M/S.marg Realities Limited,(Now Known As M/S.digital Accelerator Limited) v. The Deputy Commissioner Of Income Tax (Benami Prohibition),Room

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 30.06.2022 CORAM : THE HONOURABLE MR.JUSTICE R.MAHADEVANANDTHE HONOURABLE MR.JUSTICE J.SATHYA NARAYANA PRASAD WRIT APPEAL NOS.1257 TO 1261 OF 2022AND C.M.P.NOS.7951, 7954, 7955, 7956 & 7957 OF 2022 M/s.Marg Projects and Infrastructure Ltd,Represented by its Authorised Signatory,Mr.R.B.Srinivasan,57/2B, Sai Subhodaya Apartment,East Coast Road,Thiruvanmiyur,Chennai – 600 041. .. Appellant/Petitioner in W.A.No.1257 of 2022 M/s.Marg Capital Markets Limited,Represented by its Authorised Signatory,Mr.R.B.Srinivasan,57/2B, Sai Subhodaya Apartment,East Coast Road,Thiruvanmiyur,Chennai – 600 041. .. Appellant/Petitioner in W.A.No.1258 of 2022 M/s.Venus Meridian Agencies Private Limited,Represented by its Authorised Signatory,Mr.R.B.Srinivasan,No.28, 3[rd] Floor,Bashya Karlu Street, Kondithiope,Chennai – 600 079. .. Appellant/Petitioner in W.A.No.1259 of 2022 M/s.Global Infoserv Limited,Represented by its Authorised Signatory,Mr.R.B.Srinivasan,57/2B, Sai Subhodaya Apartment,East Coast Road,Thiruvanmiyur,Chennai – 600 041. .. Appellant/Petitioner in W.A.No.1260 of 2022 M/s.Marg Realities Limited,(Now known as M/s.Digital Accelerator Limited),Represented by its Authorised Signatory,Mr.R.B.Srinivasan,57/2B, Sai Subhodaya Apartment,East Coast Road,Thiruvanmiyur,Chennai – 600 041... Appellant/Petitioner in W.A.No.1261 of 2022 Versus 1.The Deputy Commissioner of Income Tax (Benami Prohibition),Room No.104, 1[st] Floor,Income Tax Investigation Wing Building,No.108, M.G.Road, Nungambakkam,Chennai – 600 034. 2.The Adjudicating Authority,(Under the Prohibition of Benami Property Transactions Act, 1989),Room No.26, 4[th] Floor,Jeevan Deep Building, Parliament Street,New Delhi. Writ Appeals filed under Clause 15 of the Letters Patent toset aside the common order dated 25.10.2021 passed inW.P.Nos.8150, 8149, 8148, 8147 & 8146 of 2020. Prayer in W.P.Nos.8150, 8149, 8148, 8147 & 8146 of 2020:-Writ Petitions filed under Article 226 of the Constitutionof India for issuance of Writs of Certiorari or any otherappropriate writ application or order under Article 226 of theConstitution of India calling for the records on the file of the1st respondent in order Nos. 46, 48, 45, 47, 44 / DCIT (BP) /2019-20 and quash the impugned order dated 29.01.2020 passedu/s.24(4) of the prohibition of Benami Property Transactions Act1988 as illegal arbitrary and without jurisdiction respectively. For Appellant : Mr.R.Sivaramanin all W.As.For Respondents : Mrs.M.SheelaSpecial Public Prosecutor(Income Tax)in all W.As. R.MAHADEVAN, J. COMMON JUDGMENT These writ appeals arise from a common order dated25.10.2021 passed by the learned Judge in a batch of writpetitions viz., W.P.Nos.8150, 8149, 8148, 8147 & 8146 of 2020,filed by the appellants herein. 2.The relief sought in the aforesaid writ petitions is toissue a writ of certiorari to call for the records from the fileof the first respondent pertaining to the orders dated29.01.2020 passed under section 24(4) of the Prohibition ofBenami Property Transactions Act, 1988 (hereinafter referred toas “the Act”) and quash the same as illegal, arbitrary andwithout jurisdiction. For Appellant : Mr.R.Sivaramanin all W.As.For Respondents : Mrs.M.SheelaSpecial Public Prosecutor(Income Tax)in all W.As. R.MAHADEVAN, J. COMMON JUDGMENT These writ appeals arise from a common order dated25.10.2021 passed by the learned Judge in a batch of writpetitions viz., W.P.Nos.8150, 8149, 8148, 8147 & 8146 of 2020,filed by the appellants herein. 2.The relief sought in the aforesaid writ petitions is toissue a writ of certiorari to call for the records from the fileof the first respondent pertaining to the orders dated29.01.2020 passed under section 24(4) of the Prohibition ofBenami Property Transactions Act, 1988 (hereinafter referred toas “the Act”) and quash the same as illegal, arbitrary andwithout jurisdiction. 3.1. According to the appellants, they are involved in thebusiness of real estate and developing infrastructure projectsincluding ports, SEZ's, hotels, malls, etc. In the month ofNovember, 2017, a search was conducted in the business premisesof the appellants consequent to the search in the case ofMrs.V.K.Sasikala. During the course of the same, variousdocuments were impounded and sworn statements were recorded.Consequently, the appellants received show cause notices dated01.11.2019 issued by the first respondent under section 24(1)alleging that they are benamidars for the identified beneficialowner viz., Mrs.V.K.Sasikala with respect to their shares heldin M/s. Digital Accelerators Limited and they were called uponto reply on or before 18.11.2019 as to why they should not beheld to be benamidars. In response, the appellants raisedobjections to the proposal to treat the shares as benamiproperties stating that the transactions were reversed.Subsequently, the first respondent by communication dated05.12.2019, directed the appellants to produce the requireddocuments, to which, the appellants relied on the letter dated14.12.2019 submitted by M/s.Digital Accelerator Ltd andrequested the first respondent to consider the same as response. 