Rajasthan High Court – Jodhpur
M/S Alishan Complex Private Limited vs The Initiating Officer on 3 August, 2026
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HIGH COURT OF JUDICATURE FOR RAJASTHAN
AT JODHPUR
D.B. Civil Miscellaneous Appeal No. 1595/2026
CNR: RJHC010436632026 | URN: CMA / 3831U / 2026
M/s Alishan Complex Private Limited, M/s Alishan Complex Private
Limited, Having Its Address At Plot No.4, Hanuwant Colony, Umaid
Bhawan Road, Jodhpur.
----Appellant
Versus
The Initiating Officer, The Initiating Officer, Dcit, Benami Prohibition
Unit, Jaipur, Having Its Address At Room No. 103 Na, New Central
Revenue Building, Statue Circle, Jaipur
----Respondent
For Appellant(s) : Mr. Ashwani Taneja
Mr. Divyansh Dubey
Ms. Divya Bapna
For Respondent(s) : Mr. K.K. Bissa
Mr. G.S. Chouhan
HON'BLE MR. JUSTICE ARUN MONGA
HON’BLE MR. JUSTICE SANDEEP SHAH
INDEX
1. Introductory__________________________________________ 02
2. Facts in chronological order____________________________ 04
3. The proceedings below_________________________________ 05
A. Initiating Officer___________________________________ 05
B. Adjudicating Officer________________________________ 07
C. Appellate Tribunal_________________________________ 12
4. The case of the appellant______________________________ 17
A. Arguments on behalf of the Appellant________________ 18
B. Further Submissions on behalf of the appellant________ 20
C. Case law cited on behalf of the appellant_____________ 26
5. Case of the respondents_______________________________ 29
A. Arguments on behalf of the respondents____________ 29
B. Further Submissions of the Respondents______________ 30
6. Discussion and analysis_______________________________ 32
A. Issues/ Questions involved_________________________ 32
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B. The Statutory Framework 33
C. The Material Relied Upon by the Initiating Officer______ 38
D. The Assessment Order dated 27.03.2026______________ 39
E. Legal Position on Untested/Retracted Statement 42
F. Overlapping/Contradictory Findings of the IO and the AO 50
G. The Cumulative Infirmities 52
7. Findings_________________________________________ 54
8. Answers to the questions of law 55
9. Conclusion/Order________________________________ 56
Judgment
Reportable
Pronounced on : 03/08/2026
Per: Arun Monga, J.
I. INTRODUCTORY:-
1. Appellant company, engaged in the business of real estate
development and sale/purchase of the properties, is before us, assailing,
inter alia, an order dated 01.04.2026 passed by Appellate Tribunal
under Section 46 of the Prohibition of Benami Property Transactions Act,
1988 (PBPT Act for short) whereby the Tribunal affirmed the order
dated 30.08.2024 passed by the Adjudicating Authority under Section
26(3) of the PBPT Act holding 79 immovable properties purchased by
the appellant to be benami properties.
2. The adjudicating authority (AA- for short) vide its order dated
30.08.2024 in turn upheld the final provisional attachment order dated
28.07.2023 passed under Section 24(4)(a)(i) of the PBPT Act, 1988.
Both these orders have also been impugned herein. Vide its attachment
order, the Initiating Officer (IO- for short) prima facie opined that as
many as 79 immovable properties purchased by the appellant were
benami properties as defined under Section 2(9) of the PBPT Act, 1988.
Directions are also sought that as a consequence of quashing the orders,
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ibid, the provisional attachment of the properties under PBPT Act be
revoked and the properties be released in favour of the appellant.
3. The lis in hand, in fact, traces its origin to a search conducted on
16.06.2022 under Section 132 of the Income-tax Act, 1961 in the case
of one Maharani Group. The material emerging from that search was
treated by the IO as the foundation for initiating proceedings under
Section 24 of the PBPT Act against the appellant-company. Pertinently, a
finding that the properties are benami may ultimately expose the
properties to confiscation under Section 27 of the PBPT Act and may
also attract prosecution under Section 53 of the Act, thereby giving the
present proceedings a serious civil and penal complexion.
4. The appellant is a private limited company incorporated under the
Companies Act, 1956, engaged in real estate development, including
development of Special Economic Zones and industrial plazas, and in
promoting and developing lands, buildings and townships. In the
scheme of the allegations levelled by the Initiating officer under PBPT
Act, it has been cast in the role of the benamidar i.e. the name-lender
in whose name the subject properties stand.
5. The alleged beneficial owner is one Shri Mahaveer Lunia, founder and
principal promoter of the Maharani Group, a Jodhpur-based handicrafts
business. His connection with the appellant company is that he holds
approximately 8.33% in each of two intermediary holding companies,
translating to an indirect interest of roughly 4.17% in the appellant. He
became a director of the appellant only on 06.01.2020, a date, it will be
seen, that falls after the property purchases in question.
6. The Initiating Officer, the Respondent herein, is the Deputy
Commissioner of Income Tax (Benami Prohibition), Benami Prohibition
Unit, Jaipur. He functions within the same departmental structure i.e.
the Central Board of Direct Taxes, as the Income-Tax authorities whose
assessment findings, (Uploaded
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Appellant relies upon in its favour. More of it in greater details in the
subsequent part at appropriate stage.
II. FACTS IN CHRONOLOGICAL ORDER
7. The financial spine of the appellant’s case reaches back to FY 2006-
07, by which year the company’s share capital of approximately Rs.
1.00 crore and reserves of approximately Rs. 8.95 crore, shareholders’
funds of roughly Rs. 10 crore in aggregate, stood recorded in its books.
It is not in dispute that these figures remained substantially stable
thereafter.
7.1. In FY 2016-17, the shareholding of the two intermediary holding
companies changed hands and the Lunia family entered the structure.
Significantly, both sides rely on the same subsequent fact for opposite
purposes.
7.2 In FY 2017-18, the appellant purchased 79 immovable properties at
Jodhpur for a total consideration of Rs. 11,16,06,000, each payment
made through banking channels. According to the appellant, the
purchases were funded by the recall and redeployment of short-term
loans and advances (Rs. 10.61 crore as on 31.03.2017), a conversion of
one asset class into another, not an infusion of fresh money.
7.3 On 06.01.2020, Shri Mahaveer Lunia became a director of the
appellant. The chronology bears emphasis: the directorship post-dates
every one of the 79 purchases. The appellant treats this as destroying
the theory of beneficial ownership at the time of acquisition, whereas,
the respondents treat the directorship as the securing of direct control
as a future beneficiary.
7.4 On 16.06.2022, a search under Section 132 of the Income-tax Act,
1961 was conducted on the Maharani Group. From the residence of Shri
Lunia were seized, inter alia, a list of the subject properties and, per the
Initiating Officer, certain original registered sale deeds which were
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forwarded to him by the income tax officials leading to initiation of
proceedings under PBPT Act. Custody of these documents at the
residence of the alleged beneficial owner is one of the affirmative
circumstances the Revenue asserts. Though, of course, the appellant
disputes such characterisation and the inference alike.
7.5 During the search, the statement of Shri Anil Sanklecha, a Mumbai-
based Chartered Accountant, was recorded under Section 132(4). In
answer to Question Nos. 50 and 55, he is stated to have disclosed about
routing of cash through hawala/angadia channels. However, by affidavit
dated 27.06.2022, nine days after the search concluded, he retracted
the statement, alleging that it had been extracted under duress in the
course of some 65 hours of continuous questioning.
III. THE PROCEEDINGS BELOW
A. Initiating Officer
8. Based, inter alia, on the information received from income tax
department, on 28.04.2023, the Initiating Officer (Deputy
Commissioner of Income Tax -Benami Prohibition Unit, Jaipur), issued a
show cause notice under Section 24(1) and (2) of the PBPT Act, calling
for a reply by 15.05.2023. The ‘reasons to believe’ were recorded in
paragraph 13.3 of the notice.
8.1 On 01.05.2023, before the reply period had expired, the Initiating
Officer passed a provisional attachment order under Section 24(3). The
prematurity of this order was the principal procedural grievance carried
by the appellant to this court in an earlier foray of litigation without any
success. 1 The consequence is that the procedural terrain stands
substantially traversed, and the present appeal falls to be decided on
the substantive framework of the Act.
1
Writ Petitions Nos. 16732/2023 (M/s Alishan Complex), 14527/2023 and 15074/2023, challenging the
initiation and the provisional attachment, were dismissed by this court on 12.12.2023. The procedural
challenges were rejected; the merits were expressly left open to be agitated before the Adjudicating Authority.
A review petition (D.B. Review (Writ) No. 20/2024)
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at 04:57:43 09.04.2024. The special leave petition
arising therefrom did not alter this position.
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8.2. Meanwhile, on 28.07.2023, a final attachment order under Section
24(4)(a)(i) was passed continuing the attachment. The said attachment
order continuing the proceedings initiated under PBPT Act, reflecting the
mind of the initiating officer, as to what he understood and noted, for
seeking the reference before the adjudicating authority, is extracted as
under:
“2. A Search & Seizure action u/s 132 of the 1.T. Act, 1961 was conducted on
16.06.2022 by the DDIT(Inv.)-1, Jodhpur in the case of Maharani Group,
Jodhpur of which Shri Mahaveer Lunia is the founder and main promoter.
Further, relevant documents seized during the course of the search action related
to benami transactions in respect of the above group were received in this office
through the office of the DGIT (inv.), Rajasthan, Jaipur.
2.1 Based on the factual matrix of the matter which stands fortified from the
information and credible material shared by the Investigation wing as above, a
Show Cause Notice u/s. 24(1) of the PBPT Act, 1988 was issued on 28.04.2023.
The materials analyzed to form “the reasons to believe” are as follows:
I. Income-tax Returns of M/s Alishan Complex Pvt. Ltd.
II. A detailed list of various immovable properties purchased in the name of
M/s Alishan Complex Pvt. Ltd. found & seized (Exhibit-6 of Annexure-BS) at
the residence premises of Sh. Mahveer Lunia i.e. Lalit Kunj, Opposite Hotel
Mapple Abhay, Paota, Jodhpur.
III. Statement of Shri Anil Sanklecha, CA dated 17.06.2022 & 18.06.2022
recorded during the course of search.
IV. Page No. 76 to 83 of exhibit B-9, i.e., a detailed list found during the
course of search in which cash transactions made between Shri Anil
Sanklecha and Shri Mahaveer Lunia are recorded.
V. Bank Book/Ledger book of the company for the period of 01.04.2012 to
31.03.2022.
VI. Documents available on the database of Ministry of Corporate Affairs.
VII. Statements of Shri Praveen Agarwal recorded under section 1,32(4) of
the Income Tax Act, 1961 dated 10/11.02.2015, 15.02.2014 & 18.11.2014.
VIII. Statements of Shri Pramod Ramdeen recorded under section 132(4) of
the Income Tax Act, 1961 dated 10.11.2012.
IX. Statement of Sh. Rakesh Kumar Agarwal recorded u/s 131 of the 1.T.Act,
1961 on 21.11.2014 by the Investigation wing of Kolkata.
3. Brief facts of the case leading to the issue of Show Cause Notice u/s. 24(1) of
the Prohibitions of Benami Property Transactions Act, 1988
On careful perusal and examination of the seized documents, other
details/documents and statements recorded during the Search Action on the
Maharani Group the following facts have come to the notice:
4 Modus-operandi adopted by the Group
4.1 Maharani group is mainly engaged in the business of handicraft items viz
cloths, wooden handicraft and various metal handicraft items and retails sale
thereof to local as well as foreign tourist in the name of mainly M/s Maharani
Textile and Handicraft and key person is Shri Mahaveer Lunia resident of
Jodhpur (Rajasthan). This business generates huge margin as the tourists pay
handsome price for choice items. To reduce the profit margin and also to manage
cash for requirements of the group for making further investment in purchase of
lands and immovable properties, the firm debits huge bogus purchase bills
managed from jewellers of Jodhpur. Payment is made to these jewellers through
banking channel against the bogus purchases and cash is received back.
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4.2 Apart from this, Shri Mahaveer Lunia also works as money-lender and earns
unaccounted interest income also. The unaccounted cash is then utilized for
making purchase of immovable properties and also to buy shell/paper companies
namely (1) Alishan Complex Pvt. Ltd., (2) Swagatama Enclave Pvt. Ltd. and (3)
Principal Dealers Pvt. Ltd. etc., earlier managed and controlled by the entry
operators. These companies have large amount of security premium reserve in it,
which is further utilized to buy immovable properties. These shell companies
have been purchased by the group making investment out of the cash generated
through bogus purchases. The unaccounted cash generated through bogus
purchases were routed by the group through Sh. Anil Sanklecha, CA (Mumbai
based and also covered u/s 132 of the 1.T. Act., 1962 with the group) for
purchasing the shell companies. These facts have been verified from the
documents/details found during the course of search action and the statement of
Sh. Anil Sanklecha, СA.
5. Acquisition of Kolkata based Shell Companies (Benamidars) by the Group.
5.1 On the basis of documents seized during the course of search, investigation
and post search enquiries conducted in the group, the DDIT(Inv.)-1, Jodhpur has
reported that the group has taken control of few Kolkata based shell companies
namely (1) Alishan Complex Pvt. Ltd., (2) Swagatama Enclave Pvt. Ltd. and (3)
Principal Dealers Pvt. Ltd.etc. Few of these companies have considerable
accumulated share premium reserve. The assessee group has utilized these
reserves for advancing loans to sister concerns and/or for purchasing immovable
properties. These companies have huge reserves and loans and advances (assets).
These companies were bought by the group through Sh. Anil Sanklecha and cash
was paid by the group to Anil Sanklecha, who has helped the beneficial owner
i.e. Shri Mahaveer Lunia to purchase these companies. (Benamidars).”
