TaxTMI 
TaxTMI 
2018 (2) TMI 60
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.... Property Transactions Act, 1988, as amended by Act No.43 of 2016, w.e.f. 01.11.2016 (hereinafter referred to as the Act for brevity). 2(i). The petitioner, in all these Writ Petitions, is M/s.Cascade Energy Pte Ltd., having its registered office at Singapore. 2(ii) In W.P.No.14626 of 2017, the petitioner seeks for issuance of Writ of Prohibition, restraining the official respondents from in any manner proceeding with the show cause notice, dated 19.05.2017, issued by the second respondent under Section 24(1) of the Act, calling upon the petitioner to show cause as to why 51% shares and debentures held by the petitioner in an Indian company Zynergy Solar Projects Pvt., Ltd (Zynergy India). 2(iii). In W.P.No.14627 of 2017, the petitioner seeks for issuance of a Writ of Certiorari, to quash the order dated 19.05.2017, issued under Section 24(3) of the Act, intimating the petitioner that pursuant to the provisional attachment of shares and debentures, enforced, the petitioner is restricted/prohibited from dealing in any manner and from exercising any rights in relation to the shares and debentures. 2(iv). In W.P.No.14628 of 2017, the petitioner seeks for issuance of a Writ....
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....hen O.A.No.347 of 2017, was listed on 01.06.2017, for passing orders, the impugned attachment order and the impugned prohibitory order issued to the second respondent was produced before the Court and an argument was placed stating that those orders also should be taken into consideration before passing orders in O.A.No.347 of 2017. It is submitted that the Court did not accede to such request and proceeded to dismiss O.A.No.347 of 2017. The petitioner would state that the scanned copies of the impugned orders were sent to the petitioner by e-mail, on 01.06.2017, at 10.57am and the actual physical copies were received only on 05.06.2017 by unregistered air-mail. It is further submitted that the petitioner has filed C.P.No.19 of 2017, before the NCLT against Mr.RR and his group for oppression and mismanagement and the NCLT, by order dated 27.04.2017, ordered status quo and restrained the conduct of any related party transactions, without leave of the Tribunal and directed the management of Zynergy India to produce relevant information as sought for by the petitioner. The petitioner would allege that the impugned proceedings have been initiated to prevent NCLT from proceeding further....
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.... the notice has not been forwarded. 6. Relying upon Rule (5) of the Prohibition of Benami property Transaction Rules, 2016, ('Rules' for brevity). It is submitted that for the purposes of sub-section (3) of Section 24, the Initiating Officer shall provisionally attach any property in the manner provided in the second schedule of the Income Tax Act, 1961 and the attachment can only restrain the transfer of shares and the right to receive dividend and the impugned prohibitory order goes beyond the impugned attachment order by restricting/prohibiting, the petitioner from exercising any right in relation to shares and debentures and this restriction is not found in the main attachment order issued by the 6th respondent. Referring to the notification, dated 18.05.2017, issued by the Central Board of Direct Taxes (Department of Revenue), Ministry of Finance, it is submitted that the said notification supersedes the notification dated 25.10.2016 and directs that the income tax authorities under Section 116 of the Income Tax Act specified in column-(2) of the Schedule having headquarters at places specified in corresponding entry in column-(3), to exercise powers and perform fun....
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....ctors of the petitioner by exercising its powers, as the Initiating Authority for which approval was given by the approving authority. It is further submitted that Mr.K.Visakh IRS, took charge as Assistant Commissioner of Income Tax [Benami Prohibition] and the cases, which were handled by the second respondent, were handed over to him for further continuation namely, 62 files were handed over on 29.05.2017 and 6 files on 02.06.2017 and the files pertaining to the petitioner was handed over to the new incumbent on 05.06.2017, who took charge on the very same day. Therefore, the second respondent seeks to justify the issuance of the provisional attachment order and the show cause notice, dated 19.05.2017, as being well within his powers and jurisdiction. The learned Senior counsel has drawn the attention of the Court to the additional counter affidavit filed by the second respondent, dated 07.07.2017, in which it has been avered that though the Gazette of India is dated 18.05.2017, it was digitally signed and published only on 22.05.2017 and came to his knowledge only thereafter, and therefore, it is in good faith and in exercise of powers under Act, the impugned orders were issued ....
