TaxTMI 
TaxTMI 
2021 (10) TMI 1380
X X X X Extracts X X X X
X X X X Extracts X X X X
....s and thereafter clubbed for the reason that the alleged beneficial owner in all the matters was the same person, viz., Mrs.V.K.Sasikala (henceforth and for the sake of brevity, referred to as 'VKS'). I have divided the writ petitions into three (3) batches wherein each of the sub-groups concern the transfer of an asset common to the constituents of that batch. 2.The submissions advanced by all petitioners are substantially similar and I will thus encapsulate the facts in relation to each of the batches first, including the issues raised by the respective parties and thereafter, answer the same in seriatim. Detailed submissions of Mr.R.V.Eashwar, learned Senior Counsel appearing for Mr.Sivaraman, Mr.M.R.Venkatesh and Mr.N.V.Balaji, all for the petitioners, and Mr.R.Sankaranarayanan, Additional Solicitor General of India appearing for Ms.Sheela have been heard. Facts and legal submissions in Batch -I (W.P.Nos.3641, 8352 & 8540 of 2020) 3.The first batch of Writ Petitions relate to Ganga Foundations Private Limited (petitioner in W.P.No.3641 of 2020, and referred to hereinafter as 'company'), V.J.Dinakaran (petitioner in W.P.No.8540 of 2020) and D.V.Balaji (petitioner in W.P....
X X X X Extracts X X X X
X X X X Extracts X X X X
....efined under the Prohibition of the Benami Property Transactions Act, 1988 (in short 'PBPT Act') and that the petitioners were holding Spectrum Mall as benamidhar of VKS. 10.The petitioners argue that the aforesaid conclusion was entirely erroneous, as the Mall had been built by the efforts and resources of the petitioners and there is no question of any other party holding title to the same, either beneficial or otherwise. The transaction of sale to VKS had been envisaged and proceeded with as a purely commercial transaction that does not come within the cover of the PBPT Act. 11.That apart, consideration had itself been paid only in part, and that too, in demonetized currency which had ceased to be legal tender with effect from the date of announcement of demonetization, being 08.11.2016. This would militate against the conclusion sought to be arrived at by the respondents since the definition of 'benami transaction' under the Act would stand attracted only to cases where the arrangement was established to be an illegal or malafide arrangement made with dubious design where full legal consideration had been paid. 12.Apart from being a simple commercial transaction that h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....she had not been in a position to explain or justify. 17.The notices sent to the petitioners merely replicates the contents of the forwarding letter and contains extracts from the sworn statements without indicating anywhere, independent application of mind as to whether the transaction satisfied the requirements of a benami transaction as defined under the PBPT Act. 18.He also refers to certain other Departmental documents that make reference to an MoU, emphasising that no MoU has been produced by the petitioner in the income tax proceedings. As far as reliance on the MoU is concerned, the Department has confirmed in the present proceedings that no MoU has been found in the course of search, or is part of their record. 19.The petitioners rely upon Circulars issued by the Reserve Bank of India with regard to the demonetization scheme as well as the Specified Bank Notes (Cessation of Liability) Act, 2017 and the 2016 Ordinance that preceded it, in an effort to establish that the Rs.500/- and Rs.1000/- currency notes that had been transacted as between the parties was not legal tender and thus did not amount to 'consideration' as understood and contemplated by the PB....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... for return of income for various assessment years. 25.The petitioners approached the Income Tax Settlement Commission for settlement of the disputes and demands under the assessments, but their applications were dismissed by the Settlement Commission on 31.12.2019 stating that there had been no full and true disclosure by the petitioners. Assessment proceedings thus continued and have been completed adverse to the petitioners. 26.At the time of hearing of the Writ Petitions, learned counsel for the petitioners convey to the Court the intention of the petitioners to challenge orders of assessment by way of statutory appeals. Simultaneous therewith, the petitioners were in receipt of show cause notices under Section 24(1) of the PBPT Act on 01.11.2019. 27.The petitioner in W.P.No.8146 of 2020 is Marg Realities Limited, name subsequently changed to Digital Accelerator Limited. The petitioners in W.P.Nos.8147 to 8150 of 2020 are shareholders in Digital Accelerator Limited. (W.P.Nos.8146 to 8150 of 2020). 28.The Notice is issued on the premise that the petitioners are benamidars for VKS with respect to various properties, (in W.P.No.8146 of 2020, immovable property situated....