FINAL ORDER

26.04.2024

1. The appeal has been preferred under section 46 of Prohibition of Benami Property Transaction Act, 1988 (in short, the “Act of 1988”)

against the order 28.2.2019 passed by the Adjudicating Authority.

2. By the impugned order, the Adjudicating Authority refused to confirm the attachment of the properties of the non appellants and accordingly rejected the reference. The appeal has been filed by the Department.

3. The learned counsel for the appellant submitted that M/s Danodia Investments and Finance Limited was a Company incorporated on 26.09.1994, having its registered office at Shahadra, New Delhi. The Company was subsequently transferred to Kolkata with registered office at Chowringhee Road, Kolkata.

4. The appellant received reference letter dated 07.08.2017 from the Deputy Director, Income Tax (Investigation), Kolkata along with the details of the properties of Square Four Group and the source of the investment. The reference letter was sent after a search and seizure operation conducted on 03.02.2017 under section 132 of Income Tax Act, 1961. It was noted that M/s Danodia Investments and Finance Limited has raised capital through certain companies which were only on papers. The money received by M/s Danodia Investments and Finance Limited from shell companies was used to advance loan and investment to various other respondent entities.

5. At the time of search and seizure, the amount of loan to the tune of Rs. 27,81,47,180/- as on 31.10.2017 was found due against 20 entities of which details have been given in the impugned order.

6. In the enquiry, it was found that the money was induced in M/s Danodia Investments and Finance Limited through the shell companies and for that deposits were made even in cash. The funds were generated initially out of the allotment of shares for a sum of Rs. 10/- at the premium of Rs. 990/- It was of the Company which was having no significant business to their credit.

7. The Income Tax Department recorded the statements of the Directors of M/s Danodia Investments & Finance Ltd. apart from others to find out the source of investment in the Company and its onwards loaning to 20 entities against whom an amount of Rs. 27 crores and odd was found due. It was found by none else but Square Four Group Companies which was largely managed by Ganesh Singhania.

8. The elaborate facts regarding the proceedings before attachment of the properties was given to show that it is only after compliance of the provisions of law that an order of attachment was passed.

9. The respondents could not give sources of money induced in M/s Danodia Investments & Finance Limited. On further investigation/enquiry, it was found that a sum of more than 24 crores came in the account of M/s Danodia Investments & Finance Limited and the sources to induce money was from 79 shell companies or the companies which were only on papers. This fact was revealed when 79 companies were put to notice. After undertaking the process, it was found that majority of the companies are not existing or they have not submitted IT Returns for years. Those companies were otherwise having no business to induce money in M/s Danodia Investment & Finance Limited which itself was not having any business. The statement of the Director of M/s Danodia Investment & Finance Limited, Sh. Shailesh Kumar Mishra, apart from Sunil Kumar Modi and others were recorded. The statement of Pushpajeet Kumar Yaduka was also recorded apart from the statement of Ganesh Kumar Singhania. The statement of Mahesh Kumar Sharma was also recorded where it was found that a transaction for a sum of Rs. 16 crore took place but the amount was squared off without interest after a lapse of considerable period.

10. The appellant thus established the case that the money came in the account of M/s Danodia Investment & Finance Limited by benami transaction and was thereupon used by Square Four Group and their companies and for that purpose shown it to be a loan by M/s Danodia I