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....rs., M/s.Pankaj Jain Agencies (supra) and held that the decisions rendered in M/s.Pankaj Jain Agencies represents, the correct position of law on the subject and the decisions rendered in CCE vs. New Tobacco Company [(1998) 8 SCC 250] and the decisions in Garware Nylons Ltd.,vs. Collector of Customs & Central Excise [(1998) 8 SCC 282], do not lay down the correct law and by applying the law laid down in M/s.Pankaj Jain Agencies, it has to be held that the notification dated 18.05.2016, would come into force on the same day and not as contended by the second respondent on 22.05.2016, the date on which, it was uploaded in the website. Therefore, it is submitted that the officer having come to know of it later is of no relevance and the date of publication, is the date of notification in the Gazette i.e., 18.05.2017. In this regard, the learned Senior counsel has drawn the attention of this Court to the reply received to a query under the Right to Information Act, vide application, dated 21.06.2017, wherein the Chief Public Information Officer by reply dated 13.07.2017, informed the petitioner that the date of e-publication on e-gazette website is 18.05.2017. Therefore, it is submitte....
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....e second respondent has not complied with the provisions of sub-section (2) of Section 24 and notice has not been issued to the beneficial owner and it has been given only to the nominee Director at Chennai, who cannot represent the Hongkong Company, hence, the impugned proceedings as ultra vires Section 24(2) of the Act. It is further submitted that to term a transaction as 'benami transaction', it should fall within definition of Section 2(9)(A) of the Act and to bring a transaction within the said provision, both the contingencies contemplated under Section 2(9)(A)(a) and (b) have to be satisfied and the allegation as set out in the impugned order does not satisfy both the conditions, as there is no allegation that the Singapore company is holding shares on behalf of Kohli Ventures in British Virgin Islands and Cascade Global in Hongkong. 13. Further, commenting upon the allegations made in the show cause notice, dated 19.05.2017, it is submitted that though the second respondent has stated that he has reason to believe, no reasons have been set out in the show cause notice and no reasons have been recorded in writing while issuing the show cause notice as required un....
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....acts and circumstances of the case and submitted that the impugned show cause notices/orders cannot be stated to have become defective for the reasons set out by the petitioner. It is further submitted that the Amendment Act came into force on 01.11.2016 and in terms of the amended provision, the Initiating Officer as defined under Section 2(19) of the Act is by designation and not by name and therefore, the authority was well within his jurisdiction to initiate proceedings and pass an order of attachment, which has been done after obtaining the approval from the Approving Authority. It is further submitted that the Amended Act is retroactive and not retrospective and in this regard, reliance was placed on the decision of the Hon'ble Supreme Court in the case of Excel Crop Care Ltd., vs. CCI & Anr [(2017) 8 SCC 47], wherein the Court took into consideration the earlier decision in the case of R.Rajagopal Reddy vs. Padmini Chandrasekharan [(1995) 2 SCC 630] and held that merely because an agreement relating to Benami transaction was entered to prior to come into force of the Benami Transaction (Prohibition) Act, 1988, it would not mean that the provisions of the said Act will no....
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....ppearing for the impleading parties and have made their submissions. After referring to the various averments as set out in the affidavit filed in support of the Writ Petition, it is submitted that there are direct allegations made against the impleading parties, serious comments have been made connecting the impleading parties to Shri.R.V.Aroon Prasaad, IRS, the second respondent, malice has been attributed and hence, they should be impleaded as respondents in the Writ Petition. It is submitted that in order to effectively adjudicate upon the lis in the present matter, the parties should be impleaded as respondents in the Writ Petition, more particularly when Mr.RR is the defacto complainant with respect to the information provided and he ought to have been impleaded as a party for an effective adjudication of the dispute. It is further submitted that the Writ Petitioner is a shell company owned and controlled by one Mr.Tej Kohli, an individual against whom several criminal investigation remain pending and has been indicted by the Courts of United States of America for various offences and the impleading parties acquired knowledge of these facts, only when several Banks refused to....
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....nt proceedings would not bind the impleading parties and the Writ Petitioner being dominus litus, is entitled to decide as to who has to be impleaded as party respondents to the Writ Petitions. 21. The impleading parties have filed a reply affidavit to the counter affidavit filed by the Writ Petitioner setting out facts, which are of no relevance at this stage in the present proceedings. 22. The Court also heard the learned Senior counsels on the validity of the impugned orders much of which were in support of the submissions made by the learned Additional Solicitor General. It is submitted that the publication is mandatory and only if it is published, the notification will become effective. In support of such contention, reliance was placed on the Hon'ble Supreme Court in the case of Union of India & Ors., vs. Ganesh Das Bhojraj (supra). Further, it is submitted that for the sake of arguments, if a converse case is taken up for consideration, the Writ Petitioner would have come to Court challenging that the Assistant Commissioner of Income Tax (Benami Prohibition) had no jurisdiction on 18.05.2017, to initiate proceedings as notification was published only on 22.05.2017.....
