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TMI Blog2022 (7) TMI 528X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 1054, 1047, 1049, 1050, 1051 & 1052 of 2022, are engaged in the jewellery business by running "Pondicherry Sri Lakshmi Jewellery" with various branches. In the year 2000, they started a Private Limited Company to render foreign exchange and travel related services in the name and style of M/s.Bonjour Bonheur Private Limited (in short, "the Company") and the main share holders were the family members. Thereafter, in the year 2009, the Company also ventured into the business of hotel and hospitality by promoting the resort in the name and style of "Ocean Spray", for which, the land belonging to one of the promoter Director viz., Mr.K.Nagarajan, was leased to the company and the constructions were made, after borrowing loans from banks and financial institutions. 2.1.2. While so, a search was conducted in the premises of the Pondicherry Sri Lakshmi Jewellery, consequent to the search in the case of Mrs.V.K.Sasikala. During the course of the same, various documents were impounded and sworn statements were recorded. Subsequently, the appellants received notices under Section 153C of the Income Tax Act, 1961 (in short, "the I.T. Act") for reassessment. 2.1.3. Pending the reassessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orn statements of the parties involved and the basis upon which the impugned proceedings were initiated against him, to which, the first respondent furnished only a part of the statements. Thereafter, without considering the contentions made by the appellant and without giving him a reasonable opportunity of being heard, the first respondent passed the order under section 24(4) of the Act on 28.01.2020, confirming the provisional attachment of the property till the passing of the order by the Adjudicating Authority under section 26(3) of the Act. Consequently, the first respondent made a reference to the second respondent under section 24(5) of the Act on the same day. Following the same, the second respondent issued a notice dated 12.02.2020 under section 26(1) of the Act seeking reasons as to why the appellant should not be held as the benamidar in the alleged transaction of sale leading to creation of benami property under the Act and posted the hearing on 26.03.2020. Due to lock down announced on account of the pandemic Covid-19, there was no hearing on 26.03.2020. Subsequently, another notice dated 19.05.2020 came to be issued calling upon the appellant to file a response on o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, which was subsequently abandoned at the option of the buyer and at no point of time, the transaction could be called benami, as the ingredients of a benami transaction is absent in the said case. 3.2. The learned counsel for the appellants further contended that the respondent relied upon various documents and sworn statements to come to a conclusion that the appellants are the benamidars. The appellants sought those material evidence for defending their case and also requested for cross examination of the persons, whose statements have been relied upon for initiating the impugned proceedings. Without furnishing the entire documents and sworn statements of the witnesses and without affording any opportunity to the appellants to cross examine the witnesses, the respondent has passed the order under section 24(4) of the Act, which is arbitrary, illegal and against the principles of natural justice. However, the learned Judge erred in holding that the process and procedure as envisaged for provisional attachment under section 24 is of a narrower compass, when compared with the process of adjudication to follow thereafter. 3.3. The learned counsel for the appellants also contende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ants as well as of Mrs.V.K.Sasikala and it is only thereafter, the first respondent has passed the impugned orders in terms of Section 24(4) of the Act. The appellants were heard prior to passing of the orders and their replies were considered. Thus, the first respondent was satisfied that there was prima facie material available to show that the appellants are benamidars. Adding further, the learned counsel submitted that it is not mandatory to conduct an enquiry before the issuance of show cause notice, when the matterials are deemed sufficient and the IO having reasons to believe the same. The first respondent during the course of the proceedings, asked for certain documents, which were not furnished by the appellants. Therefore, the first respondent after proper application of mind and having 'reasons to believe', has passed the orders impugned in the writ petitions and therefore, the same were rightly upheld by the learned Judge in the writ proceedings. It is also submitted that the first respondent, who armed with the sufficient materials to proceed against the appellants, has initiated the impugned proceedings as per law, after providing the required documents to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of ninety days from the last day of the month in which the notice under sub-section (1) is issued - (a)where the provisional attachment has been made under subsection (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 subsection (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a)(i), to draw up a statement of the case and refer it to the Adjudicating Authority, within fifteen days from the date of the attachment. 