Benami Transactions – Definition | Meaning | Legal Implications

A Benami transaction is one where a property is purchased or held in the name of a person (benamidar) while the actual financial contribution and ownership lie with another individual (beneficial owner). The real owner conceals their identity by registering the property in the name of someone else without an intention to benefit the person in whose name the property is held. Benami transactions are often used to disguise ownership and evade legal scrutiny. Under Indian law, such transactions are prohibited, and both the benamidar and the beneficial owner can face penalties.

Table of Contents

1. What is a ‘Benami Transaction’?
2. What is the Definition of ‘Benami Transaction’?
3. Is the Definition of Section 2(9) Retrospectively Applicable to Transactions Entered Into Prior to 1-11-2016?
4. Will Exceptions (i) to (iv) in Section 2(9)(A) as Regards Benami Transactions Apply to Benami Transactions Covered by Section 2(9)(B), 2(9)(C), and 2(9)(D) Also?
5. What is the Difference in Definition in Section 2(9) vis- a-vis the Old Definition in Section 2(a) of the Pre-Amended Act?
6. What is the Distinction Between Benami Transactions & Sham Transactions?
7. Whether the Benami Act Apply to Sham Transactions?
8. Is Every Cash Transaction a Benami Transaction?

Checkout Taxmann's Law Relating to Prohibition of Benami Property Transactions Act 1988 which provides a comprehensive, section-wise commentary on the Prohibition of Benami Property Transactions Act, 1988 (PBPT Act), featuring an easy-to-navigate FAQ format that simplifies complex legal provisions. It includes extensive case law analysis and provides practical guidance on pleadings and legal strategies for exceptions to Benami transactions. The book also offers ready reckoners for quick reference on permissible relatives, Benami share transactions, and an alphabetical guide to legal provisions. Lastly, it covers the roles of shell companies, property confiscation procedures, valuation rules for Benami properties, and the PBPT Acts' interactions with other major laws.

1. What is a ‘Benami Transaction’?

Benami transaction is a transaction or arrangement in respect of property whereby the identity of real owner (beneficial owner) of property is concealed by showing someone else (benamidar) as owner on record. The beneficial owner provides or pays consideration for purchase of property but title deed or ownership documents are in the name of person other than the beneficial owner.

Benami transactions can be entered into by ‘any person’ (viz., individual, HUF, firm, company, trust, etc.). The benamidar can be any person. So also, the beneficial owner can be any person.

The term ‘benami transaction’ denotes a transaction effected by a person (‘beneficial owner’) without using his own name, but in the name of another (‘benamidar’). [Sundaram Nadar v. Sukumaran 2000 (3) CTC 473] [legal crystal.com/795645]

A benami transaction is one where one (‘beneficial owner’) buys property in the name of another (‘benamidar’), or gratuitously transfers his property to another (‘benamidar’), without indicating an intention to benefit the other [Ranagappa v. Ranagaswami AIR 1925 Mad. 1005.]

Para 1.5 of the 57th Report of the Law Commission sets out the meaning of ‘benami transaction’ as follows:

“1.5 Meaning of ‘benami transaction’.—Purchase or holding of properties in the name of another is known in India as a benami transaction. This custom has been recognised by Indian Courts for a long time. Literally, the word ‘benami’ means ‘without name’. The essential legal characteristic of these transactions is that there is no intention to benefit the person in whose name the transaction is made. The name of that person, popularly known as the ‘benamidar’, as the Privy Council pointed out is simply an alias for that of the person beneficially interested. The benamidar has the ostensible title to the property standing in his name; but the beneficial ownership of the property does not vest in him but in the real owner.”

Para 1.9 of the said report explains that the essence of benami transactions ‘is the use of an alias in respect of the holding of property, usually (but not always), with the object of concealing the real owner’.

In G. Bahadur v. K. Visakh, Asstt. CIT, Chennai [2018] 100 taxmann.com 179/259 Taxman 556 (PBPTA – AT), the Appellate Tribunal for Prohibition of Benami Property Transactions Act, New Delhi observed as under:

“22. The characteristic of a ‘benami’ transaction is that there must be a mere lending of name without any intention to benefit the person in whose name it is made i.e. a mere name lender. The mischief sought to be punished by the Act are only such transactions which have a name lending element without deriving any benefit therein i.e. “benami” transactions. (Para 1.5 Law Commission Report No. 57 and Statement Object and Reasons of the 1988 Act) .”

