2023 (8) TMI 67 - HC - Benami Property

Benami transaction - parallel proceedings under Income-tax - cash which is said to belong to the petitioner and was seized from the hands of the petitioner's friend, was taxed in the hands of the petitioner for the Assessment Year 2021-2022 - writ filled seeking adjustment of cash that was seized from the hands of the petitioner's friend - meanwhile fourth respondent has initiated proceeding under Section 263 - HELD THAT - The prayer of the petitioner for a Mandamus cannot be countenanced without an application by the petitioner under first proviso to Section 132 of the Income Tax Act, 1961, although there could be a corresponding duty on the part of the respondents to appropriate the amount that was seized on 20.06.2020, if an application is made. If the aforesaid seized amount is to be treated as an asset of the petitioner and adjusted u/s 132 of the Income Tax Act, 1961, the petitioner has to first file an application as is contemplated under the aforesaid provision. Considering the fact that a parallel proceedings is also pending before the fifth respondent under the Prohibition of the Benami Property Transactions Act, 1988, pursuant to the order passed by this Court in W.P.No.9868 of 2023, direct the petitioner to file appropriate application before the third respondent in accordance with the provisions of Sections 132B of the Income Tax Act within a period of 7 days from the date of receipt of a copy of this order. The third respondent shall dispose the same within a period of 8 days thereafter. Considering the fact that the parallel proceedings is also likely to be heard and disposed by the fifth respondent on 01.08.2023 under the Prohibition of the Benami Property Transactions Act, 1988, the third respondent shall endeavour to pass orders as expeditiously taking note of the order to be passed by the fifth respondent.

Summary

Issues:
The issues involved in the judgment are the adjustment of seized cash against tax liability under the Income Tax Act, 1961 and the proceedings under the Prohibition of Benami Property Transactions Act, 1988.

Adjustment of Seized Cash Against Tax Liability:
The petitioner filed a writ petition seeking a Mandamus to direct the adjustment of cash seized from the petitioner's friend against the petitioner's tax liability for the Assessment Year 2021-2022. The cash of Rs.99,75,000/- seized from the petitioner's friend was taxed in the hands of the petitioner. The petitioner argued that the seized cash is an asset of the petitioner under Section 132B of the Income Tax Act, 1961 and should be adjusted against the tax liability. However, the Standing Counsel for the respondents contended that the writ petition was premature as the petitioner had not filed an application as required under the first proviso to Section 132 of the Income Tax Act, 1961. The court held that while there is a duty on the respondents to appropriate the seized amount upon application, the petitioner must first file the necessary application under the provision.

Proceedings under the Prohibition of Benami Property Transactions Act:
Meanwhile, the fourth respondent initiated proceedings under Section 263 of the Income Tax Act, 1961, and the fifth respondent passed an order treating the petitioner as the beneficial owner of the seized cash, holding it to be a benami transaction under the Prohibition of Benami Property Transactions Act, 1988. The petitioner challenged this order through a writ petition, which was allowed, quashing the order and remitting the case back to the fifth respondent for a fresh order after considering the facts on merits. The court directed the petitioner to file an appropriate application under Sections 132B of the Income Tax Act within seven days and instructed the third respondent to dispose of the application within eight days thereafter. The judgment highlighted the need for expeditious action by the third respondent considering the parallel proceedings under the Prohibition of Benami Property Transactions Act likely to be heard and disposed of by the fifth respondent.