SAILEN DAS AND ANR. V. THE DEPUTY COMMISSIONER OF INCOME TAX (BP) AND ORS.

WP(C)/4387/2022

AI Insights

The case involves three writ petitions filed by different petitioners challenging the orders and notices issued under the Prohibition of Benami Property Transactions Act, 1988, concerning properties allegedly held benami. The petitioners contended that they were not given a fair opportunity to defend themselves, and their statements were recorded under duress. The primary legal issue revolved around the applicability of the amended provisions of the Act, particularly following the Supreme Court's decision in Union of India Vs. Ganpati Dealcom Pvt. Ltd., which clarified that the amendments are prospective and not applicable to transactions prior to 2016. The court, referencing this precedent, set aside the notices issued to the petitioners.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 761635 (HC-MISC)
• Appeal Type: Others
• Pronouncement Date: 16-12-2022
• Assessment Year: misc
• Other Referred Cases: Union of India Vs. Ganpati Dealcom Pvt. Ltd.
• Laws Referred To: Prohibition of Benami Property Transactions Act, 1988
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: S G I
• Assessee Lawyers: A NEOG
• Keywords: Attachment of Properties; Benami property; Income Tax; Natural Justice; Prohibition of Benami Property Transactions Act
• Section: 24(1); 24(3); 24(4); 26(3); 24(6)(i)

Judgement Text

"Page No.# 1/12 GAHC010129512022 THE GAUHATI HIGH COURT (HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH) Case No. : WP(C)/4385/2022 BANAMALI DAS AND ANR. S/O LT. RAJEN DAS R/O H. NO. 42 BAKRAPARA NEAR DISNEY LAND SCHOOL, KHANAPARA, GUWAHATI-781002 2: BHAGYA KALITA R/O PIYOLI PHUKAN ROAD REHABARI GUWAHATI ASSAM-78100 VERSUS THE DEPUTY COMMISSIONER OF INCOME TAX (BPU) AND ORS. GUWAHATI, O/O DEPUTY COMMISSIONER OF INCOME TAX (BP) GUWAHATI, AAYKAR BHAWAN, CHRISTIAN BASTI G.S. ROAD, GUWAHATI-781005 2:THE JIONT COMMISSIONER OF INCOME TAX (BPU) GUWAHATI O/O DEPUTY COMMISSIONER OF INCOME TAX (BP) GUWAHATI AAYKAR BHAWAN CHRISTIAN BASTI G.S. ROAD GUWAHATI-781005 3:THE ADJUDICATING AUTHORITY APPOINTED UNDER SECTION 7 OF THE PROHIBITION OF BENAMI PROPERTY TRANSACTIONS ACT 1988 WITH ITS OFFICE AT 10-B MIDDLETON ROW 1ST FLOOR INCOME TAX BUILDING KOLKATA 70007 Advocate for the Petitioner : MS. A NEOG Advocate for the Respondent : ASSTT.S.G.I. Page No.# 2/12 WP(C)/4390/2022 GANESH CHANDRA DAS AND ANR S/O LT. DADHIRAM DAS R/O MEGHALI PATH PUB SARANIA P.O. AND P.S. CHANDMARI GUWAHATI-781003 2: BHAGYA KALITA R/O PIYOLI PHUKAN ROAD REHABARI GUWAHATI ASSAM-781008 VERSUS THE DEPUTY COMMISSIONER OF INCOME TAX (BP) AND ORS. GUWAHATI O/O DEPUTY COMMISSIONER OF INCOME TAX (BP) GUWAHATI AAYKAR BHAWAN CHRISTIAN BASTI G.S. ROAD GUWAHATI-781005 2:THE JIONT COMMISSIONER OF INCOME TAX (BPU) GUWAHATI O/O DEPUTY COMMISSIONER OF INCOME TAX (BP) GUWAHATI AAYKAR BHAWAN CHRISTIAN BASTI G.S. ROAD GUWAHATI-781005 3:THE ADJUDICATING AUTHORITY APPOINTED UNDER SECTION 7 OF THE PROHIBITION OF BENAMI PROPERTY TRANSACTIONS ACT 1988 WITH ITS OFFICE AT 10-B MIDDLETON ROW 1ST FLOOR INCOME TAX BUILDING KOLKATA 700071 ------------ Advocate for : MS. A NEOG Advocate for : ASSTT.S.G.I. appearing for THE DEPUTY COMMISSIONER OF INCOME TAX (BP) AND ORS. WP(C)/4387/2022 SAILEN DAS AND ANR. S/O LT. KRISHNA KANTA DAS R/O HOUSE NO. 4 BY LANE NO. 6 P.O. LACHIT NAGAR P.S. PALTAN BAZAR Page No.# 3/12 GUWAHATI-781007 2: BHAGYA KALITA R/O PIYOLI PHUKAN ROAD REHABARI GUWAHATI ASSAM-781008 VERSUS THE DEPUTY COMMISSIONER OF INCOME TAX (BP) AND ORS. GUWAHATI O/O DEPUTY COMMISSIONER OF INCOME TAX (BP) GUWAHATI AAYKAR BHAWAN CHRISTIAN BASTI G.S. ROAD GUWAHATI-781005 2:THE JIONT COMMISSIONER OF INCOME TAX (BPU) GUWAHATI O/O DEPUTY COMMISSIONER OF INCOME TAX (BP) GUWAHATI AAYKAR BHAWAN CHRISTIAN BASTI G.S. ROAD GUWAHATI-781005 3:THE ADJUDICATING AUTHORITY APPOINTED UNDER SECTION 7 OF THE PROHIBITION OF BENAMI PROPERTY TRANSACTIONS ACT 1988 WITH ITS OFFICE AT 10-B MIDDLETON ROW 1ST FLOOR INCOME TAX BUILDING KOLKATA 700071 ------------ Advocate for : MS. A NEOG Advocate for : ASSTT.S.G.I. appearing for THE DEPUTY COMMISSIONER OF INCOME TAX (BP) AND ORS. BEFORE HONOURABLE MR. JUSTICE SANJAY KUMAR MEDHI JUDGMENT Date : 16-12-2022 A common challenge has been made in these three writ petitions and accordingly, the same are being disposed of by this common judgment. 