The Appellate Tribunal further held that, the Act should be interpreted in a manner so as to punish only transactions that have mere lending of name without any intention to benefit the person in whose name it is made.

2. What is the Definition of ‘Benami Transaction’?

The term ‘benami transaction’ is defined in section 2(9) of the PBPT Act. Earlier, before the amendment of the Act by the 2016 Amendment Act whereby its title also got changed from BPT Act to PBPT Act, the term was defined in section 2(a) of the BTP Act.

Section 2(a) of the BTP Act defined “benami transaction” to mean “any transaction in which property is transferred to one person for a consideration paid or provided by another person”. Thus, there were two ingredients of a benami transaction in the definition given by section 2(a) of the BPTA :

1. a transfer of property for consideration; and
2. the consideration is provided not by the transferee but by another person for the transferee

The 2016 Amendment Act has substituted section 2 of the BPTA Act with effect from 1-11-2016. New clause (9) of the new substituted section 2 gives an exhaustive definition of the term ‘benami transaction’.

There are 4 categories of Benami Transactions as defined in section 2(9) of the PBPT Act:

1. Category I – Transaction or arrangement where consideration is provided by a person other than the transferee [Section 2(9)(A)]
2. Category II – Transaction or arrangement in respect of a property is carried out or made in a fictitious name [Section 2(9)(B)]
3. Category III – Transaction or arrangement in respect of a property where owner of the property is not aware of, or denies knowledge of, such ownership [Section 2(9)(C)]
4. Category IV – Transaction or arrangement in respect of a property where the person providing the consideration is fictitious or untraceable [Section 2(9)(D)]

It may be noted that prior to the amendment of the Act w.e.f. 1-11-2016 by the 2016 Amendment Act, the definition of ‘benami transaction’ in section 2(a) covered only Category I benami transactions which are now covered by section 2(9)(A).

In ACIT v. Tupelo Builders (P.) Ltd. [2022] 145 taxmann.com 270 (Delhi – Trib.), it was held as under:

• A perusal of the definition in section 2(9)(A) shows that for a property to be classified as Benami, the first premise is the payment of purchase consideration by “ANOTHER PERSON” i.e. a person other than the person in whose name the property is held.
• A perusal of the remaining clauses of section 2(9) of the Benami Act show that the second premise to classify a transaction as Benami is the non-disclosure of facts or source of consideration or creation of fictitious ownership which shows the real transaction to be different from the apparent transaction.

The common thread running through all the 4 categories of benami transactions as above is that it is a transaction or arrangement in respect of ‘property’. If a transaction or arrangement is not in respect of property, it is not a benami transaction. The property which is the subject matter of a benami transaction is known as ‘benami property’ [Section 2(8) of the PBPT Act]

Sub-clause (A) of new clause (9) covers the case where consideration for property is provided by a person other than the transferee which case was also covered in the old definition in section 2(a) of the BPTA. Sub-clauses (B) to (D) include situations which were not covered in the old definition. It may be noted that sub-clause (A) is subject to certain exclusions or exemptions which are listed in sub-clause (A) itself. These exclusions do not apply to benami transactions covered by sub-clauses (B) to (D) of section 2(9). Parliament has advisedly not extended the exclusions and exemptions listed in items (i) to (iv) of sub-clause (A) to the other sub-clauses i.e. sub-clauses (B) to (D).

The four categories of benami transactions and exclusions applicable to each category are summarised in the Table below:

The following table summarises the distinguishing features of all the 4 categories of benami transactions:

3. Is the Definition of Section 2(9) Retrospectively Applicable to Transactions Entered Into Prior to 1-11-2016?

Sub-section (3) of section 1 provides that—

• The provisions of sections 3, 5 and 8 shall come into force at once, and
• The remaining provisions of this Act shall be deemed to have come into force on the 19th day of May, 1988.

Section 1(3) shall apply to all sections in the Act whether originally enacted in 1988 or newly inserted by the 2016 Amendment Act. Section 1(3) was not amended by the 2016 Amendment.

