Ashesh Nanalal Doshi Vs Initiating Officer (Appellate Tribunal under SAFEMA, New Delhi)
Approval Obtained Before Section 24(1) Notice Vitiates Benami Attachment—Statutory Sequence Cannot Be Reversed: SAFEMA Tribunal
The Prohibition of Benami Property Transactions Act, 1988 prescribes a specific statutory sequence for notice and provisional attachment of property alleged to be benami. In the present case, the Appellate Tribunal under SAFEMA quashed the attachment of jewellery worth approximately ₹1.07 crore, holding that approval obtained from the Approving Authority before issuing the show-cause notice under Section 24(1) was contrary to the mandatory statutory procedure.
The Income-tax Department had conducted a search on December 3, 2021 at Sumangal Safe Deposit Vault LLP, where jewellery valued at ₹1,07,33,434 was found in Locker No. F-727 registered in the name of Parth Yoginbhai Patel. In his statement under Section 132(4) of the Income-tax Act, Parth stated that the locker had been opened on the instructions of his employer, Prarambh Shah, and that the jewellery belonged to Ashesh Nanalal Doshi. Ashesh Doshi, a partner of Sumangal Safe Deposit Vault LLP, subsequently stated that the jewellery was family jewellery handed over to his son-in-law, Prarambh Shah, who kept it in the locker registered in the name of his employee, Parth Patel. The Initiating Officer treated the jewellery as benami property and passed a provisional attachment order, which was confirmed by the Adjudicating Authority on May 1, 2023.
The appellants primarily challenged the attachment on the ground that the statutory sequence under Section 24 had been reversed. The Section 24(1) notice was issued on April 28, 2022, whereas approval of the Approving Authority under Section 24(3) had already been sought on April 27, 2022. The Tribunal held that the process must begin with the Section 24(1) notice containing the Initiating Officer’s recorded reasons to believe. Only thereafter could the Initiating Officer form the requisite opinion regarding possible alienation and seek prior approval for provisional attachment. Since the Approving Authority had granted approval before the foundational notice was issued, it could not have had the reasons and material disclosed through that notice before it for meaningful consideration. The Tribunal therefore held that the action was mechanical and contrary to the Act, set aside the impugned order and allowed both appeals. The Department was nevertheless granted liberty to initiate fresh proceedings in accordance with law, while the appellants were permitted to raise all grounds in any fresh proceedings.
FULL TEXT OF THE JUDGMENT/ORDER OF APPELLATE TRIBUNAL UNDER SAFEMA
By these appeals under Section 46(1) of the Prohibition of Benami Property Transactions Act, 1988 ( in short “the Act of 1988”), a challenge has been made to the order dated 01.05.2023 passed by the Adjudicating Authority confirming the Provisional Attachment Order (“PAO”) while answering the references against the appellants herein.
Brief facts of the case:
2. It is a case where a search was conducted by the Income Tax Department on 03.12.2021 at Sumangal Safe Deposit Vault LLP and jewellery worth of Rs.1,07,33,434/- was found in the Locker No. F-727 registered in the name of the appellant, Parth Yoginbhai Patel. Summons under Section 131(1A) of the Income Tax Act, 1961 was issued and statement of the appellant, Shri Parth Yoginbhai Patel under Section 132(4) of the Income Tax Act, 1961 was recorded on 17.12.2021 wherein he stated that the locker was opened on the instruction of his employer Shri Prarambh Shah. The locker key was also kept by Shri Prarambh Shah. The jewellery valued for Rs.1,07,33,434/- was found in the locker. The appellant Shri Parth Yoginbhai Patel denied the ownership of the said jewellery and stated that the jewellery belongs to Shri Ashesh Nanalal Doshi.
3. It was found that the actual beneficiary of the locker, Shri Ashesh N. Doshi is a partner of M/s Sumangal Safe Deposit Vault LLP. Shri Ashesh N Doshi in his statement under Section 132(4) of the Income Tax Act, 1961 stated that there exists no locker in his name or in the name of his family members. After being confronted with the statement of Shri Parth Y Patel on 17.12.2021, Shri Ashesh N Doshi stated on 08.12.2021 that he had given his family jewellery to his son-in-law, Shri Prarambh Shah which the latter kept in the said locker registered in the name of his employee, Shri Parth Y. Patel. The jewellery in the locker was thus found to be benami property and accordingly an order for provisional attachment of the jewellery/ property was caused by the Initiating Officer. Subsequently, the PAO was confirmed by the Adjudicating Authority on 01.05.2023. Aggrieved by the order, the present appeals have been filed.
