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2022 (9) TMI 1356 - HC - Benami PropertyBenami Property Transactions - Retrospective application of law enacted in the year 2016 - primary challenge made is that the transactions which have been classified by the respondents as benami transactions and the property accrued therefrom, which have been classified by the respondents as benami property, were acquired prior to 25.10.2016 or 01.11.2016 - HELD THAT - The issue before us is no longer res integra not only in view of the law laid down by this Court in Nexus Feeds Limited 2022 (5) TMI 262 - TELANGANA HIGH COURT but in view of the law declared by the Supreme Court in Union of India v. Ganpati Dealcom Pvt. Ltd. 2022 (8) TMI 1047 - SUPREME COURT This Court took the view that Section 2(9)(A) and 2(9)(C) of the Act inserted by the Amendment Act of 2016 are prospective in nature because these two provisions have significantly and substantially widened the definition of benami transaction than as was there in the unamended Benami Property Act of 1988. Taking note of the fact that Central Government had notified the date of coming into force of the Amendment Act of 2016 as 01.11.2016, this Court held that these two provisions cannot be applied to a transaction, which took place prior to 01.11.2016. In that case, the transaction was dated 14.12.2011. Therefore, the show cause notice, provisional attachment order as well as the adjudicating order were declared null and void being without jurisdiction and consequently, quashed. Supreme Court has declared that the Amendment Act of 2016 is not merely procedural but prescribes substantive provisions. Therefore, concerned authorities cannot initiate or continue criminal prosecution or confiscation proceedings for transactions entered into prior to coming into force of the 2016 Amendment Act i.e., 25.10.2016. As a consequence, all such transactions or confiscation proceedings shall stand quashed. Supreme Court has also clarified that in rem forfeiture provision under Section 5 of the Amendment Act of 2016 being punitive in nature can only be applied prospectively and not retroactively. In view of finality of the law declared by the Supreme Court, the impugned show cause notices, provisional attachment orders as well as the adjudicating orders passed by the various authorities under the Benami Property Act as amended by the Amendment Act of 2016 impugned in the batch of writ petitions cannot be sustained.
Issues Involved:
1. Validity of show cause notices issued under Section 24(1) of the Benami Property Transactions Act, 1988. 2. Validity of orders passed by the adjudicating authority under Section 26(3) of the Benami Property Act. 3. Validity of orders passed by the Commissioner of Income Tax under Section 24(4)(b)(i) of the Benami Property Act. 4. Retroactive application of the Benami Transactions (Prohibition) Amendment Act, 2016. Issue-wise Detailed Analysis: 1. Validity of Show Cause Notices Issued Under Section 24(1) of the Benami Property Transactions Act, 1988: In Group A writ petitions, the challenge was to the show cause notices dated 02.09.2021 issued by the Assistant Commissioner of Income Tax under Section 24(1) of the Benami Property Act. These notices were issued for transactions that allegedly took place before the Benami Transactions (Prohibition) Amendment Act, 2016 came into force. The petitioners argued that the transactions classified as benami and the properties accrued therefrom were acquired prior to the enactment of the 2016 amendment, making the retroactive application of the law invalid. 2. Validity of Orders Passed by the Adjudicating Authority Under Section 26(3) of the Benami Property Act: In Group B writ petitions, the challenge was to the orders passed by the adjudicating authority under Section 26(3) of the Benami Property Act. For instance, in W.P.No.33191 of 2022, the adjudicating authority confirmed the provisional attachment of the property, classifying it as benami under Section 2(9)(c) of the Act. The petitioners contended that these orders were invalid as the transactions occurred before the 2016 amendment, and the law could not be applied retroactively. 3. Validity of Orders Passed by the Commissioner of Income Tax Under Section 24(4)(b)(i) of the Benami Property Act: In Group C writ petition, the challenge was to the order dated 12.04.2022 passed by the Commissioner of Income Tax under Section 24(4)(b)(i) of the Benami Property Act. The petitioners argued that the order was invalid because the transactions in question took place before the 2016 amendment. 4. Retroactive Application of the Benami Transactions (Prohibition) Amendment Act, 2016: The primary contention across all writ petitions was that the Benami Transactions (Prohibition) Amendment Act, 2016, which came into force on 01.11.2016, could not be applied retroactively to transactions that took place before this date. The court referenced the Supreme Court's decision in Union of India v. Ganpati Dealcom Pvt. Ltd., which held that the 2016 amendment could not be applied retroactively. The Supreme Court declared Sections 3 and 5 of the unamended 1988 Act as unconstitutional from inception and held that the 2016 amendment, which introduced new substantive provisions, could only apply prospectively. The court also cited its own decision in Nexus Feeds Limited v. the Assistant Commissioner of Income Tax, which held that the widened definition of 'benami transaction' under Sections 2(9)(A) and 2(9)(C) of the 2016 amendment could only have prospective effect. Consequently, show cause notices, provisional attachment orders, and adjudicating orders based on transactions prior to 01.11.2016 were deemed null and void. Conclusion: In light of the Supreme Court's ruling and the court's own precedents, the Telangana High Court concluded that the impugned show cause notices, provisional attachment orders, and adjudicating orders under the Benami Property Act, as amended by the 2016 Act, could not be sustained for transactions that occurred before the amendment's effective date. Therefore, all such notices and orders were set aside and quashed, and all writ petitions were allowed. No costs were awarded, and any pending miscellaneous petitions were dismissed.
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