Provisional Attachment Order under PBPT Act Quashed due

Provisional Attachment Order under PBPT Act Quashed due to Approval Preceding Section 24 Notice

Issue

Whether a Provisional Attachment Order and its subsequent confirmation under Section 24 of the Prohibition of Benami Property Transactions Act, 1988 are valid when the approval of the Approving Authority under Section 24(3) was obtained prior to issuing the foundational notice under Section 24(1).

Facts

Search and Seizure: The Income Tax Department conducted a search at a safe deposit vault entity and found jewellery worth approximately ₹1.07 crores inside a locker registered under the appellant’s name (an individual employee).
Statements Recorded:
- The appellant denied ownership of the jewellery, stating on oath that he operated the locker solely on his employer’s instructions, the key remained with the employer, and the jewellery belonged to another person.
- The purported beneficial owner (a partner of the vault LLP) initially denied having any locker, but later stated that he gave family jewellery to his son-in-law, who kept it in the locker registered under the employee’s name.
Provisional Attachment: Treating the jewellery as benami property, the Initiating Officer passed a Provisional Attachment Order under Section 24.
Adjudication Confirmation: The Adjudicating Authority confirmed the Provisional Attachment Order on May 1, 2023.
Procedural Flaw: The record revealed that approval from the Approving Authority under Section 24(3) was obtained on April 27, 2022, whereas the foundational notice under Section 24(1) was issued on April 28, 2022, alongside the provisional attachment on the same day.

Decision

Procedural Defect Fatal: Obtaining approval under Section 24(3) before issuing the foundational notice under Section 24(1) vitiates the statutory procedure prescribed under the Act.
Orders Quashed: Because the mandatory statutory sequence was violated, the Provisional Attachment Order and its confirmation by the Adjudicating Authority deserve to be set aside in favor of the assessee.

Key Takeaways

Strict Adherence to Statutory Steps: Under Section 24 of the PBPT Act, statutory steps must follow the prescribed sequential order—a notice under Section 24(1) must precede or anchor the approval process for attachment.
Invalidity of Premature Approval: Obtaining approval prior to issuing the Section 24(1) notice renders the provisional attachment inherently flawed and legally unsustainable.

APPELLATE TRIBUNAL SAFEMA , NEW DELHI

Ashesh Nanalal Doshi

Initiating Officer, BPU, Surat

Justice Munishwar Nath Bhandari, Chairman
and V. Anandarajan, Member

FPA-PBPT-2604 & 2605 (SRT) of 2023

SEPTEMBER 2, 2026

Arun Kumar Agarwal and Subham Sharma, Advs. for the Appellant. Anish Dhingra and Arihant Nowlkha, Advs. for the Respondent.

ORDER

1. By these appeals under Section 46(1) of the Prohibition of Benami Property Transactions Act, 1988 (in short “the Act of 1988”), a challenge has been made to the order dated 01.05.2023 passed by the Adjudicating Authority confirming the Provisional Attachment Order (“PAO”) while answering the references against the appellants herein.

Brief facts of the case:

2. It is a case where a search was conducted by the Income Tax Department on 03.12.2021 at Sumangal Safe Deposit Vault LLP and jewellery worth of Rs.1,07,33,434/- was found in the Locker No. F-727 registered in the name of the appellant, Parth Yoginbhai Patel. Summons under Section 131(1A) of the Income Tax Act, 1961 was issued and statement of the appellant, Shri Parth Yoginbhai Patel under Section 132(4) of the Income Tax Act, 1961 was recorded on 17.12.2021 wherein he stated that the locker was opened on the instruction of his employer Shri Prarambh Shah. The locker key was also kept by Shri Prarambh Shah. The jewellery valued for Rs.1,07,33,434/- was found in the locker. The appellant Shri Parth Yoginbhai Patel denied the ownership of the said jewellery and stated that the jewellery belongs to Shri Ashesh Nanalal Doshi.

3. It was found that the actual beneficiary of the locker, Shri Ashesh N. Doshi is a partner of M/s Sumangal Safe Deposit Vault LLP. Shri Ashesh N Doshi in his statement under Section 132(4) of the Income Tax Act, 1961 stated that there exists no locker in his name or in the name of his family members. After being confronted with the statement of Shri Parth Y Patel on 17.12.2021, Shri Ashesh N Doshi stated on 08.12.2021 that he had given his family jewellery to his sonin-law, Shri Prarambh Shah which the latter kept in the said locker registered in the name of his employee, Shri Parth Y. Patel. The jewellery in the locker was thus found to be benami property and accordingly an order for provisional attachment of the jewellery/ property was caused by the Initiating Officer. Subsequently, the PAO was confirmed by the Adjudicating Authority on 01.05.2023. Aggrieved by the order, the present appeals have been filed.

