SHYAMSUNDAR SHARMA V. ACIT/INITIATING OFFICER, BENAMI PROHIBITION UNIT-2, DELHI & ANR. (NEUTRAL CITATION: 2025:DHC:10372-DB):

DATE: 19/11/2025

COURT: High Court of Delhi

BENCH: Justice V. Kameswar Rao and Justice Vinod Kumar

FACTS:

The petitioner has been running a goods transport and courier service business under the name Shyam Air Couriers since 2009 and had been providing courier services to Vestige Marketing Pvt. Ltd. (VMPL), a multi-level direct selling company. In September 2023, a search under Section 132 of the Income Tax Act was conducted at VMPL’s premises and the residences of its directors, where electronic records and excel files titled “Bogus Expenses Employee-Wise” were allegedly seized. These documents indicated payments made by VMPL to various parties for services that were not actually rendered, and according to authorities, the funds were routed back in cash to VMPL’s promoters. The petitioner’s name appeared in these excel sheets, showing payments made to him between FY 2018-19 to FY 2023-24, suggesting that he was allegedly one of the vendors used for bogus billing.

Based on this material, the Initiating Officer under the Prohibition of Benami Property Transactions Act formed a belief that the petitioner was acting as a Benamidar for VMPL and issued a Show Cause Notice dated 21.03.2025 under Section 24(1), followed by Provisional Attachment Orders of the petitioner’s bank accounts under Sections 24(3) and 24(4). The petitioner replied asserting that the transactions were genuine, submitting that his correct business identity was M/s Shyam Air Courier and denying being the person listed as Shyam Sunder Choudhary, but the authority rejected his explanation and continued with attachment. Subsequently, the matter was referred to the Adjudicating Authority, which issued a notice under Section 26 on 29.08.2025. Instead of contesting those proceedings, the petitioner filed the present writ petition challenging the Show Cause Notice, attachment orders, and the initiation of adjudication proceedings.

ISSUES:

The primary issue before the Court was whether the Show Cause Notice and subsequent provisional attachment orders issued by the Initiating Officer under Section 24 of the Prohibition of Benami Property Transactions Act, 1988, were valid. The petitioner argued that he was wrongly identified, that there was no tangible material linking him to any benami transaction, that principles of natural justice were violated due to lack of evidence, absence of approval copies, and absence of opportunity to cross-examine persons whose statements were relied upon. Essentially, the Court had to examine whether jurisdictional pre-conditions under Section 24(1), existence of material and formation of “reason to believe” were satisfied and whether the procedure prescribed in Section 24(3)-(5) was properly followed.

JUDGEMENT WITH REASONING:

The Court dismissed the writ petition and upheld the Show Cause Notice and attachment proceedings. It held that the Initiating Officer possessed relevant material namely seized excel sheets and corroborating statements and had duly recorded reasons to believe that the petitioner was involved in benami transactions. Since the adjudication process under Section 26 was already underway and the statute provided an adequate remedy at that stage, the Court refused to interfere at the preliminary stage. The Court clarified that observations made would not bind the Adjudicating Authority.

The Court first examined whether the legal threshold for issuing a Show Cause Notice under Section 24(1) was satisfied. It held that two jurisdictional prerequisites existed, possession of material and formation of reason to believe. The seized excel sheets identifying names, amounts, and suspicious transactions, read with statements of beneficial owners, constituted relevant material. The Court emphasized that while it can examine the existence and relevance of material, it cannot evaluate sufficiency or correctness at this stage. Relying on statutory interpretation of the expression “reason to believe,” including its meaning under the Bharatiya Nyaya Sanhita, the Court held that such belief is subjective and must be assessed from the perspective of the Initiating Officer. Hence, once reasons are recorded and linked to existing material, judicial review is limited.

The Court further reasoned that proceedings under Section 24 constitute only an initial stage in the statutory mechanism and are not final determinations of benami nature. A full adjudicatory process, including evidentiary evaluation, cross-examination, and opportunity of hearing, is provided under Section 26 before the Adjudicating Authority. Therefore, the Court refused to decide issues relating to evidentiary admissibility (such as Section 65B certificates), correctness of statements, or commercial genuineness of transactions at this preliminary stage. It also rejected procedural objections such as non-furnishing of approval documents holding that while approval is mandatory, supplying its copy is not a statutory requirement unless demanded. Lastly, the Court stated that financial hardship due to attachment is a matter to be raised before the Adjudicating Authority, which has power to revoke attachments. Thus, judicial interference was unwarranted at this stage, leading to dismissal of the petition.

ANALYSIS:

The Court’s decision reflects a consistent judicial approach to statutory proceedings under the Prohibition of Benami Property Transactions Act namely that judicial review at the stage of issuance of a Show Cause Notice is limited. The Court carefully distinguished between preliminary administrative actions under Section 24 and final determinations under Section 26. By recognising that the Initiating Officer had relied upon seized documents, including excel sheets and related statements, the Court treated the material as “relevant,” even if contested in veracity. This demonstrates that courts do not evaluate evidentiary sufficiency at the stage of forming “reason to believe.” Instead, they require only demonstrable linkage between the material and the person proceeded against. The Court reinforced that statutory mechanisms exist precisely to test evidentiary truth, admissibility, and credibility, and that bypassing these stages would undermine the adjudicatory framework contemplated by the Act.

At the same time, the Court balanced the rights of the petitioner by ensuring that its observations would not prejudice the adjudicating authority under Section 26. The judgment clarifies that the petitioner must engage with the statutory remedy rather than circumvent it through writ jurisdiction. The reasoning highlights judicial restraint and the idea that statutory authorities must not be pre-empted unless the notice suffers from patent illegality or lack of jurisdiction, which was not established in this case. The analysis therefore reflects a broader principle: when a statute provides a complete remedial mechanism including hearing, consideration of replies, evidence appraisal, and power to revoke attachments, courts will defer to that process. This ensures that factual disputes, financial calculations, identity-related objections, and cross-examination concerns are examined at the appropriate adjudicatory stage, rather than being prematurely litigated through constitutional remedies.