Madras High Court
Dinesh Chand Surana vs Deputy Commissioner Of Income Tax on 1 September, 2022
Author: R.Mahadevan
Bench: R. Mahadevan, Mohammed Shaffiq
WA Nos. 1598, 1599 and 1600 of 2018
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 01.09.2022
CORAM
THE HONOURABLE MR. JUSTICE R. MAHADEVAN
and
THE HONOURABLE MR. JUSTICE MOHAMMED SHAFFIQ
Writ Appeal Nos. 1598, 1599 and 1600 of 2018
and
CMP. Nos. 12848, 12849 and 12850 of 2018
---
Dinesh Chand Surana .. Appellant in all appeals
Versus
1. Deputy Commissioner of Income Tax
(Benami Prohibition)
Room No.104, First Floor
Income Tax Investigation Wing Building
108, M.G. Road, Nungambakkam
Chennai - 600 034.
2. Deputy Director of Income Tax
(Investigation Wing)
Unit 4 (1), Chennai
Income Tax Investigation Wing Building
108, M.G. Road, Nungambakkam
Chennai - 600 034 ..Respondents in
WA No.1598 of 2018
Deputy Commissioner of Income Tax
(Benami Prohibition)
Room No.104, First Floor
Income Tax Investigation Wing Building
108, M.G. Road, Nungambakkam .. Respondent in WA Nos.
Chennai - 600 034 1599 & 1600/2018
https://www.mhc.tn.gov.in/judis
1/28
WA Nos. 1598, 1599 and 1600 of 2018
W.A. No. 1598 of 2018:- Appeal filed under Clause 15 of Letters Patent
against the Order dated 02.07.2018 passed in WP No. 12848 of 2018 on the
file of this Court.
W.A. No. 1599 of 2018:- Appeal filed under Clause 15 of Letters Patent
against the Order dated 02.07.2018 passed in WP No. 13160 of 2018 on the
file of this Court.
W.A. No. 1600 of 2018:- Appeal filed under Clause 15 of Letters Patent
against the Order dated 02.07.2018 passed in WP No. 13161 of 2018 on the
file of this Court.
For Appellant : Mr. P.S. Raman, Senior Advocate
for Mr. R. Sivaraman
in all the appeals
For Respondents : Mrs. Sheela
Special Public Prosecutor
in all the appeals
COMMON JUDGMENT
[Judgment of the Court was delivered by R. MAHADEVAN, J] These three intra-court appeals arise from a common order dated 02.07.2018 passed by the learned Judge in WP.Nos.12848, 13160 and 13160 of 2018.
2.The appellant herein is the petitioner in all the aforesaid writ petitions and the case projected by him would run thus:
2.1. The appellant is an individual engaged in the business of steel and power and he is the Managing Director of M/s.Surana Industries Ltd & M/s.Surana Power Ltd. He is an assessee on the file of the ACIT, Central Circle https://www.mhc.tn.gov.in/judis 2/28 WA Nos. 1598, 1599 and 1600 of 2018
- 2(3), Chennai, in PAN No.AACPS3233K and has been regularly filing his return of income within the prescribed time.
2.2. While so, based on certain credible information, a search operation under section 132 of The Income Tax Act, 1961, (in short, "the Act") was conducted in the premises of M/s.Surana Corporation Limited and in his residence between 07.11.2017 and 11.11.2017 as per the instructions given by the Deputy Director of Income Tax (Investigation Wing). During the course of the same, several sworn statements were recorded, besides impounding documents at the time of inspection. According to the appellant, he is only a shareholder in M/s.Surana Corporation Limited and is not holding any position in the said company.
2.3. Subsequent to the search operation, the first respondent in WP.No.12848 of 2018 / respondent in other two writ petitions viz., Deputy Commissioner of Income Tax (Benami Prohibition) issued show cause notices dated 26.02.2018, which were served on the appellant on 01.03.2018, alleging that the appellant is the beneficial owner of the assets in the nature of wind mills acquired by M/s. Bell Tower Enterprises LLP. It was further stated in the said show cause notices that a survey under section 133A of the Act was conducted in the premises of M/s.Sayso Exim Pvt Ltd., at No.56A/1, Pillayar Koil Street, Tondiarpet, Chennai - 600 081 on 09.03.2017, during which, https://www.mhc.tn.gov.in/judis 3/28 WA Nos. 1598, 1599 and 1600 of 2018 certain documents were impounded and the statement of Mr. I. Prabhakaran, Director of M/s. Sayso Exim Private Limited and Mr. Vishnu Sharma and Mr. Purushothaman, Directors of M/s. Vinayaga Infra Pvt Ltd., were also recorded;
and on the basis of the statements recorded from the said persons, the department proceeded to issue the said show cause notices.