2. The petitioners have assailed the orders issued under Section 24 (4) (6) (i) of the Page No.# 4/12 Prohibition of Benami Property Transactions Act, 1988 (hereinafter referred to as the Act) and the notice passed under Section 24 (1), inter alia attaching the properties of the petitioners provisionally until passing of the order by the Adjudicating Authority under Section 26 (3) of the Act. The primary contention of the petitioners is that an incorrect and illegal conclusion has been arrived at by the authorities that the petitioner no. 1 in each of the three cases were benami holders of property or its beneficiary. The grounds of violation of the principles of natural justice have also been taken as, according to the petitioners, their replies were not properly considered and they were not given an effective opportunity to defend themselves. Allegation of recording the statement of the petitioners in duress has also been made. 3. Though the aforesaid issues would have required a detailed deliberation, this Court has been informed that recently a development has taken place in the form of a judgment of the Hon’ble Supreme Court taking a cue of which, these writ petitions can be disposed of without going deep into the merits of the dispute. However, for the sake of convenience, the basic facts of these writ petitions may be narrated as follows. WP(C)/4385/2022 4. There are two petitioners in this case. The petitioner no. 1 is one Shri Banamali Das against whom, the allegation is of being a benami holder and the petitioner no. 2 is one Shri Bhagya Kalita, who is the beneficial owner. It has been projected that two plots of land were purchased by the petitioner no. 1 in the years 2009 and 2015 and thereafter, warehouses were constructed on the same and those were given on lease. On 31.01.2022, the Deputy Commissioner of Income Tax (BP), Guwahati had issued summons to the petitioner no. 1 directing him to attend and submit certain information in connection with proceedings under the Act. Thereafter notices were issued to the petitioner no. 1 to appear before the authorities for recording of statements in connection with a proceeding under Section 19 of the Act and Page No.# 5/12 ultimately, such statements were recorded before the respondent authorities on 25.03.2022. However, on 30.03.2022 show cause notice under Section 24 (1) of the Act was issued followed by the order of attachment dated 31.03.2022 under Section 24 (3). Thereafter various communications were exchanged between the parties whereby the petitioners had requested for providing copies of the purported statement which were extracted by coercion. In the meantime, time was sought for by the petitioners to reply to the show cause notice. Ultimately, the petitioners had to file WP(C)/3246/2022 which was disposed of by this Court vide order dated 23.05.2022 allowing the petitioners to submit their replies to the show cause notice dated 30.03.2022 within a period of 10 days and it was further clarified not to give effect the attachment order in view of the clear undertaking given by the petitioners that the process will start afresh from the stage of procedure laid down in Section 24 (1) of the Act. Subsequently, the petitioners submitted their replies by contending that the impugned action was without jurisdiction and therefore, null and void. Finally, the authorities vide the impugned order dated 15.06.2022 had passed an order of attachment of the properties and assets till the passing of the order by the Adjudicating Authority under Section 26 (3) of the Act. WP(C)/4387/2022 5. There are two petitioners in this case. The petitioner no. 1 is one Shri Sailen Das against whom, the allegation is of being a benami holder and the petitioner no. 2 is one Shri Bhagya Kalita, who is the beneficial owner. It has been projected that two plots of land were purchased by the petitioner no. 1 in the years 2009 and 2015 and thereafter, warehouses were constructed on the same and those were given on lease. On 31.01.2022, the Deputy Commissioner of Income Tax (BP), Guwahati had issued summons to the petitioner no. 1 directing him to attend and submit certain information in connection with proceedings under the Act. Thereafter notices were issued to the petitioner no. 1 to appear before the authorities for recording of Page No.