Arguments of the Ld. Counsel for the appellants:
4. Ld. Counsel for the appellants contested the appeals referring to the facts of the case to show that there exists no element of benami transaction. Ld. Counsel further submitted that the provisional attachment of the property has been made in contravention of the provisions of the Act of 1988. It was specifically given out that while causing provisional attachment under sub-sections (3) & (4) of Section 24 of the Act of 1988. It was submitted that the proceedings for provisional attachment of the property can be initiated with a notice under sub-section (1) of Section 24 of the Act of 1988 to the benamidar. In the instant case, the respondent failed to issue a notice under sub-section (1) of Section 24 of the Act of 1988 prior to taking approval of the Approving Authority for causing provisional attachment of the property. For provisional attachment of the property, it is a condition precedent to have an approval of the Approving Authority but before that a notice under sub-section (1) of Section 24 of the Act of 1988 must have been issued. Referring to the facts on record, it was submitted that as per sub-section (1) of Section 24 of the Act of 1988, a notice can be caused by the Initiating Officer only when he is having material in his possession to form a reason to believe that a person is a benamidar in respect of the property and after recording reason to believe in writing, a notice is issued to show cause within such time as prescribed in the notice as to why the property should not be treated as benami property. Sub-section (2) of Section 24 of the Act of 1988 requires a copy of notice to the beneficial owner. Sub-section (3) of Section 24 of the Act of 1988 gives power to the Initiating Officer to cause provisional attachment of the property with the previous approval of the Approving Authority for a period not exceeding four months from the last date of the month in which the notice under sub-section (1) of Section 24 of the Act of 1988 is issued. In the instant case, a notice under sub-section (1) of Section 24 of the Act of 1988 was issued on 28.04.2022 while approval of the Approving Authority under sub-section (3) of Section 24 of the Act of 1988 was sought on 27.04.2022 i.e. prior to issuance of notice under sub-section (1) of Section 24 of the Act of 1988. The prior approval of the Approving Authority is to be sought when a notice under sub-section (1) of Section 24 of the Act of 1988 has already been issued and the matter is proceeded for provisional attachment of the property under sub-section (3) of Section 24 of the Act of 1988. In the instant case, the prior approval of the Approving Authority for provisional attachment of the property was prior to issuance of notice under sub-section (1) of Section 24 of the Act of 1988. Thus, on the aforesaid ground itself, impugned order deserves to be set-aside.
5. Ld. Counsel for the appellants raised further many legal and factual issues but prayed for disposal of the appeals in reference to the first legal issue raised by him.
Arguments of the Ld. Counsel for the respondent:
6. Ld. Counsel for the respondent contested the appeals on all the grounds raised by Ld. Counsel for the appellants. It was submitted that there is no illegality in issuance of the notice under sub-section(1) of Section 24 of the Act of 1988 as a case of benami transaction was detected upon search being conducted. A decision to cause provisional attachment of the property was taken immediately. It is in the follow up action that the provisional attachment of the property was caused with the approval of the Approving Authority, though approval was taken prior to the notice issued under sub-section (1) of Section 24 of the Act of 1988. Ld. Counsel submitted that a case of benami transaction was made out and therefore the action was rightly initiated by the Initiating Officer. Accordingly, prayer is made to dismiss the appeals.
Findings of the Tribunal:
7. The brief facts pertaining to the case has been given in the opening paras of this order. We have perused the record carefully and find that the action of the respondent to be not in consonance with the provisions of law. The seriatim of event for provisional attachment should start with a notice under sub-section (1) of Section 24 of the Act of 1988. It is to call upon the benamidar as to why the property in question should not be treated as benami. Sub-section (2) of Section 24 of the Act of 1988 no doubt refers to a copy of the notice to the beneficial owner, which action would be taken with a notice under sub-section (1) of Section 24 of the Act of 1988.
8. It is a case where notice was issued under sub-section(1) of Section 24 of the Act of 1988 and on the same day the provisional attachment of the property was caused but it is without following the provisions of law in view of the fact that approval of the Approving Authority was taken prior to issuance of notice under sub-section(1) of Section 24 of the Act of 1988. Thus, action of the respondent was mechanical in nature as without issuing notice under sub-section (1) of Section 24 of the Act of 1988, the respondent authority could not have taken the prior approval of the Approving Authority to cause the provisional attachment of the property. It is in view of the fact that when the notice under sub-section (1) of Section 24 of the Act of 1988 discloses the reason to believe for treating the property to be involved in benami transaction then based on the aforesaid and other material, the Approving Authority may take a decision to give prior approval for causing provisional attachment of the property.
In absence of the notice under sub-section (1) of Section 24 of the Act of 1988, the Approving Authority would not be having reasons and material to give prior approval for the provisional attachment of the benami property. In the instant case, prior approval for causing provisional attachment of the property has been given prior to the notice under sub-section (1) of Section 24 of the Act of 1988. Hence, the act of the respondent is in contravention of the provisions of the Act of 1988.
9. In light of the discussions made above, we find reason to cause interference in the impugned order. Accordingly, impugned order is set-aside and the appeals are allowed.
10. It is, however, with the liberty to the respondent for action afresh but should be in accordance with the provisions of law. Further, the appellants would also be at liberty to take all the grounds raised in the present appeals before the concerned authorities, if any action is taken.
