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TMI Blog2022 (7) TMI 528X X X X Extracts X X X X X X X X Extracts X X X X ..... substantiate their stand that the alleged transactions are not benami transactions. As such, the first respondent, after making enquiry and calling for reports or evidence and taking into account all the relevant materials, has, with the prior approval of the Approving Authority, passed the separate orders under section 24(4), continuing the provisional attachment of the property till the passing of the order by the Adjudicating Authority under section 26(3), which are purely provisional in nature. That apart, the provisions of law mandate the respondent authorities to furnish such documents, particulars or evidence and provide an opportunity of being heard to the appellants only at the stage of adjudication proceedings; and there is no provision under the Act to provide an opportuity to the appellants to cross examine the witnesses at the preliminary stage We are of the opinion that in the absence of any provision of law as well as the compelling circumstances warranting the respondent authorities to provide an opportunity of cross examination of witnesses, whose statements have been relied on by the respondent authorities, to the appellants at the stage of section 24 proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income Tax Act, 1961 (in short, the I.T. Act ) for reassessment. 2.1.3. Pending the reassessment proceedings, the appellants were issued with show cause notices under Section 24(1) of the Prohibition of Benami Property Transactions Act, 1988 (in short, the Act ) on 01.11.2019 from the office of the first respondent, alleging that they are benamidars for the identified beneficial owner, Mrs.V.K.Sasikala with respect to their shares in the Company and they were called upon to reply on or before 18.11.2019 as to why they should not be held to be benamidars. 2.1.4. Upon receipt of the same, the appellants sent communications asking for the material documents and the sworn statements of Mr.Naveen Baalaji, Mrs.V.K.Sasikala, Mrs.Krishnapriya and Mr.Senthil reserving their right to cross examine the aforesaid persons. In response, the first respondent supplied only a part of the documents, through mails. Despite the repeated reminders, the sworn statement of Mrs.Krishna Priya and a part of sworn statement of Mrs.V.K.Sasikala were not provided to the appellants. That apart, no opportunity was provided to cross examine the witnesses, whose statements have been relied upon by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quently, another notice dated 19.05.2020 came to be issued calling upon the appellant to file a response on or before 09.06.2020. Feeling aggrieved, the appellant preferred WP.No.8352 of 2020. 2.3. All the writ petitions were taken up for common hearing and were ultimately, dismissed by the learned Judge, by a common order dated 25.10.2021. Therefore, the appellants are before this court with these appeals. 3.1. Mr.R.Sivaraman, learned counsel for the appellants in all the appeals, except W.A.No.1007 of 2022, submitted that the appellants were not at all involved in the alleged transaction, which the first respondent is treating as benami transaction. According to them, in the year 2016, as the business of the appellants was failing, they decided to dispose of the resort, settle all the dues and concentrate on the gold business alone. It is around this time, the appellants got introduced to Mr.S.Senthil, Advocate through one Mr.Kumar, who informed that he was negotiating on behalf of Mrs.V.K.Sasikala and the consideration was fixed at Rs.168 crores and it was decided that Shri Nagarajan would transfer the title of the property in the name of the company and on payment of enti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d with the process of adjudication to follow thereafter. 3.3. The learned counsel for the appellants also contended that as per section 24(4)(a)(ii) of the Act, the first respondent is also empowered to revoke the entire proceedings initiated under section 24 of the Act, if the appellants are able to satisfy that the transaction is not benami in nature. However, the first respondent has conducted the proceedings in an arbitrary manner, without following due process of law. The learned Judge also failed to take note of the same and erred in dismissing the writ petitions filed by the appellants. Therefore, the learned counsel sought to allow these writ appeals by setting aside the order of the learned Judge. 4. Mr.N.V.Balaji, learned counsel for the appellant in WA.No.1007 of 2022 submitted that there is no nexus between the material in the possession of the first respondent and his purported belief that the appellant is a benamidar. The memorandum of understanding which forms the material for the first respondent to have a reason to believe that the appellant is a benamidar, was not in his possession. In such circumstances, the notice issued by the first respondent under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed against the appellants, has initiated the impugned proceedings as per law, after providing the required documents to the appellants to file their submissions, in adherence to the principles of natural justice; and as such, the order of the learned Judge directing the respondents to continue the proceedings, while dismissing the writ petitions, does not call for any interference by this court. 