1. In a significant ruling that underscores the robust powers granted to tax authorities under the anti-benami law, the Delhi High Court, on November 19, 2025, dismissed a petition challenging a provisional attachment order and a show-cause notice issued under the Prohibition of Benami Property Transactions Act, 1988 (PBPT Act). The case of Shyamsundar Sharma vs. ACIT/Initiating Officer revolves around a massive alleged bogus billing scheme uncovered during a search on a multi-level marketing company, Vestige Marketing Pvt. Ltd. (VMPL). The Court's judgment provides crucial clarity on the standard of proof required at the initial stage of benami proceedings and the extent to which courts can interfere with the "reason to believe" formed by an Initiating Officer.
2. The petitioner, Shyamsundar Sharma, ran a goods transport business named Shyam Air Couriers, which provided services to VMPL. His world turned upside down when the Benami Prohibition Unit provisionally attached his four bank accounts. The authorities alleged that he was a "benamidar"—a person who holds benami property for the real, "beneficial" owner—in a vast network of bogus transactions designed to siphon off money from VMPL. Sharma approached the High Court, arguing that the action was based on a mistaken identity and flimsy evidence, causing him severe financial hardship.
3. The case originated from a search conducted by the Income Tax Department on VMPL and its promoters on September 20, 2023. During the search, a pen drive was seized containing an Excel sheet tellingly titled "Bogus Expenses Employee-Wise." This spreadsheet listed numerous parties, including "Shyam Sunder Choudhary," who had allegedly received payments from VMPL for services that were never actually rendered. The modus operandi was straightforward: VMPL would pay these "accommodation entry providers" via banking channels for fictitious services, and the recipients would then return the bulk of the amount in cash to VMPL's promoters after deducting a small commission.
4. Statements recorded under oath from VMPL's directors and auditor during the search corroborated this scheme. They admitted to orchestrating bogus billing to generate unaccounted cash, explicitly naming vendors like "Shyam Air Courier" as participants in this arrangement. Based on this digital evidence and the sworn statements, the Initiating Officer (IO) formed a "reason to believe" that Sharma was a benamidar. Consequently, a show-cause notice under Section 24(1) of the PBPT Act was issued on March 21, 2025, followed by the provisional attachment of his bank accounts.
5. Sharma's primary defense before the High Court was two-fold. First, he argued a case of mistaken identity, contending that the Excel sheet mentioned "Shyam Sunder Choudhary," whereas his name is "Shyam Sunder Sharma." Second, he asserted that all his transactions with VMPL were genuine and backed by actual courier services provided. He claimed he had submitted a declaration from VMPL to this effect and was willing to provide bank statements and ledgers. He argued that the IO had acted on a "borrowed satisfaction" without independent inquiry and that the attachment of his accounts, which crippled his business and personal finances, was a gross violation of principles of natural justice and his constitutional right under Article 300A (right to property).
6. The Revenue, represented by the Senior Standing Counsel, vehemently defended the action. They argued that the IO possessed solid material: the incriminating Excel sheet and the corroborative statements of the very promoters who orchestrated the scheme. They emphasized that Sharma, in his reply to the show-cause notice, had failed to provide any substantive documentary evidence like invoices, e-way bills, or delivery challans to prove the genuineness of the services he claimed to have provided. His reliance on a self-serving declaration from VMPL—the main accused—was insufficient to rebut the concrete evidence gathered during the search.
7. The legal core of the dispute rested on the interpretation of Section 24 of the PBPT Act. This section empowers an Initiating Officer to issue a show-cause notice and provisionally attach property if two pre-conditions are met: (1) there is "material in his possession," and (2) on the basis of this material, he has "reason to believe" that a person is a benamidar. The Court's task was to determine whether these thresholds were crossed in this case.
8. In a meticulously reasoned analysis, the Delhi High Court delineated the limits of its jurisdiction in such matters. The Court held that its role was to conduct an "objective inquiry" into whether *any* material existed with the IO. However, it explicitly stated that it would not go into the "sufficiency or quality" of that material. The existence of the Excel sheet and the sworn statements unquestionably constituted "material in possession," thus satisfying the first precondition.
9. On the more contentious issue of "reason to believe," the Court emphasized its "subjective" nature. Relying on the definition in the Bharatiya Nyaya Sanhita, 2023, the Court stated that "reason to believe" means having "sufficient cause to believe." The Court clarified that this standard, while higher than mere "suspicion" required for a police arrest, is lower than establishing a "prima facie case" needed for a judicial authority to proceed. The IO's belief does not need to be infallible; it only needs to be based on some credible material.
10. The Court found that the IO had detailed his reasons extensively. The IO had reasoned that "Shyamsundar Choudhary" in the Excel sheet was likely a reference to the petitioner, Shyamsundar Sharma, the proprietor of Shyam Air Courier, especially since the promoters' statements also pointed to his business. The Court refused to tinker with this logical inference, stating that it could not substitute its own wisdom for the IO's at this nascent stage.
11. The Court also addressed Sharma's plea of hardship, noting that while genuine, it does not override the legal basis for a provisional attachment. The purpose of provisional attachment is precisely to prevent the disposal of property during the pendency of proceedings. The Court assured that the petitioner could raise this grievance before the Adjudicating Authority, which has the power to revoke the attachment under Section 26 of the Act.
12. In dismissing the petition, the High Court reinforced a crucial principle of administrative and tax law: the judiciary must show deference to the initial findings of specialized authorities when they act within their jurisdictional limits based on some relevant material. A writ court is not the appropriate forum to dissect evidence at the show-cause stage; that is the role of the statutory adjudicating mechanism put in place by the Act itself.
13. The judgment has far-reaching implications. It strengthens the hands of enforcement agencies in tackling complex financial crimes involving digital evidence and layered transactions. It signals that technical defenses like minor discrepancies in names, without substantive proof of genuine business, may not be sufficient to stall proceedings at the initial stage. For citizens and businesses, it serves as a stark reminder of the sweeping powers under the benami law and the critical importance of maintaining impeccable and verifiable documentation for all high-value transactions.
14. Ultimately, the Delhi High Court's decision in Shyamsundar Sharma vs. ACIT strikes a balance between enforcing a stringent law against black money and protecting the procedural rights of the accused. It affirms that while the state's power to attach property is formidable, it is not arbitrary, as it is triggered by a "reason to believe" grounded in material. At the same time, it preserves for the petitioner a full and fair opportunity to defend himself on the merits before the Adjudicating Authority, where the burden will be on the department to ultimately prove the benami nature of the transactions beyond a reasonable doubt.
Citation: Shyamsundar Sharma vs. ACIT/Initiating Officer, Benami Prohibition Unit-2, Delhi & Anr., W.P.(C) 17000/2025, Delhi High Court, Decision Dated: November 19, 2025.
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