Income Tax can seize properties even if real owner is untraceable: Court
New Delhi, Jan 15, 2025
The ruling clarifies that properties can be attached even if the person who financed the purchase cannot be identified, sending a strong message against fraudulent property transactions in India.
In a significant ruling, a quasi-judicial body has upheld the Income Tax (I-T) department's ability to attach properties under the anti-benami law even if the actual owner of the property is not identified. The ruling, issued by the Adjudicating Authority set up under the Prohibition of Benami Property Transactions (PBPT) Act, 1988, confirms that the law provides a mechanism to deal with cases where the actual owners or the person who paid for the property cannot be traced.
The decision relates to an ongoing case in which the Lucknow unit of the Income Tax department attached several properties in the Kakori area of Lucknow, valued at over Rs 3.47 crore, in 2023. These properties were purchased by real estate groups using large amounts of unaccounted cash, a common sign of benami transactions, where the property is held in someone else's name but the true owner is different.
The PBPT Act prohibits transactions where assets are bought in the name of a person (known as the "benamidar") but funded by someone else, often to conceal the real owner. The I-T department had raided multiple real estate firms in Lucknow and found that the land parcels were purchased using unaccounted cash. Despite the fact that the actual beneficiary behind the transactions could not be identified at the time, the department issued an attachment order for these properties.
In its ruling, the Adjudicating Authority, while upholding the I-T department’s decision to attach five land parcels in Kakori, noted that it did not invalidate the action just because the beneficial owner wasn’t named. The case is significant because it highlights the power of the anti-benami law to seize properties even when the person who financed the purchase is untraceable or fictitious.
Seizure of Properties Under the PBPT Act
The law allows the Income Tax department to issue attachment orders on properties that are believed to be part of benami transactions. Usually, such orders specify the names of both the benamidar (the person in whose name the property is held) and the beneficial owner (the true owner of the property). However, in this case, the provisional order did not identify the name of the actual owner, leading to questions about the validity of the attachment.
According to the ruling, the absence of a named beneficial owner does not invalidate the order. The court referenced Section 2(9)(D) of the PBPT Act, which allows for the attachment of properties in situations where the person who provided the money for the purchase is either untraceable or fictitious.
In the case at hand, the I-T department had attached the property under Section 2(9)(A), which normally deals with cases where the actual owner can be identified. The Authority confirmed that even if this provision was incorrectly invoked, the attachment order could still stand. It also cited a 2009 Supreme Court ruling that clarified that an incorrect reference to a law section does not invalidate an order if the authority has the power to act.
The Role of Ravi Kumar and Real Estate Firms
The property in question was initially found to be registered under Ravi Kumar, an office boy working for Excella, a real estate company. Although the department had also named two real estate companies—Pintail Real Estate LLP and Excella Premioinfra LLP—along with an individual, Shiv Kumar, as "interested parties," the court ruled that there was insufficient evidence against them. The ruling led to the removal of their names from the attachment order.
However, Ravi Kumar was identified as the benamidar, and his connection to the land parcels was upheld. The court also named Haresh Kumar Mishra as an "abettor" in the case and directed the Income Tax department to conduct a further investigation into other assets possibly purchased in Kumar’s name.
Focus on High-Value Benami Transactions
This ruling is important as it demonstrates the Income Tax department's increased focus on high-value benami transactions in sectors like real estate. Despite the challenges in identifying the actual owners in some cases, the department is pushing forward with its efforts to clamp down on the illegal practice of holding assets under fictitious names to evade taxes and hide illicit wealth.
In addition to the Kakori land parcels, the Lucknow Benami Prohibition Unit (BPU) has also attached five land parcels in Mohanlalganj worth over Rs 5.68 crore, which are similarly believed to be part of a benami transaction scheme.
Legal Implications for Future Benami Cases
This ruling sets an important precedent for future benami asset cases. It clarifies that the lack of a clearly identifiable owner does not prevent the attachment of benami properties. The provision in the PBPT Act that allows for the seizure of assets where the payment source is untraceable or fictitious will now likely be invoked more frequently by the Income Tax department in similar cases.
For property buyers, developers, and investors, this serves as a cautionary reminder of the potential legal consequences of engaging in benami transactions, particularly in high-value markets like real estate, where such practices are more common. The government’s stance on benami property transactions remains firm, and its ability to take action against shadow ownership structures continues to strengthen with each new ruling.
With inputs from PTI
[The Business Standard]