8. As noticed earlier, the appellants in the writ proceedings, questioned the action of the first respondent under section 24(4)(a)(i) of the PBPT Act, in ordering continuance of the attachment made under section 24(3) till the final order under section 26(3) is passed by the Adjudicating Authority. Upon considering the rival submissions and the decisions relied on by the parties, the learned Judge has dismissed the writ petitions filed by the appellants, along with other connected cases, by the common order dated 25.10.2021 and the findings of the learned Judge are profitably extracted below: "65.The nature of the transactions in question have to be established by the petitioner before the authorities upon the respondents discharging the initial burden cast upon them to furnish the primary evidences available with them to the effect that the property is benami in nature. This is a rebuttable presumption and the effectiveness of the rebuttal will depend on the evidences furnished by the noticees to the authorities. 66.In my considered view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;consideration' must comprise of legal tender alone. 75.However, the mode of payment employed as between the parties and the actual amount transacted are pure questions of fact that are best left for verification and determination by the authorities concerned. This question is also left open for decision in the course of adjudication by the authorities. 76.The challenge to the impugned orders under section 24(4) fails and the respondents are directed to proceed in line with sections 25 and 26 forthwith. All writ petitions are dismissed. ... 77.The respondents will continue with adjudication under section 25 and complete proceedings in light with the mandate of that section. Notices under section 26 of the PBPT Act will be issued within a period of 30 days from date of issue of these orders accompanied with all material that the respondents rely on and proceedings under section 26 shall be conducted scrupulously in line with the mandate thereof. 78.The petitioners shall be affored full opportunity to put forth all contentions before the adjudicating authority who shall take note of the same and pass speaking orders in accordance with law. ..." 9. As already stated, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sional in nature. That apart, the provisions of law mandate the respondent authorities to furnish such documents, particulars or evidence and provide an opportunity of being heard to the appellants only at the stage of adjudication proceedings; and there is no provision under the Act to provide an opportuity to the appellants to cross examine the witnesses at the preliminary stage. In this connection, the findings of the first respondent in the order dated 20.01.2020 passed under section 24(4) of the Act, are quoted below for ready reference: "Both benamidar and beneficial owner have requested for cross examination of the persons involved and the same is dealt with here. It is to be noted that the Initiating Officer under the Prohibition of Benami Property Transactions Act, 1988, has not been conferred upon any such authority to grant an opportunity for cross-examination of any person and the same have been intimated to both benamidar and beneficial owner. This office has initiated the benami proceedings on the basis of sworn statements recorded by the quasi-judicial authorities (income tax authorities) and other evidences, which are treated as primary evidences. Further, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground of absence of opportunity of cross-examination, 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount to an 'admission' of the contents of the show cause notice in the absence of any statutory provision and it is always open to an Assessee ot cross-examine the witnesses whose statements are relied upon or sought to be examined on behalf of the Revenue. At the stage of show cause notice, there is no adjudication. It is only a step in the process of adjudication. The show cause notice by itself is not an order of assessment. The order of assessment will be passed only after considering the evidence and the material, which is placed before the quasi judicial authority/ Tribunal. Therefore, as the show cause notice is based on prima facie material and constitutes a prima facie opinion, that does not result into an order of adjudication. The question, therefore, of an Assessee being entitled to cross-examination, even before the adjudication has commenced, in our opinion, surely would not arise. It is only after the adjudication proceedings have commenced pursuant to the show cause notice and if the Revenue seeks to rely upon the statements or documents, then the principles of natural justice would require in the absence of any statutory provision, that the person whose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn 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 U nion of India v. Kunisetty S atyanarayana 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me 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 a 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 Adjudicating Au ..... X X X X Extracts X X X X X X X X Extracts X X X X
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