MAHESH NAGAR vs. DEPUTY COMMISSIONER OF INCOME TAX

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CWP/7370/2021HC Punjab & HaryanaPHHC01032489202125 September 2023Author: MS. JUSTICE RITU BAHRI,MRS. JUSTICE MANISHA BATRA3 pages
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What did the High Court hold?

The High Court held that the present writ petitions are squarely covered by the judgment of the Hon'ble Supreme Court in Union of India vs. Ganpati Dealcom Pvt. Ltd. (supra). The Supreme Court had declared Section 3(2) of the un-amended Benami Transaction (Prohibition) Act, 1988, as unconstitutional. Consequently, the High Court quashed the impugned notices dated September 18, 2020, September 23, 2020, September 25, 2020, September 28, 2020, December 26, 2020, December 29, 2020, and December 31, 2020 (Annexures P-1 to P-25). However, the Court clarified that the respondent shall be entitled to seek revival of the petitions in case the review petition filed in the Ganpati Dealcom Pvt. Ltd. case is allowed. The ratio decidendi is that actions taken under unconstitutional provisions of a statute are void ab initio. The operative direction was to quash the notices, with a liberty to the revenue to seek revival.

What were the facts?

These three writ petitions (CWP Nos. 7370, 7371, and 7060 of 2021) were filed by Mahesh Nagar, M/s Lambodar Arts Enterprise LLP, and Rohtash Kumar, respectively, against the Deputy Commissioner of Income Tax. The petitioners sought to quash notices issued under Section 24(1) of the Prohibition of Benami Property Transaction Act, 1988. The notices were dated between September 18, 2020, and December 31, 2020. The High Court considered these petitions together due to similar issues. The core of the dispute revolves around the validity of actions taken under the Benami Transaction Act in light of a Supreme Court judgment.

What were the issues?

1. Whether the notices issued under Section 24(1) of the Prohibition of Benami Property Transaction Act, 1988, are liable to be quashed in light of the Supreme Court's decision in Union of India vs. Ganpati Dealcom Pvt. Ltd. (2022 SCC Online SC 1064)? Assessee's Contention: The petitioners argued that the notices are invalid because the Supreme Court in Union of India vs. Ganpati Dealcom Pvt. Ltd. declared Section 3(2) of the un-amended Benami Transaction (Prohibition) Act, 1988, as unconstitutional and held that Section 5 of the amended Act could only be applied prospectively. They relied on this judgment to support their claim that the proceedings initiated against them are vitiated. Revenue's Contention: The respondent (Deputy Commissioner of Income Tax) referred to an order dated January 25, 2023, passed by the Supreme Court in a review petition related to the Ganpati Dealcom Pvt. Ltd. case, indicating that the review petition was still pending. They also cited another order dated May 2, 2023, in SLP (Civil) No. 7978 of 2023 (Union of India vs. M/S Nutrient Marine Foods Ltd.) where leave to appeal was not granted, but liberty was given to approach the Apex Court if the review petition was allowed.

Which sections of the Income-tax Act were involved?

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

AI-generated summary — verify with the full judgment below

CWP Nos.7370 (O&M); 7371 (O&M) & 7060-2021 (O&M) -1- 2023:PHHC:126581-DB IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH 233/3 CWP-7370 of 2021 (O&M) Date of Decision:25.09.2023 Mahesh Nagar

....Petitioner Versus Deputy Commissioner of Income Tax .....Respondent 2) CWP-7371 of 2021 (O&M) M/s Lambodar Arts Enterprise LLP

....Petitioners Versus Deputy Commissioner of Income Tax .....Respondent 3) CWP-7060 of 2021 (O&M) Rohtash Kumar

....Petitioner Versus Deputy Commissioner of Income Tax .....Respondent CORAM: HON’BLE MS. JUSTICE RITU BAHRI HON’BLE MRS. JUSTICE MANISHA BATRA **** Present: Mr. R. Kartikeya, Advocate, Ms. Ridhi Bansal, Advocate, and Mr. Prashant Rana, Advocate, for the petitioners (in all the three cases). Mr. Sukant Gupta, Senior Standing Counsel for the respondent (in all the three cases). **** DINESH 2023.10.05 17:42 I attest to the accuracy and integrity of this document

CWP Nos.7370 (O&M); 7371 (O&M) & 7060-2021 (O&M) -2- 2023:PHHC:126581-DB RITU BAHRI

, J. (Oral)

1.

All these three Writ Petitions are being taken up together for final disposal with the consent of learned counsel for the parties as the issues involved in these three cases are similar in nature. CWP-7370 of 2021 is being treated as the main case and the facts are taken up therefrom.

2.

This petition has been filed under Articles 226/227 of the Constitution of India seeking direction to the respondent to quash the impugned notice dated 18.09.2020, 23.09.2020, 25.09.2020, 28.09.2020, 26.12.2020, 29.12.2020, 31.12.2020 (Annexure P-1 to P-25) issued under Section 24(1) of the Prohibition of Benami Property Transaction Act, 1988. 3. Reference at this stage can be made to a judgment passed by Hon'ble un-amended Benami Transaction (Prohibition) Act, 1988 (for short-the Act, 1988) and Section 5 of the Act, 1988 had been declared unconstitutional and it was directed that the provisions of Section 5 of the Benami Transaction (Prohibition) Amendment Act, 2016 (for short-the Act, 2016) being punitive in nautre could be applied only prospectively and not retroactively.

4.

Learned counsel for the respondent has referred to the order dated 25.01.2023 passed by Hon'ble the Supreme Court in a review petition filed by the In another case vide order dated 02.05.2023 passed by Hon'ble the DINESH 2023.10.05 17:42 I attest to the accuracy and integrity of this document

CWP Nos.7370 (O&M); 7371 (O&M) & 7060-2021 (O&M) -3- 2023:PHHC:126581-DB Supreme Court in SLP (Civil) No. 7978 of 2023 titled as Union of India and others vs. M/S Nutrient Marine Foods Ltd. and another, showing that the Union of India had not been granted leave to file appeal in view of judgment in case of Ganpati Dealcom Pvt. Ltd.'s case (supra), with liberty to it to approach the Apex Court by filing afresh petition in case, the review petition was allowed.

6.

In the present case Hon'ble the Supreme Court in case of Union of Section 3(2) of the un-amended Benami Transaction (Prohibition) Act, 1988 as unconstitutional.

7.

The present Writ Petitions are squarely covered by the judgment of Hon'ble the Supreme Court in Union of India vs. Ganpati Dealcom Pvt. Ltd. (supra). Accordingly, the Writ Petitions are being disposed of. The impugned notice dated 18.09.2020, 23.09.2020, 25.09.2020, 28.09.2020, 26.12.2020, 29.12.2020, 31.12.2020 (Annexure P-1 to P-25) are being quashed. However, it is clarified that the respondent shall be entitled to seek revival of the petitions in case the review petition filed by the Ganpati Dealcom Pvt. Ltd. is allowed.

8.

Pending application (s), if any, stand (s) also disposed of.

(RITU BAHRI)

JUDGE (MANISHA BATRA) JUDGE September 25, 2023

dinesh Whether speaking : Yes/No Whether reportable : Yes/No DINESH 2023.10.05 17:42 I attest to the accuracy and integrity of this document

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