Various steps have been taken for removal of unaccounted assets by Government like The Black Money Foreign Income and Asset Act, 2015, Income Disclosure Scheme 2016
, Demonetization of high denomination currency, Prime Minister Garib Kalyan Yojna, by amendments in Income Tax Act, by amendments in Money Laundering Act, Implementation of GST, Introduction of GAAR, RERA and amendments in the Benami Transactions Act, 1988. Of all the reforms being brought in the Indian economic system, amendments in Benami Law are the most stringent measure taken by the Government.
Benami Transactions (Prohibition) Amendment Act, 2016
is effective from 1st November 2016. The objective of the Act is to prohibit Benami transactions so that beneficial owners of property would be compelled to keep property in their own name. This will reduce legal complexities in administration of assets and also bring transparency in asset ownership. With the amendments the old Benami Act has been renamed as the Prohibition of Benami Property Transactions Act, 2016 (PBPT Act).
‘Benami’ is a Hindi word which means “without name”. The term “Benami Transaction” is defined under section 2(9) of PBTP Act, 2016. As per amendment the new definition is as follows:
•”Benami Transaction” means,
(A)A transaction or an arrangement—
(a)where a property is transferred to, or is held by, a person, and the consideration for such property has been provided, or paid by, another person; and
(b)the property is held for the immediate or future benefit, direct or indirect, of the person who has provided the consideration, except when the property is held by-
(i) a Karta, or a member of a Hindu undivided family, as the case may be, and the property is held for his benefit or benefit of other members in the family and the consideration for such property has been provided or paid out of the known sources of the Hindu undivided family;
(ii) a person standing in a fiduciary capacity for the benefit of another person towards whom he stands in such capacity and includes a trustee, executor, partner, director of a company, a depository or a participant as an agent of a depository under the Depositories Act, 1996 and any other person as may be notified by the Central Government for this purpose;
(iii) any person being an individual in the name of his spouse or in the name of any child of such individual and the consideration for such property has been provided or paid out of the known sources of the individual;
(iv) any person in the name of his brother or sister or lineal ascendant or descendant, where the names of brother or sister or lineal ascendant or descendant and the individual appear as joint-owners in any document, and the consideration for such property has been provided or paid out of the known sources of the individual; or
(B) a transaction or an arrangement in respect of a property carried out or made in a fictitious name; or
(C) a transaction or an arrangement in respect of a property where the owner of the property is not aware of, or, denies knowledge of, such ownership;
(D) a transaction or an arrangement in respect of a property where the person providing the consideration is not traceable or is fictitious;
Explanation.-For the removal of doubts, it is hereby declared that benami transaction shall not include any transaction involving the allowing of possession of any property to be taken or retained in part performance of a contract referred to in section 53A of the Transfer of Property Act, 1882, if, under any law for the time being in force,-
(i) consideration for such property has been provided by the person to whom possession of property has been allowed but the person who has granted possession thereof continues to hold ownership of such property;
(ii) stamp duty on such transaction or arrangement has been paid; and
(iii) the contract has been registered.
The Act defines “Benamidar” to be a person or a fictitious person, as the case may be, in whose name the benami property is transferred or held and includes a person who lends his name to such property. “Benami property” is defined as a property which is the subject matter of a benami transaction and also includes the proceeds from such property.”Property” under the said act means, assets of any kind, whether movable or immovable, tangible or intangible, corporeal or incorporeal and includes any right or interest or legal documents or instruments evidencing title to or interest in the property and where the property is capable of conversion into some other form, then the property in the converted form and also includes the proceeds from the property.
Implications of a Benami Transaction
1. Any property, which is the subject matter of benami transaction, shall be liable to be confiscated by the Central Government.
2. Benamidar shall not be allowed to re-transfer the benami property held by him to the beneficial owner or any other person acting on his behalf.
3.Where any property is re-transferred in contravention of the provisions under the act, the transaction of such property shall be deemed to be null and void.
Note: The provisions in point (1) and (2) shall not apply to a transfer made in accordance with the provisions of section 190 of the Finance Act, 2016.”
4.Person(s) who enter into any Benami transactions shall be punishable with rigorous imprisonment for a term which shall not be less than one year and shall not exceed seven years.
5.In addition to imprisonment, a fine of 25% of the fair market value of the property shall be payable.
6.The Act prohibits recovery of Benami property from the Benamidar by the real owner and where the Benamidar re-transfers the property to the beneficial owner, then the transaction for such re-transfer shall be deemed to be null & void.
7.Properties that are held as Benami are liable to be confiscated by the Government without payment of any compensation.
8.Any person who is required to furnish information under the Act, knowingly gives false information to any authority or furnishes any false document in any proceeding under this Act, shall be punishable with rigorous imprisonment for a term which shall not be less than six months but which may extend to five years and shall also be liable to fine which may extend to ten percent of the fair market value of the property.
Course of Benami Proceedings
Government shall designate an Assistant or Deputy Income-Tax Commissioner as initiator to initiate proceedings into a Benami transaction. The Assessing Officer can start investigation by simply sending a notice to the person who can be a benamidar. The initiating officer will have to gather and provide necessary evidences and documents to ensure that claim to hold property as benami is genuine. Such Officer who initiates the proceedings can keep property on hold for a period of 90 days by taking permission for such action from Approving Authority. On expiry of notice period, the initiating officer may also increase the property holding time. The officer will then refer such case to the Adjudicating Authority. On the basis of evidence provided by the initiating officer to the Adjudicating Authority, such authority may pass permission to tag the property as Benami or otherwise. The Adjudicating Authority will decide the case in 1 year determining whether the transaction / property or asset was Benami or not. If the Adjudicating Authority passes the order for confiscating the property, the case will be passed on to the administrator. On finalisation of order, Benami property will get confiscated. The properties will then be managed and disposed off by the designated Income Tax Officers. Appeals against Adjudicating Authority’s decision can be made to the Appellate Tribunal at New Delhi. Appeal against decision of the Appellate Tribunal can be made with the High Court.DID YOU KNOW: This can also be held to be a Benami Transaction:
•Company raising share capital which is not able to produce its shareholders to the concerned authorities.
•Person obtaining Loan, who is not able to substantiate the genuineness of the lender or is not able to produce the lender before the concerned authorities.