Benami transaction provisional attachment procedure requires reconsideration after authorities failed to consider reply; interim order vacated

Provisional attachment under benami law required fresh consideration where authorities failed to address a petitioner's specific reply; the definition of benami transaction covers transfers where consideration is paid by another, fictitious ownership, or undisclosed beneficial interest. The Income Tax Department must examine paragraph 6 of the petitioner's reply, afford an opportunity of hearing, and record reasons whether the arrangement amounts to a benami transaction; the interim order was vacated and the attachment's fate is to follow the department's reasoned reconsideration within three weeks.

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Issues: Whether the provisional attachment under Section 24(4) of the Prohibition of Benami Property Transactions Act, 1988 was valid when the authorities did not give fresh or reasoned consideration to the specific factual stand taken by the petitioners in paragraph-6 of their reply dated 16.04.2018.

Analysis: The factual stand in paragraph-6 stated that an investment of Rs.25,00,000 was made as stock-in-trade and that the alleged financer had limited interest for profit, not ownership. The statutory definition of benami transaction requires examination of who provided consideration and who holds the property for benefit of whom. Administrative action under Sections 19(1) and 24 requires that material explanations by a person against whom attachment is proposed be considered and a reasoned decision be recorded. Given the competing risks to public revenue and to the petitioners, a fresh consideration permitting hearing and production of material is necessary to enable a reasoned conclusion whether the transaction is benami under Section 2(ix) and whether provisional attachment under Section 24(4) should continue.

Conclusion: The provisional attachment order is to be reconsidered by the appropriate authority with opportunity of hearing and provision to produce material; the interim order previously granting stay is vacated and the authority shall pass a reasoned order within three weeks of receipt of certified copy, after affording the petitioners hearing.

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