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.... subject to the (Indian) Companies Act and therefore, they can be brought within the ambit of the Benami Act and in support of such proposition, reliance was placed on the decision in the case of N.R.Harikumar vs. WW Apparels (India) Private Ltd & Ors., [2015-5-MLJ-422 (para 7 to 15)]. It is further submitted that the Benami Property is not required to be located in India only and the statutory definition will include even foreign properties. However, in the instant case, the Companies Act would apply to the share transfer and therefore, the second respondent has jurisdiction to initiate proceedings. Reliance was placed on the decision of the High Court of Bombay in the case of Sabita Rajesh Narang vs. Sandeep Gopal Raheja & Ors., [Manu/MH/2397/2015], for the contention that the 2013 Act came into force before the present suit was filed. Section 89(8), makes it clear that absent the necessary declaration, no right in relation to that shareholding is enforceable. This would have been entered on the companies' registers of members. There is no such case even made out. 26. It is further submitted that where a substantive power is conferred upon a Court or Tribunal, all incident....
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....thentication of any electronic record by a subscriber by means of electronic method or procedure in accordance with provisions of Section 8, which deals with authentication of electronic records and the said date can at best be only the date of uploading and not to be taken as the date of notification of the gazette. Further, it is submitted that defacto doctrine as submitted by the learned Additional Solicitor General will not apply to the facts of the present case, since the second respondent on the date when he issued the impugned notice had no jurisdiction. This is more so, because, the post has been specifically mentioned. To demonstrate as to what was the purport and intent of mentioning the specific post for the initiating authority, reliance was placed on the decision of the Hon'ble Supreme Court in the case of Shri Ishar Alloy Steels Ltd., vs. Jayaswals Neco Ltd., [(2001) 3 SCC 609]. Thus, it is submitted that Section 24 read with Section 2(19) and Section 59 makes it clear that it is only the Assistant Commissioner of Income Tax (Benami Prohibition), who has jurisdiction to initiate proceedings and not any Assistant Commissioner of Income Tax. Further, it is submitted....
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..... Further, the second respondent has not formed any opinion as required under Section 24(3) before passing the impugned order. In fact, the petitioners are effectively contesting their right to retain their holding in the company. In this regard, reliance was placed on the decision of the High Court of Bombay in the case of Gandhi Trading vs Assistant Commissioner Of Income Tax [1999 (239) ITR 337 (Bombay)]. By relying upon the decision of the High Court of Bombay in the case of Keyur Shah vs. UOI [Manu/MH/1476/2014], it is submitted that it has been held that merely by stating that for protecting the interest of the revenue, the property should not be allowed to be sold/transferred or leased cannot justify an order of provisional attachment as required under Section 28BA of the Customs Act, 1962. Thus, for the above reasons, the learned Senior counsel prays that the impleading petitions may be dismissed and the Writ Petition may be allowed and the impugned proceedings may be quashed. 28.Heard the learned counsels appearing for the parties and perused the materials placed on record. 29.The following questions arise for consideration in these Writ Petitions:- (i) Whether th....
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.... so as to avoid his statutory and contractual obligations and prevented the petitioner from examining the affairs of Zynergy India. There are references to the petitions filed by M/s.Archer represented by Mr.R.R before the NCLT and this Court and the orders passed thereon. Further, it is stated that it is Mr.RR's intention to produce the impugned orders before the NCLT and to contend that no orders can be passed by NCLT at the instance of the petitioner, as the petitioner's entire shareholding in Zynergy India has been attached and the petitioner has been prohibited from exercising any rights pertaining inter alia their shareholding in Zynergy India. 32. The general rule with regard to impleadment of parties is that the petitioner or the plaintiff being dominus litis may choose the persons against whom, he wishes to litigate and cannot be compelled to sue a person against whom, he does not seek any relief. But the Court is given the discretion to add as a party, any person who is found to be a necessary party or a proper party. Though the provision of the Code of Civil Procedure are not applicable to a Writ proceedings, it has been held that principles analogous to the C....
