2025 (11) TMI 1230 - AT - Benami Property

Benami case remanded as authority ignored merits, misapplied recalled SC ruling, and skipped section 2(9)(A) analysis

The Initiating Officer ACIT, BPU, Jaipur Versus Smt. Sanju Devi & Ors.

AT held that the Adjudicating Authority failed to comply with prior HC directions to examine each case on merits while treating the 2016 amendment as ... Benami transaction - Prospective Or Retrospective Application of Amending Act, 2016 - definition of “benami transaction” given under section 2(9)(A) by the Amending Act of 2016 - scope of recall of Supreme Court Judgment on Orders - case not examined on merits - reference made by the IO and attachment of the property have not been accepted. HELD THAT:- In the instant case, the merit of the case was not examined by the Adjudicating Authority and the judgement in the case of Ganpati Dealcom Pvt. Ltd [2024 (10) TMI 1120 - SC ORDER (LB)] having being recalled, the impugned order deserves to be set aside because Judgement in the case of Niharika Jain [2019 (7) TMI 1001 - RAJASTHAN HIGH COURT] was also subject matter before the Apex Court in batch of matters decided in the case of Ganpati Dealcom Pvt. Ltd. (supra). When the Adjudicating Authority failed to comply the direction of Rajasthan High Court in the case of Niharika Jain [2019 (7) TMI 1001 - RAJASTHAN HIGH COURT] applied to the case of non-applicant Sanju Devi. The direction in the case of Niharika Jain (Supra), has been quoted earlier was to the effect that Adjudicating Authority would examine each case on its merit though keeping in mind that the Amending Act of 2016 would apply prospectively. The Adjudicating Authority did not enter into the merit, more specifically in reference to the definition of “benami transaction” given under section 2(9)(A) by the Amending Act of 2016 with its prospective application. The benami transaction is considered not only in the case of transfer of property by the beneficial owner for his ultimate benefit in future but even if such properties is held by the benamidar. If a benamidar was holding the property even after the amendment in the Act of 2016, the Adjudicating Authority was required to adjudicate the issue in reference to the provision applicable at time of passing the order and even if applied prospectively. If the transaction falls in the definition of “benami transaction” even after the amendment, whether the action of the appellant herein could have been nullified, is a question remained undecided. At this stage, we may clarify that once the judgement is recalled by the Apex Court on a Review Application, it cannot be considered to be recall of the judgement limited to the issue raised in the review application unless so specified in the recall order. Hence, we are unable to accept the argument of the learned counsel for the non-applicant that recall of the order by the Apex Court in the case of Ganpati Dealcom [2024 (10) TMI 1120 - SC ORDER (LB)] is limited to the extent of the issue raised in the Review Application. We find a case to set aside the impugned order with remand of the case to the Adjudicating Authority for afresh decision of the reference and the attachment of property - Accordingly set aside with remand of the case. ISSUES PRESENTED AND CONSIDERED 1. Whether the amended provisions of the Prohibition of Benami Property Transactions Act, 1988 introduced by the Amending Act, 2016 apply retrospectively or prospectively to transactions predating 1 November 2016. 2. Whether recall by the Supreme Court of its earlier judgment (in a case relied upon by the Adjudicating Authority) affects the validity of the Adjudicating Authority's order that applied that earlier judgment to decline confirmation of provisional attachments and reject references. 3. Whether the Adjudicating Authority complied with the High Court direction (para 94 of Niharika Jain) to examine each case on merits while keeping prospective application of the Amending Act, and whether failure to do so mandates interference/remand. 4. Whether recall of a Supreme Court judgment on a review petition should be read as limited to issues raised in the review or as affecting the entire earlier judgment for purposes of subsequent proceedings that relied on it. ISSUE-WISE DETAILED ANALYSIS - Issue 1: Prospective vs. Retrospective Application of Amending Act, 2016 Legal framework: The Amending Act, 2016 amended definitions and provisions (including definitions of 'benami transaction', 'benamidar', 'beneficial owner') and was held by certain courts to be enforceable w.e.f. 11.11.2016 (or 1.11.2016). Principle of prospective application governs statutes that introduce substantive changes unless expressly retrospective. Precedent treatment: Rajasthan High Court in Niharika Jain held that amendments are prospective and directed authorities to examine cases on merits keeping that prospective operation in view. Division Bench decisions and earlier Supreme Court pronouncements (earlier Ganpati Dealcom judgment) had been applied in lower proceedings. Interpretation and reasoning: The Adjudicating Authority applied the view that the Amending Act is not retrospective and therefore could not be applied to transactions of 2005-2006; consequently, provisions of Section 2(8), 2(9), 2(10) & 2(12) of the amended Act were found inapplicable. The Tribunal notes that the High Court's pronouncement addressed only the larger question of retrospective application and did not adjudicate factual merits, thereby requiring merits-based adjudication under the law applicable at the time of the reference and in light of the prospective effect of the amendment. Ratio vs. Obiter: The holding that the Amending Act is prospective (as stated in para 94 of Niharika Jain) is treated as a binding directional principle for authorities. Discussion that the amended definitions may still capture certain fact patterns even prospectively is treated as determinative of further adjudication, not mere obiter. Conclusions: The Amending Act, 2016 is to be treated as prospective in operation; however, whether a given