Recent Judgment Of The Apex Court In Union Ofindia And Another v. M/S.ganapati Dealcom Pvt.ltd

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE V.G.ARUN TUESDAY, THE 10 DAY OF JANUARY 2023 / 20TH POUSHA, 1944WP(C) NO. 14693 OF 2021 PETITIONER/S: JOYALUKKAS INDIA PRIVATE LIMITED,DOOR NO.40/2096 A & B, PEEVES TRITON, MARINE DRIVE, SHANMUGHAM ROAD, ERNAKULAM, COCHIN-682 031, REPRESENTED BY ITS DIRECTOR AND AUTHORISEDSIGNATORY P.D.JOSE.BY ADVS.ASWIN GOPAKUMARANWIN GOPAKUMARNIRANJAN SUDHIRKANDAMPULLY VIKRAMNIKITHA SUSAN PAULSONPRAFUL SURENDRAN RESPONDENT/S: 1THE PRINCIPAL DIRECTOR GENERAL OF INCOME TAX, (INVESTIGATION), AARYA BHANGI PINNACLE, SAHODARAN AYYAPPAN ROAD, ELAMKULAM, KOCHI-682 020.2THE ASSISTANT COMMISSIONER OF INCOME TAX (BP UNIT), KOCHI,GROUND FLOOR, POORNIMA BUILDINGS, NEAR MANORAMAJUNCTION, PANAMPILLY NAGAR, KOCHI-682 036.BY ADVS.SHRI.P.VIJAYAKUMAR, ASG OF INDIAMANU S., ASG OF INDIA THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON30.11.2022, THE COURT ON 10.01.2023 DELIVERED THE FOLLOWING: W.P.(C) No.14693 of 2021 -2- JUDGMENT Dated this the 10[th] day of January, 2023 The petitioner, a private Limited Company engaged in jewellery business, has filed thiswrit petition seeking to quash Exts.P6 series noticesissued by the first respondent. Theshort facts are as under; The petitioner receives old gold brought for exchange by its customers as part of its business. In order to assess the value of the oldgold, it has to be melted and purified. For thispurpose, the petitioner had entered into job work agreements with goldsmiths. Payments for the above activity were made through banking channels, after deducting the tax at source. While so, on 10.01.2018, a search and seizure under Section 132 of the Income Tax Act was conducted at various premises of the petitioner.Consequently, proceedings under the Prohibitionof Benami Property Transactions Act, 1988 ('theAct') was initiated alleging that eightgoldsmiths engaged by the petitioner wereactually functioning as benami entities of thepetitioner. On initiation of the proceedings, thesecond respondent passed a provisionalattachment order under Section 24(4)(b)(i) of theAct, on the premise that the capital balance inthe account of the goldsmiths was benamiproperty. Accordingly, the goldsmiths werearrayed as benamidars and the petitioner as thebeneficial owner under Section 2(12) of the Act.Thereafter, notices were issued under Section26(1) of the Act, requiring the petitioner toproduce documents/evidences to prove that theproperty is not benami property coming within themeaning of Section 2(9)(A) of the Act. Althoughpetitioner filed the statements and documents, as -4- directed, the second respondent confirmed theprovisional attachment order as per Section 26(3)of the Act. Thereupon, the petitioner preferredappeals under Section 46 of the Act. Pending theappeals, the petitioner was issued with noticesrequiring to show cause as to why sanction shouldnot be accorded for prosecuting the petitionerfor offence under Section 3(2) of the Act. Thepetitioner responded to the notices by submittingdetailed explanations. Not being satisfied withthe explanations, the first respondent issuedExt.P6 series of notices, calling upon thepetitioner to submit detailed explanation. While admitting the appeal on 22.12.2021, thisCourt granted an interim stay of furtherproceedings pursuant to Ext.P6. 2.Learned Counsel for the petitionersubmitted that Ext.P6 notices and theproceedings proposed under Section 3 of the Actare liable to be quashed in the light of the W.P.(C) No.14693 of 2021 -5- recent judgment of the Apex Court in Union ofIndia and another v. M/s.Ganapati Dealcom Pvt.Ltd [2022 SCC OnLine 1064].Having gone through thejudgment, I find the submission to be wellfounded. 3.In M/s.Ganapati Dealcom Pvt.Ltd, the 2.Learned Counsel for the petitionersubmitted that Ext.P6 notices and theproceedings proposed under Section 3 of the Actare liable to be quashed in the light of the W.P.(C) No.14693 of 2021 -5- recent judgment of the Apex Court in Union ofIndia and another v. M/s.Ganapati Dealcom Pvt.Ltd [2022 SCC OnLine 1064].Having gone through thejudgment, I find the submission to be wellfounded. 3.In M/s.Ganapati Dealcom Pvt.Ltd, the legal question considered was whether theProhibition of the Benami Property TransactionAct, 1988, as amended by Benami Transactions(Prohibition) Amendment Act, 2016 has prospectiveeffect. After elaborate consideration, it washeld that Section 3 r/w Section 2(a) and Section5 of the 1988 Act are overly broad,disproportionately harsh and operate withoutadequatesafeguardsandarehence,unconstitutional from the inception. Based onthat finding, the Apex Court declared Section3(2) of the Amendment Act as unconstitutional. Asrightly contended by the Counsel for the W.P.(C) No.14693 of 2021 -6- petitioner, Section 3(2) of the Act having been declared unconstitutional, Ext.P6 series of notices and further proceedings thereon are liable to be quashed. In the result, the writ petition is allowed and Ext.P6 series of notices are quashed. Sd/- Scl/ V.G.ARUN JUDGE APPENDIX OF WP(C) 14693/2021 PETITIONER EXHIBITSExhibit P1 TRUE COPY OF ONE OF EIGHT PROVISIONAL ATTACHMENT ORDERS THAT ARE EXACTLY IDENTICAL ALBEIT CERTAIN FIGURES.TRUE COPY OF ONE OF THE ORDER OF THE ADJUDICATING AUTHORITY UNDER SECTION 26(3) OF THE PBPT ACT DATED 16.03.2020. Exhibit P2Exhibit P3Exhibit P4Exhibit P5Exhibit P6Exhibit P7Exhibit P8 TRUE COPY OF ONE OF THE APPEALS FILED BY THE PETITIONER UNDER SECTION 46 OF THE PBPT ACT TO APPELLATE TRIBUNAL IN NEW DELHI. TRUE COPY OF THE NOTICES DATED 25.06.2021 ISSUED BY RESPONDENT NO.1 UNDER SECTION 3(2) OF THE PBPT ACT. TRUE COPY OF ONE OF THE REPLIES DATED 14.07.2021 SUBMITTED BY THE PETITIONERTO RESPONDENT NO.1. TRUE COPIES OF THE NOTICES DATED 14.07.2021 ISSUED BY THE RESPONDENT NO.1. TRUE COPY OF THE NOTICE ISSUED BY THE 1ST RESPONDENT DATED 18/11/2021 TRUE COPY OF THE LETTER ISSUED BY THE COUNSEL FOR THE PETITIONER DATED 25/11/2021