In view of section 1(3), it has been held that the definition in section 2(9) shall have retrospective applicability with effect from 19-5-1988. [Tulsiram v. Asstt. CIT [2019] 112 taxmann.com 129/[2020] 270 Taxman 309 (Chhattisgarh); Arun Das v Smt. Aparna Das [2021] 132 taxmann.com 285 (Tripura); Macro Entertainment (P.) Ltd. v. Union of India [2017] 87 taxmann.com 360 (Cal.); K. Nagarajan v. The Adjudicating Authority [2021] 130 taxmann.com 166/[2022] 284 Taxman 237 (Mad.)]

It is submitted with great respect that, in view of the Supreme Court decision in Union of India v. Ganpati Dealcom (P.) Ltd. [2022] 141 taxmann.com 389 holding that the 2016 amendments are not retrospectively or retroactively applicable, the above decisions in Tulsiram, Arun Das, Macro Entertainment and K. Nagarajan can no longer be regarded as laying down the correct law:

In Ganpati Dealcom (P.) Ltd. v. Union of India [2019] 112 taxmann.com 367/[2020] 269 Taxman 489 (Cal.), it was held that, as the Benami Transactions (Prohibition) Amendment Act, 2016 came into force with effect from 1-11-2016, the new definitions of ‘Benami Transaction’ and ‘Benami Property’ inserted in the 1988 Act by the 2016 Amendment Act could not be utilized to charge an appellant with contravention or conviction in respect of transactions carried out prior to 1-11-2016 (e.g. a transaction carried out in 2011).

In Shri Joseph Isharat v. Mrs. Rosy Nishikant Gaikwad (Second Appeal No. 749 of 2015 along with Civil Application No. 1428 of 2015 decided by the Bombay High Court on 1st March, 2017), the Court held that the definition of ‘benami transaction’ in section 2(9) shall not have any retrospective operation to transactions entered into on or before 1-11-2016.

In Anis Ur Rehman v. Mohd. Tahir [2019] 101 taxmann.com 319/261 Taxman 488 (Delhi), the Delhi High Court dissented from the view taken by Bombay High Court Joseph Isharat v. Mrs. Rozy Nishikant Gaikwad (supra). The Delhi High Court held as under:

• There does not arise any issue as regards the retrospective application of the provisions of section 2(9) of the Amended Act (PBPT Act) inasmuch as the unamended Act (BPTA), by virtue of section 4(3) created three exceptions to benami transactions, firstly, when there existed an HUF, secondly, when there is a fiduciary relationship and thirdly, when there is a relationship of a trustee. By the provisions of section 2(9) of the PBPT Act, what has happened is that the expressions HUF, fiduciary capacity and trustee have been defined, giving them the meaning which the law required, and this was done to remove any doubt or confusion with respect to the meaning of the expressions fiduciary capacity and trustee as found in the repealed provisions of section 4(3).
• Therefore, by defining the expressions fiduciary capacity and trustee, it is not as if any vested right existing under the earlier provisions of section 4(3) is taken away.
• This argument of the existence of a vested right under the repealed provision of section 4(3) would have been available, if the expressions fiduciary capacity or trustee were specifically defined under the repealed provision of section 4(3) as including certain transactions in these expressions and specifically otherwise barring certain transactions as benami (as not being exempted from being benami), and that now by the altered definition of the benami transaction in the PBPT Act defining and specifically specifying what is included (and thus also excluded) in the expressions fiduciary capacity and trustee, such alleged existing earlier exclusions in the expressions fiduciary capacity and trustee became in the PBPT Act allowed as non-prohibited transactions.
• But, that is not so, inasmuch as, there were no definitions/meaning given to the expressions fiduciary capacity and trustee in the repealed provisions of section 4(3) prescribing the exclusions to these expressions which will thus not be exempted as not being benami, being fiduciary/trustee transactions.
• Once that is so, therefore, there did not exist any vested right, and hence, there does not arise any issue of taking away of any vested right on account of the PBPT Act giving definitions and meaning to the expressions fiduciary capacity and trustee by the four exceptions (and one Explanation) to prohibited benami transactions as prescribed in section 2(9) of the PBPT Act.