8.3 Perusal of the above reveals that the case constructed by the
Initiating Officer, distilled to its essentials, runs thus: unaccounted cash
of approximately Rs. 40-42 crore, generated by the Lunia family
through bogus jewellery purchase bills and money-lending, was routed
through hawala and angadia channels, with CA Sanklecha as conduit,
into shell or paper companies formerly operated by Kolkata and
Mumbai-based entry operators; those companies, already carrying large
share premium reserves, then acquired the 79 properties in the
appellant’s name, rendering the company a benamidar and Shri Lunia
the beneficial owner.
B. Adjudicating Authority
9. Basis above finding/observations, a reference was thus made on
07.08.2023 by the Deputy Commissioner of Income Tax (Benami
Prohibition Unit, Jaipur), the Initiating Officer under the PBPT Act, to the
Adjudicating Authority under Section 24(5) i.e. The Commissioner of
Income tax.
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9.1 Upon notice, the appellant submitted its detailed response before
the adjudicating authority, inter alia, submitting that:
“1. Alishan Complex Pvt. Ltd. (hereinafter referred to as Company or Alleged
Benamidar) is a private limited company. The Company is authorized by its
memorandum and articles of association to engage in business as builder,
promoter and developers of lands, buildings, building sites, townships and other
building. In furtherance of achieving its objects, the Company purchased various
immovable properties during financial year 2017-18, details of which are given
in Annexure A to impugned reference available at page no. 1-9 of relied upon
documents enclosed with Impugned reference.
2. The Company during FY 2017-18 purchased the various immovable properties
as described in Annexure A as aforesaid out of the funds of the company being
the capital and reserves including the loans and advances given to various
parties and received back during the year. The details of the properties
purchased during FY 2017-18 are given in the foregoing reply/explanation of the
Company. The said properties have been alleged to be Benami Properties by Ld.
IO in Impugned reference before Your Honour.
3. The Company regularly files its returns of income, accounts and audited
finances to Registrar of Companies (hereinafter referred to as “ROC”) and
income tax department which has been accepted by the ROC and income tax
department.
4. The Company has always been operated and managed by the same
shareholders namely Surpati Packaging Pvt Ltd., and Upward Commerce Pvt.
However, in FY 2016-17, the shareholders of Surpati Packaging Pvt Ltd., and
Upward Commerce Pvt changed to new shareholders and thereby the ultimate
individual shareholders of the Company changed to new shareholders i.e., the
Lunia family.
5: It is submitted that the shareholding pattern of Alishan Complex Private
Limited is as follows:
(i) M/s: Surpati Packaging Pvt Ltd holding 49.99% shareholding
(ii) M/s Upward Commerce Pvt. Ltd holding 49.99% shareholding
6. The change in shareholding did not impact the business of the Company and
there has been no substantial change in nature of business. Further, in order to
achieve the objects of the Company, immovable properties were purchased by the
Company on which the capital project was likely to be introduced.
7. The financial position of the company since financial year 2006-07 till 2021-
22 is given hereunder:
F.Y. Share Capital Reserves (INR) Total
Shareholder
Funds in Rs/-
2006-07 1,00,50,000 8,95,50,000 9,96,00,000
2007-08 1,00,50,000 8,95,50,000 9,96,00,000
2008-09 1,00,50,000 9,04,66,932.28 10,05,16,932.28
2009-10 1,00,50,000 9,05,12,341.37 10,05,62,341.37
2010-11 1,00,50,000 9,05,19,898.37 10,05,69,898.37
2011-12 1,00,50,000 8,89,93,785.37 9,90,43,785.37
2012-13 1,00,50,000 8,89,94,791.52
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2013-14 1,00,50,000 8,89,90,691.52 9,90,40,691.52
2014-15 1,00,50,000 8,89,92,178.37 9,90,42,178.37
2015-16 1,00,50,000 8,91,02,748.37 9,91,52,748.37
2016-17 1,00,50,000 8,90,41,745.87 9,90,91,745.87
2017-18 1,00,50,000 8,89,46,122.13 9,89,96,122.13
2018-19 1,00,50,000 8,89,23,482.00 9,89,73,482.00
2019-20 1,00,50,000 8,89,15,964.30 9,89,65,964.30
2020-21 1,00,50,000 8,89,10,209.10 9,89,60,209.10
2021-22 1,00,50,000 8,89,05,140.00 9,89,55,140.00
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21. It is humbly submitted that the whole gamut of the impugned proceedings is
bald allegation that the Company is a shell company and it does not have its own
funds and capital to purchase the Said immovable properties, as against the fact
that Company independently acquired these properties from its own funds. It is
baselessly alleged by Ld. IO that consideration of purchase has been provided by
Shri Mahaveer Lunia through bogus accommodation entries. Without admitting
to any such allegation, it is submitted that the Company purchased the Said
Immovable Properties in its own name and the source of investment for
purchasing such immovable properties was the funds of was the funds of
Company. Details with respect to the purchase of the Said Immovable Properties
are given in the foregoing reply/ explanation of Company.
22. It is pertinent to mention here that the Assessee company is regularly filing
its income tax return and balance sheet, wherein the purchases of the Said
Immovable Properties were duly disclosed in the assets of the Company, and the
same has been accepted by the Income Tax Department. It is submitted that the
fact that the Income Tax Department has never assumed jurisdiction and
thereupon initiated proceedings against the Company with respect to the alleged
transactions clearly goes to show that the allegations levelled by the Ld. I.O. are
absolutely baseless and devoid of any merit. It is further submitted that when the
income tax department has itself not doubted the genuineness of these
transactions, then the Ld. I.O., had no jurisdiction to declare the Company as
shell company and accordingly it is not justified to hold Company as Benamidar
of its own properties purchased from its own funds
23. Furthermore, shareholders of the Maharani Group were searched u/s 132 of
the IT Act on 16.6.2022 and the same has resulted in initiation of re-assessment
proceedings u/s 148 of the IT Act in case of some of the shareholders in respect
of suspected undisclosed income. Those proceedings are still pending and are at
only inception stage. If at all there is any undisclosed income of shareholders,
the same would-be subject matter of those proceedings and the law would take
its own course. However, the entire Show Cause Notice dated 28.04.2023 as well
as the Impugned Order(s) dated 28.07.2023 and the Impugned Reference dated
07.08.2023 is just overwhelmed with the un-concluded suspicion of involvement
of some unaccounted money, which is again self-contradictory and without
evidence. In any case, that would be relevant only in the proceedings under the
Income Tax Act, that too against those persons of Maharani group, to whom such
unaccounted money belongs, which is yet to be determined. As stated above,
there are no income tax proceedings against the Company.
24. Even otherwise, the entire allegation of the Ld. IO is yet to be ascertained in
the income tax proceeding. Therefore, these proceeding under the PBPT Act, to
say the least, are premature. The
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whereby proceedings under the PBPT Act may be taken up if required, after
complete investigation and adjudication under the Income Tax Act, 1961.”
9.2 After going through the defense of the appellant, as well as, the
material available on record, the adjudicating authority, vide its order
dated 30.08.24, held as under:
“5.6 To sum up all, the financial investigation carried out by the IO results in
emerging the fact that D-1 to D-3 did not have creditworthiness or wherewithal
for acquiring the properties under question and it was D-4, who created a smoke
screen to kept himself in disguise and was the real kin-ping of whole
arrangement, where unaccounted funds were introduced by him in D-1 to D-3
through Hawala operators and also with the help of Shri Anil Sanklecha, CA and
had complete control over D-1 to D-3 through mediator companies. For the sake
of brevity, what constitutes Benami property and Benami transaction in the
present case are specified below:
Particulars Remarks
Benami Property As mentioned above in para 1.1 of this order
Benami Transaction The transactions carried out by D-4 in the form of
providing consideration which was routed by Sh. Anil
Sankhlecha, CA to the sellers for making purchases
of the said lands/immovable properties in the names
of D-1 to D-3 are “Benami Transaction” within the
meaning of Section 2(9)(A) of the PBPT Act, 1988.
Benamidar (1) M/s Alishan Complex Pvt. Ltd. (D-1)
(2) M/s Principle Dealer Pvt. Ltd. (D-2)
(3) M/s Swagatama Enclave Pvt. Ltd (D-3)Beneficial Owners (1) Shri Mahaveer Lunia (D-4)
5.7 Further, the defendants contended that the order passed by the IO does not
satisfy any of the six parameters prescribed by Hon’ble Supreme Court in the
case of Valiammal V. Subraaniam, AIR 2004 SC 4187.
The Hon’ble Supreme Court in the case of Valiammal V. Subraaniam, AIR 2004
SC 4187 laid down following parameters, while examining a benami transaction:
(i) the source from which the purchase money came;
(ii) the nature and possession of the property, after the purchase;
(iii) motive, if any, for giving the transaction a benami colour;
(iv) the position of the parties and the relationship, if any, between the claimant
and the alleged benamidar;
(v) the custody of the title deeds after the sale; and
(vi) the conduct of the parties concerned in dealing with the property after the
sale.”
The above parameters are discussed as under:
S.
No. Circumstances Remarks
1 The source from which the The entire consideration for purchase of
purchase money came the said lands/immovable properties in
the names of D-1 to D-3 was paid by Sh.
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through Sh. Anil Sankhlecha, CA
2 The nature and possession The actual possession over the said lands
of the property, after the purchased in the names of D-1 to D-3
purchase; was/is always with Sh. Mahaveer. Lunia,
the beneficial owner. D-1 to D-3 are only
the name lenders of the transactions for
land records only.
3 Motive, if any, for giving Unaccounted cash of D-4 has been
the transaction a benami introduced in D-1 to D-3, which clearly
colour; shows that the tax evasion legetimising
the unaccounted cash was the only
motive.
4 The position of the parties Sh. Mahaveer Lunia through self and his
and the relationship, if any, family members is having full control and
between the claimant and management of D-1 to D-3 since F.Y.
the alleged benamidar 2016-17 (from the date of transfer of
shares of the company in their own
names or in the name of the other
companies wherein they are holding
100% share).
5 The custody of the title It is evident from the fact that during the
deeds after the sale; search conducted on 16.06.2022, a
detailed list of various immovable
properties purchased in the name of this
company was found at the residence
premises of Sh. Mahveer Lunia i.e. Lalit
Kunj, Opposite Hotel Mapple Abhay,
Paota, Jodhpur Further, original
registered sale deeds of some of the said
lands/immovable properties were also
found & seized from the residence of Shri
Mahaveer Lunia.
6 The conduct of parties After purchasing the said
concerned in dealing with lands/immovable properties in the names
the property after the sale. of D-1 to D-3, Shri Mahaveer Lunia is
having full possession over the said
lands/immovable properties for his
immediate/future benefits.
5.8 In view of above discussion, the other contentions of the defendants that the
IO has not discharged the burden of proof, the case of the defendants falls under
exception II of section 2(9) (A) of the PBPT Act and every cash transaction could
not be treated as benami transaction hold no ground, hence rejected.
6. Order:
6.1 I, Rajendra Kumar, in view of the above findings and in exercise of the
powers conferred on me by virtue of Section 7 read with Section 26 of the PBPT
Act, 1988 (as amended), hereby confirm the Provisional Attachment Orders u/s
24(4) of the PBPT Act dated 28.07.2023 of the Initiating Officer thereby holding
the properties specified in Para 1.1 of this order to be Benami Properties, title
holder thereof i.e., D-1, D-2 & D-3 to be Benamidars, D-4 to be Beneficial
Owner and further direct that the properties specified in Para 1.1 of this Order
shall not be transferred or otherwise dealt with, in any manner, except with the
prior permission of the undersigned. The Reference nos. R-
0271/PBPT/DLI/2023, R-0272/PBPT/DLI/2023 and R-0273/PBPT/DLI/2023
are allowed.
6.2 This is an appealable order and any party hereto, if aggrieved by this order
may appeal in term of section 46 of the PBPT Act, 1988 to the Appellate Tribunal
for Forfeiture of Property, 4th Floor, Lok Nayak Bhavan, Khan Market, New
Delhi-110003, within 45 days from
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C. Appellate Tribunal
10. The above order passed by the adjudicating authority was
challenged before the learned Appellate Tribunal under section 46 of the
PBPT Act. While that appeal was pending, on 27.03.2026 the
jurisdictional Assessing Officer passed the assessment order for AY
2018-19, the very year of the purchases qua the appellant, arising out
of the very same search. The order records that the investment was
duly recorded in the audited balance sheet, supported by registered
sale deeds, made through banking channels with no cash involvement,
and that the source stood satisfactorily explained; no addition was
made under Section 69. This order, and its uneasy coexistence with the
benami findings, constitutes the another central controversy in the
appeal. The relevant portion whereof may be usefully extracted before
proceeding further:
“7.1 I have carefully considered the submission of the assessee with reference to
documents attached therewith.
It is observed that the assessee has made investment in purchase of immovable
property during the year under consideration amounting to Rs. 11,16,06,000/-.
Copies of ledger A/cs of all the parties to whom payments made against purchase
of properties have been furnished. On verification, the above investment is found
to be duly recorded in the audited balance sheet under fixed assets and is
supported by registered sale deeds and payments made through banking
channels. The amount has been duly reconciled with the bank statements and
books of account and, therefore, the same cannot be treated as unexplained.
The primary condition for invoking section 69 of the Act is that investment not
recorded in the books of account, whereas in the present case of the assessee, the
investment is fully reflected in the books of a/c and further reconciled with the
bank statements and, therefore, no adverse inference is drawn. 11
Further, the assessee has submitted that reduction in loans and advances is on
account of recovery or adjustment of earlier balance and, therefore, does not
constitute income of the year under consideration. Confirmations of parties,
their ITRs and copies of relevant ledger accounts have been furnished. Loans
and advances have been received through banking channel. Thus, identity of the
creditors / parties, their creditworthiness and genuineness of transactions has
been established.