# 6/12 statements in connection with a proceeding under Section 19 of the Act and ultimately, such statements were recorded before the respondent authorities on 25.03.2022. However, on 30.03.2022 show cause notice under Section 24 (1) of the Act was issued followed by the order of attachment dated 31.03.2022 under Section 24 (3). Thereafter various communications were exchanged between the parties whereby the petitioners had requested for providing copies of the purported statement which were extracted by coercion. In the meantime, time was sought for by the petitioners to reply to the show cause notice. Ultimately, the petitioners had to file WP(C)/3248/2022 which was disposed of by this Court vide order dated 23.05.2022 allowing the petitioners to submit their replies to the show cause notice dated 30.03.2022 within a period of 10 days and it was further clarified not to give effect the attachment order in view of the clear undertaking given by the petitioners that the process will start afresh from the stage of procedure laid down in Section 24 (1) of the Act. Subsequently, the petitioners submitted their replies by contending that the impugned action was without jurisdiction and therefore, null and void. Finally, the authorities vide the impugned order dated 15.06.2022 had passed an order of attachment of the properties and assets till the passing of the order by the Adjudicating Authority under Section 26 (3) of the Act. WP(C)/4390/2022 6. There are two petitioners in this case. The petitioner no. 1 is one Shri Ganesh Chandra Das against whom, the allegation is of being a benami holder and the petitioner no. 2 is one Shri Bhagya Kalita, who is the beneficial owner. It has been projected that two plots of land were purchased by the petitioner no. 1 in the years 2009 and 2015 and thereafter, warehouses were constructed on the same and those were given on lease. On 31.01.2022, the Deputy Commissioner of Income Tax (BP), Guwahati had issued summons to the petitioner no. 1 directing him to attend and submit certain information in connection with proceedings under the Act. Thereafter Page No.# 7/12 notices were issued to the petitioner no. 1 to appear before the authorities for recording of statements in connection with a proceeding under Section 19 of the Act and ultimately, such statements were recorded before the respondent authorities on 25.03.2022. However, on 30.03.2022 show cause notice under Section 24 (1) of the Act was issued followed by the order of attachment dated 31.03.2022 under Section 24 (3). Thereafter various communications were made between the parties whereby the petitioners had requested for providing copies of the purported statement which were extracted by coercion. In the meantime, time was sought for by the petitioners to reply to the show cause notice. Ultimately, the petitioners had to file WP(C)/3245/2022 which was disposed of by this Court vide order dated 23.05.2022 allowing the petitioners to submit their replies to the show cause notice dated 30.03.2022 within a period of 10 days and it was further clarified not to give effect the attachment order in view of the clear undertaking given by the petitioners that the process will start afresh from the stage of procedure laid down in Section 24 (1) of the Act. Subsequently, the petitioners submitted their replies by contending that the impugned action was without jurisdiction and therefore, null and void. Finally, the authorities vide the impugned order dated 15.06.2022 had passed an order of attachment of the properties and assets till the passing of the order by the Adjudicating Authority under Section 26 (3) of the Act. 7. Shri PK Goswami, learned Senior Counsel has submitted that a three Judges Bench of the Hon’ble Supreme Court in a case of Union of India Vs. Ganpati Dealcom Pvt. Ltd., reported in 2022 SCC OnLine SC 1064 has laid down certain guidelines on the applicability of the Benami Transactions (Prohibition) Amendment Act, 2016. It may be mentioned that by the Amended Act of 2016, a criminal offence was introduced in the form of Section 3 and Section 5 of the Act. The Hon’ble Supreme Court in the aforesaid decision had observed that the date of purchase of the property, alleged to have been made benami, was 02.05.2011 whereas the date of the Page No.