3.1 Whether the Definition in Section 2(9) Will Apply to Suits Pending on 1-11-2016?

When the impugned judgment was passed on 19.12.2016, what was, and is now applicable is the Prohibition of Benami Property Transactions Act, 1988 (PBPT Act) which became applicable w.e.f. 1.11.2016. As per Section 2(9) of the Amended Act (PBPT Act) what is a Benami Transaction is stated/specified, and also those transactions which are not benami are also stated/specified. As per the suit plaint/averments, in the present case the existence of the properties in the name of the respondent/defendant/wife will fall as an Exception to the prohibited benami transaction in view of Section 2(9)(A)(b) Exception (iii) inasmuch as it is legally permissible for a person to purchase an immovable property in the name of his spouse from his known sources, and in which position, the property purchased will not be a benami property but the property will be of the de jure owner/plaintiff/husband and not of the de facto owner (in whose name title deeds exist), being the respondent/defendant/wife in the present case.—Manoj Arora v. Mamta Arora [2018] 96 taxmann.com 241/258 Taxman 1 (Delhi)

4. Will Exceptions (i) to (iv) in Section 2(9)(A) as Regards Benami Transactions Apply to Benami Transactions Covered by Section 2(9)(B), 2(9)(C), and 2(9)(D) Also?

Sub-clause (A) is subject to certain exclusions or exemptions which are listed in sub-clause (A) itself. These exclusions do not apply to benami transactions covered by sub-clauses (B) to (D) of section 2(9). Parliament has advisedly not extended the exclusions and exemptions listed in items (i) to (iv) of sub-clause (A) to the other sub-clauses i.e. sub-clauses (B) to (D).

It may be noted that there is a modicum of genuinity in the benami transaction covered by section 2(9)(A). Such transaction was perfectly legal and enforceable before the BPT Act was enacted in 1988. Hence, these exceptions have been provided to section 2(9)(A). Transactions in other sub-clauses i.e. sub-clauses (B) to (D) of clause (9) of section 2 have some illegality or hanky-panky apparent even without them being included in section 2(9). In fact, benami transactions of the type in section 2(9)(B) if done in shares (share applications in fictitious names) are prosecutable offences under section 38 of the Companies Act, 2013. The Benami Transactions in section 2(9)(B) also amount to ‘cheating by personation’ under section 416 of IPC, 1860.

5. What is the Difference in Definition in Section 2(9) vis- a-vis the Old Definition in Section 2(a) of the Pre-Amended Act?

In terms of sub-clause (A) of clause (9) of section 2, the term ‘benami transaction’ covers a transaction or arrangement:

• where a property is transferred to, or is held by, a person for a consideration provided, or paid by, another person; and
• the property is held for the immediate or future benefit, direct or indirect, of the person providing the consideration.

In old definition in section 2(a), benami transaction was defined to mean

“any transaction in which property is transferred to one person for a consideration paid or provided by another person”.

Thus, there are two very noteworthy changes vis-a-vis the old definition:

• Under the old definition, the mere providing of consideration by a person other than the transferee would make the transaction a Category I benami transaction. Though the definition did not require intention of the person providing the consideration to be taken into account to determine whether transaction is benami or not, judicial rulings interpreted the definition to hold that such intention was crucial on determining transaction was benami or not. Under the new definition in section 2(9)(A), a transaction where condition (a) above (payment of consideration by person other than transferee/on record owner) is satisfied will not automatically attract the taint of benami unless condition (b) is also satisfied. Condition (b) is regarding the intention of the other person paying or providing the consideration. If that other person intends that he himself shall be the real owner of the property, then only the transferee/on record holder shall be characterised as mere benamidaar or name-lender and the transaction shall attract the taint of benami;
• Old definition of benami transaction did not cover sham transactions where possession is not given to the benamidar. Courts held that sham transactions will not be covered under the Benami Act. In old definition, benami transaction was defined to mean “any transaction in which property is transferred to one person for a consideration paid or provided by another person”. The words “property is transferred to” in section 2(a) implied transfer of both title and possession of property. In new definition in section 2(9)(A), these words have been replaced by the words “property is transferred to, or is held by” which cover cases of both transfer of title only and transfer of both title as well as possession. Besides, after the 2016 amendments, the term benamidar covers a mere ‘name lender’.Therefore, in view of the above changes in definitions of benami transaction and benamidar, it does not matter if possession of property is given or not given to the benamidar.