With regard to the increase in liabilities reflected under the head “Other Current
Liabilities” amounting to Rs. 1,72,15,000/- as against Rs. 1,02,10,000/- in the
preceding year, the assessee has furnished party-wise details of the liabilities
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[2026:RJ-JP:35541-DB] (13 of 58) [CMA-1595/2026]along with confirmations and copies of ITR acknowledgements of the concerned
parties.
Details furnished have been examined carefully. It is observed that the liabilities
are duly recorded, in the regular books of account and are identifiable with
specific parties. The assessee has furnished confirmations and basic details
establishing the identity of the creditor land, therefore, such liabilities cannot be
considered non-genuine or represent unexplained income of the assessee.
The assessee has further established that all transactions in the bank accounts
are duly recorded in the regular books of account and are relatable to disclosed
business and investment activities. The assessee reply has been examined and
test check and it is noticed that the bank transactions are duly reflected in the
books of account. Therefore, the assessee’s reply is accepted. 1
Thus, the assessee has satisfactorily explained all the issue on which explanation
with supporting documents and hence, no adverse inference is drawn and
returned income of Rs. 0/- with c/f of current year’s loss of Rs. 64,177/- is
accepted as such.
8. Assessed u/s 147 r.w.s. 143(3) at NIL. Issue demand notice & challan. The
form ITNS-150 showing calculation of tax and interest chargeable, if any, is
attached herewith and forms are part of this Order. A notice of demand u/s 156 of
the Income-tax Act, 1961 and challan for payment of tax, if payable, is hereby
issued.
This order is being issued after obtaining approval of the Addl. Commissioner of
Income Tax, Central Range, Jodhpur vide DIN no. ITBA/COM/F/17/2025-
26/1087984411(1) dated 27.03.2026.”
10.1 On 01.04.2026, the learned Appellate Tribunal dismissed the
appeal by an order now impugned herein, which reads as under:
“2. The case in hand was initiated after a search conducted under Section 132 of
the Income Tax Act on 16.06.2022 on Maharani Group of company founded by
Shri Mahaveer Lunia. The office of the 10 received information along with
relevant documents from DGIT (Inv.), Rajasthan, Jaipur. Shri Mahaveer Lunia
was shown to be the founder and main promoter of the Maharani Group. The
group is mainly engaged in the business of handicraft items viz. clothes, wooden
handicraft, various metal handicraft items, for retail sale thereof to local as well
as foreign tourists. The business generated huge margin of profit as tourists pay
handsome price for choice items. To reduce the profit margin and also to manage
cash for the requirements of the group for making further investment in purchase
of lands and immovable properties, the firm debited huge bogus purchase bills
managed from jewelers of Jodhpur. Payment was made to these jewelers through
banking channels against the bogus purchases and cash was received back.
Apart from this, Shri Mahaveer Lunia also worked as a money-lender and earns
unaccounted interest income. The unaccounted cash was utilized for making
purchase of immovable properties and also to acquire shell/paper companies
namely (1) M/s Alishan Complex Pvt. Ltd., (2) M/s Principal Dealers Pvt. Ltd.,
and (3) M/s Swagatama Enclave Pvt. Ltd., earlier managed and controlled by
entry operators of Kolkata and Mumbai. Those companies were having security
and premium reserves, which was utilized to buy immovable properties. These
companies were acquired by the group by making investment out of the cash
generated through bogus purchases.
(Uploaded The unaccounted
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[2026:RJ-JP:35541-DB] (14 of 58) [CMA-1595/2026]bogus purchases was routed through Shri Anil Sanklecha, CA, a relative of Shri
Mahaveer Lunia for purchasing the shell companies. Those companies were
operated by Shri Neeraj Khemka and Shri Praveen Agarwal (dummy Director) at
the time of share allotment, wherein Shri Praveen Agarwal accepted that these
companies are shell companies/paper companies used by him for providing
accommodation entries in lieu of cash payment.
4. The allegation was for operation of those entities from Kolkata and Mumbai
with the help of Shri Anil Sanklecha, Chartered Accountant, a relative of Shri
Mahaveer Lunia. He remained instrumental in facilitating the transactions where
approximately Rs.40 to 42 Crores was transacted in cash through Hawala
Operators (Angadias), as admitted by the witnesses in his statements The modus
was to induce cash in the shell companies (appellants no. 1 to 3) and thereupon
to acquire various properties in the name of those companies and accordingly 79
properties were purchased in the name of the appellant M/s Alishan Complex Pvt.
Ltd. while 50. properties in the name of the appellant M/s Principle Dealer Pvt.
Ltd. and lastly 14 properties in the name of appellant M/s Swagatma Enclave Pvt.
Ltd. making it in all 143 properties. The money involved therein was found to be
Rs.40 Crores, Rs. 18 Crores and Rs. 17 Crores respectively in the entities named
above. Finding a case of benami transaction, notice was issued to the appellants
under Section 24(1) followed by notice under Section 24(3) of the Act of 1988.
The provisional attachment order was caused thereupon. It was followed by
adjudication by the Adjudicating Authority on a reference by IO. After hearing
the parties, the Provisional Attachment Order was confirmed and aggrieved by
the aforesaid, these appeals have been preferred by the appellants.
-x-x-x-x-x-
Arguments of counsel for the appellants:
20. One of the argument of the appellants is that statements of different persons
recorded by the Income Tax Department, behind their back could not have been
relied upon.
21. We have considered the aforesaid issue also. The statements recorded under
one statute can be used in proceedings under another statute, if the provisions
and purposes of the statutes align and there is no express prohibition against it.
In the case at hand, statements were recorded under section 132(4) of the Income
Tax Act, 1961 and the same have been used for the proceedings under the PBPT
Act. Therefore, it becomes necessary to examine whether Income Tax Act and
PBPT Act can be construed together. It cannot be denied that the purpose of both
the Income Tax Act and the PBPT Act is to ensure transparency and legality in
financial transactions and asset holdings. The PBPT Act, like many other legal
frameworks. allows for the use of statements and evidence that are relevant to
the case, regardless of where or under which Act they were originally recorded.
Section 60 of the PBPT Act clarifies “Applications of other laws not barred”. The
provisions of the Act of 1988 shall be in addition to, and not, save as hereinafter
expressly provided. in derogation of any other law for the time being in force. It
is evident from above that the PBPT Act empowers and enables /Authorities to
use application of other laws. In view of above, the statements recorded under
the Income Tax Act, 1961 could have been used for the proceedings under the
PBPT Act, 1988. The appellants failed to explain as to why the statements
recorded under Section 132 of the Income Tax Act could not have been relied. It
is along with other material collected during the course of search and
subsequently.
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22. It was further submitted that the statements recorded behind the back had no
evidentiary value. The issue has been linked with the issue of denial of cross-
examination of the witnesses.
23. We may first clarify the issue of right of cross-examination of the witnesses
which is not inbuilt under the Act of 1988. The right of cross-examination
depends on the nature of the proceedings. The issue aforesaid has been dealt
with by Madhya Pradesh High Court in the case of Harivallabh Mohanlal Joshi
Vs. Union of India in Writ Petition (C) No. 16633/2018 decided by the order
dated. 13.08.2018. The judgment of the Apex Court was taken into consideration
to hold that cross-examination is not an integral part of the principle of natural
justice. However, it is open for the competent authority to examine the available
circumstances and if deems fit, the opportunity to cross-examination can be
provided, but not as a matter of right. The same view was taken by the Madras
High Court in the case of M/s Marg Realities Ltd. Vs. Dy. CIT (Benami
Prohibition) reported in 448 ITR 574 (Mad) (HC) to hold that there is no
provision under the Act of 1988 to provide an opportunity for cross-examination.
25. Detailed finding in that regard has been recorded, thus, the impugned order
has not been passed merely on the statements of the witnesses but other material
to prove the case of benami transaction. At this stage, we may further refer to the
retraction of the statement by Sh. Anil Sanklecha, CA, relative of Mahaveer
Lunia. The retraction was made by an affidavit after expiry of the considerable
period and it is not that the statement of Sh. Anil Sanklecha, CA was recorded by
the Income Tax authorities under duress or coercion. Retraction for the sake of it
and with the delay is not acceptable. It is otherwise a fact that the impugned
order has not been passed only based on statements, rather it was with
corroborative eviden the material and, therefore, rightly relied upon by the
respondents.
It may be that stand-alone statements indeed may lack evidentiary value, if they
are not corroborated or supported by other evidence. However, if these
statements are consistent with other evidence or provide essential context to
understanding a transaction ог arrangement covered under the PBPT Act, they
can carry significant weight.
26. In the case at hand, it is observed that the IO has not relied only on the
statements of third persons like Sh. Anil Sanklecha, CA etc. but duly analyzed the
shareholding pattern as well as current Directors in these companies and after
analyzing all financials, found that Shri Mahaveer Lunia and his family members
are now having full control and management of three companies since F.Y. 2016-
17. Moreover, during the search conducted on 16.06.2022, detailed list of
various immovable properties purchased in names of these three companies were
found at the residence premises of Shri Mahaveer Lunia. These facts show that
the statements were corroborated and supported by other evidences. Therefore,
the contention of the defendants that statements recorded behind their back have
no evidentiary value, cannot be accepted. They could not otherwise question
truthfullness of the statements. There is no provision to record statement in the
presence of the benamidar or beneficial owner.
x-x-x-x-x-x
34. It is noticed that Shri Anil Sanklecha, CA in response to question numbers 50,
55 in his statement recorded on oath u/s 132(4) of the 1.T Act, 1961 stated on
17.06.2022/18.06.2022 and admitted that he has received cash from Mahaveer
Lunia to the tune of Rs. 40-42 crores (approx.) through Angadia (Hawala
operator) in Mumbai, which was routed in the shell entities. He also stated that
his servant Mr. Suresh(Uploaded
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earlier. In order to verify the veracity of said submission, list of current and
previous directors was perused from the records, wherein it is seen that Shri
Suresh Mukhia was director in past. It is also noticed from material on record
that one company was having two shareholders namely M/s Surpati Packaging
Pvt. Ltd. and M/s Upward Commerce Pvt. Ltd, with shareholding of 49.99% each.
It is also seen that Mahaveer Lunia and his family members were having 50%
shareholding in both M/s Surpati Packaging Pvt. Ltd. and M/s Upward
Commerce Pvt. Ltd. Similarly, M/s Shivaasha Mercantile Ltd. is having 99.98%
shareholding in other companies, in which Mahaveer Lunia and his family
members were having 58.24% shareholding. Likewise, M/s Mahavir Agency Pvt.
Ltd. and M/s Jagdamba Dealer Pvt. Ltd. are having 49.98% each shareholding.
Further, M/s Jodhana Buildmart Pvt. Ltd. and M/s Marudhar Landcon Pvt.
Ltd. are having 50% each shareholding in M/s Mahavir Agency Pvt. Ltd.
Mahaveer Lunia and his family members are having 100% shareholding of M/s
Jodhana Buildmart Pvt. Ltd. and M/s Marudhar Landcon Pvt. Ltd.
x-x-x-x-x-x
39. It was urged that when the Income Tax Department has assumed the
jurisdiction and initiated proceedings against the benamidar companies with
regard to the alleged transactions, then there was no reason to make allegations
about benami transactions in regard to the same facts. It is more so when the
Income-Tax Department made the assessment of undisclosed income thus it
could not have been taken to be involved in benami transactions:
40. We find no substance in the argument, rather it has been raised based on
misconceived notions. According to the appellants, element of benami
transaction can rest only when unaccounted or illegal money is transacted. The
said concept is incorrect because element of benami transaction may exist even if
it has been transacted out of the disclosed income and source. We would
illustrate it. If somebody is having disclosed income declared in the income tax,
however, transferred to a third person for purchase of the property in his name,
then it would be a case of benami transaction despite disclosed income being
used in benami transaction. In the similar manner, even if the income tax
authority has made assessment of undisclosed income after causing notice under
Section 148 of the Income Tax Act or otherwise it may become legalized money
but would not nullify the element of benami transaction, if exists. The facts of this
case have been disclosed to show how the benami transaction has been cash out
of betting and gambling but the fact remains that the appellants changed their
stand regarding earning which was initially said to be out of service and
thereupon through the agriculture income and disclosed in the revised income
tax return. It was after the notice caused by the respondents. The IO found an
element of benami transaction where the money was routed for purchase of
shares, mutual funds and properties. It was transacted by beneficial owner and
thereupon purchase remained in the name of benamidar’s companies. The
detailed fact to show how a case of benami transaction has been made has
already been discussed thus it is not required to be repeated, however, element of
benami transaction, if made out, would not be effected by subsequent assessment
of income.
41. The next question is co-related to the last issue. The counsel for the
appellants submitted that the cash transaction cannot be taken to be the basis for
the benami transaction. It is nothing but admission about the involvement of cash
in the transaction though with the qualification that mere involvement of cash
would not make out a case of benami transaction. The proposition taken by the
counsel for the appellant may be correct and we may endorse that each cash
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transaction may not involve a benami transaction, rather it cannot be only on an
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allegation to make out a case under Section 2(9)(A) of the Act of 1988. If the
involvement of cash transaction results in benami transaction, it cannot be
nullified only on the ground that involvement of the cash would make out a case
of benami transaction. However, if no allegation is made out then even
involvement of cash would not make out a case of benami transaction. It depends
on the facts of the case. In the instant case, huge amount was involved which
remained unaccounted and even if in the revised return, it was assessed, if the
fact remained that it was used for benami transaction and, therefore, the
argument is clarified with the aforesaid and in this case respondents could not
satisfy route of transaction to make out a case of benami transaction.