2.4. Upon receipt of the show cause notices, the appellant sent a reply dated 12.03.2018 and sought for copies of the complete set of documents, which are morefully relied on in the show cause notices dated 26.02.2018. However, he was not given the complete set of documents as required, but only certain copies of the documents. He again requested the respondent to furnish the remaining documents so as to enable him to submit the detailed written submission to the show cause notices, by letter dated 23.03.2018, which was not considered.
2.5. Thereafter, on 09.04.2018, without complete set of documents, the appellant filed a preliminary written submission to the show cause notices dated 26.02.2018. While so, the respondent sent a communication dated 14.05.2018, stating that the department had received additional information from the Deputy Director of Income Tax (Investigation Wing) with respect to the offences committed under the provisions of the Prohibition of Benami Property Transactions Act, 1988 (in short, "PBPT Act") and hence, calling https://www.mhc.tn.gov.in/judis 4/28 WA Nos. 1598, 1599 and 1600 of 2018 upon the appellant to submit his reply on or before 21.05.2018. In response, the appellant sent a letter dated 21.05.2018 requesting to furnish copies of his sworn statement and any other statements recorded during the search on 09.03.2017 and provide him two weeks time to send his reply.
2.6. According to the appellant, as per Section 24 (4) of the PBPT Act, the respondent is bound to pass a preliminary order of attachment within 90 days from the date of issuing the show cause notice, however, at the fag end of completion of 90 days i.e., on 27.05.2018, the respondent alleged that they had received certain additional information and hence, directed the appellant to submit his response. In the said circumstances, the appellant filed WP No. 12848 of 2018 praying to issue a Writ of Mandamus directing the first respondent to provide the entire set of documents referred to by him in his letters dated 23.03.2018 and 21.05.2018.
2.7. When the aforesaid writ petition was taken up for hearing, this court granted an order of interim stay on 23.05.2018 and posted the matter for further hearing on 05.06.2018.
2.8. In the mean while, the respondent passed separate orders dated 23.05.2018 under Section 24(4) of the PBPT Act, in respect of two different properties. Stating that when an order of interim stay was in force, the respondent ought not to have passed the orders dated 23.05.2018, the https://www.mhc.tn.gov.in/judis 5/28 WA Nos. 1598, 1599 and 1600 of 2018 appellant preferred two more writ petitions viz., WP Nos.13160 and 13161 of 2018 to quash the same.
3.1. Opposing the writ petitions, the first respondent in WP.No.12848/2018 / respondent in other two writ petitions viz., Deputy Commissioner of Income Tax (Benami Prohibition) filed a counter affidavit contending that based on the materials collected during the search under Section 132 of the Act, the show cause notices under Section 24(1) of the Act were issued to the appellant and sufficient opportunities were provided to him to make his submission. However, the appellant sought certain documents for submitting his written submissions. In response to the same, all the documents which have been relied upon by the respondent for issuance of the show cause notices, were furnished to the appellant. Yet, the appellant pleaded that the complete set of documents were not furnished to him, which is incorrect.
3.2. According to this respondent, the sworn statement of the appellant was recorded by the second respondent in WP.No.12848 of 2018 / Deputy Director of Income Tax (Investigation) in a proceeding initiated under the Income Tax Act, which is a separate office and entirely different proceedings. The fact that few findings from the same, has been shared with the office of the first respondent, should not enable the first respondent to have control over all https://www.mhc.tn.gov.in/judis 6/28 WA Nos. 1598, 1599 and 1600 of 2018 the documents in possession of the second respondent. The documents sought for by the appellant have never been relied on by the first respondent to issue the show cause notices under Section 24 (1) of the PBPT Act. If the appellant requires those documents, he can obtain it from the concerned officer and not to seek the same from the first respondent. Contrary to the same, the sworn statement recorded by the Deputy Director of Income Tax (Investigation) was sought for from the office of the Deputy Commissioner of Income Tax (Benami Prohibition), even though it was made clear that those documents were not relied on for issuing the show cause notices.
3.3. The counter affidavit further proceeds to state that whether the property in question is a benami property or not, has to be decided by the Adjudicating Authority established under the PBPT Act. The orders dated 23.05.2018 passed by the respondent are provisional in nature and the same are subject to confirmation by the adjudicating authority, after hearing all the parties concerned. Therefore, the challenge made to the provisional orders is untenable.
3.4. The first respondent also submitted that even before the order of interim stay dated 23.05.2018 granted in WP.No.12848 of 2018 was communicated to the department, the draft order was put up before the approving authority on 22.05.2018 for approval in terms of section 24(4)(a)(i) https://www.mhc.tn.gov.in/judis 7/28 WA Nos. 1598, 1599 and 1600 of 2018 and the same was passed on 23.05.2018 after getting approval. Therefore, the allegation that the first respondent passed the orders of provisional attachment of the properties dated 23.05.2018 knowing fully well about the interim order of this court, is not correct. In fact, the order dated 23.05.2018 was communicated by the learned Senior Standing Counsel and it reached the office of the first respondent only on 25.05.2018. Hence, there is no wilful negligence on the part of the first respondent in passing the orders dated 23.05.2018 under Section 24 (4) of the PBPT Act. Even otherwise, the orders dated 23.05.2018 are provisional in nature. Therefore, according to the respondent, the relief sought in the writ petitions is pre-mature and the same will have to be dismissed.
