TMI Blog2024 (3) TMI 1147X X X X Extracts X X X X X X X X Extracts X X X X ..... lause (D) does not merely restrict itself to non-traceable sources of consideration but also to fictitious sources of consideration. Hence, there is sufficient prima facie material to indicate that the transactions-in-question were arrangements in respect of properties where the person providing the consideration is fictitious. Hence, this Court does not find that there is ex facie erroneous assumption of jurisdiction by the Investigating Authority or the Adjudicating Authority under the Benami Act sufficient to displace the legitimate opinion formed in writing by the Investigating Authority, which justifies the reference to the Adjudicating Authority after issuance of notice and passing of provisional assessment order, which was continued subsequently. For an adjudication of merits on the issues involved in the present case as indicated above, a full-fledged enquiry on factual assessments based on appreciation of evidence is required, which is entirely unwarranted at the instance of the writ court, since a comprehensive procedure is provided in Section 26 of the Benami Act, which is, as the Madhya Pradesh High Court held, in the nature of a self-contained code. Thus, no ground to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... property where the person providing the consideration is not traceable or is fictitious is also a benami transaction under the Act. 5. It is argued that the burden of showing that a transfer is benami lies with the person asserting the same which corresponds to Sections 91, 92, 101, 102 and 106 of the Indian Evidence Act, 1872. For such proposition, the petitioners cites Jaydayal Poddar (Deceased) Through L. Rs and another Vs. MST Bibi Hazra and others, reported at (1974) 1 SCC 3, P. Leelavathi (Deceased) Through L. Rs Vs. V. Shankarnarayana Rao (Deceased) Through L. Rs, reported at (2020) 19 SCC 816 and Mangathai Ammal (Deceased) Through L. Rs and others Vs. Rajeswari and others, reported at (2020) 17 SCC 496. 6. It is contended that in the present case, such burden was not discharged by the respondents. 7. Learned counsel for the petitioner next argues that there is no retrospective application of the 2016 Amendment to the Benami Act and cites Union of India and another Vs. Ganpati Dealcom Private Ltd., reported at (2023) 3 SCC 315 for such contention. It is argued that the very texture of the definition of benami transactions has been altered, introducing, inter alia, sub-claus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Rajasthan High Court held so in its judgment of Shri Kalyan Buildmart Pvt. Ltd. Vs. PCIT, reported at (2021) 131 Taxmann.com 99 Raj. 12. In the present case, it is argued that the jurisdictional question was raised in the replies of the petitioner. The challenge made to the order passed under Section 24(4) of the Benami Act is on the basis of the principles of natural justice having not been met. Such jurisdictional issue, it is argued, is required to be decided by the writ court under Article 226 of the Constitution of India. 13. In Union of India and Anr. Vs. Kunisetty Satyanarayana, reported at (2006) 12 SCC 28 , it is argued that the facts were clearly distinguishable from the present case since in the said case, the show-cause notice was issued regarding obtaining employment on a forged caste certificate where it was held that show-cause notice cannot give rise to the cause of action and cannot tantamount to an adverse order. In contrast, the provisional attachment orders passed in the present case tantamount to adverse orders. Thus, it is argued that the impugned summons and provisional attachment orders ought to be set aside. 14. Learned counsel for the respondents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m, having acquired bogus share capital from another set of paper companies with premium only to provide accommodation entries to another set of companies including the petitioner. 18. It is contended that none of the four companies to whom the shares of the petitioner-Company were allotted had any revenue from operations and had filed loss each year since incorporation and these companies had no creditworthiness of their own to enter into such transactions. Those bore characteristics of shell companies which are used as a conduit to introduce unaccounted money in books of accounts. 19. It is argued that the four allottee companies as well as the petitioner-Company filed their returns for the assessment year 2012-13 from the same computer which is evident from the IP Address shown from the Income Tax return acknowledgment, which practice continued in subsequent years, proving that the formation of the allottee companies was controlled and managed by the same persons and those were not genuine business entities. 20. It is argued that the analysis of the shareholding pattern shows that it was changed on March 31, 2014 and the shareholding was taken over by Aahana Housing Limited and A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e final adjudication by the Adjudicating Authority under the Benami Act itself and cannot stifle the legitimate adjudication process by filing a writ petition. 29. The petitioner relies on BRC Construction Company Private Limited Anr. Vs. Union of India Ors., reported at 2017 SCC OnLine Cal 16142 , but the courts specifically noticed the significance of Section 2(9)(D) of the Benami Act and found that the benami transaction is defined collectively as an arrangement in respect of a property carried out in a fictitious name, which is applicable here. 30. The respondents also cite Dinesh Chand Surana v. Deputy Commissioner of Income Tax and Another, reported at 2018 SCC OnLine Mad 3969, where it was held that a person cannot be said to be aggrieved to prefer a challenge against an order of provisional attachment especially when the Adjudicating Authority has already initiated proceedings under Section 26(3). 31. In Dinesh Chand Surana Vs. Deputy Commissioner of Income-tax, reported at [2022] 142 taxmann.com 494 (Madras) a Division Bench upheld the learned Single Judge s decision in the same case as mentioned above. 32. Learned counsel next relies on Kailash Assudani Vs. Commisioner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove judgments is that at the stage of issuance of a show-cause notice, the writ court ordinarily does not interfere. The Supreme Court, however, although in a somewhat different context, has observed that only in rare and exceptional cases such interference is called for. 40. With utmost respect, this Court cannot accept as absolute the view taken by the learned Single Judge in Kailash Assudani (supra) insofar as application of the codified principles of natural justice in sub-section (6) of Section 26 of the Benami Act to the initial issuance of a show-cause notice under Section 24 of the said Act is concerned. There cannot be any manner of doubt that Section 26, which provides for adjudication of benami property, amply puts in safeguards to ensure that the principles of natural justice are satisfied. 