Abki Baar Benami pe Vaar

Since 8^th November 2016, Prime Minister Narendra Modi announced demonetisation of rupee 500 and 1000 notes, he has indicated more stricter measures to fight black money. He categorically referred to benami properties and emphasised Govt’s intention to take stringent action against property and people involved in benami transaction. Let us take an overview of the amended provisions in respect of Benami Property Transaction Act as applicable w.e.f.1^st November, 2016.

The Benami Transactions (Prohibition) Act, 1988(the Act) came into force w.e.f. 19.5.1988. Since then for the first time, The Govt. has made wholesale amendments in the existing Act vide “The Benami Transactions (Prohibition) Amendment Act 2016” passed by the Parliament on 10^th August 2016. The provisions of the Amended Act have come into force w.e.f. from 1^st November, 2016. It extends to whole of India except the State of Jammu and Kashmir. Now the old Act is rechristened as “The Prohibition of Benami Property Transactions Act, 1988”

The amended provisions are much more stricter and harsh as the definition of benami transaction has been drastically enlarged even to cover those transactions where the same is carried out in a fictitious name, where the owner of property is not aware of or denies knowledge of ownership or in respect of a property, where the person providing the consideration is not traceable or is fictitious. The authorities under the Income Tax Act has been designated as authorities under the Amended Act. The Amended Act further seeks –

a) to define benami property and to substantially enlarge the definition of property to mean any kind of assets whether movable or immovable, tangible or intangible, corporeal or incorporeal and to include property in the converted form where the property is capable of conversion into some other form and to include the proceeds from the property;

b) to provide for confiscation of any property, by Central Government, which is subject matter of benami transaction whereas the old provisions provided for acquisition of property;

c) to provide that on confiscation, all the rights and title in property shall vest absolutely in the Central Government free of all encumbrances and no compensation shall be payable in respect of such confiscation;

d) to forbid re-transfer of benami property to beneficial owner or any person acting on his behalf and to declare such re-transfer be deemed as null and void;

e) to deem as null and void, any transfer of property after the Initiating Officer issues notice to a person to show cause why the property mentioned in the notice should not be treated as benami property;

f) to prescribes minimum period of imprisonment of one year as well as raises the maximum period of imprisonment upto seven years and fine for entering into or abetting or inducing benami transaction on or after 1^st November 2016.

g) to establishes elaborate machinery for attachment, adjudication and confiscation of the benami property;

h) to empower Initiating Officer to conduct any enquiry or investigation in respect of any person, place, property, assets, documents, books of accounts or other documents;

i) to establish Appellate Tribunal to adjudicate appeal challenging attachment order passed by the Adjudicating Authority

j) to establish Special courts for speedy trial of an offence punishable under the Act

It is believed that a large portion of black money is kept in benami properties, therefore, the government in its fight against black money has made very stringent provisions in respect of benami property transactions entered into on or after 1^st November, 2016 and also provided that any re-transfer of benami property whether entered before 1^st November 2016 or entered thereafter shall be deemed as null and void except where such re-transfer is made in accordance with the provisions of section 190 of the Finance Act 2016 i.e. where the benami property was disclosed in the Income Disclosure Scheme which closed on 30^th September, 2016.

To counter demonetisation of 500 and 1000 notes by Govt., many black money holders has devised to deposit the demonetised notes in the bank accounts held by others like relatives, servants, workers, poor people etc. All such transactions are benami property transactions prohibited by the Amended Act and not only such cash deposits are liable to confiscation but all persons involved in such benami cash deposit transaction are liable for imprisonment of minimum one year which may extend to seven years and fine.

Thus Amended Act is a well thought step taken by the Govt. to counter benami property transactions by confiscating benami properties in the country and by prosecuting persons involved in benami property transaction.

Arun Kumar Agarwal, Advocate
B.Com (H), FCA, LLB
Former Chairman and Member
Appellate Tribunal – Money Laundering (PMLA)