6. This court considered the submissions made by the learned counsel on either side and also perused the documents available on record. 7. At the outset, it is but necessary to refer to the provisions of law for effective adjudication. The Benami Transactions (Prohibition) Act, 1988, was enacted to prohibit benami transactions and the right to recover property held benami. The said Act makes it clear that all the properties held benami shall be subject to acquisition by such authority in such manner and after following such procedure as may be prescribed; and no amount shall be payable for the acquisition of any property held benami. It also provides a mechanism and procedure for confiscation of property held benami. Section 24 deals with notice and attachment of property involved in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing is stayed by an order or injunction of any Court shall be excluded: Provided that where immediately after the exclusion of the aforesaid period, the period of limitation referred to in sub-section (4) available to the Initiating Officer for passing order of attachment is less than thirty days, such remaining period shall be deemed to be extended to thirty days: Provided further that where immediately after the exclusion of the aforesaid period, the period of limitation referred to in sub-section (5) available to the Initiating Officer to refer the order of attachment to Adjudicating Authority is less than seven days, such remaining period shall be deemed to be extended to seven days.] (5)Where the Initiating Officer passes an order continuing the provisional attachment of the property under sub-clause (i) of clause (a) of sub-section (4) or passes an order provisionally attaching the property under sub-clause (i) of clause (b) of that sub-section, he shall, within fifteen days from the date of the attachment, draw up a statement of the case and refer it to the Adjudicating Authority. A reading of the aforesaid provision would show that as per section 24(1), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature. This is a rebuttable presumption and the effectiveness of the rebuttal will depend on the evidences furnished by the noticees to the authorities. 66.In my considered view, therefore, the enquiry contemplated at the stage of initial investigation is only preliminary, based upon prima facie reasons and conclusions. A detailed verification of the evidences as regards whether the transactions were benami or otherwise can, and must only be undertaken in the course of adjudication and not at the stage of preliminary enquiry. 67..... 68.The thrust of the petitioner's case is the alleged insufficiency of materials as well as the fact that the evidences gathered are unreliable. However, and at the risk of repetition, the enquiry conducted under section 24 is only a preliminary enquiry and the use of the phrase 'reason to believe' only indicates a prima facie satisfaction that all was not well as regards a particular transaction. In the present case, the trajectory of events as has been noticed by me in the preceding paragraphs of this order do not lead to the conclusion that the respondents had no reasons at all to justify the invocation of section 24. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioners shall be affored full opportunity to put forth all contentions before the adjudicating authority who shall take note of the same and pass speaking orders in accordance with law. ... 9. As already stated, the grievance of the appellants is that the first respondent did not furnish the entire documents relied on by them, nor provided any opportunity to the appellants to cross examine the persons whose statements have been referred to in the impugned proceedings and as such, the orders passed under section 24(4) of the Act, which were impugned in the writ petitions, are arbitrary, illegal and violative of the principles of natural justice. Whereas, it is the specific stand of the respondents that they have supplied the required documents to the appellants and that, there is no provision for providing an opportunity to cross examine the witnesses from whom they have collected the information regarding benami property, at the preliminary stage and therefore, the question of violation of the principles of natural justice does not arise herein. 10. Concededly, in the notices dated 01.11.2019 issued under section 24(1) of the Act, the first respondent has set out the reas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. This office has initiated the benami proceedings on the basis of sworn statements recorded by the quasi-judicial authorities (income tax authorities) and other evidences, which are treated as primary evidences. Further, there is no retraction possible for the deponent based on the theory of Estoppel, unless it is substantiated by any material evidence. There is no such material evidences placed on record by the benamidar and beneficial owner. It is pertinent to note that as the Initiating Officer was not the examination-in-chief for the sworn statements recorded under the Income-tax Act, the question of cross-examination does not arise. However, opportunities were given time and again, to furnish their material evidences which have not been utilised by them. Further, the benamidar and Beneficial owner seeks