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....ndents 7 & 8 in the Writ Petitions. Thus, the question No.(i) is answered accordingly. 35.The next question to be answered is a very crucial question in the present proceedings, as it will determine the fate of the litigation and if the question is answered in favour of the petitioner, nothing more is required to be done in the matter and there would be no necessity to decide the other two questions. In the event, the question is answered against the petitioner, there may be a necessity to answer the remaining two questions. With this caveat I proceed to consider the question No.(ii) being whether the second respondent had jurisdiction to issue the impugned notice, dated 19.05.2017, the impugned prohibitory order, dated 19.05.2017, and the impugned attachment order dated 19.05.2017. 36.The contention of the petitioner is that the notification in SO 1620(E), dated 18.05.2017, was published in the gazette of India, dated 18.05.2017, and comes into force on the said date. The said notification was issued by the Central Board of Direct Taxes (CBDT) in exercise of the powers conferred under Section 28(2) read with Section 59 of the Prohibition of Benami Property Transactions Act, ....
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.... The Initiating Officer is the Assistant Commissioner of Income Tax/Deputy Commissioner of Income Tax, (Benami Prohibition), Chennai and the Administrator is the Income Tax Officer (Benami Prohibition), Chennai. 38. Admittedly, the second respondent is not a Deputy Commissioner of Income Tax (Benami Prohibition), but Deputy Commissioner of Income Tax, Corporate Circle (I). The question would be if the second respondent is not the Initiating Officer, as notified in the notification, dated 18.05.2017, could he have initiated proceedings under the Benami Act against the petitioner. 39. The petitioner's case is that the date of the gazette and the notification is 18.05.2017 and on and after the said date, it is only the income tax authority, who has been notified in the notification, who could exercise jurisdiction under the Benami Act. The respondents would contend that though the notification is dated 18.05.2017, the same was uploaded online by the Government of India Press, New Delhi on the website of E-Gazette only on 22.05.2017 and therefore, the notification would come into effect on and after the said date and not on 18.05.2017 and therefore, the second respondent was ....
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....ssary that it should either be published or made known outside the country and as it was published and made known in India by publication in the Gazette on 24th November, the ignorance of it by the respondent, who is the foreigner is wholly irrelevant. 41. In B.K.Srinivasan (supra), one of the questions was, how and when a subordinate legislation becomes effective. It was held that it is necessary that subordinate legislation, in order to take effect, must be published or promulgated in some suitable manner, whether such publication or promulgation is prescribed by the parent statute or not. It will then take effect from the date of such publication or promulgation. It will take effect only when it is published through the customarily recognised official channel namely, official gazette or some other reasonable mode of publication. 42. In M/s.Pankaj Jain Agencies (supra), the Court, took into consideration the decision in the cases of Mayer Hans George (supra), B.K.Srinivasan (supra), it was held that the mode of publication being prescribed, notification will come into force from the date of its publication in official gazette and it is not necessary that the notification be....
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....roved as a fact as provided in the Evidence Act. Thus, the legal position which emerges from the above decisions, is that the notification, dated 18.05.2017, would come into effect from the date of publication in the official Gazette. 45. The contention raised by the official respondents as well as the private respondents is that the CBDT issued a clarification, dated 07.08.2017, confirming that the notification, dated 18.05.2017, was uploaded online by the Government of India Press (Directorate of Printing) on the website of e-gazette on 22.05.2017. By reading the Press release, dated 29.10.2016, issued by the Press Bureau of India, Ministry of Law and Justice, it is submitted that physical printing was being done away with and it was decided to switch to exclusive e-publishing of all gazette notification by uploading read with Section 2(21) of the 2016 Act and Section 8 of the Information and Technology Act, the notification could have come into force only on 22.05.2017, by uploading on the e-gazette by the Directorate of Printing as mentioned in the notification itself. 46. The Directorate of Printing, Government of India vide letter dated 31.07.2017, addressed to the CBDT....
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....ing. If that is so, it has to be seen as which would be the department of the Government of India, who would be competent to answer the query as to when the notification dated 18.05.2017, was published. The appropriate authority would be the department of publication. 48. The petitioner through their counsel filed an online application under the Right to Information Act to the Department of Publications, Government of India, vide application dated 21.06.2017. In the said application, the following information was sought for (i) please state the date of publication of SO 1621(E) passed under sub-section (2) of Section 28 read with Section 59 of the Prohibition of Benami Property Transactions Act, 1988 by the Central Government (Department of Revenue) in the Gazette of India; (ii) please state the date on which SO 1621(E) comes into effect; (iii) please state the date on which SO1621(E) was digitally signed; (iv) please state whether applicable date for coming into force of SO 1621(E) is the date of publication in the gazette or the date of digital signature; (v) please state if the department can make publications in the gazette of India without a digital signature;(vi) ....
