JOYALUKKAS INDIA PRIVATE LIMITED, vs. THE PRINCIPAL DIRECTOR GENERAL OF INCOME TAX,

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE V.G.ARUN TUE AY, THE 10TH DAY OF JANUARY 2023 / 20TH POUSHA, 1944 WP(C) NO. 14693 OF 2021 PETITIONER/S: JOYALUKKAS INDIA PRIVATE LIMITED, DOOR NO.40/2096 A & B, PEEVES TRITON, MARINE DRIVE, SHANMUGHAM ROAD, ERNAKULAM, COCHIN-682 031, REPRESENTED BY ITS DIRECTOR AND AUTHORISED SIGNATORY P.D.JOSE. BY ADVS. ASWIN GOPAKUMAR ANWIN GOPAKUMAR NIRANJAN SUDHIR KANDAMPULLY VIKRAM NIKITHA SUSAN PAULSON PRAFUL SURENDRAN RESPONDENT/S: 1 THE PRINCIPAL DIRECTOR GENERAL OF INCOME TAX, (INVESTIGATION), AARYA BHANGI PINNACLE, SAHODARAN AYYAPPAN ROAD, ELAMKULAM, KOCHI-682 020. 2 THE ASSISTANT COMMISSIONER OF INCOME TAX (BP UNIT), KOCHI, GROUND FLOOR, POORNIMA BUILDINGS, NEAR MANORAMA JUNCTION, PANAMPILLY NAGAR, KOCHI-682 036. BY ADVS. SHRI.P.VIJAYAKUMAR, ASG OF INDIA MANU S., ASG OF INDIA THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 30.11.2022, THE COURT ON 10.01.2023 DELIVERED THE FOLLOWING:

-2- JUDGMENT Dated this the 10th day of January, 2023 The petitioner, a private Limited Company engaged in jewellery business, has filed this writ petition seeking to quash Exts.P6 series notices issued by the first respondent. The short facts are as under; The petitioner receives old gold brought for exchange by its customers as part of its business. In order to assess the value of the old gold, it has to be melted and purified. For this purpose, the petitioner had entered into job work agreements with goldsmiths. Payments for the above activity were made through banking channels, after deducting the tax at source. While so, on 10.01.2018, a search and seizure under Section 132 of the Income Tax Act was -3- conducted at various premises of the petitioner. Consequently, proceedings under the Prohibition of Benami Property Transactions Act, 1988 ('the Act') was initiated alleging that eight goldsmiths engaged by the petitioner were actually functioning as benami entities of the petitioner. On initiation of the proceedings, the second respondent passed a provisional attachment order under Section 24(4)(b)(i) of the Act, on the premise that the capital balance in the account of the goldsmiths was benami property. Accordingly, the goldsmiths were arrayed as benamidars and the petitioner as the beneficial owner under Section 2(12) of the Act. Thereafter, notices were issued under Section 26(1) of the Act, requiring the petitioner to produce documents/evidences to prove that the property is not benami property coming within the meaning of Section 2(9)(A) of the Act. Although petitioner filed the statements and documents, as -4- directed, the second respondent confirmed the provisional attachment order as per Section 26(3) of the Act. Thereupon, the petitioner preferred appeals under Section 46 of the Act. Pending the appeals, the petitioner was issued with notices requiring to show cause as to why sanction should not be accorded for prosecuting the petitioner for offence under Section 3(2) of the Act. The petitioner responded to the notices by submitting detailed explanations. Not being satisfied with the explanations, the first respondent issued Ext.P6 series of notices, calling upon the petitioner to submit detailed explanation. While admitting the appeal on 22.12.2021, this Court granted an interim stay of further proceedings pursuant to Ext.P6. 2. Learned Counsel for the petitioner submitted that Ext.P6 notices and the proceedings proposed under Section 3 of the Act are liable to be quashed in the light of the -5- recent judgment of the Apex Court in Union of India and another v. M/s.Ganapati Dealcom Pvt.Ltd [2022 SCC OnLine 1064]. Having gone through the judgment, I find the submission to be well founded.

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and are hence, unconstitutional from the inception. Based on that finding, the Apex Court declared Section 3(2) of the Amendment Act as unconstitutional. As rightly contended by the Counsel for the -6- petitioner, Section 3(2) of the Act having been declared unconstitutional, Ext.P6 series of notices and further proceedings thereon are liable to be quashed. In the result, the writ petition is allowed and Ext.P6 series of notices are quashed. V.G.ARUN JUDGE Scl/ -7-