Telangana High Court
Ninganola Usha vs The State Of Telangana on 8 July, 2025
THE HON'BLE THE CHIEF JUSTICE UJJAL BHUYAN
AND
THE HON'BLE SRI JUSTICE C.V.BHASKAR REDDY
W.P.Nos. 33191, 33195, 33198, 33199, 33203, 34454, 34670, 34676, 34687, 34691,
34755, 34799, 34800, 34801, 34802, 34803, 35092, 35093, 35113, 35132, 35134,
35144, 35146, 35153, 35154, 35155, 35156, 35171, 35276, 35279 and 33403 of 2022;
23070, 23497, 23501, 23566, 23575 of 2021
COMMON ORDER:
(Per the Hon’ble the Chief Justice Ujjal Bhuyan)
This order will dispose of the above batch of writ petitions.
2. We have heard Mr. C.V.Narsimham, Mr. G.Mohan Sai and
Mr. Rohan Aloor, learned counsel for the petitioners; Mr. B.Narsimha
Sarma, learned counsel for the respondents- Income Tax Department;
and Mr. B.Mukherjee, learned counsel representing learned Assistant
Solicitor General of India appearing for Union of India.
3. For the sake of convenience, we divide the above batch of writ
petitions into three groups in the following manner:
Group A:- W.P.Nos.23070, 23497, 23501, 23566, 23575 of 2021.
Group B:- W.P.Nos.33191, 33195, 33198, 33199, 33203, 34454,
34670, 34676, 34687, 34691, 34755, 34799, 34800, 34801, 34802, 34803,
35092, 35093, 35113, 35132, 35134, 35144, 35146, 35153, 35154, 35155,
35156, 35171, 35276, 35279 of 2022
Group C:- W.P.No.33403 of 2022
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4. In the first batch of cases i.e., Group A, the challenge made is to
the show cause notices dated 02.09.2021 issued by the Assistant
Commissioner of Income Tax being Initiating Officer, Benami
Transactions (Prohibition) Unit, Hyderabad under Section 24(1) of the
Prohibition of Benami Property Transactions Act, 1988 (briefly ‘the
Benami Property Act‘ hereinafter)
5. In the second batch of cases i.e., Group B, the challenge is to the
order passed by the adjudicating authority under Section 26(3) of the
Benami Property Act. Though the dates are different in each of the writ
petitions, in the lead case of this group being W.P.No.33191 of 2022,
the order passed by the adjudicating authority is dated 25.03.2022.
6. In the last case i.e., Group C, the challenge has been made to the
order dated 12.04.2022 passed by the Commissioner of Income Tax,
who is also the initiating officer of the Benami Transactions
(Prohibition) Unit, Hyderabad under Section 24(4)(b)(i) of the Benami
Property Act.
7. For the sake of convenience, let us take W.P.No.33191 of 2022 as
the lead case.
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8. In this case, show cause notice under Section 24(1) of the Benami
Property Act dated 30.12.2019 was issued to the petitioner-
M/s. Neopride Pharmaceuticals Limited by the Assistant Commissioner
of Income Tax/Initiating Officer. In serial No.3 of the statement
forming part of the show cause notice, the benami property i.e., the
subject matter of benami transaction was described as under:
“The moveable property being 97,500 shares of M/s
Neopride Pharmaceuticals Limited worth Rs.9,75,000/-
allotted in FY 2014-15.
2. Proceeds thereof being corresponding “Fixed Asset” to
the tune of equivalent amount acquired as against the share
capital introduced in the books of M/s Neopride
Pharmaceuticals Limited during the FY 2014-15 so routed
through benami transaction.’
9. Assistant Commissioner of Income Tax/Initiating Officer, while
calling upon the petitioner to show cause, passed an order under sub-
section (2) of Section 18 and sub-section (3) of Section 24 of the
Benami Property Act provisionally attaching the aforesaid property for a
period of 90 days from the last date of the month in which the show
cause notice was issued i.e., 30.11.2019, further directing that the
attached property should not be transferred or converted or disposed or
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moved in any manner whatsoever until or unless specifically permitted
to do so by the undersigned.