3.2. The appellants further averred that in suchcircumstances, without furnishing the documents, which have beenrelied upon by the first respondent and without providing anyopportunity to the appellants to cross examine the witnesses,the first respondent has passed the orders dated 29.01.2020under section 24(4) of the Act, for continuance of theprovisional attachment of the properties till the order of theAdjudicating Authority is passed under section 26(3) of the Act.Subsequently, they made reference to the second respondent undersection 24(5) of the Act on 30.01.2020. Following the same, thesecond respondent has issued notices dated 12.02.2020 undersection 26(1) calling upon the appellants to appear for enquiry. 3.3. In such circumstances, the appellants invoked thejurisdiction under Article 226 of the Constitution of India byfiling writ petitions, to quash the orders passed by the firstrespondent under section 24(4) of the Act. However, the learnedJudge has dismissed all the writ petitions along with othercases, vide the order dated 25.10.2021. Therefore, these writappeals by the appellants/writ petitioners. 3.3. In such circumstances, the appellants invoked thejurisdiction under Article 226 of the Constitution of India byfiling writ petitions, to quash the orders passed by the firstrespondent under section 24(4) of the Act. However, the learnedJudge has dismissed all the writ petitions along with othercases, vide the order dated 25.10.2021. Therefore, these writappeals by the appellants/writ petitioners. 4.1. Mr.R.Sivaraman, learned counsel for the appellants inall the appeals, submitted that the appellants were not at allinvolved in the alleged transactions, which the first respondentare treating as benami transactions. According to the learnedcounsel, the shareholders have not received any considerationwhich was to be received on or before 30.04.2017 as per theMemorandum of Understanding and hence, the shares were nottransferred and the shareholders continue to hold the shares inM/s.Digital Accelerator Limited. With respect to the originalshare certificate found with the third party, it is submittedthat the certificates were given as surety for the materialsstored at M/s.Digital Accelerator Limited and hence, the entiretransactions are only commercial in nature and in any event, itcannot be treated as benami transactions as contemplated underthe Act. Thus, it would be inappropriate to call the appellants,who are the rightful owners of the shares, to be benamidars,merely because the cash in demonetized currencies was thrust onduring the fag end of the demonetization period to the promotersof the company. 4.2. The learned counsel for the appellants furthercontended that even though the appellants sought for thedocuments that have been relied upon by the first respondent forinitiating the impugned proceedings and requested for providingan opportunity to cross examine the persons, whose statementshave been referred to in the show cause notices, the firstrespondent has failed to consider the same, but passed theorders under section 24(4) of the Act, which were impugned inthe writ petitions and proceeded further by making referenceunder section 24(5) to the second respondent. Such action of thefirst respondent is against the principles of natural justiceand contrary to the provisions of law. However, the learnedJudge erred in holding that the process and procedure asenvisaged for provisional attachment under section 24 is of anarrower compass, when compared with the process of adjudicationto follow thereafter. 4.3. The learned counsel for the appellants also contendedthat as per section 24(4)(a)(ii) of the Act, the firstrespondent is also empowered to revoke the entire proceedingsinitiated under section 24 of the Act, if the appellants areable to satisfy that the transactions are not benami in nature. However, the first respondent has conducted the proceedings inan arbitrary manner, without following due process of law. Thelearned Judge also failed to take note of the same and erred indismissing the writ petitions filed by the appellants.Therefore, the learned counsel sought to allow these writappeals by setting aside the order of the learned Judge. 4.3. The learned counsel for the appellants also contendedthat as per section 24(4)(a)(ii) of the Act, the firstrespondent is also empowered to revoke the entire proceedingsinitiated under section 24 of the Act, if the appellants areable to satisfy that the transactions are not benami in nature. However, the first respondent has conducted the proceedings inan arbitrary manner, without following due process of law. Thelearned Judge also failed to take note of the same and erred indismissing the writ petitions filed by the appellants.Therefore, the learned counsel sought to allow these writappeals by setting aside the order of the learned Judge. 