2024 (5) TMI 84 - HC - Benami Property

Benami Property Transactions - Real/original owner - provisional attachment order issued u/s 24(3) of the Benami Transactions Act 1988 - reason to believe that the petitioner is a Benamidar of respondent no.5 her son-in-law - Who is original owner of the constructions? - Submission of petitioner is that the department has no evidence to prove any benami transaction or that the petitioner was a Benamidar of the constructions in question and respondent no.5 is the beneficial owner - HELD THAT - Sri Krishna Kumar Dubey Partner of M/s.Vishnu Mitra Buildcon has not given any basis or reason as to how he believes that the original owner of the constructions is respondent no.5 and even the department has not put a single question to Sri Krishna Kumar Dubey with regard to the basis of his knowledge. In support of his statement Sri Krishna Kumar Dubey has not provided any documentary or other evidence. Similarly the department has also not referred to any other evidence in the show cause notice to support the said statement. Section 24 (1) of the Benami Transactions Act states that where the Initiating Officer on the basis of material in his possession has reason to believe . Thus there are two pre-conditions to the issuance of the notice under Section 24(1) of the Benami Transactions Act; (i) The Initiating Officer should have material in his possession and; (ii) the material should be sufficient to cause a reason to believe. It goes without saying that while interpreting a taxing statute the principle of strict interpretation is to be applied. As per record in the present case a mere statement of the contractor without any substantial supportive evidence is made the basis of the entire proceedings. Such a mere statement without any supportive evidence cannot under law be held to be a sufficient material in possession of an Initiating Officer to arrive at a reason to believe that constructions are benami. There has to be sufficient material in possession of the Initiating Officer on the basis of which he can come to a logical conclusion that can be called a reason to believe for initiating proceedings. In the present case except for an oral statement of a contractor who has not given any reason for making such a statement and from whom the department has also not even asked as to on what basis he is making the said statement the entire proceedings are initiated. There is not even an iota of material placed by the department before this Court referred to in the show cause notice on the basis of which the Court could believe the said bare statement and conclude that a reason to believe can be arrived at. Admittedly the petitioner has already submitted her Income Tax Returns for the relevant period and the said proceedings are not yet completed. As such in the absence of the same the department also cannot claim that her earnings for the relevant year are beyond her known sources of income. This Court has no hesitation in holding that there was no material in possession of the Initiating Officer which could be held to be sufficient for holding a reason to believe that the petitioner is a Benamidar of respondent no.5 her son-in-law with regard to the constructions in question for initiating proceedings under Section 24(1) of the Benami Transactions Act. As regards the order of provisional attachment under Section 24(3) of the Benami Transactions Act is concerned Section 24(3) requires that Initiating Officer is of the opinion that the person in possession of the property held Benami may alienate the property during the period specified in the notice. Without such a satisfaction the property can not be attached by the Initiating Officer. In the present case no such material has been referred to by the Initiating Officer in the impugned attachment order or placed before this Court which could demonstrate that the property is likely to be sold and thus require him to resort to Section 24(3) for provisional attachment. Thus the order of provisional attachment is also without any basis. The impugned show cause notice issued under 24(1) of the Benami Transactions Act and also the provisional attachment order issued under Section 24(3) of the Act are hereby set aside.

Summary

Issues Involved:
1. Validity of the show cause notice dated 05.01.2023 issued u/s 24(1) of The Prohibition of Benami Property Transactions Act, 1988.
2. Validity of the provisional attachment order dated 05.01.2023 issued u/s 24(3) of The Prohibition of Benami Property Transactions Act, 1988.

Summary:

1. Validity of the show cause notice dated 05.01.2023 issued u/s 24(1) of The Prohibition of Benami Property Transactions Act, 1988:

The petitioner challenged the show cause notice dated 05.01.2023 issued u/s 24(1) of The Prohibition of Benami Property Transactions Act, 1988. The notice proposed to treat the constructions on the petitioner's Plot No.35, Srijan Vihar Colony, Gomti Nagar, Lucknow as a benami transaction, claiming the petitioner acted on behalf of her son-in-law, respondent no.5. The Supreme Court in Union of India Vs. Ganpati Dealcom Ltd. (2023) 3 SCC 315 held that the 2016 Amendment Act to the Benami Transactions Act was not merely procedural but prescribed substantive provisions and could only be applied prospectively. The court found that the petitioner's purchase of the plot was prior to the 2016 amendment, and thus, no proceedings could be initiated based on the amendment. The court scrutinized the material in possession of the Initiating Officer and found that the notice was based solely on an unsubstantiated statement by a contractor, which did not constitute sufficient material to form a "reason to believe" as required u/s 24(1). Consequently, the notice was deemed issued without relevant material and was set aside.

2. Validity of the provisional attachment order dated 05.01.2023 issued u/s 24(3) of The Prohibition of Benami Property Transactions Act, 1988:

The provisional attachment order dated 05.01.2023 issued u/s 24(3) was also challenged. The court noted that u/s 24(3), the Initiating Officer must have an opinion that the property may be alienated during the notice period. The court found no material in the attachment order or presented before the court indicating that the property was likely to be sold, thus failing to justify the provisional attachment. Therefore, the order of provisional attachment was also set aside as being without basis.

Conclusion:

The impugned show cause notice dated 05.01.2023 issued u/s 24(1) and the provisional attachment order dated 05.01.2023 issued u/s 24(3) of The Prohibition of Benami Property Transactions Act, 1988 were set aside. All consequential orders and proceedings based on the said show cause notice and provisional attachment order were declared non-est and void. The writ petition was allowed.