Article by Vijay Pal Dalmia, Advocate, Supreme Court of India and Delhi High Court, Partner & Head of Intellectual Property Laws Division, Vaish Associates Advocates, India

The Benami Transactions (Prohibition) Act, 1988 came into force on 19.05.1988 (hereinafter referred as "1988 Act") has been amended by 1the Benami Transactions (Prohibition) Amendment Act, 2016 which is also be called as Prohibition of Benami Property Transactions Act, 1988 (hereinafter also referred as "2016 Act") which came into force with effect from 1st November 2016.

The 1988 Act has been substantially amended by the 2016 Act, and various provisions and authorities have been established to curb the benami transactions and confiscate the benami Properties and punish the offenders.

Primarily, there are 2 types of actions envisaged under the 2016 Act:

  • Attachment and confiscation of properties involved in Benami transaction


  • Criminal prosecution under Section 3 or 53 of the 2016 Act.

Now, the question that comes in mind that whether the findings/ decisions of the authorities under the 2016 Act in the proceedings relating to attachment of the benami properties will have some bearing on the criminal prosecution under the 2016 Act.

In this regard, the judgments passed by the Hon'ble Supreme Court of India and Hon'ble High Courts under the Income Tax Act, 1961 are relevant:

The Hon'ble Supreme Court in the case of G.L. Didwania & Anr. vs. Income Tax Officer & Anr., [1997]224ITR687(SC) /MANU/SC/1087/1995, dealt with a situation where there was a prosecution under the Income Tax Act for making a false statement that the assessee had intentionally concealed his income and the Tribunal ultimately set aside the assessment holding that there is no material to hold that such income belong to the assessee and the petition was filed before the Magistrate to drop the criminal proceedings and thereafter an application was filed before the High Court under Section 482 Cr.P.C. to quash those criminal proceedings. The Hon'ble Supreme Court in the above case held that the whole question is whether the appellant made a false statement regarding the income which according to the assessing authority has escaped assessment and this issue was dependent on the conclusion reached by the appellate Tribunal and hence the prosecution could not be sustained.

The Hon'ble Supreme Court in the case of Commissioner of Income Tax Vs. Bhupen Champak Lal Dalal & Anr. Etc2., MANU/SC/0141/2001, MANU/SC/1562/2001, has held that if the result of adjudication proceedings has direct bearing on the criminal cases, the criminal proceedings should be stayed.

The Hon'ble Calcutta High Court while disposing Writ Petition, WP 11283 (W) of 2015, tilted as Bishwanath Garodia vs. The Principal Commissioner of Income Tax (Central), Kolkata & Ors., relied on the Supreme Court judgment in Commissioner of Income-tax Vs. Bhupen Champak Lal Dalal, reported in [2001] 248 ITR 830, and held as under:

"When ultimately the result to come out of the proceedings before the appellate authorities would have a definite bearing on the cases alleged against the respondents, we find that the High Court is justified in granting the interim order it did and we do not think that such an interim order calls for interference at our hands. Learned counsel on either side relied on several decisions, but in the view we have taken it as unnecessary to refer to those decisions." Having made those observations, it affirmed the order of the Bombay High Court staying criminal proceedings."

The Hon'ble Patna High Court in the case tilted as Gauri Shankar Prasad vs. Union of India (UOI) and Ors. MANU/BH/0002/2003, stayed the proceedings of the criminal trial for the offence u/s 276(C) of the Income Tax Act while relying upon on the Supreme Court judgment in Commissioner of Income-tax Vs. Bhupen Champak Lal Dalal, reported in [2001] 248 ITR 830.

In the case tilted as Beaver Estates Pvt. Ltd. and Ors. Vs. The Assistant Commissioner of Income Tax Corporate, Circle 1(1) and Ors. OP (Crl.) No. 400 of 2019, MANU/KE/4435/2019, the High Court of Kerala has directed the Trial Court to keep the criminal proceedings initiated against the Petitioner Company and its Managing Director on the complaint filed against them by the Assistant Commissioner of Income Tax alleging that they had made wilful attempt to evade tax and committed an offence punishable under Section 276C(1) of the Income Tax Act, 1961, in abeyance, till the disposal of Income Tax Appeal filed by the Petitioners for challenging the assessment of tax before the Commissioner of Income Tax.

In view of the aforesaid findings, it can be concluded that the findings/ decisions of the authorities under the 2016 Act in the proceedings relating to attachment/ confiscation of the benami properties will be binding on the criminal court. In a situation, where the authorities under the 2016 Act reached to a conclusion that the transaction relating to a property is not a benami transaction in that case there will be no point of continuing with the trial before the criminal court for the said transaction, as it will be an anomaly if the conclusion reached by the criminal court is different. However, in a situation where the findings/ decisions of the authorities under the 2016 Act in the proceedings are against the accused then the Income Tax Department (Notified under 2016 Act) has to prove the case against the accused before the criminal court as per the provisions of Indian Evidence Act, 1872.





Vijay Pal Dalmia, Advocate

Supreme Court of India & Delhi High Court

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Mobile No.: +91 9810081079



Twitter: @vpdalmia


Rajat Jain, Advocate

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Mobile No. 9953887311


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