2024 (3) TMI 1060 - HC - Benami Property

Benami transaction - petitioner has called in show cause notice issued u/s 24(1) of the Prohibition of Benami Property Transactions Act, 1988 and Provisional Attachment Order issued u/s 24(3) of Act of 1988 - petitioners submits that the show cause notice and provisional attachment order are called in question mainly on the ground that the alleged benami transaction has taken place prior to 01/11/2016, the date when Act of 1988 stood amended - HELD THAT - The provisional assessment order as name suggests, is provisional in nature . The adjudicating authority is best suited to decide the question of Benami nature of the property. We find substance in the argument of learned ASG that show cause notice is a detailed notice running in several pages containing several factual basis and it is within the province of adjudicating authority to decide whether property is Benami in nature and whether petitioners are liable for any action under the Act of 1988. The Division Bench declined interference against show cause notice and PAO and permitted the petitioner to raise all relevant aspects before adjudicating authority under Section 26 of the Act of 1988. We deem it proper to follow the same course. The petitioners can avail the remedies under the Act of 1988 and take all possible factual and legal grounds before the adjudicating authority . Needless to mention that judgment of Advance Infra Developers (P) Ltd 2023 (12) TMI 620 - MADRAS HIGH COURT and other judgments can be relied upon by the petitioners before the adjudicating and appellate authority (if required) to impress upon it to take a different view than the view taken by Appellate Authority in M/s. Prism Scan 2024 (1) TMI 203 - APPELLATE TRIBUNAL FOR SAFEMA AT NEW DELHI We have no doubt that if relevant grounds are taken and judgments are cited, the said authorities will consider and decide the matter on its own merits in accordance with law. We find no reason to entertain these petitions despite availability of statutory alternative remedies. The petitioners may avail the said remedy.

Issues Involved:

1. Validity of the show cause notice issued under \u/s 24(1) of the Prohibition of Benami Property Transactions Act, 1988.
2. Validity of the Provisional Attachment Order (PAO) issued under \u/s 24(3) of the Act of 1988.
3. Applicability of the amended provisions of the Act of 1988 to transactions prior to 01/11/2016.

Summary:

1. Validity of the Show Cause Notice:

The petitioner challenged the show cause notice dated 05/01/2024 under \u/s 24(1) of the Prohibition of Benami Property Transactions Act, 1988, on the grounds that the alleged benami transaction occurred before the amendment of the Act on 01/11/2016. The petitioner relied heavily on the Supreme Court's judgment in Union of India & another vs. M/s Ganpati Dealcom Private Limited (2023) 3 SCC 315, which declared Section 5 of the Act of 1988 unconstitutional. The petitioner argued that this judgment invalidates the show cause notice and that they should not be relegated to the in-house remedy under the Act of 1988.

The court, however, noted that the show cause notice is a preliminary step and interference at this stage is limited. The Apex Court in Special Director & Another Vs. Mohd. Gulam Ghouse & Another (2004) 3 SCC 440 held that writ petitions should not be entertained against show cause notices unless there is a total lack of jurisdiction. The court emphasized that the petitioners should respond to the notice and raise their legal and factual contentions before the adjudicating authority.

2. Validity of the Provisional Attachment Order (PAO):

The Provisional Attachment Order (PAO) dated 05/01/2024 issued under \u/s 24(3) of the Act of 1988 was also challenged on similar grounds. The petitioner argued that the Appellate Tribunal for SAFEMA in M/s. Prism Scan Express Pvt. Ltd. Vs. Initiating Officer (2023) held that actions are permissible if the property is held after the amendment. The court reiterated that the PAO is provisional and subject to judicial review by the adjudicating authority. The court referred to its previous decisions, including WP Nos. 3957/2019 and 3963/2019, where it declined to interfere with the PAO at the preliminary stage, emphasizing that the adjudicating authority is best suited to decide on the benami nature of the property.

3. Applicability of Amended Provisions:

The petitioner contended that the amended provisions of the Act of 1988 should not apply to transactions that occurred before the amendment date of 01/11/2016. The court acknowledged the petitioner's reliance on the Supreme Court's judgment in Ganpati Dealcom Private Limited and the decisions of other High Courts, including the High Court of Madras and the High Court for the State of Telangana, which supported the petitioner's view. However, the court maintained that the adjudicating authority should first consider these arguments and that the petitioners have the opportunity to present their case and judgments before the adjudicating and appellate authorities.

Conclusion:

The court concluded that there is no reason to entertain the petitions due to the availability of statutory alternative remedies. The petitioners were directed to avail the in-house remedies under the Act of 1988 and present their legal and factual contentions before the adjudicating authority. The petitions were disposed of without expressing any opinion on the merits of the case.

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