Acquiring property through illicit income is ‘benami transaction’: Appellate Tribunal

Property acquired through illicit income, or through income beyond known means, by a government employee is to be called benami property, held the Delhi Appellate Tribunal (PBPTAT) under the Prohibition of Benami Property Transactions Act.

The tribunal’s rule came while it was hearing a case of an agriculture department employee charged with buying property worth ₹4.58 crore, which did not align with his income.

Experts have flagged ambiguity with respect to the applicability of the law to litigations retrospectively, which is likely to be settled only by the Supreme Court’s judgement on a review petition filed pertaining to the issue. In the matter of Ganpati Dealcom, the apex court ruled against retrospective application.

Background

The employee in question had acquired approximately 12 acres of agricultural land and 12 plots/houses in the name of his wife and two sons at a circle rate of ₹4.58 crore, along with other immoveable properties that were purchased in the early 1990s and 2000s while both sons were still minors. Subsequently, it came to light that although the Benamidar had earned ₹63.95 lakh till March 2020 solely from his job aka only source of income, ₹42.94 lakh was the balance in the Benamidar’s sons’ bank accounts.

Some of these properties were acquired, and accounts opened, on or before October 25, 2016. As the amendment to the Benami Act became effective only from November 1, 2016, attachment of these immovable and movable properties was not confirmed by the adjudicating authorities.

After examining the facts, the Tribunal noted that the net earning was not sufficient to acquire the property worth more than ₹4.58 crore.

Tribunal’s rule

“The property was acquired for a sum more than the earning. It was out of illicit income of the Benamidar while in service of the agriculture department. The unaccounted amount was used to acquire the property in the name of wife and sons for his own benefit and therefore it becomes a case of ‘benami transaction’,” the tribunal said in a recent ruling.

According to Amit Maheshwari, Tax Partner, AKM Global, after the Benami Property Transactions Act was amended, there was a flurry of notices seeking investigation and attachment in cases where properties were acquired before November 1, 2016 but continued to be held by the benamidars. The apex court’s judgement in 2022 in Ganpati Dealcom case put a temporary halt on the pace of notices when it ruled against retrospective applicability of the amended law. It was challenged through a review petition, which is currently sub judice .