# 8/12 notice under Section 24 (1) was 29.08.2017. The Hon’ble Supreme Court had held that Sections 3 and 4 of the Act to be inoperative and also the fact that the amendment is prospective in nature. In other words, the amendment would be effective only from 25.10.2016. For ready reference, the relevant paragraphs of the judgment of the Hon’ble Supreme Court containing the date of purchase and date of the notice are extracted: “5. On 02.05.2011, the respondent-company purchased a property in its name from various sellers for a total consideration of Rs. 9,44,00,000/-. It is said that the consideration for the aforesaid purchase was paid from the capital of the company. On 31.03.2012, 99.9% of the respondent-company shareholdings were acquired by M/s. PLD Properties Pvt. Ltd. and M/s. Ginger Marketing Pvt. Ltd. at a discounted price of Rs. 5/- per share for a total amount of Rs. 19,10,000/-. It is a matter of fact that the two directors of the respondent- company (viz. Shruti Goenka and Ritu Goenka) also held directorship in the subsequent purchaser company. 6. Accordingly, on 29.08.2017, the Deputy Commissioner of Income Tax (Adjudicating Authority) issued a notice to the respondent-company invoking Section 24(1) of the 2016 Act to show cause as to why the aforesaid property should not be considered as Benami property and the respondent company as Benamidar within the meaning of Section 2(8) of the 2016 Act. On 06.09.2017, the respondent-company replied to the aforesaid show-cause notice denying that the scheduled property is a Benami property.” 8. The Hon’ble Supreme Court, after discussing all the decided cases and the provisions of law, has settled the law, the relevant paragraphs of which are extracted hereinbelow: Page No.# 9/12 “61. Third, it is fairly admitted by the learned ASG, Mr. Vikramjit Banerjee appearing for the Union of India, that the criminal provision was never utilized as there was a significant hiatus in enabling the functioning of such a provision. ……….. ……….. 63. The criminal provision under Section 3(1) of the 1988 Act has serious lacunae which could not have been cured by judicial forums, even through some form of harmonious interpretation. A conclusion contrary to the above would make the aforesaid law suspect to being overly oppressive, fanciful and manifestly arbitrary, thereby violating the ‘substantive due process’ requirement of the Constitution. 64. Coming to Section 5 of the 1988 Act, it must be noted that the acquisition proceedings contemplated under the earlier Act were in rem proceedings against benami property. We may note that, jurisprudentially, such in rem proceedings transfer the guilt from the person who utilized a property which is a general harm to the society, to the property itself. ……….. ……….. ……….. 68. At this stage, we may only note that when a Court declares a law as unconstitutional, the effect of the same is that such a declaration would render the law not to exist in the law books since its inception. It is only a limited exception under Constitutional law, or when substantial actions have been undertaken under such unconstitutional laws that going back to the original position would be next to impossible. In those cases alone, would this Court take recourse to the concept of ‘prospective overruling’. 69. From the above, Section 3 (criminal provision) read with Section 2(a) and Section 5 (confiscation proceedings) of the 1988 Act are overly broad, disproportionately harsh, and operate without adequate safeguards in place. Page No.# 10/12 Such provisions were still-born law and never utilized in the first place. In this light, this Court finds that Sections 3 and 5 of the 1988 Act were unconstitutional from their inception. ……….. ……….. ………. 