cross-examination without mentioning the points on which the cross-examination was to be held, which is nothing but beating around the bush. It is placed on record that the entire proceedings have been initiated based on the evidences collected and sufficient opportunities have been given to the Beneficial Owner and Benamidar to offer their objections on those ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his case. See in this connection observations of this Court in the case of Union of India and Anr. v. P.K. Roy and Ors. MANU/SC/0049/1967 : (1970) ILLJ 633 SC where this Court reiterated that the doctrine of natural justice cannot be imprisoned within the strait-jacket of a rigid formula and its application depends upon the nature of the jurisdiction conferred on the administrative authority, upon the character of the rights of the persons affected, the scheme and policy of the statute and Ors. relevant circumstances disclosed in a particular case . See also in this connection the observations of Hidayatullah, C.J., in the case of Channabasappa Basappa Happali v. State of Mysore. MANU/SC/0476/1970 : [1971] 2 SCR 645 In our opinion, in the background of facts and circumstances of this case, the nature of investigation conducted in which the appellant was associated, there has been no infraction of that principle. In the premises, for the reasons aforesaid, there has been in the facts and circumstances of the case, no infraction of any principle of natural justice by the absence of a formal opportunity of cross-examination Neither cross-examination nor the opportunity to lead eviden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after the adjudication proceedings have commenced pursuant to the show cause notice and if the Revenue seeks to rely upon the statements or documents, then the principles of natural justice would require in the absence of any statutory provision, that the person whose statement was recorded is made available for cross-examination to test the veracity of the statement. 16.We, therefore, have no hesitation in holding, that there is no requirement in the Act or Rules, nor do the principles of natural justice and fair play require that the witnesses whose statements were recorded and relied upon to issue the show cause notice, are liable to be examined at that stage. If the Revenue choose not to examine any witnesses in adjudication, their statements cannot be considered as evidence. However, if the Revenue choose to rely on the statements, then in that event, the persons whose statements are relied upon have to be made available for cross-examination for the evidence or statement to be considered. 17.We are, therefore, clearly of the opinion that there is no right, procedurally or substantively or in compliance with natural justice and fair play, to make available the witnes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after considering the reply to the show cause notice or after holding an enquiry, the authority concerned may drop the proceedings. It was further held that a writ lies only when some right is infringed and a mere show cause notice does not infringe the right of any one and it is only when a final order adversely affecting the party is passed, that the said party can be said to be having any grievance. The Supreme Court held that the writ jurisdiction being discretionary, should not ordinarily be exercised by quashing a show cause notice. (Emphasis supplied) (v) An order dated 03.08.2017 passed by the learned Single Judge of the Madhya Pradesh High Court in WP.No.10280 of 2017 in the case of Kailash Assudani v. CIT, wherein, the challange was to the order passed by the Initiating Officer under section 24(4) of the Prohibition of Benami Property Transaction Act, 1988 and the same was rejected. The relevant portion of the order, reads as follows: 6....In my view, the principles of natural justice are codified in terms of sub section (6) of section 26 of the Act. The impugned order is subject to judicial review before the adjudicating authority. The order passed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owever, the substantive order of treating the property has Benami is required to be passed by Adjudicating Authority under section 26 of the Act only. Therefore, the appellant is at liberty to take all such plea of law and facts as may be available to the appellant before the Adjudicating Authority. The Adjudicating Authority shall decide the Benami nature of the property in accordance with law. (Emphasis supplied) 13. In the given factual backdrop and applying the legal proposition as enunciated in the earlier paragraph, we are of the opinion that in the absence of any provision of law as well as the compelling circumstances warranting the respondent authorities to provide an opportunity of cross examination of witnesses, whose statements have been relied on by the respondent authorities, to the appellants at the stage of section 24 proceedings, the plea raised by the appellants in this regard, cannot be countenanced. Therefore, we do not find any error in the orders passed by the first respondent, as an interim measure, continuing the provisional attachment order of the property till the passing of the order under section 26(3) by the adjudicating authority. The learned ..... X X X X Extracts X X X X X X X X Extracts X X X X
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