4.By order dated 02.07.2018, the learned Judge disposed of the writ petition bearing no.12848 of 2018 and dismissed the other two writ petitions viz., WP.Nos.13160 and 13161 of 2018. The relevant passage of the said order is quoted below for ready reference:
"4. In my considered view, the request for any other sworn statements taken during the survey proceedings on 09.03.2017 is absolutely vague. Apart from that, the proceedings were not conducted by the 1st respondent but by the 2nd respondent. Therefore, to seek any other sworn statements recorded by the 2nd respondent from the 1st respondent is not maintainable and therefore, such request has to be rejected and accordingly, rejected.
5. The petitioner also requests copy of sworn statement recorded from him. This statement was also recorded by the 2nd https://www.mhc.tn.gov.in/judis 8/28 WA Nos. 1598, 1599 and 1600 of 2018 respondent during the course of survey proceedings. This court is inclined to entertain the request made by the petitioner for the reason that statement which was recorded from the petitioner by the 2nd respondent during the course of survey proceedings shown to be prima facie used for issuing notice under the provisions of Benami Property Transactions Act. Therefore, this court is of the view that the provisions of natural justice is met. This statement is given especially when the matter has already culminated in an order under section 24(4) of the Act, therefore, to the said extent alone, the petitioner would be entitled for the relief. Accordingly, the 1st respondent is directed to provide the certified copy of the statement given by the petitioner in the survey proceedings which was admitted, within a period of one week from the date of receipt of a copy of this order.
6. The petitioner has filed W.P.Nos.13160 & 13161 of 2018 challenging the order dated 23.05.2018 under section 24(4) of the Act. In my considered view, the prayer sought for by the petitioner is not maintainable, since the order passed under section 24(4) of the Act is being an order of provisional attachment and the petitioner cannot be stated to have been aggrieved over such order, especially, when the adjudicating authority under the Benami Act has already initiated proceedings under section 24(4) of the Act, which is only a provisional attachment and cannot be permitted to stall the adjudication under the Act by the adjudicating authority. Therefore, the relief sought for by the petitioner in W.P.Nos.13160 & 13161 of 2018 cannot be granted.
7. In the result W.P.No.12848 of 2018 is disposed of by directing the 1st respondent to furnish certified copy of sworn statement recorded from the petitioner during course of survey proceedings, within a period of one week from the date of receipt of a copy of this order and the order of interim stay granted in this writ petition is vacated.
8. For the reasons stated, above, the relief sought for in W.P.Nos.13160 & 13161 of 2018 cannot be granted and therefore, the writ petitions are dismissed and the order of interim stay granted in these writ petitions are vacated.
9. The adjudicating authority under the Act has issued show cause notice and fixed the hearing on 02.08.2018. It is well open to the petitioner to raise all contentions before the adjudicating authority and the matter shall be proceeded in accordance with law."
5.1. Mr. P.S. Raman, learned Senior counsel appearing for the appellant in all the writ appeals would contend that as per Section 24(4)(a)(ii) of the PBPT Act, the respondent viz., Deputy Commissioner of Income Tax (Benami Prohibition) is empowered to revoke the provisional order with the https://www.mhc.tn.gov.in/judis 9/28 WA Nos. 1598, 1599 and 1600 of 2018 approval of the approving authority, if the appellant is able to prove his case. Such power includes investigation, calling for information, conducting enquiry etc. and to pass an order under Section 24 (4) of the PBPT Act. In the present case, the respondent did not furnish the sworn statements sought by the appellant in his letters dated 23.03.2018 and 21.05.2018, thereby, failed to conduct a proper enquiry in terms of Section 24 (4) of the PBPT Act. While so, the learned Judge ought to have quashed the orders dated 23.05.2018, which were impugned in the writ petition nos.13160 and 13161 of 2018. Continuing further, the learned senior counsel submitted that the appellant has been cited as a beneficial owner, however, he has not been given any opportunity to establish his case before the initiating authority himself. As such, the adjudication as contemplated under Section 26 of the PBPT Act will be insignificant inasmuch as it does not precede with a proper enquiry. It is also submitted that the very foundation of the fair investigation requires supply of all the documents that are relied upon against the person against whom such an enquiry is being conducted. As long as certain documents sought for by the appellant have been withheld by the respondent, the learned Judge ought to have directed the respondent to furnish the same to facilitate a fair investigation, but he failed to do so. Further, the learned Judge failed to appreciate that the order passed by the respondent under Section 24 (4) of the https://www.mhc.tn.gov.in/judis 10/28 WA Nos. 1598, 1599 and 1600 of 2018 PBPT Act and the subsequent reference made by the respondent before the adjudicating authority is a contemptuous order, in violation of the interim order dated 23.05.2018 passed by this Court in WP No. 12848 of 2018.