128. When we come to the present enactment, history points to a different story wherein benami transactions were an accepted form of holding in our country. In fact, the Privy Council had, at one point of time, praised the sui generis evolution of the doctrine of trust in the Indian law. The response by the Government and the Law Commission to curb benami transactions was also not sufficient as it was conceded before this Court that Sections 3 and 5 of the 1988 Act in reality, dehors the legality, remained only on paper and were never implemented on ground. Any attempt by the legislature to impose such restrictions retroactively would no doubt be susceptible to prohibitions under Article 20(1) of the Constitution. 129. Looked at from a different angle, continuation of only the civil provisions under Section 4, etc., would mean that the legislative intention was to ensure that the ostensible owner would continue to have full ownership over the property, without allowing the real owner to interfere with the rights of benamidar. If that be the case, then without effective any enforcement proceedings for a long span of time, the rights that have crystallized since 1988, would be in jeopardy. Such implied intrusion into the right to property cannot be permitted to operate retroactively, as that would be unduly harsh and arbitrary. ……. Conclusion 130. In view of the above discussion, we hold as under: … … … e) Concerned authorities cannot initiate or continue criminal prosecution or confiscation proceedings for transactions entered into prior to the coming into Page No.# 11/12 force of the 2016 Act, viz., 25.10.2016. As a consequence of the above declaration, all such prosecutions or confiscation proceedings shall stand quashed. f) As this Court is not concerned with the constitutionality of such independent forfeiture proceedings contemplated under the 2016 Amendment Act on the other grounds, the aforesaid questions are left open to be adjudicated in appropriate proceedings.” 9. The learned Senior Counsel has submitted that in the instant case, 7 numbers of sale deeds are involved and there is no dispute that all the sale deeds were prior to the year 2016. It is also not in dispute that the notice under Section 24 is dated 30.03.2022. Shri Goswami, learned Senior Counsel, accordingly submits that following the law laid down by the Hon’ble Supreme Court regarding the prospective application of the Amended Act of 2016, this Court is not required to enter into the merits and on the ground held by the Supreme Court, the impugned notices are liable to be declared inoperative in law and accordingly be set aside. 10. Shri SC Keyal, learned Standing Counsel, Income Tax Department submits that the Department has many contentions to advance so far as the merits of the dispute is concerned. However, he fairly submitted that in view of the law laid down by the Hon’ble Supreme Court in the case of Ganpati Dealcom Pvt. Ltd. (supra), he would not join issues. However, the learned Standing Counsel submits that if any interference is made that should be only on the ground of prospective application of the Amended Act of 2016 and not on merits. 11. The contentions advanced on behalf of the contesting parties have been duly considered and the materials placed before this Court have been carefully examined. 12. Though contentious issues have been raised in these petitions which require elaborate deliberations, this Court is of the opinion that in view of the clear law laid Page No.# 12/12 down by the Hon’ble Supreme Court in the case of Ganpati Dealcom Pvt. Ltd. (supra), such deliberations are not at all required, as the same would otherwise, cause prejudice to either of the parties. However, in view of the undisputed fact that the transactions in question in these cases being of a period prior to 2016, the amendment of the Act made in the year 2016 would not be applicable and therefore, the impugned notices under Section 24 of the Act are not sustainable in law. Accordingly, the impugned notices are set aside and the writ petitions are allowed. 13. The writ petitions are, accordingly disposed of. No order as to costs. JUDGE Comparing Assistant "