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2023 (12) TMI 621 - HC - Benami PropertyProhibition of Benami Property Transaction - Initiating Officer issuing provisional attachment of the property order u/s 24(3) of the PBPT Act - Petitioner submitted that despite repeated requests by the petitioners, no material has been supplied to them and no opportunity of personal hearing was provided before passing of the order under Section 24(4) of the PBPT Act - as argued petitioners to the effect that the provisional attachment order passed by the Initiating Officer under Section 24(3) of the PBPT Act is illegal as the petitioners were asked to submit response/reply to the notice under Section 24(1) and (2) of the PBPT Act up to 15.05.2023 but without waiting for reply, the Initiating Officer passed the provisional attachment order on 01.05.2023 HELD THAT - From bare perusal of the provisions of Section 24 of the PBPT Act, it is clear that the Initiating Officer is not required to wait or consider the response/reply filed pursuant to the notice under Section 24(1) (2) of the PBPT Act before passing the provisional attachment order. The only requirement for the Initiating Officer is to seek approval of the approving authority before passing the provisional attachment order under Section 24(3) of the PBPT Act and from the provisional attachment order dated 01.05.2023, it is clear that prior approval of the approving authority was obtained by the Initiating Officer. Hence, the said argument of the learned counsel for the petitioner being bereft of merits is rejected. So far as argument of the learned counsel for the petitioners that the Initiating Officer, at the time of issuance of show cause notice under Section 24(1) (2) of the PBPT Act, did not record any reason to believe, is concerned, it is to be noticed that the Initiating Officer in the show cause notice dated 28.04.2023 has specifically recorded the reasons to believe. In such circumstances, we do not find any merit in the above argument of the learned counsel for the petitioners. Section 2(9)(A)(a) of the PBPT Act provides that where a property is transferred or held by a person and the consideration for such property is paid by another person, then the said transaction means Benami transaction. The stand of the respondents is that the petitioner-company is a shell company, however, immovable properties are purchased in its name not from company s funds or its capital but from the funds made available by the petitioner No.2 from the income earned through other businesses. The Initiating Officer, after taking into consideration the material available with it and the response filed on behalf of the petitioners, recorded its prima facie opinion in the order dated 28.07.2023 passed under Section 24(3) of PBPT Act. Having gone through the above reasons recorded by the Initiating Officer, we are of the opinion that submissions of learned counsel for the petitioners referring to Section 2(9) of the PBPT Act are without any basis, hence rejected. The judgment rendered in M/s Shri Kalyan Building s case 2021 (10) TMI 343 - RAJASTHAN HIGH COURT is of little help to the petitioners because in that case the petitioners approached this Court after passing of the order by the adjudicating authority under Section 26(3) of the PBPT Act and the appellate tribunal, where the petitioners had remedy to prefer appeal, was not functional, however, no such situation exists in the present case. Apart from that, the findings recorded by the learned Single Judge in M/s Shri Kalyan Building s case is based on that facts and, therefore, the same are not binding. As per the provisions of Section 24 of the PBPT Act, the Initiating Officer is required to record its prima facie satisfaction before referring the matter to the adjudicating authority. Considering the provisions of Section 24 of the PBPT Act, the Division Bench in Dinesh Chand Surana Vs. Deputy Commissioner of Income Tax (Benami Prohibition) Chennai Ors 2022 (9) TMI 1134 - MADRAS HIGH COURT as held that part, it is important to note that the proceedings under section 24 only require a recording of prima facie opinion as to the benami nature of the transaction and the respondent is required As decided in Abhay Nigam Ors. vs. Union of India Ors., 2021 (6) TMI 1044 - MADHYA PRADESH HIGH COURT If Scheme ingrained in Sec. 24 and 26 of the Act of 1988 is compared with the PML Act, it will be clear that the Scheme is almost pari materia. For this reason also, we deem it proper to hold that adjudicating authority is best suited and statutorily obliged to consider the validity of provisional attachment order and the case put forth by the present appellants. No case for interference made. Hence, all these writ petitions fail and are hereby dismissed.
Issues Involved:
1. Validity of Provisional Attachment Orders under PBPT Act. 2. Recording of Reasons by Initiating Officer. 3. Compliance with Document Identification Number (DIN) Requirements. 4. Limitation Period for Passing Orders under Section 24(4) of PBPT Act. 5. Opportunity of Personal Hearing. 6. Definition and Scope of Benami Transactions under PBPT Act. 7. Relevance of Fiduciary Capacity Exception under Section 2(9) of PBPT Act. Summary: 1. Validity of Provisional Attachment Orders under PBPT Act: The petitioners challenged the validity of the provisional attachment orders issued under Sections 24(1), (2), and (3) of the PBPT Act, arguing that the orders were issued without waiting for their response, thus violating principles of natural justice. The court held that the Initiating Officer is not required to wait for the response before issuing a provisional attachment order, provided prior approval from the approving authority is obtained. Hence, the argument was rejected. 2. Recording of Reasons by Initiating Officer: The petitioners contended that the Initiating Officer failed to record reasons for initiating proceedings. The court found that the show cause notice dated 28.04.2023 contained specific reasons to believe, as required under the PBPT Act. Therefore, this argument was also dismissed. 3. Compliance with Document Identification Number (DIN) Requirements: The petitioners argued that the orders did not contain different DINs as required by a circular from the Central Board of Direct Taxes. The court noted that both orders dated 28.07.2023 contained the same DIN and considered them as one document, dismissing this technical objection. 4. Limitation Period for Passing Orders under Section 24(4) of PBPT Act: The petitioners claimed that the order under Section 24(4) was passed beyond the limitation period. The court found that the orders dated 28.07.2023 were timely and contained the same DIN, thus rejecting this argument. 5. Opportunity of Personal Hearing: The petitioners argued that they were not provided an opportunity for a personal hearing. The court found that the petitioners were given multiple opportunities for a personal hearing, which they failed to avail. Hence, this contention was dismissed. 6. Definition and Scope of Benami Transactions under PBPT Act: The petitioners argued that the company could not be considered a Benamidar of its own shareholders. The court held that if a property is purchased in the company's name but not from the company's funds, it could be considered a Benami transaction. The court noted that the petitioner-company was a shell company, and the funds for the property were provided by petitioner No.2, thus fitting the definition of a Benami transaction under Section 2(9)(A) of the PBPT Act. 7. Relevance of Fiduciary Capacity Exception under Section 2(9) of PBPT Act: The petitioners argued that the fiduciary capacity exception applied, as the director provided funds for the company. The court held that this exception did not apply as the funds were not from the company's capital but from personal income, thus rejecting this argument. Conclusion: The court found no merit in the petitioners' arguments and dismissed all writ petitions and stay petitions, emphasizing that the adjudicating authority is best suited to consider the validity of provisional attachment orders. The judgment in M/s Shri Kalyan Building's case was distinguished based on different factual circumstances.
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