The transaction the Department calls benami was done in 2011. Can it use the 2016 definitions against me?
No, on this judgment. The Telangana High Court held that ss.2(9)(A) and 2(9)(C) are substantive, offence-creating provisions and not machinery provisions, that the 2016 Amendment Act was brought into force on 1 November 2016 by the notification of 25 October 2016 with nothing to give it effect from an earlier date, and that applying those definitions to a transaction of December 2011 would offend Article 20(1). All the writ petitions were allowed.
Decided by the High Court (Ujjal Bhuyan J and Dr Chillakur Sumalatha J, judgment delivered by Ujjal Bhuyan J) on 2022-03-08, reported as Writ Petition Nos. 14695, 11680, 11681, 13150, 13156, 13157, 13190, 13769, 13771, 13787, 13804, 13809, 13822, 13823, 14703, 14711, 14713, 14724, 17758, 17761, 17766, 17769, 17770, 17772, 17773, 17775, 17780, 17782, 20469, 20471, 20473, 20476, 20482, 20490, 20492, 20499, 20503, 20523, 23342, 23343, 23351, 23360 and 23537 of 2021; indexed as (2022) 444 ITR 261 (Telangana). It bears on section Benami s.2(9)(A), section Benami s.2(9)(C), section Benami s.3, section Benami s.24, section Benami s.53, section Benami Amendment Act 2016, section Constitution Art. 20(1) of the Income Tax Act 1961, in How Tax Law Is Read and Prosecution matters.
This is a fully reasoned High Court judgment on prospectivity decided before the Supreme Court's 23 August 2022 judgment in Ganpati Dealcom and resting on none of it. With that judgment recalled, it is an independent line of authority for a pre-November 2016 transaction — but it is a High Court judgment only, and the question is back before the Supreme Court.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
Read aloud by your device. Press again to stop.
The petitioner company allotted 4,50,000 shares worth Rs.45,00,000 to the third respondent on 14 December 2011. The third respondent was an aqua farmer who bought feed from the company and who paid for the shares by cheques drawn on his Union Bank account. A search and seizure operation under the Income-tax Act was carried out at the company's premises on 15 March 2017; it led to a large demand by way of additions, most of which were deleted in appeal. The first respondent then issued a show-cause notice dated 30 December 2019 under s.24(1) of the Prohibition of Benami Property Transactions Act to the third respondent and to the company, calling on the third respondent to show cause why the transaction should not be treated as a benami transaction, himself as benamidar and the company and its directors as beneficial owners. A provisional attachment order followed on 31 December 2019, and an order continuing the attachment was made on 30 March 2021. The Revenue contended that the writ petitions were premature and that the petitioners should go to the Adjudicating Authority.
All the writ petitions were allowed, with no order as to costs, and pending miscellaneous petitions were closed (paras 94 and 95). The Court held that ss.2(9)(A) and 2(9)(C) are substantive provisions and not machinery or procedural provisions (paras 73 and 74); that the Central Government's notification dated 25 October 2016 appointed 1 November 2016 as the date on which the 2016 Amendment Act came into force and that no other notification giving s.2(9) effect from an anterior date was produced (paras 84 and 85); and that the charge against the petitioner was specifically under s.2(9)(A) read with s.2(9)(C), provisions which were not in existence when the transaction took place on 14 December 2011 (para 78). The conclusion recorded that the very foundation for issuance of the show-cause notice and the provisional attachment order being flawed, the same was required to be recalled or set aside.
Because a transaction falling within s.2(9)(A) or s.2(9)(C) is not only prohibited by s.3(1) but is an offence punishable under s.3(2) and (3) and under s.53, those provisions are offence-creating or offence-defining and therefore substantive; a transaction falling within them attracts a stiffer penalty than the milder penalty under the un-amended Act (paras 73 and 74). A statute affecting substantive rights is presumed prospective unless made retrospective expressly or by necessary intendment, while a statute merely affecting procedure is presumed retrospective; every litigant has a vested right in substantive law but none in procedural law (paras 80 and 81, applying Hitendra Vishnu Thakur v State of Maharashtra, and paras 82 and 83, drawing on K.S. Paripoornan and Videocon International). Article 20(1) protects against conviction except for violation of a law in force at the time of the act charged, and against a penalty greater than that which might have been inflicted under the law then in force (para 77). The Additional Solicitor General's argument that s.3(2) provided the penalty for benami transactions entered into before 1 November 2016 did not answer the case, because the charge as framed was under the new definitions and not under s.2(a) of the un-amended Act (para 78).
