Taxmann Daily – Editorial Team
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The issue before the Supreme Court was:
“Whether the Prohibition of Benami Property Transactions Act, 1988 [1988 Act], as amended by the Benami Transactions (Prohibition) Amendment Act, 2016 [2016 Act] has a prospective effect”
The Supreme Court held that the main thrust of the argument put forth by the Union of India was that the amended 2016 Act only clarified the 1988 Act. The 1988 Act had already created substantial law for criminalizing the offence and the 2016 amendments were merely clarificatory and procedural, to give effect to the 1988 Act.
The court held that the criminal provisions under the un-amended 1988 Act were arbitrary and incapable of application. Thus, the law through the 2016 amendment couldn’t retroactively apply for confiscation of those transactions entered into between 5-9-1988 to 25-10-2016 as the same would tantamount to punitive punishment, in the absence of any other form of punishment.
It was in this unique circumstance that confiscation contemplated under the period between 5-9-1988 and 25-10-2016 would characterize itself as punitive if such confiscation is allowed retroactively. Usually, when confiscation is enforced retroactively, the logical reason for accepting such an action would be that the continuation of such property or instrument, would be dangerous for the community to be left free in circulation.
When we come to the present enactment, history points to a different story wherein Benami transactions were an accepted form of holding in our country. The Privy Council had, at one point in time, praised the sui generis evolution of the doctrine of trust in Indian law.
The response by the Government and the Law Commission to curb benami transactions was also not sufficient as it was conceded before this Court that Sections 3 and 5 of the 1988 Act in reality, dehors the legality, remained only on paper, and were never implemented on the ground. Any attempt by the legislature to impose such restrictions retroactively would no doubt be susceptible to prohibitions under Article 20(1) of the Constitution.
Looked at from a different angle, the continuation of only the civil provisions under Section 4, etc., would mean that the legislative intent was to ensure that the ostensible owner would continue to have full ownership over the property, without allowing the real owner to interfere with the rights of benamidar.
If that is the case, then without effective enforcement proceedings for a long span of time, the rights that have crystallized since 1988, would be in jeopardy. Such implied intrusion into the right to property cannot be permitted to operate retroactively, as that would be unduly harsh and arbitrary.
The Income-tax Department has carried out a search and seizure operation on a business group primarily engaged in the manufacturing and trading of ceramic tiles. Evidence collected during the search revealed that the group has been engaged in large-scale tax evasion by adopting various methods, including, by way of unaccounted cash sales outside the books of account, under-invoicing of sales and booking of bogus purchases.
The search action has resulted in the unearthing of unaccounted transactions exceeding Rs. 300 crores including cash loans of more than Rs. 100 crore.
That’s it from us for today! Stay Tuned for more updates from?Taxmann.com
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?? 26th August 2022 (Friday) | ?? 05:00 PM – 06:00 PM (IST)
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?? Coverage of the Webinar:
?? The concept of Family Arrangement is explained by the illuminating decision of the Apex Court in the case of Maturi Pullaiah vs Maturi Narasimham A.I.R. 1966 S.C. 1836
?? Proposition laid down by the Supreme Court in the case of Kale vs Deputy Director of Consolidation [1976] 3 SCC 119
?? Cases wherein genuineness of family settlement vis-à-vis genuineness of transactions was accepted
?? Cases wherein authenticity of family settlement vis-à-vis genuineness of transactions was not accepted
?? Analysis of the decision of the Supreme Court in the case of Hansa Industries (P.) Ltd. vs Kidarsons Industries (P.) Ltd. [2006] 72 SCL 117, wherein it was held that terms of the family settlement must be respected and followed
?? Analysis of the decision of the Supreme Court in the case of Ravinder Kaur Grewal vs Manjit Kaur [Civil Appeal No. 7764 of 2014 Decision dated 31st July 2020] wherein it was held that Memorandum of Understanding does not require registration
?? Precautions to be taken while drafting Family Arrangement
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Hailing from a family of Chartered Accountants, Shri. S. Krishnan completed his Chartered Accountancy course in 1974 and immediately set up his office in Chennai. In the last 48 years, he has handled Statutory Audits, Tax Audits, and Internal Audits of banks, hotels, and other industrial concerns.?
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