Arguments of the Ld. Counsel for the appellants:

4. Ld. Counsel for the appellants contested the appeals referring to the facts of the case to show that there exists no element of benami transaction. Ld. Counsel further submitted that the provisional attachment of the property has been made in contravention of the provisions of the Act of 1988. It was specifically given out that while causing provisional attachment under sub-sections (3) & (4) of Section 24 of the Act of 1988. It was submitted that the proceedings for provisional attachment of the property can be initiated with a notice under sub-section (1) of Section 24 of the Act of 1988 to the benamidar. In the instant case, the respondent failed to issue a notice under sub-section (1) of Section 24 of the Act of 1988 prior to taking approval of the Approving Authority for causing provisional attachment of the property. For provisional attachment of the property, it is a condition precedent to have an approval of the Approving Authority but before that a notice under sub-section (1) of Section 24 of the Act of 1988 must have been issued. Referring to the facts on record, it was submitted that as per sub-section (1) of Section 24 of the Act of 1988, a notice can be caused by the Initiating Officer only when he is having material in his possession to form a reason to believe that a person is a benamidar in respect of the property and after recording reason to believe in writing, a notice is issued to show cause within such time as prescribed in the notice as to why the property should not be treated as benami property. Sub-section (2) of Section 24 of the Act of 1988 requires a copy of notice to the beneficial owner. Sub-section (3) of Section 24 of the Act of 1988 gives power to the Initiating Officer to cause provisional attachment of the property with the previous approval of the Approving Authority for a period not exceeding four months from the last date of the month in which the notice under sub-section (1) of Section 24 of the Act of 1988 is issued. In the instant case, a notice under sub-section (1) of Section 24 of the Act of 1988 was issued on 28.04.2022 while approval of the Approving Authority under sub-section (3) of Section 24 of the Act of 1988 was sought on 27.04.2022 i.e. prior to issuance of notice under sub-section (1) of Section 24 of the Act of 1988. The prior approval of the Approving Authority is to be sought when a notice under sub-section (1) of Section 24 of the Act of 1988 has already been issued and the matter is proceeded for provisional attachment of the property under sub-section (3) of Section 24 of the Act of 1988. In the instant case, the prior approval of the Approving Authority for provisional attachment of the property was prior to issuance of notice under sub-section (1) of Section 24 of the Act of 1988. Thus, on the aforesaid ground itself, impugned order deserves to be set-aside.

5. Ld. Counsel for the appellants raised further many legal and factual issues but prayed for disposal of the appeals in reference to the first legal issue raised by him.

Arguments of the Ld. Counsel for the respondent:

6. Ld. Counsel for the respondent contested the appeals on all the grounds raised by Ld. Counsel for the appellants. It was submitted that there is no illegality in issuance of the notice under sub-section(1) of Section 24 of the Act of 1988 as a case of benami transaction was detected upon search being conducted. A decision to cause provisional attachment of the property was taken immediately. It is in the follow up action that the provisional attachment of the property was caused with the approval of the Approving Authority, though approval was taken prior to the notice issued under subsection (1) of Section 24 of the Act of 1988. Ld. Counsel submitted that a case of benami transaction was made out and therefore the action was rightly initiated by the Initiating Officer. Accordingly, prayer is made to dismiss the appeals.

Findings of the Tribunal:

7. The brief facts pertaining to the case has been given in the opening paras of this order. We have perused the record carefully and find that the action of the respondent to be not in consonance with the provisions of law. The seriatim of event for provisional attachment should start with a notice under sub-section (1) of Section 24 of the Act of 1988. It is to call upon the benamidar as to why the property in question should not be treated as benami. Sub-section (2) of Section 24 of the Act of 1988 no doubt refers to a copy of the notice to the beneficial owner, which action would be taken with a notice under sub-section (1) of Section 24 of the Act of 1988. Sub-section (3) of Section 24 of the Act of 1988 mandates formation of an opinion that a person in possession of the property held benami may alienate the property during the period specified in the notice, the provisional attachment of the property can be caused with the prior approval of the Approving Authority.

8. It is a case where notice was issued under sub-section(1) of Section 24 of the Act of 1988 and on the same day the provisional attachment of the property was caused but it is without following the provisions of law in view of the fact that approval of the Approving Authority was taken prior to issuance of notice under sub-section(1) of Section 24 of the Act of 1988. Thus, action of the respondent was mechanical in nature as without issuing notice under sub-section (1) of Section 24 of the Act of 1988, the respondent authority could not have taken the prior approval of the Approving Authority to cause the provisional attachment of the property. It is in view of the fact that when the notice under sub-section (1) of Section 24 of the Act of 1988 discloses the reason to believe for treating the property to be involved in benami transaction then based on the aforesaid and other material, the Approving Authority may take a decision to give prior approval for causing provisional attachment of the property. In absence of the notice under sub-section (1) of Section 24 of the Act of 1988, the Approving Authority would not be having reasons and material to give prior approval for the provisional attachment of the benami property. In the instant case, prior approval for causing provisional attachment of the property has been given prior to the notice under sub-section (1) of Section 24 of the Act of 1988. Hence, the act of the respondent is in contravention of the provisions of the Act of 1988.

9. In light of the discussions made above, we find reason to cause interference in the impugned order. Accordingly, impugned order is set-aside and the appeals are allowed.

10. It is, however, with the liberty to the respondent for action afresh but should be in accordance with the provisions of law. Further, the appellants would also be at liberty to take all the grounds raised in the present appeals before the concerned authorities, if any action is taken.