In the result, all the writ petitions are accordingly allowed.
Upload it and we will read it, work out your deadline and draft the reply. A CA reviews before anything is filed.
Handle my notice → Ask a CA on WhatsAppNo, on this judgment. The Telangana High Court held that ss.2(9)(A) and 2(9)(C) are substantive, offence-creating provisions and not machinery provisions, that the 2016 Amendment Act was brought into force on 1 November 2016 by the notification of 25 October 2016 with nothing to give it effect from an earlier date, and that applying those definitions to a transaction of December 2011 would offend Article 20(1). All the writ petitions were allowed. This was decided by the High Court (Ujjal Bhuyan J and Dr Chillakur Sumalatha J, judgment delivered by Ujjal Bhuyan J) and bears on section Benami s.2(9)(A), section Benami s.2(9)(C), section Benami s.3, section Benami s.24, section Benami s.53, section Benami Amendment Act 2016, section Constitution Art. 20(1) of the Income Tax Act 1961. It is reported as Writ Petition Nos. 14695, 11680, 11681, 13150, 13156, 13157, 13190, 13769, 13771, 13787, 13804, 13809, 13822, 13823, 14703, 14711, 14713, 14724, 17758, 17761, 17766, 17769, 17770, 17772, 17773, 17775, 17780, 17782, 20469, 20471, 20473, 20476, 20482, 20490, 20492, 20499, 20503, 20523, 23342, 23343, 23351, 23360 and 23537 of 2021; indexed as (2022) 444 ITR 261 (Telangana). This is a fully reasoned High Court judgment on prospectivity decided before the Supreme Court's 23 August 2022 judgment in Ganpati Dealcom and resting on none of it. With that judgment recalled, it is an independent line of authority for a pre-November 2016 transaction — but it is a High Court judgment only, and the question is back before the Supreme Court. If it applies to you, the first step is this: Fix the date of the transaction on the record and check it against 1 November 2016, the date the notification of 25 October 2016 appointed.
The petitioner company allotted 4,50,000 shares worth Rs.45,00,000 to the third respondent on 14 December 2011. The third respondent was an aqua farmer who bought feed from the company and who paid for the shares by cheques drawn on his Union Bank account. A search and seizure operation under the Income-tax Act was carried out at the company's premises on 15 March 2017; it led to a large demand by way of additions, most of which were deleted in appeal. The first respondent then issued a show-cause notice dated 30 December 2019 under s.24(1) of the Prohibition of Benami Property Transactions Act to the third respondent and to the company, calling on the third respondent to show cause why the transaction should not be treated as a benami transaction, himself as benamidar and the company and its directors as beneficial owners. A provisional attachment order followed on 31 December 2019, and an order continuing the attachment was made on 30 March 2021. The Revenue contended that the writ petitions were premature and that the petitioners should go to the Adjudicating Authority. The matter was decided on 2022-03-08 by the High Court (Ujjal Bhuyan J and Dr Chillakur Sumalatha J, judgment delivered by Ujjal Bhuyan J). On those facts the High Court held as follows. All the writ petitions were allowed, with no order as to costs, and pending miscellaneous petitions were closed (paras 94 and 95). The Court held that ss.2(9)(A) and 2(9)(C) are substantive provisions and not machinery or procedural provisions (paras 73 and 74); that the Central Government's notification dated 25 October 2016 appointed 1 November 2016 as the date on which the 2016 Amendment Act came into force and that no other notification giving s.2(9) effect from an anterior date was produced (paras 84 and 85); and that the charge against the petitioner was specifically under s.2(9)(A) read with s.2(9)(C), provisions which were not in existence when the transaction took place on 14 December 2011 (para 78). The conclusion recorded that the very foundation for issuance of the show-cause notice and the provisional attachment order being flawed, the same was required to be recalled or set aside.