5.2. Referring to the observation made by the learned Judge that the appellant may not be aggrieved by the orders passed under Section 24 (4), the learned senior counsel for the appellant would contend that under the PBPT Act, certain class of persons are provided, who may be aggrieved by the proceedings initiated under the Act and they are (i) person specified as a benamidar therein (ii) any person referred to as the beneficial owner therein or identified as such (iii) any interested party, including a banking company and
(iv) any person, who has made a claim in respect of the property, which is the subject matter of the proceedings. In the present case, the appellant was arrayed as a beneficial owner of the benami property and therefore, he is an aggrieved party under the provisions of the PBPT Act and the same was not considered by the learned Judge, while passing the order impugned in these writ appeals. It is also submitted that taking note of the fact that with a pre-conceived notion and malafide intention, the respondent proceeded to pass orders under Section 24 (4) of the Act, without furnishing the complete set of documents to the appellant, including his sworn statements, the learned Judge ought to have set aside the said orders and remanded the matter to the https://www.mhc.tn.gov.in/judis 11/28 WA Nos. 1598, 1599 and 1600 of 2018 respondent with a direction to provide the copies of the documents sought for by the appellant, whereas, he failed to do so. Thus, the learned senior counsel sought to allow these appeals by quashing the orders impugned herein as well as in the writ petitions.
6.Per contra, the learned Senior Standing Counsel appearing for the respondent(s) would submit that as mandated under the PBPT Act, the respondent issued the show cause notices dated 26.02.2018 under Section 24(1), and provided sufficient opportunities to the appellant to make his submissions. Considering the same, the learned Judge has stated that the party cannot be said to be aggrieved as the orders of the initiating officer are only provisional in nature and full opportunity of hearing is available before the adjudicating authority. Accordingly, the appellant can very well avail the opportunity available under the PBPT Act and submit himself to the hearing before the adjudicating authority, as and when the case is posted. Adding further, it is submitted that the orders passed under Section 24 (4) of the PBPT Act are only provisional in nature, attaching the properties standing in the name of another person viz., M/s.Bell Towers LLP and the appellant being its beneficial owner cannot question the same, even before the adjudicating authority takes up the proceedings to the next stage. That apart, whether the https://www.mhc.tn.gov.in/judis 12/28 WA Nos. 1598, 1599 and 1600 of 2018 property in question is a benami property or not, shall be decided only by the adjudicating authority under the PBPT Act and the same cannot be decided in the writ court. It is also submitted by the learned senior standing counsel that the adjudicating authority has been constituted with a Chairman and 2 members on the Board. The adjudicating authority would exclusively assess and examine the validity and correctness of the preliminary order passed by the initiating authority. While so, the writ petitions are pre-mature and hence, the learned Judge is right in dismissing the same with liberty to the appellant to raise all the contentions before the adjudicating authority, besides directing the respondent to furnish the sworn statement of the appellant to him. Therefore, according to the learned senior standing counsel, the order of the learned Judge does not require any interference by this court.
7.Heard the learned counsel appearing for both sides and also perused the materials placed on record.
8.Concededly, based on the materials collected from the search operation conducted between 07.11.2017 and 11.11.2017 in the business as well as the residential premises of the appellant, he was issued with two show cause notices dated 26.02.2018 stating inter alia that he is a beneficial owner of the assets in the nature of windmills acquired by M/s.Bell Tower Enterprises LLP. https://www.mhc.tn.gov.in/judis 13/28 WA Nos. 1598, 1599 and 1600 of 2018 In the said show cause notices, a reference was made about the search conducted on 09.03.2017 in the premises of M/s. Sayso Exim Pvt Ltd. at No.56A/1, Pillayar Koil Street, Tondiarpet, Chennai - 600 081, during which certain documents were impounded and the statements of Mr.I. Prabhakaran, Director of M/s. Sayso Exim Private Limited and Mr.Vishnu Sharma and Mr. Purushothaman, Directors of M/s. Vinayaga Infra Pvt Ltd, were recorded, which according to the appellant, are unrelated to his case. Upon receipt of the show cause notices, the appellant sought copies of the complete set of documents referred to in the show cause notices as well as the sworn statement recorded from him during the course of search. It is alleged that only a part of the documents was furnished to him. Even then, the appellant filed a preliminary written submission on 09.04.2018. While so, at the fag end of completion of 90 days from the date of issuance of show cause notices, the respondent viz., Deputy Commissioner of Income Tax (Benami Prohibition) sent a letter dated 14.05.2018 stating that additional information was received from the Investigation Wing, with respect to the proceedings under the PBPT Act, and hence, calling upon the appellant to file his reply. Stating that without the complete set of documents, the appellant was unable to file his reply to the show cause notices, he preferred WP.No.12848 of 2018 and obtained an order of interim stay on 23.05.2018. On the same day, i.e., the https://www.mhc.tn.gov.in/judis 14/28 WA Nos. 1598, 1599 and 1600 of 2018 respondent passed orders under section 24(4) of the PBPT Act. Aggrieved over the same, the appellant invoked the writ jurisdiction by filing WP.Nos.13160 and 13161 of 2018. However, the learned Judge disposed the first writ petition and dismissed the other two writ petitions subsequently filed by the appellant, by the order impugned in these appeals.
