Benami Proceedings Based on ‘Kachcha Paper’ Require Scrutiny: Allahabad HC Admits Appeals Against Benami Tag on Cash Seized During Raid [Read Order]
The Court noted that the explanation of disclosed income and family settlement required deeper scrutiny before being branded as benami property.
The Allahabad High Court admitted three connected appeals holding that the branding cash seized during a departmental raid as benami property requires closer judicial scrutiny, particularly since the finding was substantially based on a “kachcha paper” recovered during the search.
The appeals were filed by Maya Verma, Dinesh Kumar Verma, and Sunita Verma under Section 49 of the Prohibition of Benami Property Transactions Act, 1988. The case arose out of search and seizure operations conducted at their residence, during which cash amounting to ₹1,23,63,000 was recovered.
The appellants explained that the cash represented proceeds from the sale of gold jewellery and silver articles obtained through a family settlement executed in 2008, and the proceeds were duly disclosed in their Income Tax Return for the Assessment Year 2017-18. Their earlier Income Tax Return for the Assessment Year 2009-10 also disclosed possession of gold and silver received under the family arrangement.
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The Adjudicating Officer, however, rejected this explanation and treated the seized cash as benami property under the Prohibition of Benami Property Transactions Act, 1988, relying heavily on a handwritten “kachcha paper” found in the house, said to contain entries of amounts allegedly received from transporters. The Appellate Tribunal affirmed this finding, prompting the present appeals.
A Single Judge Bench of Justice Kshitij Shailendra held that the matter warrants detailed examination and admitted all three appeals. The Court observed that the Income Tax Return for the Assessment Year 2017-18 did reflect disclosures of income correlating with the explanation offered by the appellants. Further, the disclosure of jewellery received under the 2008 family settlement was supported by the Income Tax Return for the Assessment Year 2009-10.
The Court stated that whether the “kachcha paper” recovered during the raid could form the basis of a benami finding must be assessed in light of the statutory requirements under the Prohibition of Benami Property Transactions Act, 1988. It emphasized that the authorities must demonstrate how the seized cash fell within the definition of “benami property” under Section 2(9)(A), instead of relying on suspicion or assumptions.
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Accordingly, the court framed the following concerned questions of law:
- Whether the authorities proved that the seized cash constituted a benami transaction under Section 2(9)(A) of the Prohibition of Benami Property Transactions Act, 1988?
- Whether treating the cash as illegal gratification based solely on loose papers rendered the findings perverse?
- Whether an adverse inference could be drawn, without evidence, to link the appellant as benamidar and her family members as beneficial owners?
The Court granted interim protection to all three appellants by directing that no coercive action shall be taken pursuant to the orders impugned until further orders.
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