Case Note & Summary
The appeal before the Division Bench of the High Court of Judicature for Rajasthan at Jodhpur arose from proceedings under the Prohibition of Benami Property Transactions Act, 1988 initiated against a real estate development company, the appellant, which was alleged to be a benamidar for seventy-nine immovable properties at Jodhpur. The alleged beneficial owner was the founder and principal promoter of the Maharani Group, who held a small indirect interest in the appellant and became a director after the property purchases. The Initiating Officer, a Deputy Commissioner of Income Tax (Benami Prohibition) at Jaipur, acted on material obtained from a search under Section 132 of the Income-tax Act, 1961. The appellant sought quashing of the Appellate Tribunal order dated 01.04.2026, the Adjudicating Authority order dated 30.08.2024, and the final provisional attachment order dated 28.07.2023, and revocation of attachment and release of properties. Chronologically, the appellant company had shareholders' funds of approximately Rs. 10 crore recorded in books by FY 2006-07. In FY 2017-18, it purchased 79 immovable properties at Jodhpur for a total consideration of Rs. 11,16,06,000 through banking channels. The appellant claimed that these purchases were funded by recall and redeployment of short-term loans and advances amounting to Rs. 10.61 crore as on 31.03.2017, a conversion of one asset class into another. On 06.01.2020, Shri Mahaveer Lunia became a director of the appellant, a date after all 79 purchases. On 16.06.2022, a search under Section 132 of the Income-tax Act, 1961 was conducted on the Maharani Group, during which property lists and original sale deeds were found at Lunia's residence. A Chartered Accountant, Shri Anil Sanklecha, made statements under Section 132(4) about cash routing through hawala/angadia channels but retracted them by affidavit dated 27.06.2022, alleging duress during 65 hours of questioning. Based on information from the income tax department, the Initiating Officer issued a show cause notice under Section 24(1) and (2) of the PBPT Act on 28.04.2023, requiring reply by 15.05.2023. However, on 01.05.2023, a provisional attachment order under Section 24(3) was passed before the reply period expired. The appellant's earlier writ petitions challenging this prematurity were dismissed on 12.12.2023, review dismissed on 09.04.2024, and special leave petition did not alter the position. A final attachment order under Section 24(4)(a)(i) was passed on 28.07.2023. The Adjudicating Authority, by order dated 30.08.2024 under Section 26(3), held the 79 properties to be benami and upheld the final provisional attachment. The Appellate Tribunal, by order dated 01.04.2026 under Section 46, affirmed the Adjudicating Authority's order, leading to the present appeal. The core legal issues included whether the properties were benami under Section 2(9), whether the provisional attachment was premature, whether the retracted statement of the Chartered Accountant could be relied upon, and whether the directorship post-dating the purchases negated beneficial ownership. The appellant argued that purchases were funded from pre-existing reserves and loans, not fresh unaccounted money, and that the directorship came after acquisition. The respondents argued that custody of property documents at the alleged beneficial owner's residence and the retracted disclosures indicated benami ownership, and that directorship secured future control. The judgment discussed the statutory framework, the material relied upon by the Initiating Officer, and the legal position on retracted statements, but the final operative order and ratio decidendi are not included in the available text.
Headnote
A) Benami Property - Definition of Benami Transaction - Scope of benami transaction under PBPT Act - Prohibition of Benami Property Transactions Act, 1988, Sections 2(9), 24, 26, 27, 46, 53 - The appellant company was alleged benamidar for 79 properties purchased in FY 2017-18 for Rs 11,16,06,000; the adjudicating authority and appellate tribunal held them benami; the High Court examined whether the transactions fit the statutory definition of benami. Held that proceedings carried serious civil and penal consequences, including possible confiscation under Section 27 and prosecution under Section 53 (Paras 1-3). B) Benami Property - Provisional Attachment - Premature attachment before reply period - Prohibition of Benami Property Transactions Act, 1988, Sections 24(1), 24(2), 24(3) - Show cause notice dated 28.04.2023 required reply by 15.05.2023, but provisional attachment was passed on 01.05.2023; the appellant raised procedural prematurity which was earlier rejected in writ proceedings, with merits left open. Held that procedural terrain was substantially traversed and the present appeal was to be decided on substantive framework (Para 8.1). C) Evidence - Retracted Statement - Evidentiary value of statement recorded under Section 132(4) Income-tax Act - Income-tax Act, 1961, Section 132(4) - Statement of Shri Anil Sanklecha recorded during search was retracted by affidavit dated 27.06.2022, alleging duress during 65 hours of questioning; the legal position on untested/retracted statements was listed as a key issue. Held that the court needed to examine the legal position on untested/retracted statements (Paras 7.5, 8.2). D) Benami Property - Beneficial Ownership - Directorship post-dating property purchases - Prohibition of Benami Property Transactions Act, 1988, Section 2(9) - Shri Mahaveer Lunia held indirect interest of about 4.17% in appellant and became director on 06.01.2020, after all 79 properties were purchased; appellant argued this negated beneficial ownership at acquisition, while respondents argued it secured direct control as future beneficiary. Held that both sides relied on same subsequent fact for opposite purposes (Paras 5, 7.3). E) Constitutional/Administrative Law - Natural Justice - Opportunity of hearing before provisional attachment - Prohibition of Benami Property Transactions Act, 1988, Sections 24(1), 24(3) - The Initiating Officer passed provisional attachment before expiry of reply period; earlier writ petitions challenging initiation and provisional attachment were dismissed on 12.12.2023, review dismissed on 09.04.2024, and SLP did not alter position. Held that the procedural challenge was rejected and merits were left open to be agitated before the Adjudicating Authority (Para 8.1).
Issue of Consideration
Whether 79 immovable properties purchased by the appellant company were benami properties under Section 2(9) of the Prohibition of Benami Property Transactions Act, 1988; whether the provisional attachment order under Section 24(3) was premature; whether the retracted statement of a witness could be relied upon; whether the alleged beneficial owner's directorship post-dating the purchases negated beneficial ownership at the time of acquisition.
Final Decision
Final outcome not mentioned in the provided text; the High Court pronounced judgment on 03.08.2026 in the appeal against the Appellate Tribunal order dated 01.04.2026.
Law Points
- Benami transaction definition
- Provisional attachment procedure
- Retracted statement evidentiary value
- Beneficial ownership determination
- Natural justice and opportunity of hearing
- Search and seizure material under Income-tax Act
- Statutory framework of PBPT Act
- Penal consequences of benami declaration
- Adjudicating Authority and Appellate Tribunal orders under PBPT Act
- Assessment findings and departmental consistency
