Chhaganbhai Bholidas Patel Vs Deputy Director of Income Tax (Gujarat High Court)
Summary: The Gujarat High Court heard a petition filed by the petitioner challenging the attachment order passed under Section 24(3) of the Prohibition of Benami Property Transactions Act, 1988, as amended by the Benami Transactions (Prohibition) Amendment Act, 2016, along with all consequential proceedings arising from it. The petitioner sought to quash the attachment order and related actions, contending that the 2016 Amendment Act could not be applied retrospectively. The prayer also included a declaration that the provisions of the 2016 Amendment Act were prospective in nature.
The matter was argued by senior counsel for both sides—Mr. S.N. Soparkar for the petitioner, and Mr. M.R. Bhatt for the Initiating Officer, while Mr. Devang Vyas, Additional Solicitor General of India, appeared for the Union of India and the Adjudicating Authority. The Court, after hearing the parties and perusing the record, noted that the issue raised in the petition was no longer res integra (open for adjudication), as it had already been conclusively decided by the Hon’ble Supreme Court in Civil Appeal No.5783 of 2022 dated 23 August 2022.
The Gujarat High Court referred extensively to paragraph 18.1 of the Supreme Court judgment, which held, inter alia:
(a) Section 3(2) of the unamended 1988 Act was unconstitutional for being manifestly arbitrary, and consequently, Section 3(2) of the 2016 Amendment Act was also unconstitutional as violative of Article 20(1) of the Constitution.
(b) The in rem forfeiture provision under Section 5 of the unamended 1988 Act was unconstitutional.
(c) The 2016 Amendment Act contained substantive provisions and was not merely procedural.
(d) The in rem forfeiture provision under Section 5 of the 2016 Act, being punitive in nature, could only be applied prospectively, not retroactively.
(e) The authorities could not initiate or continue criminal prosecution or confiscation proceedings for transactions entered into prior to 25 October 2016—the date of enforcement of the Amendment Act. All such proceedings were to stand quashed as a consequence.
(f) The question regarding the constitutionality of independent forfeiture proceedings under the 2016 Act on other grounds was left open for future adjudication.
Applying the above principles, the Gujarat High Court held that since the prosecution and initiation of proceedings in the present case were based on the 2016 Amendment Act, the declaration made by the Supreme Court in paragraph 18(e) was directly applicable. Consequently, the impugned attachment order and all related proceedings were quashed.