42. The next question was that Mahaveer Lunia is not shareholder of the
appellant companies. In fact, he purchased share of shareholding company and
that too of limited extent. The appellant company purchased the immovable
properties out of their own funds and, therefore, shareholders did not become the
owner of the properties. The fact aforesaid has been raised in ignorance of the
fact that the appellant company could not support the source of funds to acquire
the properties though they had taken an excuse about availability of funds in the
account of the company itself and, therefore, it was used for purchase of the
properties. It is, however, without clarification about the generation of funds and
more specifically receipt of the amount from those to whom money was advanced
by the appellant companies. There is no material to show as to when money was
advanced and source for advance of money to the appellant company so as to
legally received it back. In the background aforesaid, receipt of the amount as a
repayment of the advances was taken to be nothing, but for creation of the
benami transaction where beneficial owner infused the cash which was shown to
be nothing but out of repayment of the advances. The source of advance and
necessary material was not found with the appellants in the proceedings
conducted by the Income Tax Department as well as the respondents and
otherwise if the appellant Mahaveer Lunia was holding shares only in the
shareholding company, then it makes a case of benami transaction because he
had infused cash amount in those companies for purchase of shares, mutual
funds and properties making out a case of benami transaction under Section
2(9)(A) of the Act of 1988. The infusion of cash by Mahaveer Lunia in the
shareholding companies was admitted by Shri Anil Sanklecha, CA. Thus, even
the last argument raised by the counsel for the appellants cannot be accepted,
rather analysis aforesaid reveals satisfaction of the ingredients of Section 2(9)(A)
of the Act of 1988.
43. In the light of the discussion made above, the appeals would fail and are
dismissed.”
IV. THE CASE OF THE APPELLANT
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A. Arguments on behalf of the Appellant
11. Mr. Ashwani Taneja, argued broadly on the lines of the grounds
pleaded in the appeal. Basis thereof, case of the appellant is crystallized
on following seven heads.
12.1 First, independent financial capacity: shareholders’ funds of
roughly Rs. 10 crore have been maintained consistently since FY 2006-
07, predating the Lunia family’s entry by a decade. The purchases were
made entirely through banking channels, funded by the repayment and
redeployment of loans and advances already appearing in the books, a
conversion of assets, not an infusion. On this footing, no external
consideration entered the transactions at all.
12.2 Second, the twin conditions of Section 2(9)(A) are said to
be unmet: the company paid from its own corpus, and it holds,
possesses and enjoys the properties itself. There is, on the appellant’s
submission, no identified person who provided the consideration and for
whose benefit the properties are held, and both limbs must be
affirmatively established before the definition is attracted.
12.3 Third, shareholding is not beneficial ownership. Shri Lunia is
not even a direct shareholder of the appellant; a shareholder of a
holding company cannot in law be the beneficial owner of property held
by the subsidiary, which is a separate juristic person, shareholders own
shares, not the company’s assets. Reliance is placed on Pr. CIT v.
Pradeep Wig2, and, for the proposition that the corporate veil may be
pierced only upon a finding of fraud, sham or facade, on Vodafone
International Holdings BV v. Union of India3 and LIC v. Escorts
Ltd.4.
12.4 Fourth, factual errors going to the root of the impugned
order (Tribunal): (i) the learned Tribunal attributed an investment of
2
ITA 681/2025, DELHI HIGH COURT
3
(2012) 6 SCC 613 (Uploaded on 03/08/2026 at 04:57:43 PM)
4
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[2026:RJ-JP:35541-DB] (19 of 58) [CMA-1595/2026]
Rs. 40 crore to the appellant against an actual figure of Rs. 11.16 crore,
an overstatement exceeding 250%; (ii) it confused the shareholding of
two distinct companies, applying the 58.24% Lunia holding in M/s
Shivaasha Mercantile to the wrong entity; and (iii) it conflated one
individual, holding an indirect interest of about 4.17%, with a twelve-
member extended family, whereas a collective family holding cannot
substitute for proof that a specific person provided the consideration.
12.5 Fifth, the burden of proof was wrongly shifted. The initial
burden of establishing a benami transaction lies on the Initiating Officer,
who, the appellant contends, never ascertained the exact amount of
cash allegedly provided nor the benefit accrued, and the Tribunal
impermissibly required the appellant to prove a negative.
12.6 Sixth, the income-tax findings were ignored, lead to two
contradictory findings: under the same Act and out of the same
search, the Assessing Officer accepted the source of the investment and
made no addition under Section 69, yet the learned Tribunal treated the
same search material as inculpatory, the Section 132(4) statements as
conclusive, while dismissing the exculpatory assessment findings as
irrelevant. Reliance is placed on Central Warehousing Corporation v.
Adani Ports SEZ Ltd. 5 against the respondent and IT department
approbating and reprobating on the same facts. The appellant thus
submits that the same Department cannot rely upon income-tax search
statements and investigative material when they appear incriminatory,
yet disregard the later findings of the Assessing Officer when those very
findings exculpate the appellant on the source and banking trail of the
same investments.
12.7 Seventh, the evidence is tainted and uncorroborated. The
case rests on the retracted statement of CA Anil Sanklecha; the
retraction, by affidavit of 27.06.2022, within nine days, alleging some
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65 hours of continuous questioning, was not belated, and accords with
the CBDT’s own instructions dated 10.03.2003 and 18.12.2014
discouraging confessions during search. The maker of the statement
was never summoned or examined in the benami proceedings, and
cross-examination, though sought, was never granted. The findings, it
is urged, amount to borrowed satisfaction from investigation reports
without independent inquiry by the Initiating Officer.
B. Further Submissions on behalf of the appellant
(i) Submissions of the appellant on the Statement of Shri Anil
Sanklecha
13. During the search, the statement of CA Anil Sanklecha (Mumbai)
was recorded under s.132(4), Income Tax Act, on 17-18.06.2022; it
was never supplied to the Appellant.
13.1 In answers to Q.50 and Q.55, Sanklecha allegedly stated he
received cash of about ₹40-42 crores from Shri Mahaveer Lunia via
Angadia in Mumbai and passed it on to persons as directed by Lunia, his
family, or agents.
13.2 Sanklecha nowhere stated the cash was used in the Appellant or
for purchasing the subject properties; per extracts in the s.24(4)
Provisional Attachment Order, he expressly said he had no knowledge of
its ultimate utilization.
13.3 The Initiating Officer wrongly drew an adverse inference,
attributing utilization of the cash to the Appellant by implication through
Q.55 , unsupported by the statement’s actual contents and legally
unsustainable.
13.4 This statement is the primary basis of the Impugned Order dated
01.04.2026 (paras 34, 42), though self-contradictory and non-
inculpatory. Sanklecha retracted it within nine days by notarized
Affidavit dated 27.06.2022, stating: the search ran more than 65 hours
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(16-19.06.2022); he and family were continuously grilled without food,
rest or sleep; his statement was taken on 18.06.2022 when exhausted
and confused; he signed without application of mind at the officers’
dictate; he never received or gave funds to Lunia or Gautam Chopra;
and the ₹40-42 crore transaction was “absolutely an incorrect version.”
His reply dated 11.02.2023 to JDIT-1, Jodhpur, confirmed no
documentary evidence was found at his premises.
13.5 The findings of the Impugned Order passed by the AA are perverse:
no evidence establishes cash payments to sellers of the impugned
properties; the AA ignored relevant material, relied on inadmissible
material, and its conclusion rests on conjecture without documentary
evidence or money trail.
13.6 The Tribunal also merely reproduced the Respondent’s allegations
as established fact without independent scrutiny. The allegations rest on
Income-tax Act statements never furnished completely/legibly, denied
cross-examination despite requests, and never independently verified
by the Initiating Officer under the Benami Act, 1988.
13.7 Several such statements were retracted by sworn affidavits,
denting their evidentiary value; absent independent corroboration by
the Initiating Officer (BPU), reliance on them is legally untenable.
13.8 This violates natural justice: adverse findings on third-party
statements require an effective opportunity of cross-examination; its
denial vitiates the proceedings, especially under so harsh a law.
13.9 Even taking Sanklecha’s statement at face value (without
admitting), it contains no reference to cash infusion into the Appellant
or use for acquiring the properties; being uncorroborated, untested and
retracted, it establishes no nexus, rendering the Respondent’s case
unsustainable under the Benami Act.
13.10 Tribunal wrongly discards the retraction as made “after expiry of
considerable period,” (Uploaded
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[2026:RJ-JP:35541-DB] (22 of 58) [CMA-1595/2026]nine days of the search — a prompt retraction that could not be
summarily brushed aside, given the original statement was allegedly
coerced and untested by cross-examination.
(ii) Submissions of the appellant on the Findings of the
Assessing Officer (Income Tax)
14. That the same Income Tax Department, the very Department
under the CBDT that houses the Benami Prohibition Unit and the IO –
has, through its Assessing Officer (DC, Central Circle 1, Jodhpur),
conducted full-fledged scrutiny assessments of the Appellant for five
assessment years (AY 2018-19 and AY 2020-21 through AY 2023-24),
all consequential to the very same search and seizure operation of
16.06.2022 that gave rise to the present benami proceedings and has
arrived at diametrically opposite findings on the very same questions of
source of funds and genuineness of the Appellant’s transactions for
acquiring the subject properties.
14.1 That the Jurisdictional Assessing Officer (DC CEN CIR1, Jodhpur)
passed the Assessment Order under Section 147 r.w.s. 144 of the IT Act,
after obtaining prior approval of the Addl. CIT, Central Range, Jodhpur.
This assessment was conducted consequential to the very same search
of 16.06.2022. During the proceedings, the AO issued detailed Show
Cause Notices specifically proposing addition of Rs.11,16,06,000/- as
unexplained investment under Sections 68 and 69 of the IT Act, the
very same properties that are the subject matter of the present benami
proceedings. The Appellant filed comprehensive replies furnishing ledger
accounts of all parties, bank statements, registered sale deeds,
confirmations from counterparties with their ITRs and Financial
Statements of the Appellant and others. The AO, after careful
examination, recorded the following findings:
(i) ‘The above investment is found to be duly recorded in the audited balance
sheet under fixed assets and is supported by registered sale deeds and payments
made through banking(Uploaded
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as unexplained.’
(ii) ‘Loans and advances have been received through banking channel. Thus,
identity of the creditors/parties, their creditworthiness and genuineness of
transactions has been established.’
(iii) ‘Thus, the assessee has satisfactorily explained all the issues on which
explanation with supporting documents and hence, no adverse inference is
drawn and returned income of Rs.0/- with c/f of current year’s loss of Rs.64,177/-
is accepted as such.’
14.2 That post-search assessment was also carried out for other
assessment years, in the case of the appellant. The Assessment Orders
for AY 2020-21, AY 2021-22, AY 2022-23 and AY 2023-24, dated
27.02.2025, 27.02.2025, 28.02.2025 & 26.02.2025, were passed
during the pendency of the appeal before the Tribunal. The AO (DC CEN
CIR1, Jodhpur) passed Assessment Orders for all four years after
issuing detailed notices under Section 142(1) and examining the
Appellant’s replies, financial statements and bank statements. In each
year, the identical finding was recorded: ‘Considering the
reply/submission of the assessee and the details and documents
available on record, the return income is accepted as such.’ No addition
was made in any year.
14.3 That the significance of these Assessment Orders, particularly the
Assessment Order for AY 2018-2019, cannot be overstated. The
Impugned Order’s core finding, that the Appellant is a ‘shell company’
whose properties were purchased from ‘unaccounted cash of Shri
Mahaveer Lunia’, has been directly and specifically negated by the same
Department’s own Assessing Officer, who after examining the very same
properties, the very same bank statements, and the very same source
of funds, has recorded that the investment is duly recorded, reconciled,
supported by banking channels and registered sale deeds, and that the
source is satisfactorily explained. These are not tangential findings;
they go to the heart of the benami allegation.
14.4 That the issue regarding acquisition of the subject properties and
the source of funds has already been duly examined by the Assessing
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Officer under the Income-tax Act, 1961 during the course of
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assessment proceedings. The Assessing Officer had raised specific
queries with respect to the acquisition of properties and their source of
funds, to which the Appellant furnished detailed explanations,
demonstrating that the investments were made out of repayment of
loans and advances reflected in the financial statements, and that all
payments were effected through regular banking channels. The
corresponding sale deeds were duly registered and examined by the
Assessing Officer before passing the assessment orders, without
drawing any adverse inference.
(iii) Submissions of the appellant on the Contradictions in the
Tribunal order
15. The Tribunal (Para 40) held that income tax assessment of
undisclosed income “legalizes” the money but does not nullify the
benami element. This is selective reliance: the Tribunal accepts
inculpatory income tax material (statements, search material,
shareholding data) but rejects exculpatory findings from the same
machinery (Assessment Orders accepting the source). Such asymmetric
borrowing violates consistency, fairness and judicial discipline, rendering
the findings arbitrary and unsustainable.
15.1 The Tribunal ignored that the Assessing Officer had already
examined the acquisition of properties and source of funds, accepted
them as genuine, and recorded no adverse findings.
15.2 The Tribunal (Para 25) wrongly dismissed Shri Sanklecha’s
retraction as made “after a considerable period.” Factually, the
retraction affidavit dated 27.06.2022 came just nine days after the
search ended (18.06.2022), not a considerable period. CBDT’s
Instruction dated 10.03.2003 and Letter dated 18.12.2014 prohibit
extracting confessions during search. A retraction within nine days,
detailing duress (65 hours of continuous interrogation without food or
rest), deserved serious consideration.
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corroborative evidence of benami; the IO misread the statement in
isolation, ignoring unrebutted documentary evidence. Uncorroborated
oral statements carry low evidentiary weight, and denial of cross-
examination has led courts to delete additions as based on suspicion.
Further, the Department cannot blow hot and cold: its AO accepted the
source as satisfactorily explained while its Benami Unit alleged the same
funds were Shri Mahaveer Lunia’s unaccounted cash routed through
hawala.
15.3 The Order suffers from perversity and internal contradiction. At
Paras 20-26 the Tribunal admits Section 132(4) statements and search
material (photocopies, without originals) into benami proceedings via
Section 60 PBPT Act, yet at Para 40 dismisses the same Department’s
Assessment Orders accepting the source as irrelevant. Evidence from
the same statutory source must be treated with parity — if the income
tax machinery can inculpate, it must equally exculpate. The Tribunal
cannot approbate and reprobate the same process; this legal error
vitiates the Order.
