The Benami Transactions (Prohibition) Act,
1988 was amended by the Benami Transaction (Prohibition) Amendment Act, 2016,
in which substantial provisions were added to the existing Act to provide extra
ordinary powers to keep a limit on the Benami Transactions and impound the
Properties which are Benami in nature. The act is also renamed as Prohibition
of Benami Property Transactions Act, 1988 and came into force on 1st
November 2016. Through the amended Act,
the term Benami Transaction is expanded and provides the rigorous imprisonment
for up to seven years along with the fine which may extend to 25 percent of the
fair market value of the Benami Property.
BENAMI
PROPERTY
Before we proceed further, it is necessary to
understand the term Benami Property. The basic meaning of Benami is the
property which is bought by an individual but not under his or her name but at
somebody else's name is known as Benami property. It includes all the property
which is held in the name of third person like children or spouse and the
amount for that property is paid by unknown sources of income. The transaction
involved in the same is called Benami transaction. People invest their money in
buying Benami property to evade taxation. Furthermore, the true owners of these
properties are hard to find due to fake identities and name. The person on
whose name the property is bought is called 'benamdar'. The Benami transactions
include buying any kind of assets — movable, immovable, tangible, intangible,
any right or interest, or legal documents.
CONCEPT OF BENAMI PROPERTY AND BENAMI
TRANSACTION UNDER THE 2016 ACT
Under the 2016 Act, the term "Benami
Property" under section 1(8) has been defined as under:
The
definition of property under 2016 Act include assets of any kind, whether
movable or immovable, tangible or intangible, corporeal or incorporeal.
Under Section 1 (9) of the 2016 Act, the term
"Benami Transaction" has been defined as under:
A Benami Transaction means,-
Therefore, the following transactions shall
fall under the scope of Benami Transaction:
Two types of Benami Transactions which are generally recognized
in India
Where a person
buys a property with his own money but in the name of another person without
any intention to benefit such other person, the transaction is called Benami. In that case, the transferee holds the
property for the benefit of the person who has contributed the purchase money,
and he is the real owner.
The second case
which is loosely termed as a Benami transaction
is a case where a person who is the owner of the property executes a conveyance in favor of another without the intention of
transferring the title to the property thereunder. In this case, the transferor
continues to be the real owner.
The difference
between the two kinds of Benami transactions referred to above lies in the fact
that whereas in the former case, there is an operative transfer from the
transferor to the transferee though the transferee holds the property for the
benefit of the person who has contributed the purchase money, in the latter
case, there is no operative transfer at all and the title rests with the
transferor notwithstanding the execution of the conveyance. One common feature, however, in both these
cases is that the real title is divorced from the ostensible title and they are
vested in different persons."
Why are Benami Transactions
considered Illegal?
The Benami transactions in India has always
been a part of India since many years. There are various cases in which the
Courts went on to observe that certain Benami transactions were customs
of the country and must be recognized as such, thereby giving it a legal
structure, since custom was one of the important sources of law back then.
However, gradually it was realised that
Benami Transactions were also being employed for various dishonest intentions
which includes money laundering, evasion of taxes etc. It was also
realized that these transactions could be misused for diverting one's assets in
another's name and thereby defeating the lawful claims of creditors and
defrauding them. Slowly and gradually it dawned that, on a cost-benefit
analysis, the losses and mischief arising from allowing Benami transactions to
continue unabated far outweighed their perceived advantages, leading to such
transactions being forbidden by law.
Is entering into a Benami Transaction a crime
as well?
When a Benami transaction is entered into: in
order to defeat the provisions of any law, to avoid payment of statutory dues
or to avoid payment to creditors, it attracts penal provisions of the Benami
Act and prosecution can be initiated under the Act after receiving the
sanction of the Central Board of Direct Taxes constituted under the Central
Board of Revenue Act, 1963.
Special Courts for trial of offences under
the Act will be set up by the Central Government, as per the mandate under the
Act.
Authorities
which deals with the Benami Property and Transactions
1. The Initiating Officer
Such officer
shall have reason to believe on the basis of material available to him and
shall record the reasons in writing. Thereafter, he shall issue a notice to the
parties and after obtaining the replies, if he thinks so, he may provisionally attach
the property with prior permission of the approving authority for a period not
exceeding 90 days and he may also revoke the provisional attachment with prior
permission of the approving authority. He shall have power to conduct enquiry
in regard to person, place, property, document, bank etc
2. The Approving Authority
The
approving authority means an Additional Commissioner or a Joint Commissioner as
defined in section 2 of the Income Tax Act, 1961. It shall have powers to give
approval for retention of books of accounts and documents impounded within 15
days and will give permission to the initiating officer. He will also give
permission or approval to the approving authority for his various actions like
continuation of attachment, revocation of attachment, enquiry, investigation,
etc.
3. The Administrator
He shall
have the power to receive and manage the property, in relation to which an
order of confiscation has been made. He is empowered to take such measures as
are necessary for managing such property. He also has the powers to enforce
possession by giving reasonable notice to the occupier of such property.
4. The Adjudicating Authority
This
authority consisting of at least two members and one chairman will issue notice
to the parties with 30 days from the date on which a reference has been
received from the initiating officer. The authority may pass an order revoking
or confirming attachment after holding that the property is Benami or not. Such
order shall be passed within expiry of one year from the end of the month in
which reference under this Act was received. This authority shall make an order
for confiscation of the property after giving an opportunity of being heard to
the person concerned.
Powers of
the concerned authorities
The
authorities shall have the same powers as are vested in a civil court under the
Code of Civil Procedure, 1908, while trying a suit in respect of the following
matters, namely–
PROCESS OF ATTACHMENT OF BENAMI PROPERTY
a) Benamidar
b) Beneficial owner (if identity known).
a) Pass an order continuing the provisional attachment of the property till the adjudication order by the Adjudicating Authority; or
b) Revoke the provisional attachment order.
a) Pass an order for attaching the property till the adjudication order by the Adjudicating Authority; or
b) Decide not to attach the property.
If there is any order for
attachment of the property or continuation of the provisional attachment, the
Initiating Officer shall draw up a statement of the case and refer it to
Adjudicating Authority within 15 days from the date of such attachment.
CONCLUSION
From comparison of the 1988 Act with the 2016 Act, it becomes clear that 1988 Act didn't have any mechanism or process of confiscation/ acquisition of the Benami property and therefore, no Benami property could be acquired by the government. On the other hand, the 2016 Act is a comprehensive law which not only provides for the mechanism and process for attachment and confiscation of the Benami property, but has also enacted the administrative structure for proper implementation of such provisions. The 2016 Act has not only widened the ambit of Benami Transaction, but the same also mandates for more stringent punishment. By the 2016 Act, the Government of India has made its intentions abundantly clear that the Benami transactions occurred during the intervening period of 1988 to 2016 are not going to be spared.