Lakhs. It is more so when initial burden to prove a case of benami transaction was satisfied by the respondents and if any defence was taken by the appellant, burden was on him to prove his case where he utterly failed.
15. The case can further be analyzed in the light of the admission of the appellant that he was involved in moving the cash for earning commission and thereby the cash seized at the time of search was not belonging to him but was of others which was given to the appellant for moving it. It makes a case of benami transaction and, therefore, we find no error in the impugned order so as to cause interference. It is more so when the statement of the appellant was corroborated by the recovery of the cash. In view of the above also, we are unable to accept any of the arguments raised by the appellant for challenge to the impugned order. It is even if we ignore the contradictory statement of the appellant made from time to time. We further find that if the cash could not have been provisionally attached, it could have been moved out and, therefore, there was a necessity to invoke Section 23(3) of the Act of 1988. In the light of the discussion made above, we do not find a case in favour of the appellant. Even if we consider the case in reference to the assessment order, the declared income assessed was Rs.3,52,150/- while the recovery of the amount is of Rs.65 Lakhs. It is apart from the fact that subsequent assessment of the amount involved in the benami transaction does not nullify the effect of the provision of the Act of 1988 and otherwise in all the benami transactions, the benamidar would seek assessment with the payment of tax. It would then nullify the object of the Act of 1988 and the purpose behind the enactment. It cannot be frustrated with acceptance of the plea raised by the appellant, that too when the declared income is only of Rs.3,52,150/-.
16. In the light of the discussion made above, appeal fails and is dismissed.