5.On the contrary, the learned Special Public Prosecutor(Income-tax) appearing for the respondents, reiterating thecontentions that were placed before the writ court, submittedthat sufficient materials were gathered in the course of searchof the premises, both that of the appellants as well as ofMrs.V.K.Sasikala and it is only thereafter, the first respondenthas passed the impugned orders in terms of Section 24(4) of theAct. The appellants were heard prior to passing of the ordersand their replies were considered. Thus, the first respondentwas satisfied that there was prima facie material available toshow that the appellants are benamidars. Adding further, thelearned counsel submitted that it is not mandatory to conduct anenquiry before the issuance of show cause notice, when thematterials are deemed sufficient and the IO having reasons tobelieve the same. The first respondent during the course of theproceedings, asked for certain documents, which were notfurnished by the appellants. Therefore, the first respondentafter proper application of mind and having 'reasons tobelieve', has passed the orders impugned in the writ petitionsand therefore, the same were rightly upheld by the learned Judgein the writ proceedings. It is also submitted that the firstrespondent, who armed with the sufficient materials to proceedagainst the appellants, has initiated the impugned proceedingsas per law, after providing the required documents to theappellants to file their submissions, in adherence to theprinciples of natural justice; and as such, the order of thelearned Judge directing the respondents to continue theproceedings, while dismissing the writ petitions, does not callfor any interference by this court. 6.Heard both sides and perused the materials available onrecord. 7.At the outset, it is but necessary to refer to theprovisions of law for effective adjudication. The BenamiTransactions (Prohibition) Act, 1988, was enacted to prohibitbenami transactions and the right to recover property heldbenami. The said Act makes it clear that all the properties heldbenami shall be subject to acquisition by such authority in suchmanner and after following such procedure as may be prescribed;and no amount shall be payable for the acquisition of anyproperty held benami. It also provides a mechanism and procedurefor confiscation of property held benami. Section 24 deals with notice and attachment of property involved in benamitransaction, which reads as follows: “24.Notice and attachment of property involved inbenami transaction.- (1)Where the Initiating Officer, on the basis ofmaterial in his possession, has reason to believe thatany person is a benamidar in respect of a property, hemay, after recording reasons in writing, issue anotice to the person to show cause within such time asmay be specified in the notice why the property shouldnot be treated as benami property. (2)Where a notice under sub-section(1) specifiesany property as being held by a benamidar referred toin that sub-section, a copy of the notice shall alsobe issued to the beneficial owner if his identity isknown. notice and attachment of property involved in benamitransaction, which reads as follows: “24.Notice and attachment of property involved inbenami transaction.- (1)Where the Initiating Officer, on the basis ofmaterial in his possession, has reason to believe thatany person is a benamidar in respect of a property, hemay, after recording reasons in writing, issue anotice to the person to show cause within such time asmay be specified in the notice why the property shouldnot be treated as benami property. (2)Where a notice under sub-section(1) specifiesany property as being held by a benamidar referred toin that sub-section, a copy of the notice shall alsobe issued to the beneficial owner if his identity isknown. (3)Where the Initiating Officer is of the opinionthat the person in possession of the property heldbenami may alienate the property during the periodspecified in the notice, he may, with the previousapproval of the Approving Authority, by order inwriting, attach provisionally the property in themanner as may be prescribed, for a period notexceeding ninety days from the last day of the monthin which the notice under sub-section (1) is issued. (4)The Initiating Officer, after making suchinquires and calling for such reports or evidence ashe deems fit and taking into account all relevantmaterials, shall, within a period of ninety days fromthe last day of the month in which the notice undersub-section (1) is issued - (a)where the provisional attachment has been madeunder sub-section (3)- (i)pass an order continuing the provisionalattachment of the property with the prior approval ofthe Approving Authority, till the passing of the orderby the Adjudicating Authority under sub-section (3) ofsection 26; or (ii)revoke the provisional attachment of theproperty with the prior approval of the ApprovingAuthority; (b)where provisional attachment has not been madeunder sub-section (3)-(i)pass an order provisionally attaching theproperty with the prior approval of the Approving Authority, till the passing of the order by theAdjudicating Authority under sub-section (3) ofsection 26; or (ii)decide not to attach the property asspecified in the notice, with the prior approval ofthe Approving Authority. [Explanation.