10. Thereafter, the aforesaid authority passed order dated 18.03.2021
under Section 24(4)(a)(i) of the Benami Property Act. As per the said
order, the provisional attachment of the property was continued till such
time order was passed by the adjudicating authority under Section 26(3)
of the Benami Property Act.
11. Finally, after notice and hearing, adjudicating authority passed
order dated 25.03.2022 under Section 26(3) of the Benami Property Act.
By the said order, the adjudicating authority held that the movable
property is a benami property being subject matter of benami
transaction within the meaning of Section 2(9)(c) of the Benami
Property Act. Consequently, the provisional attachment order has been
confirmed.
12. At this stage, we may note that in the year 2016, Benami
Transactions (Prohibition) Amendment Act, 2016 was enacted to amend
the Benami Property Act.
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13. We may mention that Benami Transactions (Prohibition)
Amendment Act, 2016 (briefly ‘the Amendment Act’ hereinafter) had
received the assent of the President on 25.10.2016 whereafter, it was
notified in the Gazette on 01.11.2016.
14. In all the writ petitions before us, the primary challenge made is
that the transactions which have been classified by the respondents as
benami transactions and the property accrued therefrom, which have
been classified by the respondents as benami property, were acquired
prior to 25.10.2016 or 01.11.2016. Such a transaction could not have
been classified as benami transaction by retroactively applying the law
enacted in the year 2016. For example, in W.P.No.33191 of 2022, the
alleged benami properties have been mentioned as follows:
“The moveable property being 97,500 shares of M/s
Neopride Pharmaceuticals Limited worth Rs.9,75,000/-
allotted in FY 2014-15 on 08.01.2015.
Proceeds thereof being corresponding “Fixed Asset”
added during the FY 2014-15 for Rs.4,38,33,534/- in the form
of “Immovable Property admeasuring 47790 sq. mts. In
Sy.Nos.49P, 50P and 51P, Plot No.24E in laout T-1 in
Lalamkodur (v) registered vide doc. Number 2717/2015 of
SRO Yelamanchili”, to the tune of Rs.9,75,000/- equivalent to
the share capital routed through benami transaction and
introduced in the books of M/s Neopride Pharmaceuticals
Limited during the FY 2014-15.’
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15. Thus, the shares were allotted on 08.01.2015 and the fixed assets
accrued therefrom finds place in the books of account during the
financial year 2014-2015 i.e., being prior to 25.10.2016 or 01.11.2016.
16. The issue before us is no longer res integra not only in view of the
law laid down by this Court in Nexus Feeds Limited v. the Assistant
Commissioner of Income Tax1, but in view of the law declared by
the Supreme Court in Union of India v. Ganpati Dealcom Pvt. Ltd.2
17. Mr. B.Narsimha Sarma, learned counsel for the respondents-
Income Tax Department, while acknowledging that in view of the
decision rendered by the Supreme Court in Union of India v. Ganpati
Dealcom Pvt. Ltd. (2 supra), the matter stands covered, however
submits that respondents are contemplating filing of review petition
before the Supreme Court seeking review of the decision in Union of
India v. Ganpati Dealcom Pvt. Ltd. (2 supra). Therefore, hearing of
the present batch of cases may be deferred for some time.
18. We are unable to accept the submissions made by learned counsel
for the respondents for the simple reason that the decision of the
1
2022(5) TMI 262
2
2022 SCC Online SC 1064
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Supreme Court in Union of India v. Ganpati Dealcom Pvt. Ltd. (2
supra) is binding on all Courts, Tribunals and Authorities throughout
the country. Hearing cannot be deferred on the ground that
respondents are contemplating to file a review petition for review of the
aforesaid decision. As a matter of fact, we find that after the
adjudication order was passed on 25.03.2022 in W.P.No.33191 of 2022,
para 18A was inserted by the adjudicating authority taking note of the
decision of this Court in Nexus Feeds Limited v. the Assistant
Commissioner of Income Tax (1 supra). However, the adjudicating
authority proceeded to decide on merits with the observation that the
legal question as to retrospectivity vis-à-vis prospectivity of the
Amendment Act of 2016 was pending before the Supreme Court.
