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IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD
UJJAL BHUYAN, C.V. BHASKAR REDDY, JJ.
M/s. Neopride Pharmaceuticals Limited - Petitioner
Versus
The Adjudicating Authority - Respondent
W.P. Nos. 33191, 33195, 33198, 33199, 33203, 34454, 34670, 34676, 34687, 34691, 34755, 34799, 34800, 34801, 34802, 34803, 35092, 35093, 35113, 35132, 35134, 35144, 35146, 35153, 35154, 35155, 35156, 35171, 35276, 35279 and 33403 of 2022; 23070, 23497, 23501, 23566, 23575 of 2021
Decided On : 13-09-2022
Benami Property Act - Challenge to show cause notices and orders under Benami Property Act - Section 24(1), Section 26(3), Section 24(4)(b)(i) - The court discussed the applicability of the Benami Transactions (Prohibition) Amendment Act, 2016 and its retrospective effect on transactions prior to its enactment. The court referred to the decisions in Nexus Feeds Limited v. The Assistant Commissioner of Income Tax and Union of India v. Ganpati Dealcom Pvt. Ltd. to interpret the provisions of the Amendment Act and held that the Amendment Act of 2016 is not merely procedural but prescribes substantive provisions. Therefore, concerned authorities cannot initiate or continue criminal prosecution or confiscation proceedings for transactions entered into prior to coming into force of the 2016 Amendment Act i.e., 25.10.2016. As a consequence, all such transactions or confiscation proceedings shall stand quashed.
Fact of the Case:
The court disposed of a batch of writ petitions challenging show cause notices and orders issued under the Benami Property Act. The challenge was made to the show cause notices dated 02.09.2021, order passed by the adjudicating authority dated 25.03.2022, and the order dated 12.04.2022 passed by the Commissioner of Income Tax.
Finding of the Court:
The court found that the impugned show cause notices, provisional attachment orders, and adjudicating orders passed under the Benami Property Act as amended by the Amendment Act of 2016 cannot be sustained in view of the finality of the law declared by the Supreme Court. Therefore, those were set aside and quashed. All the writ petitions were allowed in the above terms.
Issues: The primary challenge made in the writ petitions was that the transactions classified as benami transactions and the property accrued therefrom were acquired prior to the enactment of the Benami Transactions (Prohibition) Amendment Act, 2016, and could not have been classified as benami transactions by retroactively applying the law enacted in the year 2016.
Ratio Decidendi: The court interpreted the provisions of the Benami Transactions (Prohibition) Amendment Act, 2016 and held that concerned authorities cannot initiate or continue criminal prosecution or confiscation proceedings for transactions entered into prior to the coming into force of the 2016 Amendment Act i.e., 25.10.2016. As a consequence, all such transactions or confiscation proceedings shall stand quashed.
Final Decision: All the writ petitions were allowed, and the impugned show cause notices, provisional attachment orders, and adjudicating orders passed under the Benami Property Act as amended by the Amendment Act of 2016 were set aside and quashed. No costs were awarded, and miscellaneous petitions, pending if any, stand dismissed.
ORDER :
Ujjal Bhuyan, J.
This order will dispose of the above batch of writ petitions.
2. We have heard Mr. C.V. Narsimham, Mr. G. Mohan Sai and Mr. Rohan Aloor, learned counsel for the petitioners; Mr. B. Narsimha Sarma, learned counsel for the respondents-Income Tax Department; and Mr. B. Mukherjee, learned counsel representing learned Assistant Solicitor General of India appearing for Union of India.
3. For the sake of convenience, we divide the above batch of writ petitions into three groups in the following manner :
Group A:- W.P.Nos.23070, 23497, 23501, 23566, 23575 of 2021.
Group B:- W.P.Nos.33191, 33195, 33198, 33199, 33203, 34454, 34670, 34676, 34687, 34691, 34755, 34799, 34800, 34801, 34802, 34803, 35092, 35093, 35113, 35132, 35134, 35144, 35146, 35153, 35154, 35155, 35156, 35171, 35276, 35279 of 2022
Group C:- W.P.No.33403 of 2022
4. In the first batch of cases i.e., Group A, the challenge made is to the show cause notices dated 02.09.2021 issued by the Assistant Commissioner of Income Tax being Initiating Officer, Benami Transactions (Prohibition) Unit, Hyderabad under Section 24(1) of the Prohibition of Benami Property Transactions Act, 1988 (briefly ‘the Benami Property Act’ hereinafter).
5. In the second batch of cases i.e., Group B, the challenge is to the order passed by the adjudicating authority under Section 26(3) of the Benami Property Act. Though the dates are different in each of the writ petitions, in the lead case of this group being W.P.No.33191 of 2022, the order passed by the adjudicating authority is dated 25.03.2022.
6. In the last case i.e., Group C, the challenge has been made to the order dated 12.04.2022 passed by the Commissioner of Income Tax, who is also the initiating officer of the Benami Transactions (Prohibition) Unit, Hyderabad under Section 24(4)(b)(i) of the Benami Property Act.
7. For the sake of convenience, let us take W.P.No.33191 of 2022 as the lead case.
8. In this case, show cause notice under Section 24(1) of the Benami Property Act dated 30.12.2019 was issued to the petitioner - M/s. Neopride Pharmaceuticals Limited by the Assistant Commissioner of Income Tax/Initiating Officer. In serial No.3 of the statement forming part of the show cause notice, the benami property i.e., the subject matter of benami transaction was described as under :
2. Proceeds thereof being corresponding “Fixed Asset” to the tune of equivalent amount acquired as against the share capital introduced in the books of M/s Neopride Pharmaceuticals Limited during the FY 2014-15 so routed through benami transaction.’
9. Assistant Commissioner of Income Tax/Initiating Officer, while calling upon the petitioner to show cause, passed an order under subsection (2) of Section 18 and sub-section (3) of Section 24 of the Benami Property Act provisionally attaching the aforesaid property for a period of 90 days from the last date of the month in which the show cause notice was issued i.e., 30.11.2019, further directing that the attached property should not be transferred or converted or disposed or moved in any manner whatsoever until or unless specifically permitted to do so by the undersigned.
10. Thereafter, the aforesaid authority passed order dated 18.03.2021 under Section 24(4)(a)(i) of the Benami Property Act. As per the said order, the provisional attachment of the property was continued till such time order was passed by the adjudicating authority under Section 26(3) of the Benami Property Act.
11. Finally, after notice and hearing, adjudicating authority passed order dated 25.03.2022 under Section 26(3) of the Benami Property Act. By the said order, the adjudicating authority held that the movable property is a benami property being subject matter of benami transaction within the meaning of Section 2(9)(c) of the Benami Property Act. Consequently, the provisional attachment order has been confirmed
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