15.4 The Tribunal’s finding (Para 33) that no legitimate documents
disclosed the source of loans, reserve capital and share premium is
squarely contradicted by the Assessment Order for AY 2018-19 dated
27.03.2026, which, after examining audited financials, bank statements,
ledgers, confirmations and counterparties’ ITRs , held the investments
duly recorded, banked, reconciled, and the creditors’ identity,
creditworthiness and genuineness established.
15.5 Even Section 164 CrPC statements are not automatically
admissible without proof before the Magistrate and cross-examination;
statements before other authorities stand on weaker footing.
15.6 Neither copies of the statements were furnished to the Appellant
nor cross-examination allowed, a clear breach of natural justice.
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15.7 Even where the Evidence Act does not strictly apply, no judicial,
quasi-judicial or executive authority may rely on adverse statements
without affording effective cross-examination.
15.8 Denial of cross-examination renders reliance on such statements
illegal and the Order unsustainable.
15.9 The Order rests substantially on the retracted Section 132(4)
statement of Shri Anil Sanklecha, CA, recorded behind the Appellant’s
back, never furnished, with no cross-examination — contrary to
Andaman Timber Industries v. CCE6, Andaman Timber Industries v. CCE,
holding such denial “a serious flaw which makes the order a nullity.”
C. Case law cited on behalf of the appellant
16. Learned counsel for the appellant relied on plethora of judgments.
Some of the relevant ones are succinctly discussed and noted here in
after.
16.1 In the case of CIT v. SMC Share Brokers Ltd.7, the order of the
ITAT was confirmed by the High court and the Court held that in the
absence of cross examination of the witness, despite repeated requests
by the assessee, the statement of the witness cannot be utilized against
the assessee to arrive at an adverse conclusion against it.
16.2 In the case of Dhakeswari Cotton Mills Ltd. Vs. CIT 8 , the
following propositions were laid down in the matter of utilization of
adverse evidence and material collected against the assessee:
The Income Tax officer is not bound by the technical rules of evidence as
contained in the Indian Evidence Act. He can act on the material which may
not be considered as evidence under the Evidence Act.
Although his powers are wide, the Assessing Officer must act in
accordance with the principles of natural justice. This postulates that he
cannot lake use of the material or evidence unless tested in cross
examination.
Any conclusion which is based on surmise, suspicion and conjectures is not
outcome of a fair hearing.
Any estimate of gross profit without confronting the material to the
assessee is not proper.
6
(2015) 324 ELT 641 (SC)
7
(2007) 288 ITR 345 (DELHI) (Uploaded on 03/08/2026 at 04:57:43 PM)
8
(1954) 26 IT 775 (SC) (Downloaded on 03/08/2026 at 08:24:46 PM)
[2026:RJ-JP:35541-DB] (27 of 58) [CMA-1595/2026]16.3 In Sanjeev Kumar Hain9, the Assessing Officer made use of the
statements recorded from some witnesses without giving an opportunity
to the assessee to rebut the same. The court held that up to the stage
of recording the statements, there could be no infirmity. Illegality would
arise only after that when no opportunity was given to the assess to
cross examine the witnesses.
16.4 In CIT vs. Indrajit Singh Suri 10 , the Assessing Officer made
additions in the basis of the statements of some parties without giving
an opportunity to the assessee to cross examine them. The additions
were deleted.
16.5 In Strapted (India) P. Ltd. V. Dy. CIT 11 , while dealing with
penalty under section 271D, it was held that the statement of one
person cannot be utilized against another person unless the other
person is given an opportunity to cross examine the first person. In the
absence of cross examination, the evidence would remain untested and
would lose its evidentiary value. The penalty was deleted.
16.6 In V. Mahes Gulabrai Joshi V. CIT12, the sale of a diamond to
one “V” by the assessee was held to be bogus and the amounts
introduces in the books were added to the assessee’s income on the
basis of statement of “V”. the Tribunal held that although the burden of
proof lies on the assessee in such matters, but when the assessee
depended on the Assessing Officer for enforcing the attendance of “V”
for cross examination, any failure in this regard would vitiate the
assessment and the addition solely basing on the untested testimony of
“V” could not be sustained.
16.7 The statements of third parties recorded at the back of the
assessee has no evidentiary value unless the witness is cross examined
9
(2009) 310 ITR 178 (P&H)
10
(2013) 33 taxmann.com 284 (Guj.)
11
(2003) 84 ITD 320 (Mumbai) (Uploaded on 03/08/2026 at 04:57:43 PM)
12
(2005) 95 ITD 300 (Mumbai)(Downloaded on 03/08/2026 at 08:24:46 PM)
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as held in the case of Alok Agrawal V. DCIT 13 . In this case the
assessment was set aside to be reframed again.
16.8 Unilateral utilization of the contents of the statements of third
parties without affording opportunity to cross examine such person is
bad in law as held in the case of Hamish Engineering Industries P.
Ltd. V. DCIT14. In this case the matter was remanded.
16.9 Evidence tendered by the assessee, by way of production of
witness cannot be considered on merits by the CIT(A) without affording
necessary opportunity to the Assessing officer to cross examine the
witness. This was held in the case of CIT v. Subbu Shashank15.
16.10 In CIT Vs. Eastern Commercial Enterprise16, it was held that
the approach of the Assessing Officer was legally infirm as no
opportunity of cross- examination was given. The matter was remanded
to the Assessing Officer.
16.11 Reference is also placed on the following Judgements:
Amitabh Bansal vs. Income Tax Officer, Ward 46(4), New
Delhi 17.
Andaman Timber Industries vs. Commissioner of Central
Excise18.
H.R. Mehta vs. Assistant Commissioner of Income Tax19
Kalra Glue Factory vs Sales Tax Tribunal and Ors 198720
Marg Realities Ltd. v. Dy. CIT (Benami Prohibition)21
16.12 In light of the above it is thus, submitted by learned counsel
for the appellant that the statements recorded by another agency
i.e., Income Tax Department during some different proceedings
which were retracted by the concerned persons cannot be used out
13
(2006) 67 TTJ 109 (Delhi)
14
(2010) 120 ITD 166 (Mumbai)
15
(2010) 327 ITR 577 (Madras)
16
(1994) 210 ITR 103 (Cal)
17
175 ITD 401
18
2015 SCC OnLine SC 1051
19
(2016) 289 CTR 0561 (BOM)
20
167 ITR 498 SC (Uploaded on 03/08/2026 at 04:57:43 PM)
21
(2022) 448 ITR 649 (Mad.) (HC).
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of context and the IO has selectively relied upon for framing the
baseless and untrue charges. The same do not carry any credence
in legal proceedings and cannot be imported blindly and also the
statement being relied upon by the IO is also not forming part of the
RUD.
16.13 Learned counsel would strenuously argue that it is a settled rule
of evidence that unless a retracted confession is corroborated in
material particulars it is not prudent to base the decision on the
confessional statement alone, (A.I.R. 1953 SC 459).
V. CASE OF THE RESPONDENTS
A. Submissions/Arguments on behalf of the respondents
17. Based on the written submissions and per arguments of Mr.
K.K.Bissa, learned counsel representing respondent, the respondents’
case, briefly speaking, can be summed up under five discrete heads.
17.1 First, the limited scope of this appeal: Section 49 confines the
Court to substantial questions of law. Facts stand concurrently
examined by the Adjudicating Authority under Section 26(3) and by the
Tribunal; dissatisfaction with findings of fact does not render an order
perverse, and the appellant’s grounds, properly read, are said to be an
invitation to reappreciate evidence.
17.2 Second, beneficial ownership rests on control, not percentage.
The case was never one of arithmetical shareholding; it rests on
cumulative evidence of effective control, management, fund-routing and
ultimate beneficial interest since FY 2016-17. Shri Lunia’s directorship
from 06.01.2020 is characterised not as an afterthought but as the
securing of direct control, squarely within the statutory words
‘immediate or future benefit, direct or indirect’.
17.3 Third, the income-tax proceedings are independent. The
Assessing Officer examined only whether the investment was recorded
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in the books, which is why Section 69 was never attracted, and never
examined the source of the source or the question of beneficial
ownership. To treat income-tax findings as binding in benami
proceedings would render Section 67 of the PBPT Act nugatory; and
where two statutes carry non-obstante clauses, the later enactment
prevails (Bank of India v. Ketan Parekh).
17.4 Fourth, there is no absolute right of cross-examination. Cross-
examination is not an inbuilt facet of natural justice under the PBPT Act,
reliance is placed on Harivallabh Mohanlal Joshi v. Union of India22
and M/s Marg Realities Ltd. v. Dy. CIT (Benami Prohibition) 23 ,
and, in any event, the findings rest on documentary and financial
evidence, not on the statements alone.
17.5 Fifth, the retraction is belated and uncorroborated and cannot
displace a statement recorded on oath; and any mis-recording of
shareholding figures in the common order is a clerical error, not
touching the core findings, and rectifiable under Section 47.
B. Further Submissions of the Respondents
18. Shri Anil Sanklecha, CA, in his Section 132(4) statements on oath
dated 17-18.06.2022 (Q. Nos. 50 and 55), categorically admitted
receiving approximately Rs. 40-42 Crores in cash from Shri Mahaveer
Lunia through Angadia/Hawala operators in Mumbai, routed through the
appellant entities, and that his servant Shri Suresh Mukhia had been a
Director in those companies — a fact independently verified from
directorship records.
18.1 The assessment orders relied upon by the Appellants show the AO
examined only whether the ~Rs. 11 Crore property investments (F.Y.
2017-18) were recorded in the books. On ledgers, audited balance
sheets and banking-channel proof, the AO merely held Section 69
22
W.P.(C) 16633/2018, MADHYA(Uploaded
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23
448 ITR 574 (Mad) (Downloaded on 03/08/2026 at 08:24:46 PM)
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(unexplained investment) was not attracted since the investments were
reflected in the books.
18.2 The AO’s inquiry was thus confined to book entries — not the issue
in the benami proceedings. He neither examined the “source of source”
of funds nor rendered any finding on real beneficial ownership.
18.3 The proceedings were not founded merely on third-party
statements; the IO independently examined the entire material
gathered in the Section 132 search and under the PBPT Act.
18.4 The retraction plea is meritless — the Tribunal rightly held it was
made after considerable lapse of time and lacks credibility. In any event,
Shri Mahaveer Lunia is the promoter of the Maharani Group, and the
incriminating statements of Shri Sanklecha and others identify him as
the beneficial owner who conceived and executed the benami
arrangement.
18.5 The Appellants’ reliance on the AO’s acceptance of returned
income and book-recorded investments, with no adverse inference, is
misconceived and does not advance their case.
18.6 The ground ignores the material findings in the benami
proceedings. The companies justified acquisitions by funds in their
accounts but failed to explain the genuine source and genesis of such
funds, claiming repayment of earlier advances without any evidence of
when the advances were made, from what legitimate source, or on
what terms.
18.7 Absent supporting material, the “repayment of advances” was
rightly treated as a layering mechanism: the beneficial owner’s cash
projected as repayments through accommodation entities.
18.8 The AO’s acceptance of book-recorded investments does not touch
the crucial issues of source of source, routing of funds and beneficial
ownership, which were never adjudicated in assessment. Hence
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[2026:RJ-JP:35541-DB] (32 of 58) [CMA-1595/2026]assessment findings cannot dilute or override the independent findings
under the PBPT Act, 1988.
VI. DISCUSSION AND ANALYSIS
19. Having heard the competing arguments of learned counsel
appearing for the respective parties, gist of which has been noted
hereinabove and having perused the case file including grounds of
appeal/ submissions filed by the respondents as well as the counter
affidavit/submissions filed by the respondents, we shall now proceed to
render our opinion on the issues involved herein by recording our
reasons thereof, as per the discussion and analysis recorded
hereinabove.
A. Issues/ Questions involved
20. Two substantial questions of law arise for our consideration, which
are as below :-
a. Whether the non-indictment of an individual and or an entity
under section 69 of income tax act in respect of unexplained
income to purchase the same very immovable property, which is
also under the scanner of section 2(9) of the PBPT Act alleging it to
be benami property, shall operate as a legal bar to take any further
action under PBPT Act ?
b. Whether the statements of the witnesses recorded during a
search, and seizure raid committed by the revenue officials under
section 132 of Income Tax Act, 1961 can be used as the basis of
forming an opinion under section 2(9) of the PBPT act without
examining them in the PBPT proceedings and without affording a
right of cross examination to the affected party being prosecuted
under PBPT act ?
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[2026:RJ-JP:35541-DB] (33 of 58) [CMA-1595/2026]20.1 In the course of consideration of the aforesaid two substantial
questions, the following sub-questions also crystallise for determination.
Sub-questions (i), bear upon substantial question (a), while sub-
question (ii) and (iii) have a bearing upon substantial question (b):
(i) Whether a company which purchases property in its own name,
out of own corpus reflected in its books, can be held a benamidar
under Section 2(9)(A)?
(ii) Whether the Tribunal was obliged to reckon with the
subsequent assessment order dated 27.03.2026 for AY 2018-19,
accepting the source of the very investment and whether the
assessment order discloses an impermissible asymmetry in the use
of the income-tax record vis a vis PBPT record ?
and
(iii). Whether the impugned order records entity-specific and
property-wise findings qua the appellant’s 79 properties and Rs.
11.16 crore investment, or proceeds on collective figures and
generic reasoning, and if the latter, with what consequence. ?
B. The Statutory Framework:
Section 69 of the Income-tax Act and Section 2(9)(A) of the
PBPT Act.
21. Because so much of the argument turns on the coexistence of the
assessment order with the benami findings, the relationship between
the two provisions is required to be looked into.