6. What is the Distinction Between Benami Transactions & Sham Transactions?

Court decisions have drawn a distinction between a ‘benami transaction’ and a ‘sham transaction’. For a transaction to be ‘benami transaction’, there has to exist an actual transaction or arrangement which has taken place. In a sham transaction or bogus transaction or fictitious transaction, no transaction has actually taken place and the transaction is merely shown to have taken place on paper. This is where a benami transaction differs from a sham/bogus/fictitious transaction. In Sree Meenakshi Mills Ltd. v. CIT [1957] 31 ITR 28 (SC), the Supreme Court explained that the word ‘benami’ is used to denote two classes of transactions which differ from each other in their legal character and incidents. In one sense, it signifies a transaction which is real, as for example, when A sells properties to B but the sale deed mentions X as the purchaser. Here the sale itself is genuine, but the real purchaser is B, X being his benamidar. This is the class of transactions which is usually termed as benami. But the word ‘benami’ is also occasionally used, perhaps not quite accurately, to refer to a sham transaction, as for example, when A purports to sell his property to B without intending that his title should cease or pass to B. The fundamental difference between these two classes of transactions is that whereas in the former (benami transactions) there is an operative transfer resulting in the vesting of title in the transferee, in the latter (sham transactions) there is none such, the transferor continuing to retain the title notwithstanding the execution of the transfer deed. In benami transactions, it would be necessary, when a dispute arises as to whether the person named in the deed is the real transferee or B, to enquire into the question as to who paid the consideration for the transfer, X or B. But when the question is whether the transfer is genuine or sham, the point for decision would be, not who paid the consideration but whether any consideration was paid.

7. Whether the Benami Act Apply to Sham Transactions?

This question needs to be examined from the angle of:

• Act as originally enacted in 1988 [BTP Act]
• Act as amended by the 2016 Amendment Act. [PBPT Act]

Position under the BPTA – The answer to the above question is clearly in the affirmative. The definition of ‘Benami Transaction’ in section 2(a) of the BTP Act excludes sham transactions. Courts ruled that sham transactions are outside the purview of the term ‘benami transaction’ and would be out of the ambit of the Act which applies only to benami transactions.

In Ouseph Chacko v. Raman Nair Raghavan Nair AIR 1989 Ker. 317/[1989] 180 ITR 511/[1990] 48 Taxman 410 (Ker.), the Court reviewed the provisions of sections 81, 82 and 94 of the Indian Trusts Act, 1882 which were repealed by section 7 of the BPTA (now section 56 of the PBPT Act). The Court noted that the Trusts Act, in Chapter IX, declared certain obligations to be in the nature of a trust. Section 81 applied to those cases where it did not appear that the transferor intended to dispose of the beneficial interest. The illustration (a) to that Section reads thus: — ‘A conveys land to B without consideration and declares no trust of any part. It cannot, consistently with circumstances under which the transfer is made, be inferred that A intended to transfer the beneficial interest in the land. B holds the land for the benefit of A’. Thus, section 81 applies to a transaction under which no transfer was intended and no consideration passed, i.e. to sham transaction. But section 82 of the Trusts Act provides for another class of transactions which are also statutorily treated as obligations in the nature of trust and they relate to ‘transfer to one for consideration paid by another’. It is significant that section 82 of the Trusts Act has practically been bodily lifted and incorporated in the definition of benami transaction in the BTP Act. This definition in BTP Act has nothing to do with the concept contained in section 81 of the Trusts Act.

In view of the above, the Court held that.

“If the Act intended to embrace transactions covered by section 81 of the Trusts Act also, there was no reason for restricting the definition of benami transaction to the phraseology employed in section 82 of the Trusts Act. This also gives an indication that sham transactions, loosely called as benami transactions, which are in fact no benami transactions in the real sense of the term, are not subject to the rigour of the Act.”

Position under the PBPT Act – Unlike section 2(a) of the BTP Act (old definition of ‘benami transaction’), section 2(9) of the PBPT Act (new definition of ‘benami transaction’) is not limited to ‘transfer to one for consideration paid by another’ which was contained in section 82 of the Indian Trusts Act, 1882. Section 82 of the Indian Trusts Act, 1882 was repealed by section 7(1) of the BPTA [now section 56(1) of the PBPT Act] with effect from 19-5-1988. The transaction contained in erstwhile section 82 of the Indian Trusts Act, 1882 is only one of the types of transactions covered in clause (9) of section 2 of the PBPT Act. The definition in clause (9) also covers a transaction where the provider of consideration is fictitious or untraceable  [See sub-clause (D) of clause (9) of section 2]. Such a transaction would be a sham transaction as the question would not be who provided the consideration but whether any consideration was at all provided.

