SEJAL CO. OP. HOUSING SOCIETY LTD. vs. DEPUTY DIRECTOR OF INCOME TAX

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SCA/5703/2021HC GujaratGJHC24016795202107 September 2022Bench: HONOURABLE THE CHIEF JUSTICE MR. JUSTICE ARAVIND KUMAR,HONOURABLE MR. JUSTICE ASHUTOSH SHASTRI5 pages
AI SummaryAllowed

What did the High Court hold?

The High Court held that the issue was no longer res integra in light of the Supreme Court's judgment in Civil Appeal No. 5783 of 2022 dated 23.08.2022. The Supreme Court had concluded that the 2016 Amendment Act prescribed substantive provisions and that its in rem forfeiture provisions, being punitive, could only be applied prospectively. Consequently, authorities cannot initiate or continue criminal prosecution or confiscation proceedings for transactions entered into prior to 25.10.2016, and all such proceedings shall stand quashed. Applying this to the present case, the High Court held that the impugned attachment order and all consequential proceedings initiated pursuant thereto were squarely covered by the Supreme Court's declaration and were therefore quashed. The Court also noted that questions left open by the Supreme Court in paragraph 18.1(f) of its judgment would also be applicable to the facts of this case.

What were the facts?

The petitioner, Sejal Co. Op. Housing Society Ltd., filed a Special Civil Application seeking to quash an attachment order passed under Section 24(3) of the Benami Transactions (Prohibition) Amendment Act, 2016, and all consequential proceedings. The petitioner contended that the provisions of the 2016 Amendment Act were prospective and that notices and orders issued pursuant to it should be quashed. The respondents included the Deputy Director of Income Tax (Initiating Officer), the Union of India, and the Adjudicating Authority under the Benami Transactions (Prohibition) Act, 1988.

What were the issues?

1. Whether the provisions of the Benami Transactions (Prohibition) Amendment Act, 2016, are prospective in nature, and consequently, whether notices and orders issued under it for transactions prior to its commencement are liable to be quashed? (Question of law turning on the interpretation of the Benami Transactions (Prohibition) Amendment Act, 2016). Assessee's Contention: The petitioner argued that the 2016 Amendment Act is prospective and therefore, proceedings initiated under it for transactions entered into before its commencement are invalid. Revenue's Contention: The judgment records that learned advocates for the parties were heard, and the issue was considered in light of the Supreme Court's judgment. No specific arguments for the revenue are detailed, but their stance would implicitly be that the proceedings were valid.

Which sections of the Income-tax Act were involved?

Section 24(3),Section 3(2),Section 5,Section 20(1)

AI-generated summary — verify with the full judgment below

C/SCA/5703/2021 ORDER DATED: 07/09/2022 IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 5703 of 2021 ================================================== SEJAL CO. OP. HOUSING SOCIETY LTD. Versus DEPUTY DIRECTOR OF INCOME TAX ================================================== Appearance: MR S.N. SOPARKAR, SENIOR ADVOCATE WITH MS NUPUR D SHAH(10233) for the Petitioner(s) No. 1 for the Respondent(s) No. 1 MR DEVANG VYAS, ADDITIONAL SOLICITOR GENERAL OF INDIA for the Respondent(s) No. 2,3 MR M.R. BHATT, SENIOR ADVOCATE FOR M R BHATT & CO.(5953) for the Respondent(s) No. 1 ================================================== CORAM:HONOURABLE THE CHIEF JUSTICE MR. JUSTICE ARAVIND KUMAR and HONOURABLE MR. JUSTICE ASHUTOSH J. SHASTRI

Date : 07/09/2022 ORAL ORDER (PER : HONOURABLE THE CHIEF JUSTICE MR. JUSTICE ARAVIND KUMAR) 1. We have heard Mr. S.N. Soparkar, learned Senior Advocate appearing on behalf of Ms. Nupur D. Shah for the petitioner, Mr. M.R. Bhatt, learned Senior Advocate appearing for respondent No.1 namely the Initiating Officer as defined under Section 2(19) read with Sections 18(1), 24 of the Prohibition of Benami Property Transactions Act, 1988 (for short ‘the Act’) and Mr. Devang Vyas, learned Additional Page 1 of 5

C/SCA/5703/2021 ORDER DATED: 07/09/2022 Solicitor General of India appearing for respondent Nos.2 and 3 viz., Union of India and Adjudicating Authority as defined under Section 2(1) read with Sections 18(1)(d) and 24(3) of the Act. Perused the records. 2. Petitioner has prayed for quashing of the attachment order passed under Section 24(3) of the Benami Transactions (Prohibition) Amendment Act, 2016 and the all consequential proceedings initiated pursuant thereto. 3. In this petition, essentially petitioner is seeking for writ of certiorari to declare the provisions of Benami Transactions (Prohibition) Amendment Act, 2016 being prospective and consequently the notices issued to the petitioner and quashing of the orders passed pursuant to the same. 4. Having heard the learned advocates appearing for the parties, we are of the considered view that aforesaid issue is no more res integra in view of the judgment of the Hon’ble Apex Court rendered in Civil Appeal No.5783 of 2022 dated 23.8.2022 whereunder Hon’ble Apex Court after considering the contentions raised thereunder as well as relevant provisions of Page 2 of 5

C/SCA/5703/2021 ORDER DATED: 07/09/2022 the Act pressed into service, has arrived at the following conclusion: “18.1 In view of the above discussion, we hold as under: a) Section 3(2) of the unamended 1988 Act is declared as unconstitutional for being manifestly arbitrary. Accordingly, Section 3(2) of the 2016 Act is also unconstitutional as it is violative of Article 20(1) of the Constitution. b) In rem forfeiture provision under Section 5 of the unamended Act of 1988, prior to the 2016 Amendment Act, was unconstitutional for being manifestly arbitrary. c) The 2016 Amendment Act was not merely procedural, rather, prescribed substantive provisions. d) In rem forfeiture provision under Section 5 of the 2016 Act, being punitive in nature, can only be applied prospectively and not retroactively. e) Concerned authorities cannot initiate or continue criminal prosecution or confiscation proceedings for transactions entered into prior Page 3 of 5

C/SCA/5703/2021 ORDER DATED: 07/09/2022 to the coming into force of the 2016 Act, viz., 25.10.2016. As a consequence of the above declaration, all such prosecutions or confiscation proceedings shall stand quashed. f) As this Court is not concerned with the constitutionality of such independent forfeiture proceedings contemplated under the 2016 Amendment Act on the other grounds, the aforesaid questions are left open to be adjudicated in appropriate proceedings.” 5. As could be seen from the aforesaid judgment, it has been clearly held by the Hon’ble Apex Court that authorities cannot initiate or continue criminal prosecution or confiscation proceedings for transactions entered into prior to the coming into force of the 2016 Act, viz., 25.10.2016 and as a consequence thereof, all such prosecutions and confiscation proceedings which had been initiated came to be quashed. 6. In that view of the matter, we are of the considered view prosecution and initiation of proceedings in the instant case being pursuant to the Amendment Act the declaration made by the Hon’ble Apex Court in paragraph 18(e) would squarely be Page 4 of 5

C/SCA/5703/2021 ORDER DATED: 07/09/2022 applicable and as such, impugned attachment order stands quashed and all consequential proceedings initiated thereto. We also make it clear that question which has been kept open by the Hon’ble Apex Court in paragraph 18.1(f), would squarely be applicable to the facts on hand also. With aforesaid observation, Special Civil Application stands allowed and we make no order as to costs. (ARAVIND KUMAR,CJ) (ASHUTOSH J. SHASTRI, J) Bharat Page 5 of 5

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