Bhagya Kalita v. 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, Gu

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. WP(C)/4390/2022 GANESH CHANDRA DAS AND ANRS/O LT. DADHIRAM DAS R/O MEGHALI PATH PUB SARANIA P.O. AND P.S. CHANDMARI GUWAHATI-781003 2: BHAGYA KALITAR/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 AUTHORITYAPPOINTED 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 NEOGAdvocate 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 GUWAHATI-7810072: BHAGYA KALITAR/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 AUTHORITYAPPOINTED 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 NEOGAdvocate for : ASSTT.S.G.I. appearing for THE DEPUTY COMMISSIONER OF INCOME TAX (BP) AND ORS. BEFORE HONOURABLE MR. JUSTICE SANJAY KUMAR MEDHI Date : 16-12-2022 JUDGMENT A common challenge has been made in these three writ petitions andaccordingly, 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 Prohibition of Benami Property Transactions Act, 1988 (hereinafter referred to as theAct) and the notice passed under Section 24 (1), inter alia attaching the properties ofthe petitioners provisionally until passing of the order by the Adjudicating Authorityunder Section 26 (3) of the Act. The primary contention of the petitioners is that anincorrect and illegal conclusion has been arrived at by the authorities that thepetitioner no. 1 in each of the three cases were benami holders of property or itsbeneficiary. The grounds of violation of the principles of natural justice have also beentaken as, according to the petitioners, their replies were not properly considered andthey were not given an effective opportunity to defend themselves. Allegation ofrecording the statement of the petitioners in duress has also been made. 3. Though the aforesaid issues would have required a detailed deliberation, thisCourt has been informed that recently a development has taken place in the form of ajudgment of the Hon’ble Supreme Court taking a cue of which, these writ petitions canbe disposed of without going deep into the merits of the dispute. However, for thesake 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 BanamaliDas against whom, the allegation is of being a benami holder and the petitioner no. 2is one Shri Bhagya Kalita, who is the beneficial owner. It has been projected that twoplots of land were purchased by the petitioner no. 1 in the years 2009 and 2015 andthereafter, 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 issuedsummons to the petitioner no. 1 directing him to attend and submit certaininformation in connection with proceedings under the Act. Thereafter notices wereissued to the petitioner no. 1 to appear before the authorities for recording ofstatements in connection with a proceeding under Section 19 of the Act and ultimately, such statements were recorded before the respondent authorities on25.03.2022. However, on 30.03.2022 show cause notice under Section 24 (1) of theAct was issued followed by the order of attachment dated 31.03.2022 under Section24 (3). Thereafter various communications were exchanged between the partieswhereby the petitioners had requested for providing copies of the purported statementwhich were extracted by coercion. In the meantime, time was sought for by thepetitioners to reply to the show cause notice. Ultimately, the petitioners had to fileWP(C)/3246/2022 which was disposed of by this Court vide order dated 23.05.2022allowing the petitioners to submit their replies to the show cause notice dated30.03.2022 within a period of 10 days and it was further clarified not to give effect theattachment order in view of the clear undertaking given by the petitioners that theprocess will start afresh from the stage of procedure laid down in Section 24 (1) of theAct. Subsequently, the petitioners submitted their replies by contending that theimpugned action was without jurisdiction and therefore, null and void. Finally, theauthorities vide the impugned order dated 15.06.2022 had passed an order ofattachment of the properties and assets till the passing of the order by theAdjudicating 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 Dasagainst whom, the allegation is of being a benami holder and the petitioner no. 2 isone Shri Bhagya Kalita, who is the beneficial owner. It has been projected that twoplots of land were purchased by the petitioner no. 1 in the years 2009 and 2015 andthereafter, 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 issuedsummons to the petitioner no. 1 directing him to attend and submit certaininformation in connection with proceedings under the Act. Thereafter notices wereissued to the petitioner no. 1 to appear before the authorities for recording of WP(C)/4387/2022 5. There are two petitioners in this case. The petitioner no. 1 is one Shri Sailen Dasagainst whom, the allegation is