Provisional attachment of property purchased prior to Benami Transaction (Prohibition) Amendment Act, 2016 upheld by High Court
ABCAUS Case Law Citation:
ABCAUS 3313 (2020) (05) HC
Important case law relied upon by the parties:
R Rajgopal Reddy vs. Padmini Chandrasekharran (1995) 2 SCC 630
Mangathai Ammal (Died) through L.Rs. and Others vs. Rajeswari and Others AIR 2019 SC 2918
The instant Writ was filed against the order passed by the Single Judge, who dismissed the challenge to provisional attachment of the property and the notice/proceedings under the Prohibition of Benami Property Transactions Act, 1988 (‘Act of 1988).
The appellants were husband and wife and they owned different extents of properties in different villages acquired by utilizing the funds allegedly from their own sources.
Ever since purchase/acquisition of the properties, they were stated as enjoying the same with absolute ownership, exclusive possession and clear and marketable title.
The Assistant Commissioner of Income Tax (Benami Prohibition) served the Petitioners with the notice to the effect that as per the information gathered, the above properties were to be held as ‘benami properties’ and hence the said properties were provisionally attached, till final adjudication.
The Petitioners/Appellants pointed out that the properties under question were purchased prior to the Benami Transaction (Prohibition) Amendment Act, 2016 (‘Amendment Act, 2016’) which came into force only from 01.11.2016 and hence they could not be proceeded against.
However, the ACIT regardless of the explanation offered confirmed order for provisional attachment.
Aggrieved, the Petitioner approached High Court by filing a writ petition seeking for a direction to quash the order for provisional attachment and notices/proceedings.
The main challenge raised before the learned Single Judge was that the ACIT was proceeding to ‘confiscate’ the property and that the power to confiscate the property had been brought into force only as per the Amendment Act, 2016.
According to the Petitioners, earlier, on establishing the facts and figures as to the benami nature of the property, the course of action available was only to have the property acquired without any compensation. The provision to ‘confiscate’ the property was brought in, as per the Amendment Act, 2016, which came into force only from 01.11.2016. This being the position, the above property could not be attached even provisionally in connection with any proceeding, as no confiscation of the property was possible.
The single judge however confirmed the order passed. Hence the appellants filed an appeal before the Division Bench of the Hon’ble High Court.
The Department made a reference to the clarification given by the Finance Minister in the Lok Sabha while recommending the Amendment Bill, 2016. It was the contention of the Department that the amendment made with effect from 01.11.2016 is ‘substantive’, insofar as the ‘punishment’ is concerned; whereas it is only ‘procedural’, in respect of the various steps to be pursued.
It was also pointed out that, with regard to the fate of the property, once it is established that it is ‘benami property’, there is no much difference; as, even under the old Act it was to be acquired without compensation. After the amendment, the property is liable to be confiscated, which is more or less equal in effect.
The Hon’ble High Court noted that as per the information gathered by the Initiating Officer, PBPT Act one person had allegedly purchased benami properties of more than 200 acres of land in different villages/Tehsil in the name of the Appellants herein, as detailed therein. After conducting the verification and on finding the necessity to take further steps, approval was obtained under Section 23 of the Act of 1988 from the competent authority to conduct further investigation.
Further, documents were called for from the Land Revenue Authorities and Bank statements were obtained from the Banks concerned, besides recording the statements of the Appellants. The outcome of the scrutiny done with reference to above materials was to the effect that the Appellants were not having sufficient income to purchase the above properties. It was even beyond the knowledge of the Appellants that some of such properties were registered in their names. Show cause notice was issued to the Appellants on 02.05.2019.
The Hon’ble High Court further noted that the Department after considering the replies, found that the particulars furnished by the Appellants did not reconcile with the materials on record. It was accordingly, that a prima facie finding was rendered to the effect that the matter required to be proceeded further; thus the order was passed for provisional attachment in terms of the mandate under Section 24 (5) of the Act of 1988. The order was pending final adjudication.
The Hon’ble High Court noted that no prejudice had been caused to the Appellants/Petitioners in any manner, because of the provisional attachment. This was more so, in view of the undertaking made by the Appellants that they would not alienate the properties till the adjudication is finalized.
The Hon’ble High Court stated that if the Appellants had no intention to alienate the property, they need not feel worried about the provisional attachment.
The Hon’ble High Court pointed out that what will be the course of action to be ordered by the Department on culmination of the adjudication proceedings, was a matter which was still to be ascertained. How the properties of the Appellants/Petitioners, covered were going to be dealt with was also yet to be decided. Whether any provisions of the statute which are ‘substantive’ in character would be applied retrospectively by the Department, was also not known; which could not be considered only after passing the final order.
The Hon’ble High Court opined that the very purpose of passing provisional order of attachment, pending adjudication, was only to see that no third party interest was created over the property. When the Appellants concede that they do not have any intent/idea to alienate the properties, there could not be any genuine grievance in this regard.
According ti the Hon’ble High Court the order passed was only of interim measure; which was only to sub-serve the final verdict and always subject to the outcome of the adjudication.
Accordingly, the appeal was dismissed.
Download Full Judgment Click Here >>
- Manufacturing and other operations undertaken in bonded warehouses – Clarifications
- Vivad se Vishwas-Clarification on payment where declaration is filed till 31.12.2020
- Delay in filing appeal condoned as auditor sought opinion from tax advocate who misplaced records
- Govt. Scheme for grant of ex-gratia payment of difference between compound / simple interest for 6 months
- No postponement of CA November 2020 Exams. ICAI warns of fake announcement