Challenge regarding S. 24 of PBPT Act: Supreme Court list Matter After Two Weeks [Read Order]

The Supreme Court in a recent case regarding a challenge on section 24 of the Prohibition of Benami Property Transaction Act, 1988 listed the matter after two weeks

The petition arose out of impugned final judgment and order dated 12-12-2023 in DBCWP No. 16732/2023 09-04-2024 in DBRPW No. 20/2024 passed by the High Court of Judicature for Rajasthan. The two judge bench comprising Justice B.V. Nagarathna and Justice R. Mahadevan listed the matter after two weeks.

Alishan Complex Private Limited & Anr, the assessee is a private limited company incorporated under the provisions of Companies Act, 1956, whereas the petitioner No.2 is the Director of the petitioner No.1-company. Notices under Section 19 of the Prohibition of Benami Property Transaction Act, 1988

was issued to the petitioners by the Initiating Officer and responses to the same were filed. Thereafter show cause notice under Section 24(1) and (2) of the PBPT Act was issued to the petitioners by the respondents on 28.04.2023. On 01.05.2023, an order for provisional attachment of the property was issued under Section 24(3) of the PBPT Act. On 28.07.2023, the respondents issued an order for provisional attachment of the property under Section 24(4)(a)(i) of the PBPT Act till the passing of the order passed by the Adjudicating Authority under Section 26(3) of the PBPT Act. Vide order dated 07.08.2023, the Initiating Authority made a reference to the Adjudicating Authority.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

Challenging the validity of the orders, counsel for the petitioners have argued that the show cause notice under Section 24(1) and (2) of the PBPT Act was issued to the petitioners on 28.04.2023 asking them to submit their response to the show cause notice up to 15.05.2023, however, without waiting for the reply of the petitioners, the provisional attachment order under Section 24(3) of the PBPT Act was issued on 01.05.2023. It is submitted that the said action of the respondents is violative of principles of natural justice and, therefore, the provisional attachment order is liable to be quashed and set aside.

It was argued that as per the exception provided under Section 2(9) of the PBPT Act, the transaction or arrangement cannot be called as a Benami transaction when the property is held by a person standing in a fiduciary capacity for the benefit of another person towards whom he stands in such capacity. It is submitted that the petitioner No.2 being the Director and shareholder of the petitioner No.1-company, even if provided funds for purchase of the property in the name of petitioner No.1, it cannot be held that the property purchased in the name of petitioner No.1 is the property of petitioner No.2

As per the provisions of Section 24 of the PBPT Act, the Initiating Officer is required to record its prima facie satisfaction before referring the matter to the adjudicating authority.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates