Jodhpur: In a landmark judgment delivered on August 3, the Rajasthan High Court clarified that the primary burden of proving a benami transaction rests with the department, reinforcing that properties cannot be declared benami solely on the basis of suspicion or unsubstantiated allegations. The ruling came while hearing a dispute involving 79 immovable properties worth approximately ₹11.16 crore and is expected to have wider implications for Benami proceedings across the country.
A Division Bench of Justice Arun Monga and Justice Sandeep Shah set aside the orders of the Benami Adjudicating Authority and the Appellate Tribunal in the case of M/s Alishan Complex Pvt. Ltd. v. The Initiating Officer, DCIT, Benami Prohibition Unit, Jaipur. The Bench remanded the matter to the Initiating Officer for fresh adjudication in accordance with law after finding that the proceedings required reconsideration.
The dispute stemmed from an Income Tax Department search conducted in June 2022, following which Benami proceedings were initiated against the company. Authorities alleged that 79 immovable properties, valued at around ₹11.16 crore and registered in the company's name, were actually being held for the benefit of another person. The properties were provisionally attached, and the attachment was later upheld by both the Adjudicating Authority and the Appellate Tribunal.
However, the High Court held that the matter required a fresh examination in line with the principles of natural justice. It directed that the company be given an effective opportunity to cross-examine a key witness whose statement formed an important part of the proceedings. The Court also instructed the authorities to consider all relevant material, including findings recorded under the Income-tax Act, before passing a fresh order.
In its judgment, the Court also clarified the relationship between proceedings under the Prohibition of Benami Property Transactions Act and the Income-tax Act. While observing that the two laws operate independently, the Bench said findings arising from the same search and concerning the same transactions cannot be ignored without proper consideration. It noted that the jurisdictional Assessing Officer had accepted that the investments in the properties were duly recorded in the company's books, supported by registered sale deeds, made through banking channels and did not warrant any addition under Section 69 of the Income-tax Act.
Reaffirming an important legal principle, the Court observed that the department bears the primary responsibility of establishing every essential ingredient of a benami transaction through cogent, objective and legally sustainable evidence. It stressed that proceedings carrying serious civil consequences must be based on evidence rather than assumptions or suspicion.
The judgment also examined the legal status of company-owned assets, observing that ownership by a corporate entity must be determined on the basis of statutory requirements and evidence rather than merely changes in shareholding or management.
Commenting on the ruling, advocate Ashwani Taneja, who represented the appellant company and is a former member of the Income Tax Appellate Tribunal, said the judgment would serve as an important guide for the department, courts and the public.
"For the first time since the amended Benami law came into force on November 1, 2016, the High Court has explained the scope of various provisions of the legislation. It has clarified that the primary burden of proving a transaction or property as benami rests with the department and must be discharged through cogent evidence. A property cannot be attached as benami merely on the basis of suspicion or bald allegations," Taneja said.
Legal observers believe the ruling is likely to become an important precedent in Benami litigation by reinforcing evidentiary standards, promoting consistency between proceedings under different statutes arising from the same facts, and providing greater clarity on the treatment of corporate-owned assets under the PBPT Act.