- For the purposes of this section,in computing the period of limitation, the periodduring which the proceeding is stayed by an order orinjunction of any Court shall be excluded: Provided that where immediately after theexclusion of the aforesaid period, the period oflimitation referred to in sub-section (4) available tothe Initiating Officer for passing order of attachmentis less than thirty days, such remaining period shallbe deemed to be extended to thirty days: Provided further that where immediately after theexclusion of the aforesaid period, the period oflimitation referred to in sub-section (5) available tothe Initiating Officer to refer the order ofattachment to Adjudicating Authority is less thanseven days, such remaining period shall be deemed tobe extended to seven days.] (5)Where the Initiating Officer passes an ordercontinuing the provisional attachment of the propertyunder sub-clause (i) of clause (a) of sub-section (4)or passes an order provisionally attaching theproperty under sub-clause (i) of clause (b) of thatsub-section, he shall, within fifteen days from thedate of the attachment, draw up a statement of thecase and refer it to the Adjudicating Authority." Provided further that where immediately after theexclusion of the aforesaid period, the period oflimitation referred to in sub-section (5) available tothe Initiating Officer to refer the order ofattachment to Adjudicating Authority is less thanseven days, such remaining period shall be deemed tobe extended to seven days.] (5)Where the Initiating Officer passes an ordercontinuing the provisional attachment of the propertyunder sub-clause (i) of clause (a) of sub-section (4)or passes an order provisionally attaching theproperty under sub-clause (i) of clause (b) of thatsub-section, he shall, within fifteen days from thedate of the attachment, draw up a statement of thecase and refer it to the Adjudicating Authority." A reading of the aforesaid provision would show that as persection 24(1), when the Initiating Officer based on thematerials in his possession, has reason to believe that anyperson is a benamidar in respect of a property, he may afterrecording reasons in writing, issue a notice to the person toshow cause as to why the property should not be treated asbenami property. Sub section (3) to section 24 states that theInitiating Officer, who is of the opinion that the person inpossession of the property held behami, may alienate theproperty during the period specified in the notice, may, withthe previous approval of the Approving Authority, by order inwriting, attach the property provisionally, for a period of 90days from the last day of the month in which the notice undersection 24(1) is issued. According to section 24(4)(a)(i), theInitiating Officer, after conducting enquiry and calling forreports / evidence and taking into account all the relevantmaterials, shall pass an order continuing the provisionalattachment of the property till the passing of the order by the Adjudicating Authority under sub section (3) of section 26.Under section 24(4)(a)(ii), the Initiating Officer may revokethe provisional attachment of the property with the priorapproval of the Approving Authority. Section 24(5) requires theInitiating Officer, who passes an order continuing theprovisional attachment of the property under section 24(4)(a)(i), to draw up a statement of the case and refer it to theAdjudicating Authority, within fifteen days from the date of theattachment. 8.As noticed earlier, the appellants in the writproceedings, questioned the action of the first respondent undersection 24(4)(a)(i) of the Act, in ordering continuance of theattachment made under section 24(3) till the final order undersection 26(3) is passed by the Adjudicating Authority. Uponconsidering the rival submissions and the decisions relied on bythe parties, the learned Judge has dismissed the writ petitionsfiled by the appellants, along with other connected cases, bythe common order dated 25.10.2021 and the findings of thelearned Judge are profitably extracted below: “65.The nature of the transactions in questionhave to be established by the petitioner before theauthorities upon the respondents discharging theinitial burden cast upon them to furnish the primaryevidences available with them to the effect that theproperty is benami in nature. This is a rebuttablepresumption and the effectiveness of the rebuttal willdepend on the evidences furnished by the noticees tothe authorities. 66.In my considered view, therefore, the enquirycontemplated at the stage of initial investigation isonly preliminary, based upon prima facie reasons andconclusions. A detailed verification of the evidencesas regards whether the transactions were benami orotherwise can, and must only be undertaken in thecourse of adjudication and not at the stage ofpreliminary enquiry. 67..... 66.In my considered view, therefore, the enquirycontemplated at the stage of initial investigation isonly preliminary, based upon prima facie reasons andconclusions. A detailed verification of the evidencesas regards whether the transactions were benami orotherwise can, and must only be undertaken in thecourse of adjudication and not at the stage ofpreliminary enquiry. 67..... 68.The thrust of the petitioner's case is thealleged insufficiency of materials as well as the factthat the evidences gathered are unreliable. However,and at the risk of repetition, the enquiry conductedunder section 24 is only a preliminary enquiry and theuse of the phrase 'reason to believe' only indicates aprima facie satisfaction that all was not well asregards a particular transaction. In the present case,the trajectory of events as has been noticed by me inthe preceding paragraphs of this order do not lead tothe conclusion that the respondents had no reasons atall to justify the invocation of section 24. 69.Yet another ground taken by the petitioners isas regards the denial of opportunity to cross examinethe parties at the stage of investigation. As regardsthis, the respondents deny that such opportunity wassought for by all petitioners. In any event, theyreiterate that opportunity for cross examination willbe granted, as apporpriate, in the course ofadjudication proceedings. 