19. In Nexus Feeds Limited v. the Assistant Commissioner of
Income Tax (1 supra), this Court held as follows:
From the conspectus of the discussions made
above, it is apparent that Section 2 (9) (A) and
Section 2 (9) (C) are substantive provisions creating
the offence of benami transaction. These two
provisions are significantly and substantially wider
than the definition of benami transaction under
Section 2 (a) of the unamended 1988 Act. Therefore,
Section 2 (9) (A) and Section 2 (9) (C) can only have
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effect prospectively. Central Government has notified
the date of coming into force of the Amendment Act
of 2016 as 01.11.2016. Therefore, these two
provisions cannot be applied to a transaction which
took place prior to 01.11.2016.Admittedly, in the
present case, the transaction in question is dated
14.12.2011. That being the position, we have no
hesitation to hold that the show cause notice
dated 30.12.2019, provisional attachment order
dated 31.12.2019 and the impugned order
dated 30.03.2021 are null and void being without
jurisdiction. Consequently, the impugned order is set
aside and quashed.
20. Thus, from the above, it is evident that this Court took the view
that Section 2(9)(A) and 2(9)(C) of the Act inserted by the Amendment
Act of 2016 are prospective in nature because these two provisions have
significantly and substantially widened the definition of ‘benami
transaction’ than as was there in the unamended Benami Property Act
of 1988.
21. Taking note of the fact that Central Government had notified the
date of coming into force of the Amendment Act of 2016 as 01.11.2016,
this Court held that these two provisions cannot be applied to a
transaction, which took place prior to 01.11.2016. In that case, the
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transaction was dated 14.12.2011. Therefore, the show cause notice,
provisional attachment order as well as the adjudicating order were
declared null and void being without jurisdiction and consequently,
quashed.
22. In Union of India v. Ganpati Dealcom Pvt. Ltd. (2 supra),
which went to the Supreme Court from a decision of the Calcutta High
Court, the question, which was considered by the Supreme Court was
whether the Benami Property Act as amended by the Amendment Act
of 2016 has a prospective effect ? While examining this question,
Supreme Court went into the constitutionality of the original Act i.e.,
Benami Property Act. At the first place, it was held as follows:
The simple question addressed by the counsel
appearing for both sides is whether the amended
2016 Act is retroactive or prospective. Answering the
above question is inevitably tied to an intermediate
question as to whether the 1988 Act was
constitutional in the first place. The arguments
addressed by the Union of India hinges on the fact
that the 1988 Act was a valid substantive law, which
required only some gap filling through the 2016 Act,
to ensure that sufficient procedural safeguards and
mechanisms are present to enforce the law.
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According, to the Union of India, the 2016 Act was a
mere gap filling exercise.
However, upon studying the provisions of
the 1988 Act, we find that there are questions of
legality and constitutionality which arise with respect
to Sections 3 and 5 of 1988 Act. The answers to such
questions cannot be assumed in favour of
constitutionality, simply because the same was never
questioned before the Court of law. We are clarifying
that we are not speaking of the presumption of
constitutionality as a matter of burden of proof.
Rather, we are indicating the assumption taken by the
Union as to the validity of these provisions in the
present litigation. Such assumption cannot be made
when this Court is called upon to answer whether the
impugned provisions are attracted to those
transactions that have taken place before 2016.
23. After elaborate deliberation, Supreme Court came to the
conclusion that Section 3 (criminal provision), Section 2(a) (definition
clause) and Section 5 (confiscation proceedings) of the Benami Property
Act are overly broad, disproportionately harsh and without adequate
safeguards. Though such provisions were in a dormant condition,
nonetheless, Supreme Court declared Sections 3 and 5 of the Benami
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Property Act as unconstitutional from inception. It was held as
follows:
From the above, Section 3 (criminal provision) read
with Section 2(a) and Section 5 (confiscation proceedings)
of the 1988 Act are overly broad, disproportionately
harsh, and operate without adequate safeguards in place.