9.Before proceeding further, it is but necessary to look into the relevant provisions of law, viz., Section 24 of the PBPT Act, which deals with notice and attachment of property involved in benami transaction and the same reads as follows:
“24.Notice and attachment of property involved in benami transaction.-
(1)Where the Initiating Officer, on the basis of material in his possession, has reason to believe that any person is a benamidar in respect of a property, he may, after recording reasons in writing, issue a notice to the person to show cause within such time as may be specified in the notice why the property should not be treated as benami property.
(2)Where a notice under sub-section(1) specifies any property as being held by a benamidar referred to in that sub-section, a copy of the notice shall also be issued to the beneficial owner if his identity is known.
(3)Where the Initiating Officer is of the opinion that the person in possession of the property held benami may alienate the property during the period specified in the notice, he may, with the previous approval of the Approving Authority, by order in writing, attach provisionally the property in the manner as may be prescribed, for a period not exceeding ninety days from the last day of the month in which the notice under sub- section (1) is issued.
(4)The Initiating Officer, after making such inquires and calling for such reports or evidence as he deems fit and taking into account all relevant materials, shall, within a period of ninety days from the last day of the month in which the notice under sub-section (1) is issued -
https://www.mhc.tn.gov.in/judis (a)where the provisional attachment has been made under sub- 15/28 WA Nos. 1598, 1599 and 1600 of 2018 section (3)-
(i)pass an order continuing the provisional attachment of the property with the prior approval of the Approving Authority, till the passing of the order by the Adjudicating Authority under sub-section (3) of section 26; or
(ii)revoke the provisional attachment of the property with the prior approval of the Approving Authority;
(b)where provisional attachment has not been made under sub- section (3)-
(i)pass an order provisionally attaching the property with the prior approval of the Approving Authority, till the passing of the order by the Adjudicating Authority under sub-section (3) of section 26; or
(ii)decide not to attach the property as specified in the notice, with the prior approval of the Approving Authority.
[Explanation.- For the purposes of this section, in computing the period of limitation, the period during which the proceeding is stayed by an order or injunction of any Court shall be excluded:
Provided that where immediately after the exclusion of the aforesaid period, the period of limitation referred to in sub-section (4) available to the Initiating Officer for passing order of attachment is less than thirty days, such remaining period shall be deemed to be extended to thirty days:
Provided further that where immediately after the exclusion of the aforesaid period, the period of limitation referred to in sub-section (5) available to the Initiating Officer to refer the order of attachment to Adjudicating Authority is less than seven days, such remaining period shall be deemed to be extended to seven days.] ........."
A reading of the aforesaid provision would make it clear that as per section 24(1), when the Initiating Officer based on the materials in his possession, has reason to believe that any person is a benamidar in respect of a property, he may after recording reasons in writing, issue a notice to the person to show cause as to why the property should not be treated as benami property. Sub section (3) to section 24 states that the Initiating Officer, who is of the opinion that the person in possession of the property held behami, may alienate the property during the period specified in the notice, with the previous approval of https://www.mhc.tn.gov.in/judis 16/28 WA Nos. 1598, 1599 and 1600 of 2018 the Approving Authority, by order in writing, attach the property provisionally, for a period of 90 days from the last day of the month in which the notice under section 24(1) is issued. According to section 24(4)(a)(i), the Initiating Officer, after conducting enquiry and calling for reports / evidence and taking into account all the relevant materials, shall pass an order continuing the provisional attachment 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 revoke the provisional attachment of the property with the prior approval of the Approving Authority.
10.According to the appellant, he has no relation with M/s.Bell Tower Enterprises LLP and the windmills were purchased by the said entity only by means of the valid bank auction, however, he was issued with show cause notices dated 26.02.2018 calling upon him to explain as to why the properties mentioned therein should not be treated as benami properties, which are illegal and bad in law. Further, the grievances expressed by the appellant are that though he sought the copies of complete set of documents referred to in the show cause notices, only a part of the documents were furnished to him, thereby depriving him to submit his written submissions effectively; as per section 24(4), the respondent is bound to pass a preliminary order of https://www.mhc.tn.gov.in/judis 17/28 WA Nos. 1598, 1599 and 1600 of 2018 attachment within 90 days from the date of issuing the show cause notices, i.e., on or before 27.05.2018, but at the fag end of 90 days, they sent a communication 14.05.2018 to the appellant stating that the department had received certain additional information from the Deputy Director of Income Tax (Investigation Wing) with respect to the offences committed under the provisions of PBPT Act, 1988 and hence, calling upon him to submit his reply on or before 21.05.2018. Immediately, without furnishing the complete set of documents to the appellant, the respondent passed the orders dated 23.05.2018 under section 24(4) of the PBPT Act, attaching the properties provisionally, that too, despite the order of interim stay granted in WP.No.12848 of 2018 on 23.05.2018 and the same are arbitrary, illegal and in violation of principles of natural justice. Without properly appreciating those aspects, the learned Judge erred in dismissing the writ petitions filed to quash the said orders.