transaction (even predating the amendment) falls within the substantive concept of 'benami' as clarified by amendment requires merits adjudication by the Adjudicating Authority applying the correct temporal lens. ISSUE-WISE DETAILED ANALYSIS - Issue 2: Effect of Recall of Supreme Court Judgment on Orders That Relied on It Legal framework: Orders of higher courts relied upon by lower courts/authorities influence pending matters; subsequent recall or withdrawal of a supreme pronouncement changes the legal landscape for cases decided in reliance on that pronouncement. Precedent treatment: The Adjudicating Authority relied on the then-operative Supreme Court judgment (Ganpati Dealcom) in disposing appeals/references; later recall of that Supreme Court judgment was raised by the appellant as a ground to set aside the Adjudicating Authority's order. Interpretation and reasoning: The Tribunal reasoned that the recall of the Supreme Court judgment which was applied by the Adjudicating Authority has direct effect on decisions premised upon it. Because the impugned order expressly tied its reasoning and its subject-to-litigational-outcome qualification to the Supreme Court decision, the subsequent recall eliminates the foundation for that part of the Adjudicating Authority's reasoning and thereby undermines the impugned order's sustainability. Ratio vs. Obiter: The conclusion that recall of a superior court judgment affects subordinate decisions that were decided in terms of that judgment is ratio where the subordinate decision expressly depended on the now-recalled ruling. Observations about limits of recall in other contexts are explanatory but support the operative finding. Conclusions: Recall of the Supreme Court judgment materially affects the impugned Adjudicating Authority order and justifies reconsideration of the matter by the Adjudicating Authority; reliance on an earlier-now-recalled ruling cannot sustain the order. ISSUE-WISE DETAILED ANALYSIS - Issue 3: Compliance with High Court Direction to Adjudicate Merits (Para 94 of Niharika Jain) and Necessity of Remand Legal framework: Where a higher court confines its determination to a legal question (here, prospective application of an amendment) and directs fact-sensitive authorities to decide merits, those authorities are bound to undertake merits adjudication consistent with that legal position. Precedent treatment: Para 94 of Niharika Jain expressly clarified that the High Court had not examined merits and directed authorities to examine each case on its own merits in light of prospective application. The Adjudicating Authority, however, purported to decline confirmation of attachments and references without conducting the mandated merits inquiry. Interpretation and reasoning: The Tribunal examined the impugned order and found that the Adjudicating Authority did not enter into the factual merit analysis required by the High Court's direction (notably regarding the amended definition of 'benami transaction' under section 2(9)(A) and its prospective application). Because the merits were not considered and the Adjudicating Authority's conclusions were intertwined with later-recalled precedent, the Tribunal concluded that justice requires remand for fresh adjudication on merits in accordance with the correct legal position. Ratio vs. Obiter: The direction that failure to adjudicate merits as required by the High Court constitutes ground for remand is ratio. Remarks on what aspects the Adjudicating Authority ought to consider when examining whether a transaction still falls within the notion of 'benami' post-amendment are illustrative but relevant to the remedial direction. Conclusions: The Adjudicating Authority failed to comply with the High Court's direction to examine merits; that failure, together with the recall of controlling precedent, necessitates setting aside the impugned order and remanding the references and attachments for fresh decision on the merits consistent with para 94. ISSUE-WISE DETAILED ANALYSIS - Issue 4: Scope of Recall - Limited to Review Issues or Entire Judgment Legal framework: When a superior court recalls a prior judgment in exercise of review powers, the terms of the recall determine its scope. Absent express limitation, recall affects the earlier judgment as a whole for purposes of subsequent reliance. Precedent treatment: The respondent argued the recall was limited to the narrow ground in the review petition; the Tribunal examined the recall order and applicable principles of finality and effect of recall. Interpretation and reasoning: The Tribunal held that, unless the recalling order expressly limits the recall to specified issues, a recall cannot be assumed to be restricted to the narrow grounds raised in the review petition. Therefore, the argument that recall should be read narrowly failed where the recall order did not so specify. Consequently, the recalling of the earlier Supreme Court judgment removed its precedential force for matters resolved in reliance on it. Ratio vs. Obiter: The ruling that recall is not to be read as limited to the review issues unless so specified is a direct holding (ratio) guiding how lower authorities treat later recalls. Ancillary remarks about the scope of review and judicial notice are supportive observations. Conclusions: The Tribunal rejects the contention that recall should be read as narrowly confined; in absence of express limitation, the recall impacts the whole earlier judgment for purposes of reliance by lower authorities, thereby supporting remand where that earlier judgment were applied. OVERALL CONCLUSION AND RELIEF The impugned order is set aside and the matter remanded to the Adjudicating Authority for fresh adjudication of the reference and confirmation of attachments on merits in conformity with the holding that the Amending Act, 2016 is prospective, the High Court's directive to decide merits (para 94 of Niharika Jain), and having regard to the effect of the recall of the earlier Supreme Court judgment. Parties directed to appear before the Adjudicating Authority on the specified date.