70....71.... 72.... 73.Thus, the process and procedure as envisagedfor provisional attachment under section 24 is of anarrower compass when compared with the process ofadjudication to follow thereafter. That apart, not allthe petitioners before me appear to have sought anopportunity to cross examine witnesses. It would thussuffice to state that it is open to the petitioners tomake such request for cross-examination once they havebeen supplied with the relied upon documents at thetime of adjudication, and such request, if and whenmade, will be considered by the respondents inaccordance with law. 74.The argument that it is only when fullconsideration is paid, that enquiry under PBPT Act maybe commenced, is left open to be decided in the courseof adjudication. On the aspect of demonetization,there is no question that currency notes of the valueof Rs.500/- and Rs.1000/-, once demonetized, do notconstitute legal tender and it is a plausible argumentto state that 'consideration' must comprise of legaltender alone. 75.However, the mode of payment employed asbetween the parties and the actual amount transactedare pure questions of fact that are best left forverification and determination by the authoritiesconcerned. This question is also left open fordecision in the course of adjudication by theauthorities. 76.The challenge to the impugned orders undersection 24(4) fails and the respondents are directedto proceed in line with sections 25 and 26 forthwith.All writ petitions are dismissed. ... 77.Therespondentswillcontinuewithadjudication under section 25 and complete proceedingsin light with the mandate of that section. Noticesunder section 26 of the PBPT Act will be issued withina period of 30 days from date of issue of these ordersaccompanied with all material that the respondentsrely on and proceedings under section 26 shall be conducted scrupulously in line with the mandatethereof. 78.The petitioners shall be affored fullopportunity to put forth all contentions before theadjudicating authority who shall take note of the sameand pass speaking orders in accordance with law. ...” 77.Therespondentswillcontinuewithadjudication under section 25 and complete proceedingsin light with the mandate of that section. Noticesunder section 26 of the PBPT Act will be issued withina period of 30 days from date of issue of these ordersaccompanied with all material that the respondentsrely on and proceedings under section 26 shall be conducted scrupulously in line with the mandatethereof. 78.The petitioners shall be affored fullopportunity to put forth all contentions before theadjudicating authority who shall take note of the sameand pass speaking orders in accordance with law. ...” 9.As already stated, the grievance of the appellants is thatthe first respondent did not furnish the entire documents reliedon by them, nor provided any opportunity to the appellants tocross examine the persons whose statements have been referred toin the impugned proceedings and as such, the orders passed undersection 24(4) of the Act, which were impugned in the writpetitions, are arbitrary, illegal and violative of theprinciples of natural justice. Whereas, it is the specific standof the respondents that they have supplied the requireddocuments to the appellants and that, there is no provision forproviding an opportunity to cross examine the witnesses fromwhom they have collected the information regarding benamiproperties, at the preliminary stage and therefore, the questionof violation of the principles of natural justice does not ariseherein. 10.Concededly, in the notices dated 01.11.2019 issued undersection 24(1) of the Act, the first respondent has set out thereasons for forming an opinion that the appellants arebenamidars in respect of the properties in question; and theywere called upon to show cause as to why the properties shouldnot be treated as benami properties, on or before 18.11.2019.Though the appellants raised their objections to the same,failed to produce the documents called for by the firstrespondent, to show that the alleged transactions were reversedsubsequently, but they complained that there is no fair play onthe part of the respondent authorities, while passing ordersunder section 24(4) of the Act. 11.As a matter of fact, it is to be pointed out that theapplicability of the principles of natural justice and fairplay, depends on the facts and circumstances of each case and issubjected to statutory provisions; and that, the proceedingsunder section 24 only require a recording of prima facie opinionas to the benami nature of the transaction. It is an admittedcase that the appellants failed to furnish the necessarydocuments to substantiate their stand that the allegedtransactions are not benami transactions. As such, the firstrespondent, after making enquiry and calling for reports orevidence and taking into account all the relevant materials,has, with the prior approval of the Approving Authority, passedthe separate orders under section 24(4), continuing theprovisional attachment of the properties till the passing of the order by the Adjudicating Authority under section 26(3), whichare purely provisional in nature. That apart, the provisions oflaw mandate the respondent authorities to furnish