11.Resisting the averments made by the appellant, the learned senior standing counsel appearing for the respondent(s) filed an affidavit of the Deputy Commissioner of Income Tax (Benami Prohibition) dated 21.06.2022, wherein it is inter alia stated as follows:
● The proceedings under section 24(1) commenced on 26.02.2018 along with a provisional attachment order under section 24(3) to prevent https://www.mhc.tn.gov.in/judis 18/28 WA Nos. 1598, 1599 and 1600 of 2018 alienation of the property and a copy of the notice was also served to the appellant in terms of section 24(2) of the PBPT Act.
● All the materials and documents that were relied upon by the respondent, were provided to the appellant, but his sworn statement was not provided to him, as the same was not relied upon in the section 24 proceedings.
● In accordance with the provisions of the PBPT Act, section 24(4) draft order was put up before the Approving Authority on 22.05.2018 as mandated under section 24(4)(a)(i) for their approval to continue the provisional attachment order passed under section 24(3) on 26.02.2018.
Thereafter, this respondent passed the orders under section 24(4) on 23.05.2018.
● Such orders dated 23.05.2018 were passed without unaware of the interim order dated 23.05.2018 passed in WP.No.12848 of 2018, which was communicated to the respondent only on 25.05.2018. By the time, the orders under section 24(4) of the PBPT Act were passed and the copies of the same were sent to tapal section for despatch. Hence, there is no wilful disobedience or deliberate violation of the order of this court dated 23.05.2018.
● Even otherwise, the orders dated 23.05.2018 passed by this respondent https://www.mhc.tn.gov.in/judis 19/28 WA Nos. 1598, 1599 and 1600 of 2018 are only provisional in nature and the appellant can very well place his submissions with supportive materials before the Adjudicating Authority, who is empowered to pass any order, with respect to the subject matter in issue, in accordance with the provisions of the PBPT Act.
Thus, according to the respondent, the orders impugned in the writ petitions, were passed, after following due process of law and the same were rightly confirmed by the learned Judge in the writ proceedings.
12.Upon considering the rival submissions, it must be stated that whether the properties provisionally attached under section 24(4) of the PBPT Act, are benami properties or not, is the subject matter of the proceedings before the Adjudicating Authority. Therefore, what is to be determined herein is, whether the orders dated 23.05.2018 passed by the respondent under section 24(4) of the PBPT Act, which were impugned in WP.Nos.13160 and 13161 of 2018, are in violation of the principles of natural justice as well as the interim order dated 23.05.2018 passed by the learned Judge in WP.No.12848 of 2018.
13.As already stated, the grievance of the appellant is that he was not furnished with the complete set of documents, whereas according to the https://www.mhc.tn.gov.in/judis 20/28 WA Nos. 1598, 1599 and 1600 of 2018 respondent, all the documents, which were relied on in the show cause notices were provided, but the sworn statement of the appellant, which was not relied on in the proceedings, was not furnished to him. After taking note of the entire aspects, the learned Judge, while disposing WP.No.12848 of 2018, directed the respondent to furnish the certified copy of the sworn statement recorded from the appellant during the course of survey proceedings, to him, within a period of one week. While doing so, the learned Judge has rightly rejected the relief sought by the appellant seeking any other sworn statements recorded during the search on 09.03.2017, as the same is absolutely vague, besides the said proceedings were not conducted by the respondent viz., Deputy Commissioner of Income Tax (Benami Prohibition), but by the Investigation Wing. It is pertinent to mention herein that applicability of the principles of natural justice and fair play, depends on the facts and circumstances of each case and is subjected to statutory provisions. In this context, it is relevant to refer to the observation of the Hon'ble Supreme Court in K.L. Tripathi v. State Bank of India and Ors. [AIR 1984 SC 273], which reads as follows:
“42. It is true that all actions against a party which involve penal or adverse consequences must be in accordance with the principles of natural justice but whether any particular principle of natural justice would be applicable to a particular situation or the question whether there has been any infraction of the application of that principle, has to be judged, in the light of facts and circumstances of each particular case. The basic requirement is that there must be fair play in action and the decision must be arrived at in a just and objective manner with regard to the relevance of the materials and reasons. We must reiterate again that https://www.mhc.tn.gov.in/judis 21/28 WA Nos. 1598, 1599 and 1600 of 2018 the rules of natural justice are flexible and cannot be put on any rigid formula. In order to sustain a complaint of violation of principles of natural justice on the ground of absence of opportunity of crossexamination, it has to be established that prejudice has been caused to the appellant by the procedure followed. See in this connection the observations of this Court in the case of Jankinath Sarangi v. State of Orissa. MANU/SC/0502/1969 : (1970) ILLJ 356 SC Hidayatullah, C J.", observed there at page 394 of the report "there is no doubt that if the principles of natural justice are violated and there is a gross case this Court would interfere by striking down the order of dismissal; but there are cases and cases. We have to look to what actual prejudice has been caused to a person by the supposed denial to him of a particular right." Judged by this principle, in the background of the facts and circumstances mentioned before, we are of the opinion that there has been no real prejudice caused by infraction of any particular rule of natural justice of which appellant before us complained in this case. See in this connection observations of this Court in the case of Union of India 