[Prohibition Of Benami Transaction Act] Opportunity For Cross-Examination Need Not Be Provided At The Stage Of Show-Cause Notice: Madras HC

A division bench of Justice R Mahadevan and Justice Sathya Narayana Prasad observed:

"The provisions of law mandate the respondent authorities to furnish such documents, particulars or evidence and provide an opportunity of being heard to the appellant only at the stage of adjudication proceedings; and there is no provision under the Act to provide an opportunity to the appellant to cross examine the witnesses at the preliminary stage."

The court also opined that the proceedings under Section 24 of the Prohibition of Benami Property Transactions Act, 1988 only required a recording of prima facie opinion as to the benami nature of the transaction. In the present case, the appellant was issued a show cause notice under Section 24(1) of the Act to which he failed to reply. Thus, the order of the adjudicating authority was after making enquiry and calling for reports or evidence and taking into account all the relevant materials.

It is to be pointed out that the applicability of the principles of natural justice and fair play, depends on the facts and circumstances of each case and is subjected to statutory provisions; and that, the proceedings under section 24 only require a recording of prima facie opinion as to the benami nature of the transaction. It is an admitted case that the appellant failed to submit his reply to the notice issued under section 24(1). As such, the first respondent, after making enquiry and calling for reports or evidence and taking into account all the relevant materials, has, with the prior approval of the Approving Authority, passed the order under section 24(4), continuing the provisional attachment of the property till the passing of the order by the Adjudicating Authority under section 26(3), which is purely provisional in nature.

In the present case, the appellant contended that he was in the business of money lending, chit fund etc and in 2017 a search was conducted in his premises consequent to the search in the case of Mrs V.K Sasikala. During the course of the same, various documents were impounded and sworn statements were recorded. Subsequently, the appellant received notices under section 153C of the Act alleging that he had received a sum of Rs.18 crores towards his share in the Spectrum Mall located at Perambur, Chennai.

The appellant contended that he received show cause notice under section 24(1) of the Act as if he is the binamidar for Mrs V.K Sasikala. His prime contention was that he was not involved in the alleged transactions. He also submitted that he was not provided with the entire documents relied upon by the respondent department for initiating the proceedings nor was he given an opportunity to cross examine the witnesses before the order under Section 24(4) of the Act was passed. He also relied on Section 24(4)(a)(ii) of the Act and submitted that the respondent was empowered to revoke the entire proceedings if the appellant was able to satisfy that the transaction was not benami in nature. But here he was not given an opportunity.

He thus contended that the act of the respondent was against the provisions of law and the principles of natural justice. The single judge had erred in holding that the process and procedure as envisaged for provisional attachment under Section 24 is of narrower compass when compared to the process of adjudication to follow thereafter.

The respondent department submitted that there was prima facie material available to show that the appellant was a benamidar and that the non existence of memorandum of Understanding will not vitiate the proceedings. It was submitted that the order under Section 24(4) was passed after proper application of mind and after having reasons to believe so. Sufficient opportunities were also provided to the appellant to file his objections in adherence to the principles of natural justice and therefore, the impugned order does not warrant any interference.

Relying on legal precedents of various courts in the country, the court opined that in the absence of any provision of law or compelling circumstances, the plea raised by the appellant that he was not given an opportunity of cross examination cannot be countenanced. It observed as under:

In the given factual backdrop and applying the legal proposition as enunciated in the earlier paragraph, we are of the opinion that in the absence of any provision of law as well as the compelling circumstances warranting the respondent authorities to provide an opportunity of cross examination of witnesses, whose statements have been relied on by the respondent authorities to the appellant at the stage of section 24 proceedings, the plea raised by the appellant in this regard, cannot be countenanced. Therefore, we do not find any error in the order passed by the first respondent, as an interim measure, continuing the provisional attachment order of the property till the passing of the order under section 26(3) by the adjudicating authority.

The court thus dismissed the writ appeals observing that the appellant had not made out any case to interfere with the order of the court below.

Case Title: V.S.J.Dinakaran v. The Deputy Commissioner of Income Tax (Benami Prohibition) and another

Case No: Writ Appeal No. 1174 of 2022

Citation: 2022 LiveLaw (Mad) 298

Counsel for the Appellant: M/s.Vandana Vyas

Counsel for the Respondents: Mrs. Sheela Special Public Prosecutor (Income Tax)