“69. Unexplained investments:
Where in the financial year immediately preceding the assessment year the
assessee has made investments which are not recorded in the books of account,
if any, maintained by him for any source of income, and the assessee offers no
explanation about the nature and source of the investments or the explanation
offered by him is not, in the opinion of the [Assessing Officer], satisfactory, the
value of the investments may be deemed to be the income of the assessee of
such financial year.”
Section 69 of the Income-tax Act is thus a deeming charging
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recorded in the books. If the trigger fires and the assessee offers no
satisfactory explanation of the nature and source, the investment is
deemed income. If the investment is recorded and bank-routed, the
trigger never fires and the inquiry stops at the first layer of provenance.
Section 69 asks: is this investment explained income?
21.1 Section 2(9)(A) of the PBPT Act, by contrast, defines a benami
transaction and is concerned with real ownership, not taxability. It
requires two cumulative conditions: (a) that the consideration for the
property has been provided or paid by another person; and (b) that the
property is held for the immediate or future benefit, direct or indirect, of
that person. It asks: who is the real owner behind this name? Said sub
section for ready reference is reproduced as below :-
“(9) “benami transaction” means,–
(A) a transaction or an arrangement–
(a) where a property is transferred to, or is held by, a person, and the
consideration for such property has been provided, or paid by, another person;
and
(b) the property is held for the immediate or future benefit, direct or indirect, of
the person who has provided the consideration,
except when the property is held by–
(i) a Karta, or a member of a Hindu undivided family, as the case may be, and
the property is held for his benefit or benefit of other members in the family
and the consideration for such property has been provided or paid out of the
known sources of the Hindu undivided family;
(ii) a person standing in a fiduciary capacity for the benefit of another person
towards whom he stands in such capacity and includes a trustee, executor,
partner, director of a company, a depository or a participant as an agent of a
depository under the Depositories Act, 1996 (22 of 1996) and any other person
as may be notified by the Central Government for this purpose;
(iii) any person being an individual in the name of his spouse or in the name of
any child of such individual and the consideration for such property has been
provided or paid out of the known sources of the individual;
(iv) any person in the name of his brother or sister or lineal ascendant or
descendant, where the names of brother or sister or lineal ascendant or
descendant and the individual appear as jointowners in any document, and the
consideration for such property has been provided or paid out of the known
sources of the individual; or
-x-x-x-x-x-
21.2 A cumulative reading of above two sections of Income Tax Act and
the PBPT Act reveals that the decisive structural difference lies in the
burden architecture. Once triggered, Section 69 casts the burden on the
assessee to explain. Section 2(9)(A) places the initial burden on the
Initiating Officer to establish
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deeming fiction doing the work for him. A clearance under Section 69
therefore cannot mechanically become a benami clearance: the
assessee cleared Section 69 by discharging a burden that fell on him,
whereas under the PBPT Act the burden was never primarily his. By the
same token, however, the assessment order is a fact in the record
which the Initiating Officer must overcome, not a nullity he may ignore.
21.2 At this stage, section 24(1) of PBPT be seen, which is as below :-
Section 24(1) of PBPT Act:
“24. Notice and attachment of property involved in benami transaction.–
(1) Where the Initiating Officer, on the basis of material in his possession, has
reason to believe that any person is a benamidar in respect of a property, he may,
after recording reasons in writing, issue a notice to the person to show cause
within such time as may be specified in the notice why the property should not be
treated as benami property.”
Perusal of Section 24(1) reveals that it is, in fact, the jurisdictional
gateway of the PBPT Act, and its language carries three built-in
safeguards, each of which bears directly on where the burden lies i.e.
(a) : the belief must rest “on the basis of material in his possession,”
and; (b) : it must rise to “reason to believe” (not suspicion), and; (c) :
reasons must be recorded in writing before the notice is issued. Read
together, these make clear that the initial and continuing burden is on
the IO, not the noticee. The rule thus is that the burden of proving a
transaction to be benami lies squarely on the person who asserts it,
because the law presumes that the person in whose name property
stands is its real owner. “Reason to believe” would mean that the belief
must be that of an honest and reasonable person, based on relevant
and tangible material bearing a rational and live nexus to the formation
of the belief.
21.3 “Reason to believe” is a higher threshold than “reason to suspect”.
No doubt, the sufficiency of reasons may not be examined by a court, in
this case by us, but their existence and relevance certainly are open to
judicial review. Thus, an IO cannot
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vague information, or a bare recital of the statutory language; the
recorded reasons must themselves disclose the material and the nexus.
A show-cause notice is not an instrument of inquiry to find material, it
presupposes that the material already exists in the IO’s possession.
21.4. Per the stand taken by the Department, to argue that once notice
issued, it is for the noticee to demonstrate why the property is not
benami may appear convincing on first blush. But, that inverts the
statutory scheme. The Section 24 notice merely affords the noticee an
opportunity of rebuttal; the substantive burden of establishing both
limbs of Section 2(9)(A), that the consideration was provided or paid by
another person and that the property is held for the immediate or future
benefit of that person, remains on the IO through provisional
attachment under 24(4), the reference under 24(5), and its
adjudication under Section 26.
21.5. In fact, we are of the view that in proceedings under section 24
of the PBPT Act, 1988, the burden of proof operates as a shifting burden
rather than a fixed one. The Initiating Officer must first possess credible
and cogent material to justify issuance of the show-cause notice and
any order of provisional attachment. The statutory scheme does not
permit action on mere suspicion or mechanical application. Once such
material is disclosed and the notice is issued, the affected party,
typically the person in possession or the recorded owner, bears the
burden of rebutting the allegation by explaining the source of funds, the
nature of the transaction, and the bona fides of the ownership. If the
party furnishes a satisfactory explanation supported by documents, the
ultimate burden to establish that the transaction is benami shifts back
to the revenue/Initiating Officer, who must then prove the benami
character by evidence.
21.6. Once a party shows that the transaction was legitimately funded
and explains the arrangement, the burden
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prove benami, and in the absence of such proof, the attachment can not
be sustained. Really speaking, the IO has ample investigative power but
must still form a meaningful prima facie basis before proceeding under
section 24. The broader legal principle is that benami must be proved
by cogent evidence and not lightly presumed. 21.5. In the context of
burden of proof, reference may be had to Hon’ble Suprme Court in
Valliamal vs Subramaniam 24 relevant thereof is extracted here in
below :-
“13. This Court in a number of judgments has held that it is well established
that burden of proving that a particular sale is benami lies on the person who
alleges the transaction to be a benami. The essence of a benami transaction is
the intention of the party or parties concerned and often, such intention is
shrouded in a thick veil which cannot be easily pierced through. But such
difficulties do not relieve the person asserting the transaction to be benami of
any part of the serious onus that rests on him, nor justify the acceptance of mere
conjectures or surmises, as a substitute for proof. Refer to Jaydayal Poddar v.
Bibi Hazra, Krishnanand Agnihotri v. State of M.P.2, Thakur Bhim Singh v. Thakur
Kan Singh³, Pratap Singh v. Sarojini Devi and Heirs of Vrajlal J. Ganatra v. Heirs
of Parshottam S. Shah. It has been held in the judgments referred to above that the
question whether a particular sale is a benami or not, is largely one of fact, and
for determining the question no absolute formulas or acid test, uniformly
applicable in all situations can be laid. After saying so, this Court spelt out the
following six circumstances which can be taken as a guide to determine the nature
of the transaction:
“(1) the source from which the purchase money came;
(2) the nature and possession of the property, after the purchase;
(3) motive, if any, for giving the transaction a benami colour;(4) the
position of the parties and the relationship, if any, between the
claimant and the alleged benamidar;
(5) the custody of the title deeds after the sale; and
(6) the conduct of the parties concerned in dealing with the property
after the sale.” (Jaydayal Poddar v. Bibi Hazra, SCC p. 7, para 6)
14. The above indicia are not exhaustive and their efficacy varies according to the
facts of each case. Nevertheless, the source from where the purchase money came
and the motive why the property was purchased benami are by far the most
important tests for determining whether the sale standing in the name of one
person, is in reality for the benefit of another. We would examine the present
transaction on the touchstone of the above two indicia.”
(emphasis is ours)
21.6. Taking the debate further on the stand taken by the respondent
i.e. the ‘source of the source’ inquiry pressed by the Revenue to
ascertain if it is tainted. In principle, such recourse is, no doubt open to
it, but it is a licence to inquire, not a licence to presume. The authority
must prove that the source is tainted; it may not assume it. To reason
that ‘the company lacked creditworthiness, therefore the money must
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(2004) 7 SCC 233 (Downloaded on 03/08/2026 at 08:24:47 PM)
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have been the beneficiary’s cash’ is to reverse the statutory burden by
the back door. The existence of unaccounted cash somewhere in a
group is not proof that these properties were funded by that cash: a
business group may genuinely generate huge cash and, separately, a
company within it may genuinely hold pre-existing reserves and
redeploy repaid advances into property. Both can be true at once. In the
absence of a traced flow of the cash, the narrative assigned by the
respondent is more of a speculation and does not fall within the
meaning of “consideration” as envisaged within limb (a), as stated in
para 21.1 of the preceding para of his order.
21.7 There is also a temporal dimension. Section 2(9)(A)(a) asks who
‘has provided’ the consideration, in the past tense, anchored to the
acquisition. If the corpus that funded the purchases demonstrably
existed a decade before the alleged beneficial owner came near the
company, then prima facie the consideration was not provided by him;
control acquired after an asset was funded is not the same as having
provided the consideration for it. The respondents’ answer pushes the
inquiry back to the genesis of the 2006-10 capital itself, a far heavier
evidentiary undertaking, and one exposed to the objection that distinct
transactions across different years have been clubbed into a single
reference.
C. The Material Relied Upon by the Initiating Officer
22. Before we advert to address the questions, ibid, first and foremost,
it is pertinent to note that the triggering point for initiation of
proceedings under the PBPT Act was the search and raid conducted on
the promoter family group of the appellant on 16.06.2022. The said
search led to discovery of the list of the properties in questions along
with some of the sale deeds. The said information led to an enquiry
under the PBPT Act. The following material formed the basis of the
initiating officer declaring the property as Benami (duly noted in his
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order dated 07.08.2023), which in turn was also relied upon by the
adjudicating authority as well as the learned appellate Tribunal :-
“I. Income-tax Returns of M/s Alishan Complex Pvt. Ltd.
II. A detailed list of various immovable properties purchased in the name of M/s
Alishan Complex Pvt. Ltd. found & seized (Exhibit-6 of Annexure-BS) at the
residence premises of Sh. Mahveer Lunia i.e. Lalit Kunj, Opposite Hotel Mapple
Abhay, Paota, Jodhpur.
III. Statement of Shri Anil Sanklecha, CA dated 17.06.2022 & 18.06.2022
recorded during the course of search.
IV. Page No. 76 to 83 of exhibit B-9, i.e., a detailed list found during the course
of search in which cash transactions made between Shri Anil Sanklecha and Shri
Mahaveer Lunia are recorded.
V. Bank Book/Ledger book of the company for the period of 01.04.2012 to
31.03.2022.
VI. Documents available on the database of Ministry of Corporate Affairs.
VII. Statements of Shri Praveen Agarwal recorded under section 132(4) of the
Income Tax Act, 1961 dated 10/11.02.2015, 15.02.2014 & 18.11.2014.
VIII. Statements of Shri Pramod Ramdeen recorded under section 132(4) of the
Income Tax Act, 1961 dated 10.11.2012.
IX. Statement of Sh. Rakesh Kumar Agarwal recorded u/s 131 of the 1.T.Act,
1961 on 21.11.2014 by the Investigation wing of Kolkata.”
22.1 From perusal of the above, it is borne out that except at serial
number VI, (Documents from database of MCA viz. ROC returns etc.)
rest of the material is nothing but what was provided by the income tax
officials during the raid carried out by them under section 132 of the
income tax act. Thus, predominantly it’s the same material being relied
upon by income tax authorities, and parallel by the initiating officer
under the PBPT act who is also an income tax official under the income
tax act and is simultaneously exercising ex officio powers as initiating
officer under the PPT act.
D. The Assessment Order dated 27.03.2026
23. During the pendency of the proceedings under the PBPT Act, an
assessment order dated 27.03.2026 (Annexure 20) came to be
passed.Perusal thereof shows that it is based upon detailed examination
of the entire material. The Assessing Officer found that the earlier
suspicion formed pursuant to the raid conducted under Section 132 of
the Income Tax Act was misplaced. Resultantly, the appellant was given
a clean chit qua the tax liability
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of cash transactions and/or the material seized during the raid,
including the very property documents that are the bone of contention
in the present proceedings under the guise of being “benami”. No doubt,
other material was also taken into consideration by the Initiating Officer,
but perusal of the order passed by the Initiating Officer, followed by the
adjudicating authority and the learned Appellate Tribunal, reveals that
predominantly it is the same material relied upon under the PBPT Act
which was the very basis of the assessment proceedings resulting from
the raid under Section 132 of the Income-Tax Act.
23.1 Though, of course, the Income-Tax Act and the PBPT Act operate in
different domains, the material relied upon being the same, the
evidentiary value of that material in both proceedings has a bearing on
each other.
23.2 In the course of hearing, on a query put by the Court to the
learned counsel for the respective parties as to whether the assessment
order was ever placed on record before the competent authority under
the PBPT Act or the Appellate Tribunal, it transpired that although a
request had been made to keep the proceedings in abeyance pending
the outcome of the assessment, no such course was adopted, and the
proceedings before the Initiating Officer as well as the Adjudicating
Authority continued regardless. Learned counsel for the appellant
further submitted that the assessment order was in fact passed after
the judgment was reserved by the learned Appellate Tribunal, and
hence the Tribunal too had no occasion to take it into consideration.
Having examined the contents of the show cause notice issued by the
Initiating Officer as well as the orders passed by the Adjudicating
Authority, followed by the appellate order of the learned Tribunal, as
reproduced hereinabove in paras 8 to 10, especially the heavy reliance
placed on the statement of the witness (the Chartered Accountant)
recorded during the raid qua alleged cash receipts, a statement that
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was subsequently retracted, and in respect of which the appellant’s
request for cross-examination was given short shrift, it does appear
that the appellant has been denied a fair opportunity to defend itself,
apart from resulting in an impermissible shifting of the onus from the
Initiating Officer under the PBPT Act on to the appellant.