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 imprisoned within the strait-jacket of a rigid formula and its application depends upon the nature of the jurisdiction conferred on the administrative authority, upon the character of the rights of the persons affected, the scheme and policy of the statute and Ors. relevant circumstances disclosed in a particular case". See also in 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 645 In our opinion, in the background of facts and circumstances of this case, the nature of investigation conducted in which the appellant was associated, there has been no infraction of that principle. In the premises, for the reasons aforesaid, there has been in the facts and circumstances of the case, no infraction of any principle of natural justice by the absence of a formal opportunity of cross-examination Neither cross-examination nor the opportunity to lead evidence by the delinquent is an integral part of all quasi judicial adjudications.” Therefore, it cannot be said that there is violative of principles of natural justice, as alleged by the appellant.
14.As regards the allegation levelled by the appellant that the orders under section 24(4) were passed in total disrespect to the interim order of this https://www.mhc.tn.gov.in/judis 22/28 WA Nos. 1598, 1599 and 1600 of 2018 court dated 23.05.2018 in WP.No.12848 of 2018, it is to be noted that both the orders of the respondent and the interim order of this court were on the same day i.e., 23.05.2018. During the course of argument, the learned senior standing counsel appearing for the respondent drew the attention of this court to the documents enclosed in the additional typed set of papers dated 21.06.2022, which disclose that the Deputy Commissioner of Income Tax (Benami Prohibition) has placed the draft of section 24(4) orders before the Approving Authority for approval on 22.05.2018 and after obtaining approval from the approving authority, passed the orders dated 23.05.2018 under section 24(4) of the PBPT Act. In the mean while, the appellant filed WP.No.12848 of 2018 and obtained an order of interim stay on 23.05.2018, which was communicated to the respondent by the learned senior standing counsel only on 25.05.2018, according to the counter affidavit filed by them. Such being the factual matrix, this court finds merit and acceptance in the contention made on the side of the respondent that the initiating officer came to aware of the order of interim stay granted by this court on 23.05.2018 in WP.No.12848 of 2018, only after passing the orders under section 24(4) of the PBPT Act and hence, there is no deliberate or wilful disobedience of the order of this court.
https://www.mhc.tn.gov.in/judis 23/28 WA Nos. 1598, 1599 and 1600 of 2018
15.That apart, it is important to note that the proceedings under section 24 only require a recording of prima facie opinion as to the benami nature of the transaction and the respondent is required to furnish the documents, particulars or evidence and provide an opportunity of being heard to the appellants only at the stage of adjudication proceedings. Accordingly, the first respondent, after making enquiry and calling for reports or evidence and taking into account all the relevant materials, has, with the prior approval of the Approving Authority, passed the orders dated 23.05.2018 under section 24(4), continuing the provisional attachment of the properties till the passing of the order by the Adjudicating Authority under section 26(3), which are purely provisional in nature. While passing such orders as an interim measure to protect the interest of Revenue, there is no hastiness or procedural violation on the part of the respondent, as alleged by the appellant. Having noted the same in proper perspective, the learned Judge has rightly dismissed the writ petitions filed by the appellant challenging the said orders passed by the respondent under section 24(4) of the PBPT Act, however, granting liberty to the appellant to raise all the contentions before the adjudicating authority.
16.At this juncture, it would be appropriate to refer to the following https://www.mhc.tn.gov.in/judis 24/28 WA Nos. 1598, 1599 and 1600 of 2018 decisions: In Arun Kumar Mishra v. Union of India [2014 SCC Online Del 493], it was held by the Delhi High Court as follows:
“13.We are unable to agree. The Adjudicating Authority is currently seized of and in seisin of the complaints. We, at this stage, do not know as to which way the order of the Adjudicating Authority will go. It cannot also be said at this stage whether the Adjudicating Authority even if deciding against the appellants will rely upon the material before it qua which the appellants claim a right of cross-examination. All this can be known only when the Adjudicating Authority passes an order and qua which if the appellants are aggrieved, the appellants shall have their statutory remedy. Any interference by us at this stage in the proceedings of which the Adjudicating Authority is seized is thus uncalled for and would result in a situation which the Supreme Court has warned the High Courts to avoid. Reference may also be made to Union of India v. Kunisetty Satyanarayana AIR 2007 SC 906 reiterating that the reason why ordinarily a writ petition should not be entertained against a mere show cause notice is that at that stage the writ petition may be held to be premature - a mere show cause notice does not give rise to any cause of action, because it does not amount to an adverse order which affects the rights of any party unless the same has been issued by a person having no jurisdiction to do so and it is quite possible that after considering the reply to the show cause notice or after holding an enquiry, the authority concerned may drop the proceedings. It was further held that a writ lies only when some right is infringed and a mere show cause notice does not infringe the right of any one and it is only when a final order adversely affecting the party is passed, that the said party can be said to be having any grievance. The Supreme Court held that the writ jurisdiction being discretionary, should not ordinarily be exercised by quashing a show cause notice.
