Disclosure Of Income & Payment Of Income Tax Do Not Bar Proceedings Under Benami Transactions Act: Kerala High Court
Mehak Dhiman
10 Nov 2025 9:30 AM IST
The Kerala High Court has held that disclosure of income and payment of tax under the Income Tax Act, 1961, does not preclude initiation of proceedings under the Prohibition of Benami Property Transactions Act, 1988. Justice Ziyad Rahman A.A. agreed with the department that the fact that the assessees have disclosed the income in the return and the same was proceeded against under...
The Kerala High Court has held that disclosure of income and payment of tax under the Income Tax Act, 1961, does not preclude initiation of proceedings under the Prohibition of Benami Property Transactions Act, 1988.
Justice Ziyad Rahman A.A. agreed with the department that the fact that the assessees have disclosed the income in the return and the same was proceeded against under the provisions of the Income Tax Act, by itself, cannot be a reason to interfere with the proceedings under the Prohibition of Benami Property Transactions Act, 1988.
The petitioners/assessee had approached the Court after ₹88,77,000/- in cash was seized by the police and later declared as cash-in-hand in their revised income tax returns.
In the meantime, notices were issued to the assessees under Section 24(1) of the Prohibition of Benami Property Transactions Act, 1988, requiring them to show cause as to why the property referred above (cash) should not be treated as benami property as per the provisions of the Act.
An assessment order was passed by the assessing officer under the Income Tax Act, wherein the officer concerned, by invoking Section 37 of the Income Tax Act, disallowed the indirect expenses debited in the amount shown therein and completed the assessment.
The assessee argued that once the amount was taxed, no further action could be taken under the Benami Transactions Act.
According to the assessee, there are no sufficient materials going by notices, to invoke the jurisdiction of the Assistant Commissioner of Income Tax, by treating the cash seized as Benami property, as per sub clause (D) to sub section (9) of Section (2) of the Act.
Rejecting the contention of the assessee, the Court emphasised that Sections 60 and 67 of the Benami Act provide that the Act operates in addition to and has overriding effect over other laws. Thus, tax assessment does not automatically validate the underlying transaction or determine real ownership.
The Court further observed that at the stage of issuing a notice under Section 24(1), the authority only needs a prima facie “reason to believe” based on material in possession. The assessee's sworn statement claiming the cash was proceeds from gold sales constituted such material.
Finding no ground for interference under Article 226 at this pre-adjudicatory stage, the Court dismissed the writ petition while permitting the assessee to file objections to the notices within three weeks.
Case Title: Vittal Sait Popat v. The Assistant Commissioner of Income Tax
Case Number: WP(C) NO. 4193 OF 2020
Citation: 2025 LiveLaw (Ker) 721
Counsel for Petitioner/Assessee: Smt. Latha Anand, Sri. M.N. Radhakrishna Menon, Sri. Radhakrishna Pillai B., Shri. Sidharth P.S., Sri. Rohith Mohan, and Shri. S.S. Vishnu
Counsel for Respondent/Department: Navaneeth N. Nath