23.3 From the importance given to the statement of the CA, it appears
to be rather foundational, and not merely corroborative. The alleged
benami character of the transactions rests on one factual premise, that
unaccounted cash of the Lunia family was routed into these companies,
and Sanklecha’s Section 132(4) statement (Q. 50 and 55) is the only
direct evidence of that premise anywhere in the record. Everything else
the IO and Tribunal invoke, shareholding pattern, family control, the
property list found in the search, the “shell company” characterisation,
is circumstantial, and each of those circumstances is equally consistent
with lawful corporate ownership unless the cash story is given
overriding acceptance. That’s why the Tribunal’s own reasoning at paras
25, 26 and 34 keeps circling back to the statement and to defending its
use. The Tribunal’s assertion at para 26 of its order that the IO “has not
relied only on the statements” is the respondents’ best answer, but the
test is severability: strike the statement out mentally and ask whether
the remaining material can independently sustain a finding that
consideration was provided by another person under s. 2(9)(A). On this
record, no banking trail, cash deposit, or financial instrument linking
Lunia money to the 79 purchases has been identified, so the structure
seems to stand or fall with the statement.
23.4 Adverting now to consequence of denying opportunity of cross-
examination. The settled position, Andaman Timber Industries being the
sharpest expression, is that where statements form the basis of the
order, denial of cross-examination despite request is a serious violation
of natural justice that vitiates the order itself; it is not a curable
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irregularity. The consequence is therefore conditional: if the statement
is foundational (as above), the denial goes to the root; if genuinely
independent material sustains the finding, the denial may be treated as
non-prejudicial. Three features aggravate the position here. First, the
witness was never summoned or examined in the benami proceedings
at all, the material is wholly borrowed from another statute’s proceeding
and was never tested in this one. Second, the statement stands
retracted within days, and the diminished evidentiary value requires
corroboration of a retracted statement before acting on it, corroboration
which is precisely what cross-examination might have tested and what
the record allegedly lacks. Third, the Tribunal’s answer that cross-
examination is “not inbuilt” under the 1988 Act sits uneasily with the
penal consequences the Act carries (attachment, confiscation,
prosecution), which ordinarily attract full natural-justice protections
regardless of whether the statute spells them out.
E. The Legal Position on Untested and Retracted Statements
24. The legal position on the use of untested and retracted statements,
as canvassed at the Bar, may now be noticed. Conceded position is that
there has been a denial of opportunity to summon and cross-examine
the witness whose statement under Section 132 of the Income-tax Act,
1961 forms the foundation of proceedings under the Prohibition of
Benami Property Transactions Act, 1988 (“PBPT Act”). The entire edifice
of the proceedings initiated by the Ld. Initiating Officer (“IO”) rests
upon the statement of one witness recorded under Section 132(4) of
the Income-tax Act, 1961. The said statement has since been
unequivocally retracted by its maker. Despite a specific and reasoned
request by the Respondent, the IO has neither summoned the witness
nor afforded any opportunity to examine or cross-examine him.
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PROPOSITION 1:
25. Where the statement of a witness forms the basis of the order,
denial of cross-examination despite request renders the order a nullity
25.1 Andaman Timber Industries v. Commissioner of Central
Excise, Kolkata-II25, — The Hon’ble Supreme Court held that where
the statements of witnesses were made the basis of the impugned order,
not allowing the assessee to cross-examine those witnesses, despite a
specific request, is a serious flaw which makes the order a nullity,
inasmuch as it amounts to violation of the principles of natural justice.
The Court further held that it was not open to the adjudicating authority
to unilaterally conclude that cross-examination was unnecessary; if the
testimony was to be relied upon, the opportunity had to be given, and if
the authority disputed the need for cross-examination, it ought not to
have relied upon the statements at all.
25.2 The present case falls squarely within Andaman Timber. The
Section 132 statement is not corroborative surplusage; it is the very
substratum of the “reason to believe” recorded under Section 24(1) of
the PBPT Act and of the reference made to the Ld. Adjudicating
Authority. Remove the statement, and the proceedings have no legs to
stand on.
25.3 State of Kerala v. K.T. Shaduli Grocery Dealer 26 — In the
context of sales tax assessment, the Hon’ble Supreme Court held that
where the assessing authority relied upon the books and accounts of
third parties to reject the assessee’s returns, the right to be heard
included the right to cross-examine those third parties, and denial
thereof vitiated the assessment.
25.4 Lakshman Exports Ltd. v. Collector of Central Excise27– The
Hon’ble Supreme Court held that where the assessee had specifically
asked for cross-examination of the persons whose statements were
25
(2016) 15 SCC 785 : (2015) 324 ELT 641 (SC)
26
(1977) 2 SCC 777 (Uploaded on 03/08/2026 at 04:57:43 PM)
27
(2005) 10 SCC 634 (Downloaded on 03/08/2026 at 08:24:47 PM)
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relied upon, that request could not be brushed aside, and the matter
was remanded for the purpose of allowing cross-examination.
25.5 Kishinchand Chellaram v. CIT 28 — Even in income-tax
proceedings, where strict rules of evidence do not apply, the Hon’ble
Supreme Court held that evidence gathered behind the back of the
assessee (a letter from a bank manager) could not be used against the
assessee without giving the assessee an opportunity to controvert it and
to cross-examine its author. The statement in the present case,
recorded behind the back of the Respondent, stands on an identical
footing.
25.6 Mehta Parikh & Co. v. CIT 29 — Where the deponents of
affidavits were neither called for examination nor cross-examined, the
Revenue could not thereafter challenge the correctness of their
statements. The converse equally applies: the Revenue cannot rely on
an untested statement while shutting out the very process by which its
probative value could be assessed.
PROPOSITION 2:
26. A deposition acquires probative value only when tested by cross-
examination.
26.1 M/s Telestar Travels Pvt. Ltd. v. Special Director of
Enforcement 30 — Even this decision, ordinarily cited against cross-
examination, expressly holds that it is only when a deposition “goes
through the fire of cross-examination” that a court or statutory
authority is able to determine and assess its probative value; that using
an untested deposition may amount to using evidence which the party
has had no opportunity to question; and that such refusal may amount
to violation of the rule of fair hearing. The Supreme Court sustained the
denial in that case only because the statements were merely
28
(1980) 125 ITR 713 (SC)
29
(1956) 30 ITR 181 (SC) (Uploaded on 03/08/2026 at 04:57:43 PM)
30
(2013) 9 SCC 549, para 25 (Downloaded on 03/08/2026 at 08:24:47 PM)
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corroborative of undisputed documents seized from the appellants’ own
premises, which were disclosed and never disputed, and hence no
prejudice arose (para 28).
26.2 The distinction is decisive. In Telestar, the documentary evidence
was primary and undisputed; the statements were peripheral. Here, (i)
the statement is foundational, and (ii) far from being undisputed, it
has been retracted by its own maker. Both conditions on which
Telestar excused cross-examination are absent. Telestar, properly read,
therefore supports the Respondent.
26.3 For the same reason, Vallabh Textiles v. Additional
Commissioner, Central Tax GST, Delhi East31and K.L. Tripathi v.
State Bank of India32 are distinguishable: those were cases where the
statements merely corroborated undisputed documentary evidence
(kaccha ledgers seized in search), and the request was a blanket one.
Indeed, para 19 of Vallabh Textiles itself lays down that where a
specific, reasoned request is made in respect of a specific witness,
the Authority “has to consider the same fairly and if the need is so felt
in respect of a particular person, the same ought to be permitted”, and
if refused, reasons must be recorded. The Respondent’s request here is
precisely such a specific, reasoned request directed at the sole material
witness, whose credibility stands demolished by his own retraction. No
reasons worth the name have been recorded for its refusal.
PROPOSITION 3:
27. A retracted statement cannot be the foundation of an adverse
finding without independent corroboration and without being tested
27.1 Vinod Solanki v. Union of India33– The Hon’ble Supreme Court
held that a retracted confession may be acted upon only if it is
corroborated by independent and cogent evidence, and that the burden
31
2025:DHC:2559-DB (Delhi HC, 09.04.2025)
32
(1984) 1 SCC 43 (Uploaded on 03/08/2026 at 04:57:43 PM)
33
(2008) 16 SCC 537 (Downloaded on 03/08/2026 at 08:24:47 PM)
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lies on the prosecution/department to show that the confession was
voluntary. The court must bear in mind the attending circumstances
including the time of retraction, the nature thereof, and the manner in
which the initial statement was recorded.
27.2 K.T.M.S. Mohd. v. Union of India 34 — Statements recorded
under compulsion of statutory provisions, once retracted, require the
authority to examine voluntariness and truthfulness before any reliance
is placed thereon.
27.3 Pullangode Rubber Produce Co. Ltd. v. State of Kerala35– An
admission is an important piece of evidence but is not conclusive; it is
open to the maker to show that it is incorrect. A fortiori, where the
maker has himself retracted, the affected third party against whom the
statement is deployed must have the opportunity to demonstrate its
falsity, which is possible only through cross-examination.
27.4 The CBDT has itself, by Instruction F. No. 286/2/2003-IT (Inv. II)
dated 10.03.2003 and Circular/letter dated 18.12.2014, deprecated
reliance on confessional statements recorded during search which are
not supported by credible evidence. The departmental policy itself
recognizes the frailty of the very species of evidence upon which the
entire proceeding here has been erected.
PROPOSITION 4:
28. The PBPT Act statutorily arms the authorities with the power to
summon and examine witnesses , refusal to exercise it, despite request,
is an abdication of statutory duty
28.1 Section 19(1)(b) of the PBPT Act confers upon the authorities the
powers of a civil court under the Code of Civil Procedure, 1908, in
respect of summoning and enforcing the attendance of any person and
examining him on oath. Section 26(3) obliges the Adjudicating Authority
34
(1992) 3 SCC 178 (Uploaded on 03/08/2026 at 04:57:43 PM)
35
(1973) 91 ITR 18 (SC) (Downloaded on 03/08/2026 at 08:24:47 PM)
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to provide the parties an opportunity of being heard and to consider all
relevant materials before passing an order.
28.2 Where a specific request is made to summon the sole material
witness, whose statement is both foundational and retracted, the
refusal to exercise the statutory power under Section 19 is not a matter
of discretion but a refusal to perform a duty cast by the statute in aid of
natural justice. The standard of proof for establishing a benami
transaction is settled to be strict, the burden resting on the party
alleging benami: Jaydayal Poddar v. Bibi Hazra36; reiterated in the
PBPT context by various Tribunals and High Courts. That strict burden
cannot be discharged by an untested, retracted statement.
28.3 The gravity of consequences under the PBPT Act, attachment and
confiscation of property under Section 27 and prosecution under Section
53, attracts a correspondingly higher content of natural justice. The
more drastic the civil consequence, the fuller the hearing that must
precede it: Swadeshi Cotton Mills v. Union of India37.
PROPOSITION 5:
28.4. There is yet another dimension in the matter i.e. in those cases
where jurisdiction of civil courts is barred and the adjudicatory process
is as per the special statute, which is a self-contained code, it becomes
all the more imperative to accord legitimate right in a given case for
cross examining the witness, whose statement, particularly a retracted
one, is being relied upon, as well as observe other principles of natural
justice. In the case in hand, the PBPT Act is a special statute and
creates a self-contained adjudicatory mechanism (Initiating Officer →
Adjudicating Authority → Appellate Tribunal, with limited judicial review
under writ jurisdiction) and simultaneously bars civil court jurisdiction,
the constitutional and jurisprudential imperative to afford principles of
natural justice, including the right to cross-examine witnesses whose
36
(1974) 1 SCC 3 (Uploaded on 03/08/2026 at 04:57:43 PM)
37
(1981) 1 SCC 664 (Downloaded on 03/08/2026 at 08:24:47 PM)
[2026:RJ-JP:35541-DB] (48 of 58) [CMA-1595/2026]statements are relied upon, becomes even more compelling. The
affected party is since deprived of the ordinary civil trial safeguards (full
discovery, evidence testing, witness examination under the
CPC/Evidence Act). In such a scenario, the quasi-judicial forum under
the special statute must internalise those safeguards to satisfy Article
14 and Article 21 of the Constitution.
28.5. If we examine the statutory scheme under PBPT Act, it is borne
out that Section 24 is a preliminary/investigatory stage i.e. the IO
records “reasons to believe” and may provisionally attach property. At
this stage cross-examination is not mandatory, as the IO only forms a
prima facie opinion. Whereas, Section 26 is the adjudicatory stage i.e.
the Adjudicating Authority conducts a hearing, considers evidence, and
decides whether the property is benami. Here, the principles of natural
justice apply in full force, including the right to cross-examine witnesses
whose statements are relied upon for the adverse finding, given that
there is no provision under the PBPT Act to provide an opportunity to
the appellant to cross examine the witnesses at the preliminary stage
under section 24. Section 26(3) requires the Adjudicating Authority to
give the affected person a reasonable opportunity of being heard before
passing an order of confiscation. While the PBPT Act does not explicitly
mention “cross-examination,” the right to a fair hearing under Section
26(3) necessarily includes the right to test adverse evidence, especially
when the order relies on third-party statements (in present case
recorded under Section 131/32 of the Income-tax Act during
search/survey). Thus, denial of cross-examination at the Section 26
stage, where the Authority decides rights, appears to be a fatal flaw in
present case in light of the retraction of the confessional statement
made before third party by the witness.
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SUMMATION
29. The tests laid down by the line of authority relied upon by the
Department, Telestar Travels, K.L. Tripathi, and Vallabh Textiles, are
conditional: cross-examination may be declined only where (i) the
statement is merely corroborative of independent, undisputed material,
and (ii) no prejudice is demonstrated.