(Emphasis supplied)
(ii) In an order dated 03.08.2017 passed by the learned Single Judge of the Madhya Pradesh High Court in WP.No.10280 of 2017 in the 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, 1988 and the same was rejected, it was held as follows:
https://www.mhc.tn.gov.in/judis “6....In my view, the principles of natural justice are codified in 25/28 WA Nos. 1598, 1599 and 1600 of 2018 terms of sub section (6) of section 26 of the Act. The impugned order is subject to judicial review before the adjudicating authority. The order passed by the adjudicating authority can be assailed before the appellate tribunal constituted under section 31 of the Act. The order of the appellate tribunal can also be called in question by preferring appeal to the High Court within a period of 60 days. A microscopic reading of provisions make it clear that principles of natural justice are reduced in writing in the shape of amendment in the said Act. The amended provisions contains a complete code in itself.
7.In this backdrop, it is to be seen whether at this stage any interference is warranted by this court. In C.B.Gautam the order of compulsory purchase under section 269-UD(1) of Income Tax Act was served on the petitioner without issuing any show cause notice and without giving any opportunity to him. The Apex Court in the aforesaid factual back drop interfered in the matter. In the said case, neither show cause notice was given nor reasons were assigned in the impugned compulsory purchase order. In the present case show cause notice has been issued, opportunity has been given to the petitioner. The order impugned is provisional/tentative in nature. It is subject to judicial review by adjudicating authority. If order of adjudicating authority goes against the petitioner, the further forums of judicial review of the said order is available to the petitioner before the appellate tribunal and then before this court. Hence, against the tentative/provisional order, no interference is warranted by this court at this stage. As per the scheme of the Act, the petitioner can raise all possible grounds before the adjudicating authority.
The adjudicating authority is best suited and statutorily obliged to consider all relevant aspects. Thus, at this stage no case is made out for interference. Moreso, when adjudicating authority has already fixed the hearing on 23.08.2017. Resultantly, the petition is dismissed.” (Emphasis supplied) The aforesaid order got the stamp of approval by the Division Bench in WA.No.704 of 2017 decided on 16.08.2017 and the finding of the same would run thus:
“We do not find any merit in the present appeal. It is the Adjudicating Authority who is to decide the question of Benami nature of the property. The proceedings under section 24 of the Act contemplates the issuance of show cause notice as to why the property specified in the notice should not be treated as Benami property. However, the substantive order of treating the property has Benami is required to be passed by Adjudicating Authority under section 26 of the Act only. Therefore, the appellant is at liberty to take all such plea of law and facts as may be available to the appellant before the Adjudicating Authority. The https://www.mhc.tn.gov.in/judis 26/28 WA Nos. 1598, 1599 and 1600 of 2018 Adjudicating Authority shall decide the Benami nature of the property in accordance with law.” (Emphasis supplied)
17. Thus, the overall appreciation of the factual matrix as well as the legal principles stated above, would compel this court to come to an irresistible conclusion that the appellant has not made out any ground to interfere with the order of the learned Judge as well as the orders impugned in the writ petitions, at this stage. Accordingly, all the appeals stand dismissed. However, the appellant is at liberty to raise all the contentions before the adjudicating authority. No costs. Consequently, connected miscellaneous petitions are closed.
(R.M.D., J.) (M.S.Q., J.)
01.09.2022
rsh
To
1. Deputy Commissioner of Income Tax
(Benami Prohibition)
Room No.104, First Floor
Income Tax Investigation Wing Building
108, M.G. Road, Nungambakkam
Chennai - 600 034.
2. Deputy Director of Income Tax
(Investigation Wing)
Unit 4 (1), Chennai
Income Tax Investigation Wing Building
108, M.G. Road, Nungambakkam
Chennai - 600 034
https://www.mhc.tn.gov.in/judis
27/28
WA Nos. 1598, 1599 and 1600 of 2018
R.MAHADEVAN, J.
and
MOHAMMED SHAFFIQ , J.
rsh
Common Judgment in
WA Nos. 1598, 1599 & 1600/2018
01.09.2022
https://www.mhc.tn.gov.in/judis
28/28