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....only from the date on which, it is uploaded in the official website. If the same interpretation is to be given with regard to the old practice of physical printing, then it would amount to stating that the notification issued by the Government of India, would come into force, only on the date when it is made available for sale to the public. This interpretation is wholly untenable and contrary to the law laid down by the Apex Court in M/s.Pankaj Jain Agencies (supra). Interestingly, the authority who is competent to speak on the date of publication has stated that the date of e-publication on e-gazette website is 18.05.2017. Thus, the date of uploading by the Directorate of Printing is of no consequence and what is relevant, is the date as certified by the Department of Publication that is on 18.05.2017. 52. Having steered heard of this legal/factual position, it has to be seen as to whether the second respondent could have exercised jurisdiction as an Initiating Officer. 53. Section 2(19) defines 'Initiating Officer' to mean an Assistant Commissioner or a Deputy Commissioner as defined in clauses (9A) and (19A) respectively of Section 2 of the Income Tax Act,1961. Se....
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....ai. Thus, when a statutory notification is issued specifying the authority who will be entitled to exercise power as an Initiating Officer, no other authority would be entitled to exercise such power and if done so, it would be without jurisdiction. 56. The learned Additional Solicitor General referred to Section 2(19) which defines Initiating Officer to mean an Assistant Commissioner or a Deputy Commissioner of Income Tax as defined in clauses 9A and 19A respectively of Section 2 of Income Tax Act and the second respondent being a Deputy Commissioner of Income Tax was well within his jurisdiction to initiate proceedings under Section 24 of the Act. This argument could have been accepted, but for the notification, dated 18.05.2017. As noted earlier, the notification in SO 1620 (E) was issued in exercise of the powers conferred on the Government of India under Section 59 of the Act, which provision empowers the Central Government to issue directions and while issuing directions, the Central Government may have regard to the territorial area or classes of persons or classes of cases or any other criterion that may be specified by the Central Government. In exercise of such power, ....
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....iction is confirmed the Collector of Customs (Preventive) becomes a proper officer in Section 28 of the Customs Act, it was held that if such contention is accepted, it would lead to a situation of utter chaos and confusion, in as much as, all officers of customs, in a particular area be it under the Collectorate of Customs (imports) or the preventive Collectorate would be proper officers . Therefore, it was held that it is only officers of customs, who are assigned the functions of assessment, which would include reassessment, working under the jurisdictional Collectorate within whose jurisdiction, the bills of entry or package declaration had been filed and consignment had been cleared for home consumption will have jurisdiction to issue notice under Section 28 of the Customs Act. 59. Thus, when the Central Government has specified that the Initiating Officer having headquarters at Chennai, whose territorial area is within the limits of State of Tamil Nadu and Union Territory of Puducherry (including Karaikal, but excluding Mahe and Yanum), shall only be the Deputy Commissioner of the Income Tax (Benami Prohibition) and not any other Deputy Commissioner of Income Tax. The abov....
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....fferently by using two different articles. It was further held that the is word before nouns, with the specifying or particularizing effect as opposed to the indefinite or generalising force of a or an . It determines what particular thing is meant; i.e., what particular thing we are to assume to be meant; The is always mentioned to denote a particular thing or a person . The , would, therefore, refer implicitly to a specified bank and not any bank. Therefore, it was held the bank referred to in clause (a) to the proviso to Section 138 of the NI Act would mean the drawee bank, on which the cheque is drawn and not all banks, where the cheque is presented for collection including the bank of the payee, in whose favour, the cheque is issued. 61. As pointed out earlier, Section 24 of the Act refers to the Initiating Officer . Therefore, it denotes 'a particular officer or a person' and it cannot be generalised and stated that all Deputy Commissioners of Income Tax and Assistant Commissioners of Income Tax can function as the Initiating Officer under Section 24. Thus, the only and correct conclusion would be that the Initiating Officer in the instant case can be either an Ass....
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....t takes effect from the said date. 63. The learned Additional Solicitor as well as the learned Senior counsels appearing for the private respondents sought to invoke the 'defacto doctrine'. It has to be seen as to whether such doctrine could be invoked, when the Court has come to the conclusion that the second respondent lacked inherent jurisdiction on the day when the impugned notification/orders were passed. Explaining the said doctrine, the Apex Court pointed out that the defacto doctrine requires two requisites namely, (i) the possession of the office and the performance of the duties attached thereto and (ii) colour of title, i.e., apparent right to the office and acquiescence in the possession thereof by public. It was pointed out that according to the doctrine, the acts of officers defacto perform within the sphere of their assumed official authority in the interest of the public or third parties and not for their own interest or generally held valid and binding, as if they were performed by de jure officers. The Court referred to the decision of the Allahabad High Court in Jayakumar vs. State , 1968 Allahabad Law Journal 877, upheld the judgment of the District J....