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ers to part with the shares under threat of dire consequences, if they were not so inclined. 34.On account of the pressure applied, the promoters were forced to succumb. The consideration for the sale of the shares was fixed at Rs.170 crores and the transaction was to be completed before the end of April, 2017. According to the petitioner, the entire transaction was open and transparent and had been carried out only through banking channels. A draft Memorandum of Understanding (hereinafter referred to as MoU) had also been prepared in regard to the transfer of the shares. 35.At that juncture, and pending finalization of the transaction, the petitioner had been suddenly told that part of the consideration would only be paid in demonetized currency for onward transmission to various other persons identified by the middleman. After a series of negotiations, an amount of Rs.115 crores had been agreed to be paid in the form of raw materials for completion of unfinished building projects that were to be regularized by material bills and invoices. 36.The petitioners were called upon to execute a MoU which, according to them, was blank in regard to the name of the buyer. It was du....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t the petitioner does not answer to the term 'benamidhar' and that the transaction in question does not fall within the scope of a benami transaction under the PBPT Act, lies heavily on the respondents, and it was incumbent upon the respondents to have discharged that burden fully. 42.However, the petitioners received impugned orders dated 29.01.2020 under Section 24(4) of the PBPT Act, in terms of which, the provisional attachment of the property originally made was extended/continued till such time, and subject to a final order being passed by the second respondent, which would be an order of adjudication. The show cause notices and the impugned orders proceed on suspicions and surmises, whereas, the PBPT Act, which casts a very onerous liability upon the parties, calls for strict and minute compliance with all its provisions. Facts and legal submissions in Batch -III (W.P.Nos.2813 to 2815, 2817, 2818 and 2820 of 2020) 43.The third sub-batch batch of Writ Petitions relate to a resort located at Nos.7, 8 and 9, East Coast Road, Manjakuppam Village, Tindivanam Taluk, Villupuram District including constructions buildings, machinery, fittings and furniture along with....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hered in the course of the search of the premises, both that of the petitioners as well as of VKS and it is only thereafter that the first respondent has passed the impugned orders in terms of Section 24(4) of the PBPT Act. The petitioners were heard prior to passing of the order and their replies were considered. The Writ Petitions are liable to be dismissed as pre-mature and the petitioners directed to co-operate in the proceedings to follow. 50.According to the respondents, proceedings under Section 24 only require a recording of prima facie satisfaction that all was not well as regards a particular transaction. This requirement stands satisfied in the present case as the materials found have led to a prima facie satisfaction upon the strength of which the assets in question have been attached, pending adjudication. 51.Section 25 of the PBPT Act provides for a full-fledged adjudication requiring the parties to be heard in full, prior to any decision being taken in the matter. The provision also specifically requires the respondents to serve all material upon which they rely to the petitioners, to ensure that they are fully aware of the basis upon which allegations were bei....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ere is no necessity for the Department to await completion of the transaction in full and in fact, doing so would be fatal to the interests of the Department. My attention is drawn to the definitions under the PBPT Act to illustrate that any transaction or arrangement where a property is held directly or indirectly by a third party for the immediate or future benefit of another person who has provided the consideration would fall within the definition of benami transaction. Such consideration can be either part or whole, as the enactment does not contain any stipulation, or make any differentiation in this regard. 55.Judgments in the celebrated cases of Phool Chand Bajran Lal V. Income Tax Officer (203 ITR 456), Income Tax Officer V. LakhmaniMewaldas (1976 (3) SCR 956), and Aslam Mohd Merchant V. Competent Authority ((2008) 14 SCC 186) are cited to state that the belief that an officer holds that the property was benami at the time of invocation of power of attachment under Section 24, is only a prima facie belief, based on available evidences and materials found in the course of search and enquiry thereafter. This requirement is satisfied in the present case. Discussion and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er of the property is not aware of, or, denies knowledge of, such ownership; (D) a transaction or an arrangement in respect of a property where the person providing the consideration is not traceable or is fictitious; Explanation.