The Appellate Tribunal under the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act (SAFEMA) has upheld the attachment of ₹1 crore under the Prohibition of Benami Property Transactions Act, 1988, holding that discrepancies in gold sale invoices—including rates inconsistent with prevailing market prices, unusual bullion weights, and the absence of any prior business relationship with the alleged purchaser firms—were sufficient to expose the transactions as a mere façade for routing demonetised cash through the banking system. 

The bench of Balesh Kumar (Member) and Rajesh Malhotra (Member) has observed that the documentary evidence produced by the appellant lacked independent corroboration. There was no evidence demonstrating any prior business relationship between Appellant and the two purchasing entities.

The proceedings arose from allegations that, following the demonetisation announcement on November 8, 2016, old currency notes amounting to ₹1 crore were deposited into bank accounts controlled by Shri Asit B. Doshi, who was alleged to be the benamidar. According to the Income Tax Department’s investigation, after retaining a commission of approximately ₹5 lakh, Doshi caused ₹95 lakh to be transferred through RTGS to M/s Appellant via two entities—M/s Aman Trading and M/s Marina Trading. 

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The Initiating Officer alleged that these transactions constituted a benami arrangement, with Appellant being the beneficial owner and Doshi merely acting as the conduit for routing demonetised cash into the banking system. 

Appellant contended that the entire allegation rested solely on the statement of Shri Asit B. Doshi without any independent corroborative evidence. The firm argued that it had genuinely sold gold to Aman Trading and Marina Trading, against which payments were received through normal banking channels.

The appellant further submitted that the gold sold was duly reflected in its books of accounts; adequate stock existed to support the sales; delivery of the gold had been made; and the sale proceeds were received through RTGS in the ordinary course of business.

The firm maintained that none of the statutory ingredients of a benami transaction under the PBPT Act were satisfied and argued that it had not received any unlawful benefit. 

A principal ground urged before the Tribunal was that the proceedings were vitiated because Appellant was not permitted to cross-examine Shri Asit B. Doshi or the intermediary, Shri Mangilal, who allegedly delivered the demonetised cash.

The appellant argued that the attachment order had been passed without proper inquiry and that reliance upon Doshi’s statement, without affording an effective opportunity for cross-examination, violated the principles of natural justice. 

The Department relied upon Doshi’s statement recorded under Section 131 of the Income-tax Act, wherein he admitted receiving ₹1 crore in demonetised currency from Shri Mangilal for providing RTGS entries to Appellant after deducting a 5% commission.

According to the Department, the gold sale invoices relied upon by Appellant were fabricated to provide legitimacy to what was essentially an accommodation entry. It pointed to several circumstances supporting this allegation, including: gold being sold to previously unknown entities; pricing allegedly below prevailing market rates; unusual weights reflected in the invoices; absence of proper KYC documentation; and delayed delivery despite substantial transaction value.

The Department asserted that these facts demonstrated a carefully planned benami transaction designed to convert demonetised cash into legitimate banking transactions. 

The Tribunal observed that the present appeal formed part of four substantially similar matters involving Shri Asit B. Doshi and different alleged beneficiary firms, all arising out of demonetisation-related transactions.

It noted that certain facts remained undisputed is ₹1 crore in demonetised currency had been deposited into accounts controlled by Doshi; ₹95 lakh was transferred through RTGS to Appellant from Aman Trading and Marina Trading; and Appellant admitted receipt of those RTGS payments.

While Appellant sought to explain the payments as consideration for gold sales, the Tribunal held that the documentary evidence produced by the appellant lacked independent corroboration. It further observed that there was no evidence demonstrating any prior business relationship between Appellant and the two purchasing entities. The Tribunal also considered the timing of the transactions, occurring shortly after demonetisation, to be a significant surrounding circumstance. 

Rejecting the appellant’s plea regarding denial of cross-examination, the Tribunal observed that no statement of Shri Mangilal existed on record, making any demand for his cross-examination untenable.

Regarding Shri Asit B. Doshi, the Tribunal noted that his statement had already been supplied to the appellant; and Doshi had been summoned for cross-examination but failed to appear.

The Tribunal relied extensively upon Supreme Court decisions including Kanungo & Co. v. Collector of Customs, Dharampal Satyapal Ltd. v. CCE, Telestar Travels Pvt. Ltd. v. Special Director of Enforcement, and State of Uttar Pradesh v. Sudhir Kumar Singh, reiterating that denial of cross-examination does not automatically invalidate proceedings unless actual prejudice is established.

It emphasized that the principles of natural justice are flexible and that procedural irregularities do not by themselves render an order invalid where no substantive prejudice has been demonstrated. 

Holding that the appellant failed to establish any prejudice resulting from the denial of cross-examination and finding sufficient material supporting the benami allegations, the Tribunal dismissed the appeal.

Accordingly, it upheld the Adjudicating Authority’s order confirming the provisional attachment of ₹1 crore under the Prohibition of Benami Property Transactions Act and disposed of all pending applications.

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