RAJESH EXPORTS LIMITED V. DEPUTY COMMISSIONER OF INCOME TAX

WP/18548/2017

AI Insights

The case involves Rajesh Exports Limited, which challenged a show cause notice issued under the Prohibition of Benami Property Transactions Act, 1988, as amended in 2016. The petitioner argued that the transactions in question occurred between 2005 and 2007, well before the amendment came into effect, and thus should not be subjected to the amended provisions. The respondent, Deputy Commissioner of Income Tax, contended that the notice was valid under the amended act. However, both parties acknowledged that the legal issues were covered by the Supreme Court's decision in Union of India v. Ganpati Dealcom Pvt. Ltd., which held that the amended provisions are not retrospective.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 752473 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 03-08-2023
• Assessment Year: misc
• Other Referred Cases: Union of India v. Ganpati Dealcom Pvt. Ltd. (Civil Appeal No. 5783/2022), W.P. No.14512/2021 and connected cases, W.P. No.27322/2019 and connected cases
• Laws Referred To: Prohibition of Benami Property Transactions Act, 1988, Benami Transactions (Prohibition) Amendment Act, 2016, Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: DILIP
• Assessee Lawyers: SHASHWATH
• Keywords: Benami property; Legal Notice; Mandamus; Prohibition of Benami Property Transactions Act; Show cause notice
• Section: 133A; 24

Judgement Text

" - 1 - NC: 2023:KHC:27255 WP No. 18548 of 2017 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 3RD DAY OF AUGUST, 2023 BEFORE THE HON'BLE MR JUSTICE R. NATARAJ WRIT PETITION NO. 18548 OF 2017 (GM-RES) BETWEEN: RAJESH EXPORTS LIMITED NO.4, BATAVIA CHAMBERS, KUMARA PARK ROAD, BENGALURU - 560 001 REP. BY ITS AUTHORISED SIGNATORY MALLIKARJUN B.G. …PETITIONER (BY SRI. SHASHWATH S.P., ADVOCATE FOR SRI. CHANDRASHEKAR K., ADVOCATE) AND: DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 1(1)(1) AND INITIATING OFFICER UNDER THE PBPT ACT, 1988, KARNATAKA AND GOA REGION, BENGALURU-560095. …RESPONDENT (BY SRI. DILIP M., ADVOCATE FOR SRI. K.V. ARAVIND, ADVOCATE) THIS WP IS FILED UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH SHOW CAUSE NOTICE BEARING F.NO.Benami Property/ShowCause/2016-17/8 DATED 20.02.2017 AT ANNEXURE-A PURPORTED TO BE UNDER SECTION 24 OF THE PROHIBITION OF BENAMI PROPERTY TRANSACTIONS ACT, 1988 (AS AMENDED IN 2016) AS ILLEGAL AND ABINITIO VOID AND ETC. THIS PETITION, COMING ON FOR PRELIMINARY HEARING IN 'B' GROUP, THIS DAY, THE COURT MADE THE FOLLOWING: Digitally signed by SUMA Location: HIGH COURT OF KARNATAKA - 2 - NC: 2023:KHC:27255 WP No. 18548 of 2017 ORDER The petitioner has called in question the legality of the show cause notice bearing No.Benami property/ShowCause/2016-17/8 dated 20.02.2017 purportedly issued under Section 24 of the Prohibition of Benami Property Transactions Act, 1988 (for short, 'the Act of 1988'). The petitioner has also sought for a writ in the nature of mandamus to restrain the respondent from initiating any action under the Benami Transactions (Prohibition) Act, 1988 as amended by the Benami Transactions (Prohibition) Amendment Act, 2016 (for short, 'the Act of 2016'), concerning transactions that were brought about prior to 01.11.2016. 2. The petitioner claims that it intended to aggregate land for its manufacturing plant and identified land with the assistance of a person named Mr. N. Srinivasa/Mr. N. Srinivas and had entered into a memorandum of understanding with him on 08.07.2005. The said Mr. N. Srinivas had executed a power of attorney - 3 - NC: 2023:KHC:27255 WP No. 18548 of 2017 dated 22.08.2005. Further, it is contended that it was agreed that the petitioner would pay the sale consideration directly to the owners of the land and that Mr.N. Srinivas had agreed to this understanding and that he would execute various documents to safeguard the investment and interest of the petitioner. Accordingly, several properties were purchased by the petitioner between 14.09.2005 and 13.06.2007 in the name of Mr. N. Srinivas. It further claimed that after such purchase, steps were to be taken for conversion of the land which were thereafter transferred to the petitioner. It claimed that out of the extent of land purchased in the above manner, some lands are transferred to the name of the petitioner. 3. When things stood thus, a survey was conducted by the respondent on 02.07.2007 at the premises of the petitioner under Section 133A of the Income Tax Act, 1961. Consequent thereto, an assessment order was passed treating the payment made for the purchase of property in the name of Mr. N. Srinivas - 4 - NC: 2023:KHC:27255 WP No. 18548 of 2017 as a loan transaction. It was claimed that at the relevant time when the transaction was brought about, the Benami Transactions (Prohibition) Act, 1988 was in force which however did not contain provisions to take out proceedings for confiscation. After the Benami Transactions (Prohibition) Act, 1988 was amended, the respondent issued the impugned notice under Section 24 of the Act of 1988 (as amended in 2016) to the petitioner to show cause as to why action under the relevant provisions of the Act of 1988 should not be initiated against it. 4. Learned counsel for the petitioner, Mr. Shashwath S.P., submits that the transactions were for the years 2005 to 2007 and thus, the question of invocation of the provisions of the Benami Transactions (Prohibition) Act, 1988 as amended by the Act of 2016 is impermissible. He also submits that this is also the position of law declared by the Hon’ble Apex Court in the case of Union of India v. Ganpati Dealcom Pvt. Ltd. (Civil Appeal No. 5783/2022 disposed off on 23.08.2022). He also sought - 5 - NC: 2023:KHC:27255 WP No. 18548 of 2017 support from a judgment of a coordinate Bench of this Court in W.P. No.14512/2021 and connected cases (disposed off on 19.09.2022) as well as judgment of a coordinate Bench of this Court in W.P. No.27322/2019 and connected cases (disposed off on 05.09.2022) and contended that the notice issued by the respondent is unsustainable in the eyes of law. 5. Learned counsel for the respondent did not dispute that the questions raised by the petitioner in this petition are fully covered on all fours by the judgment of the Hon’ble Apex Court in the case of Ganpati Dealcom Pvt. Ltd. (supra). He also did not dispute that a coordinate Bench of this Court in W.P. No.27322/2019 and connected cases has followed the said judgment and has held that the provisions of Benami Transactions (Prohibition) Act, 1988 as amended by the Act of 2016 is prospective and cannot include transactions which were brought about prior to 2016. - 6 - NC: 2023:KHC:27255 WP No. 18548 of 2017 In that view of the matter, the petition is allowed. The impugned show cause notice bearing No.Benami property/ShowCause/2016-17/8 dated 20.02.2017 issued by the respondent is quashed. Sd/- JUDGE SMA List No.: 1 Sl No.: 47 "