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Rules Retracted Statements Insufficient For Proving Benami Property Transactions
In a significant ruling concerning the , the has set aside an attachment order involving 79 immovable properties. A division bench comprising Justice Arun Monga and Justice Sandeep Shah delivered a stern rebuke to authorities for relying exclusively on retracted witness statements without affording an opportunity for .
The dispute stems from search and seizure operations conducted by the against the Jodhpur-based in . The Initiating Officer (IO) had alleged that , a real estate firm, acted as a for the group’s promoter, Mahaveer Lunia. The department claimed that approximately ₹40–42 crore in unaccounted cash was routed through channels to purchase properties in the company's name.
The Foundation of the Dispute
The Revenue's case relied heavily on a statement recorded under from a Mumbai-based Chartered Accountant, Anil Sanklecha. Within nine days of the search, Sanklecha retracted his statement via an affidavit, claiming it was obtained under duress during 65 hours of continuous interrogation. Despite the appellant's repeated requests, the IO never summoned the witness for in the benami proceedings, treating the retracted statement as gospel.
The company maintained that its property investments, totaling ₹11.16 crore in the , were funded by legitimate internal reserves and recycled loans, noting that its financial structure remained stable long before the entry of the Lunia family into its shareholding.
Procedural Fairness and
The High Court emphasized that statutory power to summon witnesses under is not merely discretionary but a duty to be exercised in aid of . The Court highlighted that since the PBPT Act is a self-contained code that bars civil court jurisdiction, authorities must internalize safeguards to protect the rights of the accused under .
The bench held that when the entire case against an entity rests upon a retracted confessional statement, the denial of
renders the resulting order a
.
"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,"
the Court stated.
Impact of Income-Tax Findings
A critical element of the case was a recent assessment order from , where the Assessing Officer under the accepted the appellant’s explanation regarding the source of funds, noting that all transactions were reflected in audited books and bank statements. The High Court clarified that while the PBPT Act operates independently, findings under the are not legally irrelevant. Authorities cannot blindly disregard primary tax assessments that contradict their own "shell company" theories.
Key Observations
The High Court underscored the following principles in its judgment:
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"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."
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"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."
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"Findings returned under
, though not conclusive, carry evidentiary value in proceedings under the PBPT Act and are required to be considered."
The Path Ahead
The High Court has remanded the matter to the Initiating Officer for a inquiry. The authorities must now take the 2026 assessment order on record, provide a reasoned response to the company's documentation regarding its fund vintage, and if the Revenue chooses to rely on Sanklecha’s testimony, the appellant must be given a fair opportunity to cross-examine him. While the properties will remain under provisional attachment to protect revenue interests during this fresh investigation, the ruling marks a significant victory for procedural transparency in complex economic litigation.
