Show cause notice and provisional attachment order set aside under Sections 24(1) and 24(3) of Benami Transactions Act for lack of sufficient material

The Allahabad HC set aside a show cause notice and provisional attachment order under Sections 24(1) and 24(3) of the Benami Transactions Act, 1988. The court found that the Initiating Officer lacked sufficient material to establish "reason to believe" that the petitioner was a benamidar of her son-in-law regarding certain constructions. The proceedings were based solely on an unsupported oral statement from a contractor without any documentary evidence or logical basis. The court emphasized that taxing statutes require strict interpretation and that mere statements without substantial supportive evidence cannot constitute sufficient material for initiating benami proceedings. The provisional attachment order was also found baseless as no material demonstrated risk of property alienation.

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Issues Involved:
1. Validity of the show cause notice dated 05.01.2023 issued u/s 24(1) of The Prohibition of Benami Property Transactions Act, 1988.
2. Validity of the provisional attachment order dated 05.01.2023 issued u/s 24(3) of The Prohibition of Benami Property Transactions Act, 1988.

Summary:

1. Validity of the show cause notice dated 05.01.2023 issued u/s 24(1) of The Prohibition of Benami Property Transactions Act, 1988:

The petitioner challenged the show cause notice dated 05.01.2023 issued u/s 24(1) of The Prohibition of Benami Property Transactions Act, 1988. The notice proposed to treat the constructions on the petitioner's Plot No.35, Srijan Vihar Colony, Gomti Nagar, Lucknow as a benami transaction, claiming the petitioner acted on behalf of her son-in-law, respondent no.5. The Supreme Court in Union of India Vs. Ganpati Dealcom Ltd. (2023) 3 SCC 315 held that the 2016 Amendment Act to the Benami Transactions Act was not merely procedural but prescribed substantive provisions and could only be applied prospectively. The court found that the petitioner's purchase of the plot was prior to the 2016 amendment, and thus, no proceedings could be initiated based on the amendment. The court scrutinized the material in possession of the Initiating Officer and found that the notice was based solely on an unsubstantiated statement by a contractor, which did not constitute sufficient material to form a "reason to believe" as required u/s 24(1). Consequently, the notice was deemed issued without relevant material and was set aside.

2. Validity of the provisional attachment order dated 05.01.2023 issued u/s 24(3) of The Prohibition of Benami Property Transactions Act, 1988:

The provisional attachment order dated 05.01.2023 issued u/s 24(3) was also challenged. The court noted that u/s 24(3), the Initiating Officer must have an opinion that the property may be alienated during the notice period. The court found no material in the attachment order or presented before the court indicating that the property was likely to be sold, thus failing to justify the provisional attachment. Therefore, the order of provisional attachment was also set aside as being without basis.

Conclusion:

The impugned show cause notice dated 05.01.2023 issued u/s 24(1) and the provisional attachment order dated 05.01.2023 issued u/s 24(3) of The Prohibition of Benami Property Transactions Act, 1988 were set aside. All consequential orders and proceedings based on the said show cause notice and provisional attachment order were declared non-est and void. The writ petition was allowed.

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