suchdocuments, particulars or evidence and provide an opportunity ofbeing heard to the appellants only at the stage of adjudicationproceedings; and there is no provision under the Act to providean opportuity to the appellants to cross examine the witnessesat the preliminary stage. In this connection, the findings ofthe first respondent in the orders dated 29.01.2020 passed undersection 24(4) of the Act, at paragraph 8.15, are quotedhereunder, for ready reference: order by the Adjudicating Authority under section 26(3), whichare purely provisional in nature. That apart, the provisions oflaw mandate the respondent authorities to furnish suchdocuments, particulars or evidence and provide an opportunity ofbeing heard to the appellants only at the stage of adjudicationproceedings; and there is no provision under the Act to providean opportuity to the appellants to cross examine the witnessesat the preliminary stage. In this connection, the findings ofthe first respondent in the orders dated 29.01.2020 passed undersection 24(4) of the Act, at paragraph 8.15, are quotedhereunder, for ready reference: “....It is to be noted that the Initiating Officerunder the Prohibition of Benami Property TransactionsAct, 1988, was not conferred upon any such authority togrant an opportunity for cross-examination of anyperson. Further, the Beneficial Owner seeks crossexamination without mentioning the points on which thecross – examination was to be held, which is beatingaround the bush. This office has initiated the benami proceedingson the basis of sworn statements recorded by the quasi-judicial authorities (income tax authorities) and otherevidences, which are treated as primary evidences.Further, there is no retraction possible for thedeponent based on the theory of Estoppel, unless it issubstantiated by any material evidence. There is nosuch material evidences placed on record by thebenamidar and beneficial owner. It is pertinent to notethat as the Initiating Officer was not the examination-in-chief for the sworn statements recorded under theIncome-tax Act, the question of cross-examination doesnot arise. However, opportunities were given time andagain, to furnish their material evidences which havenot been utilised by them. It is placed on record that the entire proceedingshave been initiated based on the evidences collectedand sufficient opportunities have been given to theBeneficial Owner and Benamidar to offer theirobjections on those evidences. In addition to theabove, the current proceedings under the PBPT Act aretime bound one. The peculiar situation is that theBeneficial Owner is in Central Prison, Bengaluru.” 12.At this juncture, it will be useful to refer to thefollowing decisions, in which, it was categorically held that“the exercise of cross-examination commences only after theproceedings for adjudication have commenced”; and “a writpetition should not be entertained against a mere show causenotice”. (i)The Hon'ble Supreme Court in K.L. Tripathi v. StateBank of India and Ors. , has observed asfollows: 12.At this juncture, it will be useful to refer to thefollowing decisions, in which, it was categorically held that“the exercise of cross-examination commences only after theproceedings for adjudication have commenced”; and “a writpetition should not be entertained against a mere show causenotice”. (i)The Hon'ble Supreme Court in K.L. Tripathi v. StateBank of India and Ors. , has observed asfollows: “42. It is true that all actions against a party whichinvolve penal or adverse consequences must be inaccordance with the principles of natural justice butwhether any particular principle of natural justicewould be applicable to a particular situation or thequestion whether there has been any infraction of theapplication of that principle, has to be judged, in thelight of facts and circumstances of each particularcase. The basic requirement is that there must be fairplay in action and the decision must be arrived at in ajust and objective manner with regard to the relevanceof the materials and reasons. We must reiterate againthat the rules of natural justice are flexible andcannot be put on any rigid formula. In order to sustaina complaint of violation of principles of naturaljustice on the ground of absence of opportunity ofcrossexamination, it has to be established thatprejudice has been caused to the appellant by theprocedure followed. See in this connection theobservations of this Court in the case of JankinathSarangi v. State of Orissa. MANU/SC/0502/1969 : (1970)ILLJ 356 SC Hidayatullah, C J.", observed there at page394 of the report "there is no doubt that if theprinciples of natural justice are violated and there isa gross case this Court would interfere by strikingdown the order of dismissal; but there are cases andcases. We have to look to what actual prejudice hasbeen caused to a person by the supposed denial to himof a particular right." Judged by this principle, inthe background of the facts and circumstances mentionedbefore, we are of the opinion that there has been noreal prejudice caused by infraction of any particularrule of natural justice of which appellant before uscomplained in this case. See in this connectionobservations of this Court in the case of Union ofIndia 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 imprisonedwithin the strait-jacket of a rigid formula and itsapplication depends upon the nature