Wed. Oct 4th, 2023

The Union Finance Ministry is readying a review petition to challenge erstwhile Chief Justice of India N V Ramana’s judgment against the Modi government’s 2016 amendment to the Benami Property Act, which has resulted in the national exchequer losing income-tax claims to the tune of several thousand crores of rupees. It has also enabled tax evaders to go scot-free.

Why Act was amended

The amendments to the Benami Property Act were necessitated as originally the 1988 Act had many infirmities that allowed a lot of people with unaccounted money to invest and buy immovable property in the name of some other persons or a non-existent person or a fictitious person or a Benami person.

The amendment was predominantly an anti-black money measure under which any transaction which is Benami was illegal and the property could be confiscated.

The Prohibition of the Benami Property Transactions Act (PBPTA) 1988 was a toothless law as no rules were framed for 26 years for taking action against Benami transactions. Hence, the law was amended to cover all Benami transactions with retrospective effect from the year 1988 onwards.

CJI Ramana’s judgment

The bench headed by the then CJI N. V. Ramana termed the amendments made by Parliament on August 27, 2016, as unconstitutional. The bench held that the amendments allowing the implementation of the PBPT Act 1988 retrospectively were violative of Article 20 (1) of the Constitution.

As per Article 20 (1) “no person shall be convicted of any offence except for violation of a law in force at the time of the commission of the (criminal) act…” The judges thus abrogated the retrospective effect (implementation) of the amendments introduced in 2016 resulting in allowing the income tax evaders in Benami deals to go scot-free.

While concluding the order, the bench also held, “the concerned authorities can not initiate or continue criminal prosecution or confiscation (of Benami properties) … prior to October 25, 2016 (the day when the amendments came into force after passage by Parliament)… as a consequence… all such prosecutions or confiscation proceedings shall stand quashed.” This gave a severe body blow to the Income Tax Department.

Calcutta High Court order

The order of the Apex court bench had germinated from a judgment of the Calcutta High Court in the case of M/s Ganpati Dealcom Pvt Ltd dated December 12, 2019, which gave benefit to the petitioners on the ground that the amendments cannot be implemented with retrospective effect and would be prospective.

The order of the Calcutta High Court was challenged in the Supreme Court by the government and the court stayed the operation of the order in favour of the government.

However, after the change of judges’ roster, the case came up for hearing before the bench headed by the then CJI Ramana. Senior advocate Abhishek Manu Singhvi moved an application before the bench to be allowed to act as an intervenor in the case which was accepted.

Later, after hearing the arguments of the parties and the intervenor, the bench rejected the amendments to the PBPT Act holding that they could not have a retrospective effect and would be prospective.

Who all benefited

Those who had been proceeded against by Punjab and Haryana Benami Properties Unit of the Income Tax Department but were likely to be benefited from the Apex Court’s stance include Robert Vadra (husband of Priyanka Gandhi Vadra), SP Singla Constructions, M/s SportKing group, M/s Jain Amar Clothing, M/s IGM Group, the 3MM India Ltd, to name a few from the states of Punjab and Haryana.

The cases of all these alleged tax evaders were hotly contested by the senior standing counsel of the IT Department, Denesh Goyal who convinced the court not to grant any major relief to the defaulters. All these matters were pending in the Punjab and Haryana High Court and fixed for hearing in November.

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