Clause (10) of new section 2 defines the term ‘benamidar’. The inclusive limb of the definition clarifies that a mere name-lender would also be regarded as ‘benamidar’. In the context of the definition in section 2(a)of the BPTA, the benamidar would be a mere name-lender where he is not in possession of the property of which he is the on-paper owner. In such a case, the transaction would not be a benami transaction and would be a sham transaction and would not be covered by the Act. The purpose of including a mere name lender within the definition of benamidar would appear to enlarge the scope of ‘benami transaction’ to cover ‘sham transactions’ also. Under the BPTA, Courts had consistently held that sham transactions would be outside the purview of the Act. It would appear that the inclusive limb of the definition in section 2(10)seeks to overcome these court decisions and include sham transactions also within the scope of ‘benami’ under the PBPT Act.

Old definition of benami transaction did not cover sham transactions where possession is not given to the benamidar. Courts held that sham transactions will not be covered under the Benami Act. In old definition, benami transaction was defined to mean “any transaction in which property is transferred to one person for a consideration paid or provided by another person”. The words “property is transferred to” in section 2(a) implied transfer of both title and possession of property. In new definition in section 2(9)(A), these words have been replaced by the words “property is transferred to, or is held by” which cover cases of both transfer of title only and transfer of both title as well as possession. The word ‘held’ in Section 2(9)(A)(a)/(b) does not mean possession. It means legal title as evidenced by the title deed or other ownership documents. In Jilubhai Nanabhai Khjachar v. State of Gujarat 1995 Supp (1) SCC 596, the Supreme Court held that the word “held” only means possession of legal title and does not require actual connected occupation.

Therefore, in view of the above changes in definitions of benami transaction and benamidar, it does not matter if possession of property is given or not given to the benamidar. Thus, that sham transactions are also covered under the PBPT Act. The above view that sham transactions are also covered under the PBPT Act in view of the 2016 amendments is vindicated by the Supreme Court decision in Ganpati Dealcom case.

In Union of India v. Ganpati Dealcom (P.) Ltd. [2022] 141 taxmann.com 389, the Supreme Court observed that the Benami Act

“now condemns not only those transactions which were traditionally denominated as benami, rather a new class of fictitious and sham transactions are also covered under the same. In this regard, the intention of the legislature is to condemn such property and there is an implicit effort by the Parliament to take into consideration the fact that such transactions are often acquired from ill-gotten wealth.”

7.1 Elements of a ‘Benami Transaction’

• The term ‘benami transaction’ is exhaustively defined in clause (9) of section 2 of the PBPT Act to cover the following 4 categories of transactions:

1. 1. Category I – Transaction or arrangement where consideration provided by person other than the transferee or the person in whose name property is held [sub-clause (A)].
   2. Category II – Transaction or arrangement in respect of property carried out in a fictitious name [sub-clause (B)].
   3. Category III – Transaction or arrangement in respect of property where owner denies knowledge of ownership or not aware of ownership [sub-clause (C)].
   4. Category IV – Property transaction or arrangement where person providing consideration is not traceable or is fictitious, [sub-clause (D)].

From the above definition, the following 4 elements of benami transaction emerge:

• If any transaction does not fall within the scope of any of the 4 sub-clauses of clause (9) of section 2, it is not a benami transaction and property involved will not be benami property.
• Any property which is the subject matter of any of these four types of transactions is ‘benami property’.
• Benamidar is on record owner in whose name property is held.
• Beneficial owner is the real owner who provides or pays consideration for the property.
• Benamidar may be any person-individual or HUF or firm or company or AOP or BOI or artificial juridical person.
• Beneficial owner may also be any person-individual or HUF or firm or company or AOP or BOI or artificial juridical person.

8. Is Every Cash Transaction a Benami Transaction?

Cash enables one to transact with anonymity. It enables one to transact without leaving a trail or digital footprint. There are provisions of the Income-tax Act which impose restrictions and monetary limits on cash transactions and there are consequences for violating that. [See sections 40A(3), 40A(3A), 2nd proviso to sections 43(1), 69D, 80G(5D), 80GGB, 80GGC, 80JJAA, 269S, 269SS & 269T of that Act]. Nevertheless, a cash transaction by itself is not a benami transaction unless it satisfies the ingredients of the definition in section 2(9).

