P.M.SHARJITH, vs. THE ASST COMMISSIONER OF INCOME TAX (BENAMI PROHIBITION UNIT),

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WP(C)/4432/2020HC KeralaKLHC01012061202008 February 2023Bench: HONOURABLE MR. JUSTICE T.R.RAVI4 pages
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What did the High Court hold?

The High Court held that the amended provisions of the Prohibition of Benami Property Transactions Act, 1988, shall be applied against the petitioner only if the transaction(s) in question were entered into on or after 25.10.2016. This decision is based on the Supreme Court's judgment in Union of India & Anr. v. M/s. Ganpati Dealcom Pvt.Ltd. (2022 LiveLaw (SC) 700). The Supreme Court had declared Section 3(2) of the unamended 1988 Act and Section 3(2) of the 2016 Act as unconstitutional. It also held that the in rem forfeiture provision under Section 5 of the unamended Act of 1988 was unconstitutional. Furthermore, the in rem forfeiture provision under Section 5 of the 2016 Act, being punitive, can 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 such proceedings shall stand quashed. The High Court's operative direction is to apply the amended Act prospectively.

What were the facts?

This case involves a writ petition filed by P.M. Sharjith against the Assistant Commissioner of Income Tax (Benami Prohibition Unit) and the Adjudicating Authority under the Benami Property Transactions Act, 1988. The petitioner challenged actions taken under the Benami Transactions Prohibition Act, 1988. The core of the dispute revolves around the applicability of certain provisions of the Act, particularly concerning transactions entered into before the amendment in 2016. The petitioner sought relief from proceedings initiated by the revenue authorities. The case was heard by the High Court of Kerala.

What were the issues?

1. Whether the amended provisions of the Prohibition of Benami Property Transactions Act, 1988, can be applied to transactions entered into prior to 25.10.2016? (Question of law) Assessee's Contention: The petitioner implicitly argues that the amended provisions, especially those related to forfeiture, should not be applied retroactively to transactions predating the 2016 amendment. The petitioner relies on the Supreme Court's decision in Union of India & Anr. v. M/s. Ganpati Dealcom Pvt.Ltd. Revenue's Contention: The judgment does not explicitly record any arguments made by the revenue. However, the context suggests the revenue would have sought to apply the Act as amended.

Which sections of the Income-tax Act were involved?

Section 3(2),Section 5

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE T.R.RAVI WEDNESDAY, THE 8TH DAY OF FEBRUARY 2023 / 19TH MAGHA, 1944 WP(C) NO. 4432 OF 2020 PETITIONER: P.M.SHARJITH, AGED 42 YEARS S/O.KUNHAMEED, POOVANITHERUVATH MALIYEKKAL HOUSE, 12/510, THEKKUMTHALA, KUTTICHIERA, CALICUT - 673 001. BY ADVS. M.P.SHAMEEM AHAMED SRI.HARISH R. MENON SRI.CYRIAC TOM RESPONDENTS: 1 THE ASST COMMISSIONER OF INCOME TAX (BENAMI PROHIBITION UNIT),GROUND FLOOR, POORNIMA BUILDING, NEAR MANORAMA JUNCTION, PANAMPILLY NAGR, KOCHI - 682 036. 2 THE ADJUDICATING AUTHORITY UNDER THE BENAMI PROPERTY TRANSACTIONS ACCT, 1988, ROOM NO.26, 4TH FLOOR, JEEVAN DEEP BUILDING, PARLIAMENT STREET, NEW DELHI - 110 001. 3 UNION OF INDIA, (REPRESENTED BY FINANCE SECRETARY),MINISTRY OF FINANCE, DEPARTMENT OF REVENUE, ROOM 46, NORTH BLOCK, NEW DELHI - 110 00. * ADDL.R4 FEROS V.P., SALEENA MANZIL, CALICUT UNIVERSITY P.O., MALAPPURAM DISTRICT, PIN-673 635. *ADDL.R4 IS IMPLEADED AS PER ORDER DT.8.2.2023 IN I.A.NO.1/2021. BY ADVS. DR.K.P.SATHEESAN (SR.) SRI.P.MOHANDAS (ERNAKULAM) SRI.S.K.ADHITHYAN SRI.SABU PULLAN SRI.GOKUL D. SUDHAKARAN SRI. S. MANU, DSGI. THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 08.02.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

WP(C) NO. 4432 OF 2020 2 T.R. RAVI, J. -------------------------------------------- W.P.(C) No.4432 of 2020 -------------------------------------------- Dated this the 08th day of February, 2023 JUDGMENT The issues raised in the writ petition are covered by a judgment of the Supreme Court in Union of India & Anr. v. M/s. Ganpati Dealcom Pvt.Ltd.; 2022 LiveLaw (SC) 700 (Civil Appeal No.5783 of 2022), where a three judge Bench of the Supreme Court has concluded as follows: “18. 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.

WP(C) NO. 4432 OF 2020 3 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 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”. In view of the aforesaid, it is declared that the amended provisions of the Prohibition of Benami Property Transactions Act, 1988, shall be applied against the petitioner in the case only if the transaction/transactions in question is/are entered into on or after 25-10-2016. Sd/- T.R.RAVI JUDGE mpm

WP(C) NO. 4432 OF 2020 4 APPENDIX OF WP(C) 4432/2020 PETITIONER’S EXHIBITS EXHIBIT P1 COPY OF THE NOTICE DATED 2/09/2019 U/S 24(1) IN CONNECTION WITH SALE DEED 15/01/2015 DT.25/03/2015. EXHIBIT P2 COPY OF THE COMMON REPLY DATED 10/10/2019 BEFORE THE RESPONDENT. EXHIBIT P3 COPY OF THE ORDER DATED 26/11/2019 PASSED BY THE 1ST RESPONDENT UNDER SEC 24 (4) IN CONNECTION WITH SALE DEED 15/01/2015 DT.25/03/2015. EXHIBIT P4 COPY OF THE PROVISIONAL ATTACHMENT ORDER DATED 26/11/2019. EXHIBIT P5 COPY OF REFERENCE MADE BY THE 1ST RESPONDENT U/S 24 (5) OF THE BENAMI PROHIBITION ACT. EXHIBIT P6 COPY OF THE SHOW CAUSE NOTICE DATED 23/12/2019 IN R-1869/2019. EXHIBIT P7 COPY OF THE NOTIFICATION SO 3289 (E) DT. 25/10/2016. EXHIBIT P8 COPY OF THE INTERIM ORDER DATED 4/04/2018 IN WP 10387/2018. EXHIBIT P8 (A) COPY OF INTERIM ORDER DATED 4/04/2018 IN WP 10441/2018. EXHIBIT P8 B COPY OF COMMON INTERIM ORDER DATED 30/01/2020 PASSED IN WP 2577/2020, 2590/2020, 2595/2020,2596/2020, 2621/2020 AND 2627/2020.

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