A transaction can’t be treated as Benami if alleged beneficial owner is actually the joint owner of property: ITAT

Case Details: ACIT v. Tupelo Builders (P.) Ltd. [2022] 145 taxmann.com 270 (Delhi-Trib.)

Judiciary and Counsel Details

• • G.S. Pannu, President & Challa Nagendra Prasad, Judicial Member
  • Ajay Wadhwa, Adv. for the Appellant.
  • Vivek Verma, CIT DR for the Respondent.

Facts of the Case

Assessee-company filed original return of income declaring loss. The Assessing Officer (AO) noted that the assessee along with one ‘R’ purchased a property in New Delhi. The assessee was holding 95% stage whereas ‘R’ had 5% stake.

Based on some reports in the newspaper, AO held that an arrangement of purchase of property in the name of the assessee was made by ‘R’ by paying the entire consideration provided by ‘R’. He held that the assessee was only for the namesake and ‘R’ takes all the decisions relating to the property.

AO examined the purchase of property in the light of the provisions of prohibition of the Benami Property Transaction Act, 1988, and held that ‘R’ was de-facto the owner of the property.

On appeal, the CIT(A) reversed the order of AO. Aggreived-AO filed the instant appeal before the Tribunal.

ITAT Held

The Delhi Tribunal held that AO relied on news clippings to state that ‘R’ purchased property. However, the purchase of property by ‘R’ is not inaccurate, as he is one of the joint owners of the property as per the registered sale deed. This fact was disclosed by the assessee itself in its books of accounts.

Further, AO had also reiterated the source of the purchase consideration, which was already disclosed in the books of accounts of the assessee. Property to be classified as Benami, the first premise is payments of purchase consideration by a person other than the person in whose name the property is held. In the assessee’s case, AO’s allegation is part of purchase consideration was indirectly paid by ‘R’, who is indeed the joint owner of the property. Thus, the first basic premise clearly fails.

The second premise to classify a transaction as Benami is the non-disclosure of facts or source of consideration or creation of fictitious ownership which shows the real transaction to be different from the apparent transaction. The relationship of ‘R’ was also disclosed in the documents and books of account. There were no undisclosed transactions, facts, or involvement of any party apart from the parties to the transaction. Hence, the second basic premise also fails.