Such provisions were stillborn law and never utilized in
the first place. In this light, this Court finds that
Sections 3 and 5 of the 1988 Act were unconstitutional
from their inception.
24. Continuing with the deliberation, Supreme Court observed that
once Sections 3 and 5 of the Benami Property Act were declared as
unconstitutional, it would mean that the Amendment Act of 2016 would
in effect create new provisions and new offences as the offences under
Section 3(1) for the transactions entered into between 05.09.1988 (when
the original Act received the presidential assent) and 25.10.2016 (when
the Amendment Act of 2016 was notified), the law cannot retroactively
invigorate a still-born criminal offence. Thereafter, it was categorically
held that the Amendment Act of 2016 containing criminal provisions
would be applicable only prospectively. Supreme Court held as follows:
In the case at hand, the 2016 Act containing the
criminal provisions is applicable only prospectively, as
the relevant Sections of the pre-amendment 1988 Act
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containing the penal provision, have been declared as
unconstitutional. Therefore, the question of
construction of the 2016 Act as retroactive qua the
penal provisions under Sections 3 or 53, does not
arise.
25. Supreme Court clarified that as it has held that criminal
provisions under the Benami Property Act were arbitrary and incapable
of application, the law through the 2016 amendment could not
retroactively apply for confiscation of those transactions entered into
between 05.09.1988 to 25.10.2016 as the same would amount to
punitive punishment. Finally, the Supreme Court concluded as under:
In view of the above discussion, we hold as
under:
a) Section 3(2) of the unamended 1988 Act is
declared as unconstitutional for being manifestly
arbitrary.
Accordingly, Section 3(2) of the 2016 Act is also
unconstitutional as it is violative of Article 20(1) of
the Constitution.
b) In rem forfeiture provision under Section 5 of the
unamended Act of 1988, prior to the 2016
Amendment Act, was unconstitutional for being
manifestly arbitrary.
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c) The 2016 Amendment Act was not merely
procedural, rather, prescribed substantive provisions.
d) In rem forfeiture provision under Section 5 of the
2016 Act, being punitive in nature, can only be
applied prospectively and not retroactively.
e) Concerned authorities cannot initiate or continue
criminal prosecution or confiscation proceedings for
transactions entered into prior to the coming into
force of the 2016 Act, viz., 25.10.2016. As a
consequence of the above declaration, all such
prosecutions or confiscation proceedings shall stand
quashed.
f) As this Court is not concerned with the
constitutionality of such independent forfeiture
proceedings contemplated under the 2016
Amendment Act on the other grounds, the aforesaid
questions are left open to be adjudicated in
appropriate proceedings.
26. From the above, it is evident that Supreme Court has declared
that the Amendment Act of 2016 is not merely procedural but
prescribes substantive provisions. Therefore, concerned authorities
cannot initiate or continue criminal prosecution or confiscation
proceedings for transactions entered into prior to coming into force of
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the 2016 Amendment Act i.e., 25.10.2016. As a consequence, all such
transactions or confiscation proceedings shall stand quashed. Supreme
Court has also clarified that in rem forfeiture provision under Section 5
of the Amendment Act of 2016 being punitive in nature can only be
applied prospectively and not retroactively.
27. In view of finality of the law declared by the Supreme Court, the
impugned show cause notices, provisional attachment orders as well as
the adjudicating orders passed by the various authorities under the
Benami Property Act as amended by the Amendment Act of 2016
impugned in the batch of writ petitions cannot be sustained.
Accordingly, those are hereby set aside and quashed.
28. All the writ petitions are allowed in the above terms. No costs.
As a sequel, miscellaneous petitions, pending if any, stand
dismissed.
__________________
UJJAL BHUYAN, CJ
_______________________
C.V.BHASKAR REDDY, J
Date: 13.09.2022
LUR
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