of the jurisdictionconferred on the administrative authority, upon thecharacter of the rights of the persons affected, thescheme and policy of the statute and Ors. relevantcircumstances disclosed in a particular case". See alsoin 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 645In our opinion, in the background of facts andcircumstances of this case, the nature of investigationconducted in which the appellant was associated, therehas been no infraction of that principle. In thepremises, for the reasons aforesaid, there has been inthe facts and circumstances of the case, no infractionof any principle of natural justice by the absence of aformal opportunity of cross-examination Neither cross-examination nor the opportunity to lead evidence by thedelinquent is an integral part of all quasi judicialadjudications.” (ii) In an order dated 29.11.2010 passed in Special AppealNo.741 of 2010 (MANU/UP/2113/2010) in the case of Commissionerof Central Excise v. Parmarth Iron Pvt Ltd, it was observed bythe Allahabad High Court as follows: (ii) In an order dated 29.11.2010 passed in Special AppealNo.741 of 2010 (MANU/UP/2113/2010) in the case of Commissionerof Central Excise v. Parmarth Iron Pvt Ltd, it was observed bythe Allahabad High Court as follows: “15.The question, however, before us is, does theRespondent have a right to call upon the Appellants tomake available the witnesses for cross-examinationeven before they being examined or their statementsrelied upon by the Department in proceedings inadjudication.... Is, therefore, an Assessee entitled to cross examinethe witnesses at the stage of filing a reply to theshow cause notice? A show cause notice is issued onthe basis of uncontested material available before theAssessing Authority, who based thereon, has arrived ata prima facie finding whether a show cause noticeought to be issued or not. The material, thus, whichhas to be considered is, untested and uncorroborated.A party is called upon to reply to the said show causenotice in order to enable the Revenue to know thestand of the Assessee, in the context of the materialproduced as to whether the proceedings should befurther proceeded with. It is an opportunity to theparty being proceeded against to disclose any materialthat the party may have to rebut the prima facieopinion. Even if, the Assessee fails to reply to theshow cause notice, that does not amount to an'admission' of the contents of the show cause noticein the absence of any statutory provision and it isalways open to an Assessee ot cross-examine thewitnesses whose statements are relied upon or soughtto be examined on behalf of the Revenue. At the stage of show cause notice, there is noadjudication. It is only a step in the process ofadjudication. The show cause notice by itself is notan order of assessment. The order of assessment will be passed only after considering the evidence and thematerial, which is placed before the quasi judicialauthority/ Tribunal. Therefore, as the show causenotice is based on prima facie material andconstitutes a prima facie opinion, that does notresult into an order of adjudication. The question,therefore, of an Assessee being entitled to cross-examination, even before the adjudication hascommenced, in our opinion, surely would not arise. Itis only after the adjudication proceedings havecommenced pursuant to the show cause notice and if theRevenue seeks to rely upon the statements ordocuments, then the principles of natural justicewould require in the absence of any statutoryprovision, that the person whose statement wasrecorded is made available for cross-examination totest the veracity of the statement.16.We, therefore, have no hesitation in holding, thatthere is no requirement in the Act or Rules, nor dothe principles of natural justice and fair playrequire that the witnesses whose statements wererecorded and relied upon to issue the show causenotice, are liable to be examined at that stage. Ifthe Revenue choose not to examine any witnesses inadjudication, their statements cannot be considered asevidence. However, if the Revenue choose to rely onthe statements, then in that event, the persons whosestatements are relied upon have to be made availablefor cross-examination for the evidence or statement tobe considered. 17.We are, therefore, clearly of the opinion thatthere is no right, procedurally or substantively or incompliance with natural justice and fair play, to makeavailable the witnesses whose statements were recordedfor cross examination before the reply to the showcause notice is filed and before adjudicationcommences. The exercise of cross-examination commencesonly after the proceedings for adjudication havecommenced.” (iii)In Century NF Castings v. Union of India [2011 SCCOnline P&H 17614 : (2011) 269 ELT 221], it was held by thePunjab and Haryana High Court as follows: 17.We are, therefore, clearly of the opinion thatthere is no right, procedurally or substantively or incompliance with natural justice and fair play, to makeavailable the witnesses whose statements were recordedfor cross examination before the reply to the showcause notice is filed and before adjudicationcommences. The exercise of cross-examination commencesonly after the proceedings for adjudication havecommenced.” (iii)In Century NF Castings v. Union of India [2011 SCCOnline P&H 17614 : (2011) 269 ELT 221], it was held by thePunjab and