-For the removal of doubts, it is hereby declared that benami transaction shall not include any transaction involving the allowing of possession of any property to be taken or retained in part performance of a contract referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882), if, under any law for the time being in force,- (i) consideration for such property has been provided by the person to whom possession of property has been allowed but the person who has granted possession thereof continues to hold ownership of such property; (ii) stamp duty on such transaction or arrangement has been paid; and (iii) the contract has been registered. 57.A blanket restriction is cast upon all persons, by virtue of Section 3 of the Act, to enter into a benami transaction, Section 4 prohibits any person from instituting a claim or action to enforce any right in regard to benami property as against any ot....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eeding ninety days from the date of issue of notice under sub-section (1). (4) The Initiating Officer, after making such inquires and calling for such reports or evidence as he deems fit and taking into account all relevant materials, shall, within a period of ninety days from the date of issue of notice under subsection (1),- (a) where the provisional attachment has been made under sub-section (3),- (i) pass an order continuing the provisional attachment of the property with the prior approval of the Approving Authority, till the passing of the order by the Adjudicating Authority under sub-section (3) of section 26; or (ii) revoke the provisional attachment of the property with the prior approval of the Approving Authority; 12 (b) where provisional attachment has not been made under sub-section (3),- (i) pass an order provisionally attaching the property with the prior approval of the Approving Authority, till the passing of the order by the Adjudicating Authority under sub-section (3) of section 26; or (ii) decide not to attach the property as specified in the notice, with the prior approval of the Approving Authority....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t upon them to furnish the primary evidences available with them to the effect that the property is benami in nature. This is a rebuttable presumption and the effectiveness of the rebuttal will depend on the evidences furnished by the noticees to the authorities. 66.In my considered view, therefore, the enquiry contemplated at the stage of initial investigation is only preliminary, based upon prima facie reasons and conclusions. A detailed verification of the evidences as regards whether the transactions were benami or otherwise can, and must only be undertaken in the course of adjudication and not at the stage of preliminary enquiry. 67.In the case of MangathaiAmmal V. Rajeswari (111 taxmann.com 275) the Hon'ble Supreme Court dealt with a challenge to a judgment of this Court in an Appeal Suit. The contention that was accepted was that the burden of proving that a particular sale was benami in nature and that the the appellant - purchaser was not the real owner, rested on the person making such allegation. Thus, if the Department were of the view that the sale of the asset was a benami transaction, then it is for the Department to bring on record enough evidences to clin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hich the demand could have been confirmed and since that opportunity had been denied, the demand had been set aside. 72.In the present case, the testimony of the parties is one among other material that the respondents claim to be in possession of. The petitioners also rely upon a decision of the learned single Judge in Thilagarathinam Match Works Vs. Commissioner of Central Excise, Tirunelveli (46 taxmann.com 382) to the effect that where the assessee asks for a request for cross examination, such request must be acceded to. 73.Thus, the process and procedure as envisaged for provisional attachment under Section 24 is of a narrower compass when compared with the process of adjudication to follow thereafter. That apart, not all the petitioners before me appear to have sought an opportunity to cross examine witnesses. It would thus suffice to state that it is open to the petitioners to make such request for cross-examination once they have been supplied with the relied upon documents at the time of adjudication, and such request, if and when made, will be considered by the respondents in accordance with law. 74.The argument that it is only when full consideration is paid, t....