Because a transaction falling within s.2(9)(A) or s.2(9)(C) is not only prohibited by s.3(1) but is an offence punishable under s.3(2) and (3) and under s.53, those provisions are offence-creating or offence-defining and therefore substantive; a transaction falling within them attracts a stiffer penalty than the milder penalty under the un-amended Act (paras 73 and 74). A statute affecting substantive rights is presumed prospective unless made retrospective expressly or by necessary intendment, while a statute merely affecting procedure is presumed retrospective; every litigant has a vested right in substantive law but none in procedural law (paras 80 and 81, applying Hitendra Vishnu Thakur v State of Maharashtra, and paras 82 and 83, drawing on K.S. Paripoornan and Videocon International). Article 20(1) protects against conviction except for violation of a law in force at the time of the act charged, and against a penalty greater than that which might have been inflicted under the law then in force (para 77). The Additional Solicitor General's argument that s.3(2) provided the penalty for benami transactions entered into before 1 November 2016 did not answer the case, because the charge as framed was under the new definitions and not under s.2(a) of the un-amended Act (para 78). In the words reproduced by the source cited on this page: "In the result, all the writ petitions are accordingly allowed." The decision followed or applied Hitendra Vishnu Thakur v State of Maharashtra, (1994) 4 SCC 602 — applied on the substantive-procedural distinction; K.S. Paripoornan v State of Kerala, (1994) 5 SCC 593 — relied on; Videocon International Ltd v SEBI, (2015) 4 SCC 33 — relied on; Thirumalai Chemicals Ltd v Union of India, (2011) 6 SCC 739 — relied on.
It was decided by the High Court on 2022-03-08 and is reported as Writ Petition Nos. 14695, 11680, 11681, 13150, 13156, 13157, 13190, 13769, 13771, 13787, 13804, 13809, 13822, 13823, 14703, 14711, 14713, 14724, 17758, 17761, 17766, 17769, 17770, 17772, 17773, 17775, 17780, 17782, 20469, 20471, 20473, 20476, 20482, 20490, 20492, 20499, 20503, 20523, 23342, 23343, 23351, 23360 and 23537 of 2021; indexed as (2022) 444 ITR 261 (Telangana). Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section Benami s.2(9)(A), section Benami s.2(9)(C), section Benami s.3, section Benami s.24, section Benami s.53, section Benami Amendment Act 2016, section Constitution Art. 20(1), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. All the writ petitions were allowed, with no order as to costs, and pending miscellaneous petitions were closed (paras 94 and 95). The Court held that ss.2(9)(A) and 2(9)(C) are substantive provisions and not machinery or procedural provisions (paras 73 and 74); that the Central Government's notification dated 25 October 2016 appointed 1 November 2016 as the date on which the 2016 Amendment Act came into force and that no other notification giving s.2(9) effect from an anterior date was produced (paras 84 and 85); and that the charge against the petitioner was specifically under s.2(9)(A) read with s.2(9)(C), provisions which were not in existence when the transaction took place on 14 December 2011 (para 78). The conclusion recorded that the very foundation for issuance of the show-cause notice and the provisional attachment order being flawed, the same was required to be recalled or set aside. It arises in How Tax Law Is Read and Prosecution matters, on section Benami s.2(9)(A), section Benami s.2(9)(C), section Benami s.3, section Benami s.24, section Benami s.53, section Benami Amendment Act 2016, section Constitution Art. 20(1) of the Income Tax Act 1961, and was decided by Ujjal Bhuyan J and Dr Chillakur Sumalatha J, judgment delivered by Ujjal Bhuyan J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Read the show-cause notice to see which limb of s.2(9) is charged; the Court's point is that the charge here was under s.2(9)(A) read with s.2(9)(C), provisions that did not exist in 2011, and not under s.2(a) of the un-amended Act. Plead that ss.2(9)(A) and 2(9)(C) are offence-creating and so substantive, and that Article 20(1) bars a greater penalty than the law in force at the time of the act. Do not cite Ganpati Dealcom (2022) as settling the point: it has been recalled and Civil Appeal 5783/2022 is restored and undecided. Rely on this judgment on its own reasoning. Do not treat the Rajasthan High Court decision in Niharika Jain as established authority on the strength of this judgment — see the editor's note.