Every cash transaction cannot be termed as a ‘benami’ transaction. As per section 2(9)(A), the following twin conditions need to be satisfied:

• firstly, the property being held by a person who has not provided the consideration;
• secondly, the property is held by that person for the immediate or future benefit, direct or indirect of the person who has provided the said consideration. Where appellant sports co-ordinator in a college had clarified that he received Rs. 15 lakhs from Chairman of trust running said college and said amount was handed over to State Football Association for organizing a football tournament, Initiating Officer was unjustified in holding that cash was given by Chairman to appellant to deposit and retain his own money in demonetised currency in guise of loan received which had to be repaid after some time in new currency. The existence of the ‘benami’ transaction has to be proved by the authorities, i.e., the person who alleges the transaction. The authorities have failed to discharge the burden of proof. The authority has purely gone on the premise that cash is transferred from one person to another, with an object to defeat, demonetization. This is insufficient to establish a ‘benami’ transaction. [P. Ezhilpandian v. K. Visakh, Dy. CIT [2018] 100 taxmann.com 182/259 Taxman 583 (PBPTA – AT)]

In G. Bahadur v. K. Visakh, Asstt. CIT [2018] 100 taxmann.com 179/259 Taxman 556 (PBPTA – AT), the Appellate Tribunal held that payment of advance salary by employer to its employee during the demonetisation period didn’t come under purview of Benami Transaction. Appellant was employed in a College run by a Trust. He received Rs. 50,000 as advance salary from said Trust. Appellant deposited entire amount in his bank account, which was subsequently withdrawn by him and consumed for his personal purposes. Initiating Officer (I.O) assumed that Chairman of said Trust had forced employees to distribute, deposit and retain his own money in demonetized currency in guise of loan received, which had to be repaid after some time in new currency. I. O, thus, held Chairman of college as beneficial owner and appellant as benamidar and passed order provisionally attaching salary bank account of appellant. According to appellant, IO had completely disregarded fact recorded in his sworn statement before IT Authorities that sum received in cash was his salary in advance and same was immediately returned to trust. Therefore, there was no benami property lying in the Bank account which had been attached. The Adjudicating Authority had passed the order under sub-section (3) of section 26 upholding the order passed by the I.O. In appeal, it was held as under in the favour of the appellant:

• Every cash transaction cannot be termed as a ‘benami’ transaction. As per section 2(9)(A) the following twin conditions need to be satisfied- (1) the property being held by a person who has not provided the consideration, (2) the property is held by that person for the immediate or future benefit, direct or indirect of the person who has provided the said consideration.
• The characteristic of a ‘benami’ transaction is that there must be a mere lending of name without any intention to benefit the person in whose name it is made i.e. a mere name lender. The mischief sought to be punished by the Act are only such transactions which have a name lending element without deriving any benefit therein i.e. ‘benami’ transactions.
• The appellant is merely employee of the Trust. The statement of Chairman has already been recorded. From the entire record, it has not been established that the appellant had any point of time hatched any conspiracy with the employer in order to conceal any cash amount or they have any link and nexus with the employer pertaining to any criminal activities. It is admitted by the respondent that they were employees with the Trust and the advance-salary received by them was against the services to be provided by them. The same would have to be treated as earned money and disclosed income. It is not a case where they have received the advance salary amount and left the job. In the present cases, there is no direct or indirect evidence available on record to show that they were involved in assisting any crime. They have already paid/adjusted the entire amount towards their salaries.
• The impugned order assumes that the object of the disbursement was to bring undisclosed amount into circulation by depositing into 3rd person accounts, who did not own the money legitimately. There is no material on record about any 3rd persons accounts. Furthermore, there is no material on record to show that the lecturers owned the money illegitimately.
• The only material present with the Initiating Officer were sworn statements. These statements only disclose a receipt of cash. This is insufficient to construe the existence of a ‘benami’ transaction.
• The facts of the present case are clear that the property was never held by the appellants. The amount received by them have returned/adjusted towards salaries. Even the question of any arrangement in the present case does not arise as the appellants have received only advance salary from the employer under oral contract at the asking of the respondent, the same was immediately returned. The said factual position has not been denied by the respondent. This is also not a case where the person providing the consideration was not traceable or fictitious. The admitted position is that the management/employer was very much traceable, his statement was recorded, the money returned by the appellants was dealt by the department.