of being a benami holder and the petitioner no. 2 isone Shri Bhagya Kalita, who is the beneficial owner. It has been projected that twoplots of land were purchased by the petitioner no. 1 in the years 2009 and 2015 andthereafter, 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 issuedsummons to the petitioner no. 1 directing him to attend and submit certaininformation in connection with proceedings under the Act. Thereafter notices wereissued 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 andultimately, such statements were recorded before the respondent authorities on25.03.2022. However, on 30.03.2022 show cause notice under Section 24 (1) of theAct was issued followed by the order of attachment dated 31.03.2022 under Section24 (3). Thereafter various communications were exchanged between the partieswhereby the petitioners had requested for providing copies of the purported statementwhich were extracted by coercion. In the meantime, time was sought for by thepetitioners to reply to the show cause notice. Ultimately, the petitioners had to fileWP(C)/3248/2022 which was disposed of by this Court vide order dated 23.05.2022allowing the petitioners to submit their replies to the show cause notice dated30.03.2022 within a period of 10 days and it was further clarified not to give effect theattachment order in view of the clear undertaking given by the petitioners that theprocess will start afresh from the stage of procedure laid down in Section 24 (1) of theAct. Subsequently, the petitioners submitted their replies by contending that theimpugned action was without jurisdiction and therefore, null and void. Finally, theauthorities vide the impugned order dated 15.06.2022 had passed an order ofattachment of the properties and assets till the passing of the order by theAdjudicating 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 GaneshChandra Das against whom, the allegation is of being a benami holder and thepetitioner no. 2 is one Shri Bhagya Kalita, who is the beneficial owner. It has beenprojected that two plots of land were purchased by the petitioner no. 1 in the years2009 and 2015 and thereafter, warehouses were constructed on the same and thosewere 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 andsubmit certain information in connection with proceedings under the Act. Thereafter WP(C)/4390/2022 6. There are two petitioners in this case. The petitioner no. 1 is one Shri GaneshChandra Das against whom, the allegation is of being a benami holder and thepetitioner no. 2 is one Shri Bhagya Kalita, who is the beneficial owner. It has beenprojected that two plots of land were purchased by the petitioner no. 1 in the years2009 and 2015 and thereafter, warehouses were constructed on the same and thosewere 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 andsubmit certain information in connection with proceedings under the Act. Thereafter notices were issued to the petitioner no. 1 to appear before the authorities forrecording of statements in connection with a proceeding under Section 19 of the Actand ultimately, such statements were recorded before the respondent authorities on25.03.2022. However, on 30.03.2022 show cause notice under Section 24 (1) of theAct was issued followed by the order of attachment dated 31.03.2022 under Section24 (3). Thereafter various communications were made between the parties wherebythe petitioners had requested for providing copies of the purported statement whichwere extracted by coercion. In the meantime, time was sought for by the petitionersto reply to the show cause notice. Ultimately, the petitioners had to fileWP(C)/3245/2022 which was disposed of by this Court vide order dated 23.05.2022allowing the petitioners to submit their replies to the show cause notice dated30.03.2022 within a period of 10 days and it was further clarified not to give effect theattachment order in view of the clear undertaking given by the petitioners that theprocess will start afresh from the stage of procedure laid down in Section 24 (1) of theAct. Subsequently, the petitioners submitted their replies by contending that theimpugned action was without jurisdiction and therefore, null and void. Finally, theauthorities vide the impugned order dated 15.06.2022 had passed an order ofattachment of the properties and assets till the passing of the order by theAdjudicating Authority under Section 26 (3) of the Act. 7. Shri PK Goswami, learned Senior Counsel has submitted that a three JudgesBench of the Hon’ble Supreme Court in a case of Union of India Vs. GanpatiDealcom Pvt. Ltd., reported in 2022 SCC OnLine SC 1064has laid down certainguidelines on the applicability of the Benami Transactions (Prohibition) AmendmentAct, 2016. It may be mentioned that by the Amended Act of 2016, a criminal offencewas introduced in the form of Section 3 and Section 