2022 (12) TMI 779 - HC - Benami Property

Prohibition of Benami Property Transactions - attaching the properties of the petitioners provisionally until passing of the order by the Adjudicating Authority u/s 26 (3) of the Act - primary contention of the petitioners is that an incorrect and illegal conclusion has been arrived at by the authorities that the petitioner in each of the three cases were benami holders of property or its beneficiary - grounds of violation of the principles of natural justice have also been taken as, according to the petitioners, their replies were not properly considered and they were not given an effective opportunity to defend themselves - Allegation of recording the statement of the petitioners in duress has also been made - HELD THAT - Though contentious issues have been raised in these petitions which require elaborate deliberations, this Court is of the opinion that in view of the clear law laid down by the Hon ble Supreme Court in the case of Ganpati Dealcom Pvt. Ltd. 2022 (8) TMI 1047 - SUPREME COURT such deliberations are not at all required, as the same would otherwise, cause prejudice to either of the parties. As in view of the undisputed fact that the transactions in question in these cases being of a period prior to 2016, the amendment of the Act made in the year 2016 would not be applicable and therefore, the impugned notices under Section 24 of the Act are not sustainable in law. Accordingly, the impugned notices are set aside and the writ petitions are allowed.

Summary

Issues Involved:
1. Legality of orders issued under Section 24(4)(6)(i) of the Prohibition of Benami Property Transactions Act, 1988.
2. Validity of notices passed under Section 24(1) of the Act.
3. Alleged violation of principles of natural justice.
4. Applicability of the Benami Transactions (Prohibition) Amendment Act, 2016.

Detailed Analysis:

1. Legality of Orders Issued Under Section 24(4)(6)(i):
The petitioners challenged the orders issued under Section 24(4)(6)(i) of the Prohibition of Benami Property Transactions Act, 1988, which provisionally attached their properties until the Adjudicating Authority passed an order under Section 26(3). The primary contention was that the authorities incorrectly and illegally concluded that the petitioners were benami holders or beneficiaries of the properties. The petitioners argued that their replies were not properly considered, and they were not given an effective opportunity to defend themselves, thus violating principles of natural justice. Allegations of duress in recording statements were also made.

2. Validity of Notices Passed Under Section 24(1):
In each case, the Deputy Commissioner of Income Tax (BP) issued summons and notices to the petitioners to appear and submit information in connection with proceedings under the Act. Subsequently, show cause notices under Section 24(1) were issued, followed by orders of attachment under Section 24(3). The petitioners requested copies of their statements, claiming coercion, and sought time to reply to the show cause notices. They contended that the actions taken were without jurisdiction and thus null and void. The authorities eventually passed orders of attachment of properties and assets until the Adjudicating Authority's decision under Section 26(3).

3. Alleged Violation of Principles of Natural Justice:
The petitioners argued that their replies to the show cause notices were not properly considered, and they were not given an effective opportunity to defend themselves. They also alleged that their statements were recorded under duress. The court noted these contentions but decided not to delve deeply into them due to a recent Supreme Court judgment that influenced the outcome of the cases.

4. Applicability of the Benami Transactions (Prohibition) Amendment Act, 2016:
The court referenced the Supreme Court judgment in Union of India vs. Ganpati Dealcom Pvt. Ltd., which provided guidelines on the applicability of the 2016 Amendment Act. The Supreme Court held that Sections 3 and 4 of the Act were inoperative and that the amendment was prospective, effective only from 25.10.2016. The court noted that the transactions in question occurred before 2016, and the notices under Section 24 were issued in 2022, making the 2016 amendment inapplicable. Consequently, the impugned notices were declared unsustainable in law.

Conclusion:
The court concluded that, given the transactions occurred prior to 2016 and the clear law laid down by the Supreme Court, the amendments made in 2016 were not applicable. Therefore, the impugned notices under Section 24 were set aside, and the writ petitions were allowed. The court did not delve into the merits of the dispute to avoid prejudice to either party. The writ petitions were disposed of without any order as to costs.