29.1 In the present case: (a) the Section 132 statement is the sole
foundation of the proceedings, not corroboration; (b) the statement
stands retracted by its maker, destroying any claim that the material is
“undisputed”; (c) the Respondent made a specific, reasoned request for
summoning and cross-examination of a specific witness, satisfying even
the standard in para 19 of Vallabh Textiles; (d) prejudice is manifest: a
confiscatory finding is sought to be rested on evidence the Respondent
has had no opportunity to test, and which its own maker disowns; (e)
the statutory power to summon under Section 19 PBPT Act was
available and was not exercised, without recording any tenable reasons.
29.2 The cumulative position is thus: an untested statement is weak
evidence; a retracted statement is weaker still; an untested and
retracted statement, standing alone, is no evidence at all in the eyes of
law for sustaining a finding as grave as that of a benami transaction,
which carries confiscatory and penal consequences.
29.3 Consequently, the reliance upon the said statement without cross-
examination vitiates the proceedings, and the impugned order passed
by Adjudicating Authority deserves to be set aside and the third party
statement of the witness namely Sh. Anil Sanklecha deserves to be
eschewed from consideration, without affording the Appellant an
opportunity of cross-examination.
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F. Overlapping and Contradictory Findings :
By the Initiating Officer (BPU) and the Assessing Officer
(Income Tax)
30. A comparison of the overlapping findings returned by the
Initiating Officer (BPU) and the Assessing Officer under the Income Tax
Act reveals that both of them have relied upon same material and same
set of facts.
The apparent contradictions :
30.1 It so appears that the Initiating Officer, BPU/ Respondent passed
the order in a rather hurried manner. Whereas the Assessing Officer
under the Income Tax Act, 1961 who has a primary jurisdiction to verify
the genuineness and source of transaction of acquisition of properties
made detailed examination during assessment proceedings found that
the sources are genuine. The Assessment Order dated 27.03.2026
passed by the Assessing Officer Assessment Order, which has been
passed on the basis of the very same material and financial records
already forming part of the record before both the Respondent
authorities and the Income Tax Department. The said Assessment Order
has substantial relevance in the present proceedings, in as much as it
contains specific findings regarding the genuineness of the transactions,
source of funds, and banking trail pertaining to the acquisition of the
subject properties. Accordingly, we feel that the matter warrants fresh
consideration by the Ld. Initiating Officer/Respondent in light of the
aforesaid subsequent findings recorded by the competent Income Tax
Authority on the same set of facts and material.
30.2 Pertinently, the Initiating Officer, BPU / Respondent does not hold
primary jurisdiction to hold findings with regards of sources and
genuineness of acquisition of subject properties. Therefore, he cannot
blindly disregard and contradict the order of the primary jurisdictional
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authority i.e. Assessing Officer nor can he ignore the Assessment Order
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[2026:RJ-JP:35541-DB] (51 of 58) [CMA-1595/2026]for AY 2018-19 dated 27.03.2026 as well as entire material in his
possession including factual and legal pleadings as maybe raised during
the proceedings in the light of findings recorded by the Income Tax
Department.
30.3 As regards the invocation of Section 67 and of the non-obstante
principle, while correct so far as it goes, answers a question the
appellant is not asking. The appellant does not contend that the
Income-tax Act overrides the PBPT Act; it advances an evidentiary-
consistency argument, that the same Department, on the same
material, ought not to reach opposite factual conclusions unless the
difference is explained by the different statutory question each authority
was answering. Non-obstante priority resolves a conflict of legal
operation; it does not resolve factual incoherence. The respondents’
stronger answer is the different-question point: the Assessing Officer
examined recording in the books; the Initiating Officer examined the
genesis of the recorded source, and if that distinction holds on the
record, both findings can stand without embarrassment.
30.4 Prima facie, from the perusal of the entire Attachment Order u/s
24(4)(a)(i) dated 28.07.2023 (Annexure-3), no independent material
has been brought on record to establish the essential ingredients of a
benami transaction, namely the source of consideration, beneficial
ownership, or existence of any real beneficiary behind the subject
properties. That the mandatory twin conditions stipulated under section
2(9)(A) of PBPT Act, 1988 has not been shown to be fulfil at all in the
present proceedings.
30.5 We are thus of the view that it would not be legally permissible for
the Respondents to adopt a contrary position based on the same facts
and premises of the case, unless the same is corroborated and
supplemented with concrete objective facts.
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G. The Cumulative Infirmities
31. On a cumulative reading of Show cause notice dated 28.04.2023,
order dated 28.07.2023 passed Initiating Officer, order dated
30.08.2024 passed by Adjudicating Authority and order dated
01.04.2026 passed by Appellate Tribunal, in light of the subsequent
assessment order dated 27.03.2026, three infirmities emerge which, in
our considered opinion, go to the root of the fact, finding exercise
undertaken by the Initiating Officer and affirmed by the Adjudicating
Authority and the Tribunal, and which warrant interference.
31.1 First, the finding that the consideration for the properties was
“routed through Sh. Anil Sankhlecha, CA”, which forms the very
foundation of parameters (i), (iii) and, indirectly, (v) of the six-fold test
laid down in Valliammal v. Subramaniam 38 , as applied by the
Adjudicating Authority at para 5.7 of its order (para 9.2 above), and
again relied upon by the Tribunal at para 42 of its order (para 10 above),
rests substantially on the statement of Sh. Anil Sanklecha recorded
during the search on 17/18.06.2022 (Item III, para 3 above). It is not
in dispute that this statement was subsequently retracted, and that the
appellant’s request to cross-examine Sh. Sanklecha was declined at the
stage of adjudication. It is well settled that where an adverse finding is
founded substantially on the statement of a witness, the denial of an
opportunity to cross-examine that witness, more so where the
statement stands retracted, constitutes a serious infirmity going to the
root of the matter and renders the resultant finding vulnerable, being in
breach of the principles of natural justice. (See M/s Andaman Timber
Industries v. Commissioner of Central Excise, Kolkata-II 39 ,
Supreme Court of India, decided on 02.09.2015, where it was held that
failure to allow cross-examination of witnesses whose statements are
relied upon to pass an adverse order is a serious flaw rendering the
38
(2004) 7 SCC 233 : AIR 2004 SC 4187 (Supreme
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39
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order a nullity). Evidence relied upon to the extent of documentary may
not require cross but oral statements which seems to have weighted on
the mind of Appellate Authority and Appellate Tribunal. This infirmity
has not been cured at any stage, neither before the Adjudicating
Authority nor before the Tribunal, and, in our view, cannot be cured for
the first time before this Court either, since it necessarily requires a
fresh exercise of fact-finding at first instance.
31.2 Second, the assessment order dated 27.03.2026, even though it
does not by itself conclude the question of benami ownership, a
question which, as the Tribunal correctly observed at para 40 (para 7
above), is not automatically resolved either way by the fate of income,
tax proceedings, nevertheless examines, on the very same set of facts
and seized material, the identical investment of Rs. 11,16,06,000/- in
immovable property, the identical reduction in loans and advances
treated by the Tribunal at para 42 as a device for infusing unaccounted
cash, and the identical bank transactions, and records a specific,
reasoned finding that all of these stand duly reconciled with the books
of account and bank statements and are not unexplained. This is
precisely the factual premise, unexplained source of funds routed as
repayment of advances, on which para 42 of the Tribunal’s order
proceeds. Since this assessment order was neither placed before the
Adjudicating Authority nor before the Tribunal, its bearing on the finding
of benami transaction has never been examined by any authority under
the PBPT Act. Being a subsequent development going to the very
foundation of the finding under challenge, it is a matter that must be
considered in the first instance by the fact-finding authority, namely the
Initiating Officer, and not for the first time in appeal or in these
proceedings.
31.3 Third, the appellant’s specific defence, i.e., that its reserves, as
reflected in the financial statements for financial years 2006-07 to
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2021-22 , remained materially static at approximately Rs. 8.89 to 9.05
crore throughout this period, including in the years preceding the Lunia
family’s acquisition of shareholding control in FY 2016-17, and that the
properties were purchased in FY 2017-18 out of the company’s own
capital, reserves and recycled loans and advances, has not been
specifically dealt with at any stage. The Adjudicating Authority’s finding
that D-1 to D-3 “did not have creditworthiness or wherewithal” (para
5.6) and the Tribunal’s finding that the appellant “could not support the
source of funds” (para 42) do not engage with this specific chronological
point: namely, that the bulk of the reserves said to fund the purchase
had already existed for roughly a decade before Sh. Mahaveer Lunia’s
family had any shareholding interest in the company at all. Under
Section 24 of the PBPT Act, it is for the Initiating Officer to record
“reasons to believe” on credible material, and once the noticee
furnishes a specific, document-backed explanation of source, that
explanation must be specifically examined and either accepted or
rejected with reasons, it cannot simply be treated as discharged by
requiring the noticee to additionally establish the ultimate origin, years
earlier, of monies since repaid and reflected in audited accounts
accepted year after year by the Registrar of Companies and the Income
Tax Department (para 5, points 3 and 22 above).
VII FINDINGS
32. To sum up, the cumulative discussion leads us to the following
findings :
(i) There is no absolute immunity to a company from being
a benamidar merely because it is a corporate entity, provided,
the relevant conditions under the PBPT Act read with
parameters laid down in Valliamal (supra) are met;
(ii) In the case in hand, the finding of benami transaction
rests substantially(Uploaded
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which was retracted and never subjected to cross-examination
despite request. It is held to be in breach of the principles of
natural justice;
(iii) The assessment order dated 27.03.2026, which
examines and accepts as explained, the very investment and
fund-flow has been treated as unexplained under the impugned
orders, though it was never placed before or considered by any
authority under the PBPT Act, but it requires to be taken into
account, whatever be its evidentiary worth found to be once it is
gone into.
(iv) The appellant-company’s specific, document-backed
explanation regarding the exact year/month and source of its
reserves (predating the change in shareholding by nearly a
decade) has not been specifically examined and dealt with by
reasoned findings at any stage.
VIII. ANSWERS TO THE QUESTIONS OF LAW
33. In light of the above findings in preceding para, the sub-questions
of law i.e. (i) and (ii) are answered in the negative but the question no.
(iii) is answered in affirmative.
33.1 Adverting now to the substantial question of law, as an upshot of
the foregoing discussion and analysis of the position of law, we hold
that the PBPT Act operates independently of the outcome under the
Income-tax Act, the two enactments occupying distinct domains. The
“source of the source” is examinable in benami proceedings, and a
clearance under Section 69 of the Income-tax Act does not, of itself,
foreclose a finding of benami. At the same time, findings returned under
Section 69, though not conclusive, carry evidentiary value in
proceedings under the PBPT Act and are required to be considered.
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33.2 Proceedings under the PBPT Act are not per se barred merely
because no addition was made under Section 69, since the two
enactments operate in distinct though overlapping spheres. However,
findings of the adjudicating authority resting foundationally on a
confessional statement of a witness, later retracted, and made in third-
party proceedings, without affording an opportunity of cross-
examination in the PBPT proceedings, do not advance the case of the
revenue. The substantial questions of law are answered accordingly: i.e.
answer to the question (a) is in the affirmative and question (b) is in
the negative.
IX. CONCLUSION / ORDER
34. As an upshot, we are of the view that the proper course is to
remand the matter to the Initiating Officer, the authority statutorily
entrusted the functions under Section 24 of the PBPT Act for recording
the “reasons to believe” and conducting the necessary inquiry in the
first instance, for a fresh and reasoned determination in accordance
with law.
35. In view of the foregoing, we pass the following order:
(a) The order dated 01.04.2026 passed by the learned Appellate
Tribunal under Section 46 of the PBPT Act, 1988, and the order
dated 30.08.2024 passed by the Adjudicating Authority and
consequently the final attachment order dated 28.07.2023 are set
aside with a direction to the Initiating officer (IO) to proceed
afresh .
(b) The matter is thus remanded to the Initiating officer (BPU) at
the stage of passing of provisional attachment order dated
01.05.2023 under section 24(3) of the PBPT Act.
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(c) The IO shall proceed further to either continue or revoke the
provisional attachment under section 24(4)/(5) of the PBPT Act in
accordance with law.
(d) The IO, before passing a fresh order shall:
(i) take the assessment order dated 27.03.2026 on record
and specifically deal with its bearing, if any, on the question
of benami transaction;
(ii) specifically consider and record reasons on the
appellant-company’s explanation regarding the source and
vintage of its reserves and the recycling of loans and
advances;
and
(iii) afford a reasonable opportunity of hearing to the
appellant-company before passing a fresh, reasoned order
under Section 24(4)/(5) of the PBPT Act.
(e) The fresh order shall be passed as per the statutory period
provided under section 24 of the PBPT Act with effect from the
date instant order is uploaded on the website of this court.
(f) All contentions of both parties are kept open and nothing
stated in the orders now set aside, shall be treated as an
expression of opinion on the merits of determination to be made
by IO, by passing proposed fresh order, either way.
(g) Should the IO, after reconsideration, pass a fresh order under
section 24(5) of the PBPT Act and refer the matter to the
adjudicating authority, in that event, the adjudicating authority
shall afford the appellant-company an opportunity to cross-
examine Sh. Anil Sanklecha, CA, if the respondent wishes to rely
upon his statement made in third party proceedings under the
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Income Tax Act, 1961, provided the appellant-company also
wishes to rely on the retraction of his statement;
(h) The instant appeal stands disposed of in the above terms.
Any pending application also stands disposed of. No order as to
costs.
36. In the parting, it is made clear that, pending passing of the fresh
order, either way by the IO, the provisional attachment of the properties
shall continue to operate, in order to protect the interest of the Revenue,
but this is without expressing any final opinion on the merits of the
controversy i.e. whether the properties are benami or not, which
decision is kept open for determination in accordance with law.
(SANDEEP SHAH),J (ARUN MONGA),J
117/Bjsh
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