5 of the Act. The Hon’bleSupreme Court in the aforesaid decision had observed that the date of purchase of theproperty, alleged to have been made benami, was 02.05.2011 whereas the date of the notice under Section 24 (1) was 29.08.2017. The Hon’ble Supreme Court had held thatSections 3 and 4 of the Act to be inoperative and also the fact that the amendment isprospective in nature. In other words, the amendment would be effective only from25.10.2016. For ready reference, the relevant paragraphs of the judgment of theHon’ble Supreme Court containing the date of purchase and date of the notice areextracted: “5. On 02.05.2011, the respondent-company purchased a property in its namefrom various sellers for a total consideration of Rs. 9,44,00,000/-. It is said thatthe consideration for the aforesaid purchase was paid from the capital of thecompany. On 31.03.2012, 99.9% of the respondent-company shareholdingswere 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 thesubsequent purchaser company. “5. On 02.05.2011, the respondent-company purchased a property in its namefrom various sellers for a total consideration of Rs. 9,44,00,000/-. It is said thatthe consideration for the aforesaid purchase was paid from the capital of thecompany. On 31.03.2012, 99.9% of the respondent-company shareholdingswere 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 thesubsequent purchaser company. 6. Accordingly, on 29.08.2017, the Deputy Commissioner of Income Tax(Adjudicating Authority) issued a notice to the respondent-company invokingSection 24(1) of the 2016 Act to show cause as to why the aforesaid propertyshould not be considered as Benami property and the respondent company asBenamidar 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 denyingthat the scheduled property is a Benami property.” 8. The Hon’ble Supreme Court, after discussing all the decided cases and theprovisions of law, has settled the law, the relevant paragraphs of which are extractedhereinbelow: “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 andmanifestly 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 acquisitionproceedings 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 thisCourt 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. Such provisions were still-born law and never utilized in the first place. In thislight, this Court finds that Sections 3 and 5 of the 1988 Act were unconstitutional from their inception. ……….. ……….. ………. 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. Such provisions were still-born law and never utilized in the first place. In thislight, 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 imposesuch 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 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 AmendmentAct 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 ofsale deeds are involved and there is no dispute that all the sale deeds were prior tothe year 2016. It is also not in dispute that the notice under Section 24 is dated30.03.2022. Shri Goswami, learned Senior Counsel, accordingly submits that followingthe law laid down by the Hon’ble Supreme Court regarding the prospective applicationof the Amended Act of 2016, this Court is not required to enter into the merits and onthe ground held by the Supreme Court, the impugned notices are liable to be declaredinoperative in law and accordingly be set aside. 10.Shri SC Keyal, learned Standing Counsel, Income Tax Department submits thatthe Department has many contentions to advance so far as the merits of the dispute isconcerned. However, he fairly submitted that in view of the law laid down by theHon’ble Supreme Court in the case of Ganpati Dealcom Pvt. Ltd. (supra), he wouldnot join issues. However, the learned Standing Counsel submits that if any interferenceis made that should be only on the ground of prospective application of the AmendedAct of 2016 and not on merits. 11.The contentions advanced on behalf of the contesting parties have been dulyconsidered and the materials placed before this Court have been carefully examined. 12.Though contentious issues have been raised in these petitions which requireelaborate deliberations, this Court is of the opinion that in view of the clear law laid 11.The contentions advanced on behalf of the contesting parties have been dulyconsidered and the materials placed before this Court have been carefully examined. 12.Though contentious issues have been raised in these petitions which requireelaborate deliberations, this Court is of the opinion that in view of the clear law laid 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, causeprejudice to either of the parties. However, in view of the undisputed fact that thetransactions in question in these cases being of a period prior to 2016, theamendment 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