Benami transactions are and have been a common practice in this country which means a system of acquiring and holding property and even of carrying on business in names, other than those of the real owners.[1] However, after understanding the evils of such transactions, the Government framed a legislation named as the Benami Transactions (Prohibition) Act, 1988 (‘Original Act’) to prohibit the real owner to recover the property from the benamidar, thus, legislatively putting an end to the encouragement provided to benami transactions. However, since the Original Act did not contain any provisions in relation to confiscation, appeal mechanism and other procedures, the act could not be implemented effectively and thus on November 01, 2016, Benami Transactions (Prohibition) Amendment Act, 2016 (‘Amended Act’) was implemented, which contained detailed provisions, which were absent in the Original Act. However, the Hon’ble Apex Court in the case of Union of India v. Ganpati Dealcom^[2], (‘Ganpati Dealcom’) has held that criminal prosecution could not be initiated for transaction entered prior to coming into force of the Amended Act as Section 2(a) (Definition of Benami Transaction), Section 3 (Initiation of Criminal Proceedings) and Section 5 of the Original Act, which dealt with criminal prosecution were unconstitutional from their inception, by the reason of being overly broad, disproportionately harsh. Such decision has been consistently followed by various judicial authorities, throughout the country.^[3]

However interestingly, the Delhi Bench of Prohibition of Benami Property Transactions Appellate Tribunal (‘BM Tribunal’) in a recent decision,^[4] have taken a contrary view on this issue, which stood settled. In this case, the Appellant companies were alleged as Benamidars for purchase of shares of Bhageria Industries. The case of the Appellants before the BM Tribunal was that the alleged transaction has occurred prior to the introduction of the Amended Act, and in terms of the Hon’ble Apex Court’s judgment in the case of Ganpati Dealcom, criminal proceedings qua such transactions could not be initiated. On the other hand, the revenue authorities submitted before the Hon’ble BM Tribunal that the definition of ‘Benami Transaction’ under Section 2(9)(a) of the Amended Act observed that the amended definition does not only pertain to transfer of property but also includes its holding by a person without payment of consideration, rather it was paid or provided by another person, and even though the transaction of purchase of shares by the Appellant was prior to implementation of the Amended Act, holding of such shares subsequent to the amendment would still constitute a Benami Transaction.

This contention of the Revenue Authority found favor with the Hon’ble BM Tribunal, and accordingly it was held that since the shares were held by the Appellant Companies after the implementation of the Amended Act, the same would fall within the purview of the definition prescribed under the Amended Act. Further, the Tribunal also observed that the Hon’ble Supreme Court’s judgment in the Ganpati Dealcom’s case did not adjudicate upon the argument of ‘holding of property’ by a person of which consideration was paid or provided by another person, and ignorance of this argument would lead to an incorrect interpretation of a statutory provision.

It is however pertinent to state here that, whilst rendering this judgement, the BM Tribunal has glaringly overlooked the fact that the Hon’ble Apex Court in the Ganpati Dealcom judgment had observed that Section 2(9) by an amendment to the Original Act has added various ingredients to the definition to ‘benami transactions’ and has substantially changed the scope of the offence by enlarging its ambit, and, thus, such provision is in the nature of a substantive law which cannot be applied retrospectively in terms of settled judicial dictum^[5].

Thus, the BM Tribunal has committed a blatant error in applying substantive provisions retrospectively, which issue stood settled by the Hon’ble Apex Court in Ganpati Dealcom. Hence, it is almost certain that the view taken by the BM Tribunal in favor of the revenue, would once again instigate proactive litigation on this issue, however whether the interpretation as adopted by the Hon’ble BM Tribunal could be said to have overruled the settled law on the subject, is still a question which would require determination.

[1] Gur Narayan v. Sheo Lal Singh, AIR 1918 PC 140 (Privy Council).

[2] Union of India v. Ganpati Dealcom [2022] 141 taxmann.com 389 (Supreme Court).

[3] ACIT v. Nutrient Marine Foods Ltd [2023] 152 taxmann.com 87 (Supreme Court), ACIT v. Neporide Pharmaceuticals [2023] 152 taxmann.com 344 (Supreme Court), Pravesh Constructions (P.) Ltd v. Union of India [2023] 150 taxmann.com 427 (Bombay High Court), Banamali Das v. DCIT [2023] 147 taxmann.com 278 (Gauhati High Court).

[4] Prism Scan Express Pvt. Ltd v. DCIT [TS-805-PBPTAT-2023(Delhi High Court)]

[5] CIT v. Vatika Township (P.) Ltd., [2014] 49 taxmann.com 249 (Supreme Court).