41. However, if the premise of the challenge to a notice under Section 24 is that the authorities palpably lacked jurisdiction under the Benami Act, it would be unnecessary multiplicity of proceedings and harassment to the petitioner to relegate the petitioner to a subsequent adjudication under Section 26, even if it is palpable ex facie that the authorities did not have jurisdictio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case as well, we are to ascertain whether the shareholding pattern or the change in it has any relevant bearing prima facie on the allegation of benami. 47. It is evident from the scheme of the Benami Act that the definition of benami transaction has undergone a sea-change after the 2016 Amendment. Sub-clause (D) of Section 2(9) of the said Act labels a transaction as benami if it is a transaction or an arrangement in respect of a property where the person providing the consideration is not traceable or is fictitious. It is the very clause on which the respondents rely in the present case. 48. Under Chapter IV of the Benami Act, Section 24 provides the where the Initiating Officer, on the basis of the material in his possession has reason to believe that any person is benamidar in respect of a property, he may after recording reasons in writing issue a notice to the person to show cause. 49. Preceding the said Chapter, Section 19 provides that the authorities are conferred with the powers, inter alia, as vested in a civil court under the Code of Civil Procedure, including discovery and inspection, enforcing attendance of any person, compelling production of books of account and oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), was justified to the extent of laying down the proposition that Section 26 is a self-contained code embodying principles of natural justice. 55. Section 24 is just a precursor of the said exercise in order to provide teeth to the authorities to prevent the disposal of the subject-property of benami transaction till an adjudication takes place under Section 26. Under normal circumstances, no hearing is required to be given to the alleged benamidar at the stage of Section 24 of the Benami Act, since if such a provision is read into Section 24, it will be an additional layer of protection to the alleged benamidar, as, in any event, he gets a right of hearing and sufficient opportunity of representation in an adjudication of benami property under Section 26 by the Adjudicating Authority. 56. However, Section 24(1) contemplates a show-cause notice. The very expression show cause implicitly contains a right of the noticee to give a reply in writing disclosing his version of the matter. In the present case, the petitioner got such opportunity and gave as many as two replies to the show-cause notice. Thus, it cannot be said that the petitioner was deprived of such opportunity. 57. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resent case, the petitioner, thus, has ample remedies in law under Sections 26 and 27 as well as by way of an appeal under Sections 30 and 31 and can avail of the same in accordance with law, raising all questions, even including those relating to jurisdiction. 67. However, in patently exceptional cases, where it can be seen from the provisional order of assessment or the notice under Section 24 that the assumption of jurisdiction is erroneous, a small window remains for the writ court to interfere on the ground of jurisdiction. 68. Let us now examine the case made out by the respondents in such context, to ascertain whether ex facie it takes the transactions-in-question beyond the jurisdiction of the authorities under the Benami Act. 69. For such purpose, the respondents case has to be taken as it is, without entering into a factual enquiry, which is best left for the Adjudicating Authority, which is in seisin of the matter now, to decide. 70. The respondents alleged upon an enquiry that the petitioner-Company purchased 37 properties by certain funds. To come within the definition of benami transaction under Section 2(9)(D), a transaction or an arrangement in respect of a property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ium. The premium was enhanced by a quantum leap from Re. 1/- per share to Rs. 499/- per share. By virtue of such transactions, it does not leave anything to guesswork to come to the conclusion that a money-trail emerges, which is open-ended at the source. 75. Seen in proper perspective, the primary shareholders, who were shell companies, could not have funded the share capital of the petitioner or lend sufficient creditworthiness to the petitioner for the purchases unless there were other entities behind them. After the subsequent transfers of the shares through a string of shell companies, it remains blurred as to who was the ultimate provider of the consideration. 76. The respondents say that the statement of Entry Operator, one Mr. Munka, recorded by the DDIT Investigation, Kolkata reveals that he had provided accommodation entries such as bogus unsecured loans, bogus sale of unlisted investments, etc. through various groups including various companies of the Shakambhari Group including the petitioner-Company and has given the details of the modus operandi of the petitioner. Upon analysis of the financial data of the petitioner, it has been revealed that the fund raised as share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n factual assessments based on appreciation of evidence is required, which is entirely unwarranted at the instance of the writ court, since a comprehensive procedure is provided in Section 26 of the Benami Act, which is, as the Madhya Pradesh High Court held, in the nature of a self-contained code. 80. Thus, I do not find any ground to interfere with the impugned notice under Section 24 or the provisional orders passed therein, particularly, since the matter has already been referred to the Adjudicating Authority and is under consideration before it within the contemplation of Section 26 of the Benami Act. The appropriate remedy before the petitioner is to participate in the said proceedings, and to have its defence vindicated there. In any event, even thereafter, the petitioner has two stages of remedies one, a hearing before confiscation and the other by way of an appeal under Sections 30 and 31 of the Benami Act, if aggrieved by the decision of the Adjudicating Authority. 81. In the above circumstances, WPA No. 16821 of 2022 is dismissed on contest without any order as to costs. 82. However, it is made clear that the above findings are of a tentative nature only to prima facie e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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