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 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 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.
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 under somebody else's name . It includes all properties held in the name of a 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.
Under the 2016 Act, the term "Benami Property" under section 1(8) has been defined as under:
The definition of property under 2016 Act includes 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:
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, 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."
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 and far outweighed their perceived advantages, leading to such transactions being forbidden by law.
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.
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 an enquiry in regard to person, place, property, document, bank etc
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.
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.
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.
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
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.
From comparison of the 1988 Act with the 2016 Act, it becomes clear that 1988 Act did not 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.Copyright 2022 – Helpline Law
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