Searched for later treatment; none was found. That is not the same as a source affirming it. A Supreme Court decision affirming this judgment is indexed at (2023) 453 ITR 459; that order could not be opened and nothing is said here about what it decided or on what footing. No decision doubting or overruling this judgment was located. What matters more for present purposes is that the judgment does not rest on Union of India v Ganpati Dealcom (23 August 2022) at all — it was decided earlier, and the only reference to that name in it is to the Supreme Court's order of 3 February 2020 staying the Calcutta High Court's judgment. The recall of the 2022 judgment on 18 October 2024 therefore does not disturb this judgment's reasoning; but it does mean that the Supreme Court's own view on prospectivity is no longer settled, Civil Appeal 5783/2022 is restored and undecided, and a Telangana High Court judgment is what a taxpayer outside that jurisdiction now has. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The discovery record for this judgment gets two things wrong. First, it gives the provisional attachment as 30 March 2021; the judgment records the provisional attachment order as 31 December 2019, with the order continuing the attachment made on 30 March 2021. Second, it records the judgment as noting that the Rajasthan High Court in Niharika Jain had held the 2016 Amendment Act prospective. That statement appears in this judgment at para 32.8 as counsel's submission for the petitioner, and at para 33.1 the Revenue's answer is recorded — that a Division Bench of the Rajasthan High Court had stayed the learned single Judge's judgment in Niharika Jain. Neither is the Bench's own adoption of Niharika Jain, and this judgment cannot be used as authority for what Niharika Jain held or for its present standing. The text at indiankanoon truncates in the middle of para 85, before the conclusion. Paragraph 94 and the sentence about the foundation of the notice being flawed were located by searching within the same judgment; the sentence about the flawed foundation reads as the Court's conclusion but its paragraph number could not be established, and a reader should verify whether the Court itself or counsel said it. The paragraphs between 86 and 93 were not read, so the precise terms in which the show-cause notice, the provisional attachment and the reference were set aside are not recorded here. The citation (2022) 444 ITR 261 (Telangana) is taken from an index entry and not from any page of the judgment. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
All the writ petitions were allowed, with no order as to costs, and pending miscellaneous petitions were closed (paras 94 and 95). The Court held that ss.2(9)(A) and 2(9)(C) are substantive provisions and not machinery or procedural provisions (paras 73 and 74); that the Central Government's notification dated 25 October 2016 appointed 1 November 2016 as the date on which the 2016 Amendment Act came into force and that no other notification giving s.2(9) effect from an anterior date was produced (paras 84 and 85); and that the charge against the petitioner was specifically under s.2(9)(A) read with s.2(9)(C), provisions which were not in existence when the transaction took place on 14 December 2011 (para 78). The conclusion recorded that the very foundation for issuance of the show-cause notice and the provisional attachment order being flawed, the same was required to be recalled or set aside.
TaxSphere, “Nexus Feeds Ltd v ACIT”, https://taxnotice.vittsphere.com/caselaw/case/nexus-feeds-v-acit-benami-2016-amendment-prospective/ (validity last checked 2026-09-16)
The judgment itself is a government work and may be quoted freely. The summary, the validity note and the reasoning on this page are this library's own writing: quote them with attribution, and please do not present either as the words of the court — this page keeps the two apart and so should a quotation of it.
Every entry in this library links to where it was found, so you can check it yourself rather than take our word for it.
The property was bought years before November 2016 and the benami notice came after. Can the amended Act reach back?
The department says shares allotted in my name were benami. I knew about the allotment and the money came into my account. Does s.2(9)(C) still catch me?
Can benami proceedings be taken against me for a property bought before October 2016?
The Special Court summoned me on a benami complaint without examining the complainant, and I live outside its jurisdiction. Can I get the summoning order quashed?