Haryana High Court as follows: “6.We are unable to accept the submission. Nodoubt cross-examination is a valuable right, the effectof not permitting the cross examination depends uponthe facts and circumstances of each case. At thisinterim stage when decision on merits is yet to betaken, we do not find any ground to adjudicate upon the question whether absence of cross examination willaffect the case of the petitioner. Question can beexamined at appropriate stage by the concernedauthorities and by this court, if necessary.” (iv) In Arun Kumar Mishra v. Union of India [2014 SCC OnlineDel 493], it was held by the Delhi High Court as follows: “13.We are unable to agree. The AdjudicatingAuthority is currently seized of and in seisin of thecomplaints. We, at this stage, do not know as to whichway the order of the Adjudicating Authority will go. Itcannot also be said at this stage whether theAdjudicating Authority even if deciding against theappellants will rely upon the material before it quawhich the appellants claim a right of cross-examination. All this can be known only when theAdjudicating Authority passes an order and qua which ifthe appellants are aggrieved, the appellants shall havetheir statutory remedy. Any interference by us at thisstage in the proceedings of which the AdjudicatingAuthority is seized is thus uncalled for and wouldresult in a situation which the Supreme Court haswarned the High Courts to avoid. Reference may also bemade to Union of India v. Kunisetty Satyanarayana AIR2007 SC 906 reiterating that the reason why ordinarilya writ petition should not be entertained against amere show cause notice is that at that stage the writpetition may be held to be premature - a mere showcause notice does not give rise to any cause of action,because it does not amount to an adverse order whichaffects the rights of any party unless the same hasbeen issued by a person having no jurisdiction to do soand it is quite possible that after considering thereply to the show cause notice or after holding anenquiry, the authority concerned may drop theproceedings. It was further held that a writ lies onlywhen some right is infringed and a mere show causenotice does not infringe the right of any one and it isonly when a final order adversely affecting the partyis passed, that the said party can be said to be havingany grievance. The Supreme Court held that the writjurisdiction being discretionary, should not ordinarilybe exercised by quashing a show cause notice. (Emphasis supplied) (v)An order dated 03.08.2017 passed by the learned SingleJudge of the Madhya Pradesh High Court in WP.No.10280 of 2017 inthe 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, 1988and the same was rejected. The relevant portion of the order,reads as follows: (Emphasis supplied) (v)An order dated 03.08.2017 passed by the learned SingleJudge of the Madhya Pradesh High Court in WP.No.10280 of 2017 inthe 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, 1988and the same was rejected. The relevant portion of the order,reads as follows: “6....In my view, the principles of naturaljustice are codified in terms of sub section (6) ofsection 26 of the Act. The impugned order is subjectto judicial review before the adjudicating authority.The order passed by the adjudicating authority can beassailed before the appellate tribunal constitutedunder section 31 of the Act. The order of theappellate tribunal can also be called in question bypreferring appeal to the High Court within a period of60 days. A microscopic reading of provisions make itclear that principles of natural justice are reducedin writing in the shape of amendment in the said Act.The amended provisions contains a complete code initself. 7.In this backdrop, it is to be seen whether atthis stage any interference is warranted by thiscourt. In C.B.Gautam the order of compulsory purchaseunder section 269-UD(1) of Income Tax Act was servedon the petitioner without issuing any show causenotice and without giving any opportunity to him. TheApex Court in teh aforesaid factual back dropinterfered in the matter. In the said case, neithershow cause notice was given nor reasons were assignedin the impugned compulsory purchase order. In thepresent case show cause notice has been issued,opportunity has been given to the petitioner. Theorder impugned is provisional/tentative in nature. Itis subject to judicial review by adjudicatingauthority. If order of adjudicating authority goesagainst the petitioner, the further forums of judicialreview of the said order is available to thepetitioner before the appellate tribunal and thenbeforethiscourt.Hence,againstthetentative/provisional order, no interference iswarranted by this court at this stage. As per thescheme of the Act, the petitioner can raise allpossible grounds before the adjudicating authority.The adjudicating authority is best suited andstatutorily obliged to consider all relevant aspects.Thus, at this stage no case is made out forinterference. Moreso, when adjudicating authority hasalready fixed the hearing on 23.08.2017. Resultantly,the petition is dismissed.” (Emphasis supplied) The aforesaid order got a stamp of approval by the DivisionBench in WA.No.704 of 2017 decided on 16.08.2017 and the findingof the same would run thus: “We do not find any merit in the present appeal.It is the Adjudicating Authority who is to decide thequestion of Benami