DR. RAJKUMAR S. ADUKIA
B. Com. (Hons.), FCA, FCS, FCMA, LL.B.,
M.B.A, DIPR, Dip IFRS (UK), Dip LL&LW,
Dip in criminology, Ph.D.
What does Benami mean?
Benami is a South Asian word that means “without name” or “no name”. So, the term benami property means property without a name. It includes the transactions, in which the person who pays for the property is the beneficiary who purchase the property in the name of another person. The person does not buy it under his/her own name.The person on whose name the property has been purchased is called the benamdar and the property so purchased is called the benami property.
Meaning of Benami as per ‘’Merriam Webster” dictionary: made, held, done, or transacted in the name of (another person) – used in Hindu law to designate a transaction, contract, or property that is made or held under a name that is fictitious or is that of a third party who holds as ostensible owner for the principal or beneficial owner.
The Benami Transactions (Prohibition) Act, 1988: Evolution and developments
– The 57th report of Law Commission on ‘Benami Transactions’ was forwarded by the chairman, Mr. P. B. Gajendragadkar on August 1973.
– Accordingly, the Benami Transactions (Prohibition) Act, 1988 was enacted by the Parliament which came into force on 19 May 1988.
– The Benami Transactions (Prohibition) Bill, 2011 was introduced in the Lok Sabha in July 2011. The report was submitted by the Standing Committee in June 2012. The Benami Transactions (Prohibition) Bill, 2011 however lapsed in view of dissolution of the Fifteenth Lok Sabha.
– The Benami Transactions (Prohibition) Amendment Bill, 2015 was first introduced in the Lok Sabha on May 13, 2015 by Finance Minister Arun Jaitley. It was then referred to by a Standing Committee on Finance. The Committee submitted its report on April 28, 2016. The government has proposed amendments to the Bill on July 22, 2016. Then, it was passed in the Lok Sabha and Rajya Sabha on July 27 and August 2 respectively. On 10th August 2016, the Act received the assent of the President. On 25th October 2016, the Central Board for Direct Taxes (CBDT) notified that the provisions of the Benami Transactions (Prohibition) Amendment Act, 2016 which would come in effect from November 1, 2016.
What falls under benami transaction?
As per Section 2(8) “benami property” means any property which is the subject matter of a benami transaction and also includes the proceeds from such property.
The following transaction is benami transaction under Section 2(9)-
– A property which is purchased using a fictitious/fictional name means the owner does not exist.
– Person holding the property has no knowledge about the transaction mode or ownership of the property.
– A person who has provided the required money for the transaction is no longer traceable.
– Person holding the property or the person on whose name the property has been transferred has not paid the money or the price of the property in question is paid by someone else.
Any transaction where possession of any immovable property is taken as a part performance of a contract is not a Benami transaction if the contract is registered and consideration as well as stamp duty have been paid.
Property would include asset of any kind, whether movable or immovable, tangible or intangible, and includes rights or interest as well as proceeds from the property.
For example, Suppose a property of Rs. 10 Lakhs was purchased in the name of Mr.B, and the consideration was paid by Mr. A, who is not traceable, is a Benami transaction.
What isn’t a benami transaction?
Benami Transaction has the following exceptions:
– In case of Hindu Undivided Family (HUF), Karta or any other member of HUF owns or held any property for his benefit or for the benefit of the family members and the consideration for the same is paid out of the known source income of HUF.
– A person acting within fiduciary capacity for the benefit of another person i.e. transaction involving 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.
– Any individual transacting in the name of his/her spouse or any of his/her children (excluding married daughter) and consideration of such property is paid out of the known source of income of the individual.
– any person in the name of his brother or sister or lineal ascendantor descendant, where the names of brother or sister or lineal ascendant ordescendant and the individual appear as joint-owners in any document,and the consideration for such property has been provided or paid out ofthe known sources of the individual.
Facts for determination
– The source from which the purchase-money was derived;
– The possession of the property
– The position of the parties and their relation to one another;
– The circumstances or otherwise, of the alleged transferor;
– His motive in taking the alleged transfer;
• Initiating Officer
• Approving authority
• Adjudicating Authority
“Initiating Officer” means an Assistant Commissioner or a deputy commissioner as defined in clauses (9A) and (19A) respectively of section 2 of the Income-tax Act, 1961.
“Approving Authority” means an Additional Commissioner or a Joint Commissioner as defined in clauses (1C) and (28C) respectively of section 2 of the Income-tax Act, 1961.
“Administrator” means an Income-tax Officer as defined in clause (25) of section 2 of the Income-tax Act, 1961.
(a) has been a member of the Indian Revenue Service and has held the post of Commissioner of Income-tax or equivalent post in that Service; or
(b) has been a member of the Indian Legal Service and has held the post of Joint Secretary or equivalent post in that Service.
An Initiating Officer, if believes that person is benamidar then he may issue the notice to that benamidar with the previous approval of the Approving Authority. Initiating officer may hold the property for a period of 90 days from the date of issue of notice.
Then after 90 days, the case is referred to Adjudicating Authority. On receipt of a reference, the Adjudicating Authority shall issue notice, to furnish such documents, particulars or evidence as is considered necessary on a date to be specified therein. The notice shall provide a period of not less than thirty days to the person to whom the notice is issued to furnish the information sought.
The Adjudicating Authority after considering the reply, such inquiries, reports or evidence, taking into account all relevant materials, give an opportunity of being heard to the benamidar, the Initiating Officer, and any other person who claims to be the owner of the property. Then pass an order on whether or not to hold the property as benami.
But no order shall be passed after the expiry of one year from the end of the month in which the reference was received.
According to the order of the Adjudicating Authority, the Administrator will confiscate the property.
The Administrator shall,—
(a) by notice in writing, order within seven days of the date of the service of notice to any person, who may be in possession of the benami property, to surrender or deliver possession thereof to the Administrator or any other person duly authorised in writing by him in this behalf;
(b) in the event of non-compliance of the order referred to in clause (a), or if in his opinion, taking over of immediate possession is warranted, for the purpose of forcibly taking over possession, requisition the service of any police officer to assist him and it shall be the duty of the officer to comply with the requisition.
In case the individual is not satisfied with the order of adjudicating authority, may prefer an appealto the Appellate Tribunal.
A person preferring an appeal to the Appellate Tribunal under this Act may either appear in person or take the assistance of an authorised representative of his choice to present his case before the Appellate Tribunal.
Appeal to High Court
Any party aggrieved by any decision or order of the Appellate Tribunal may file an appeal to the High Court within a period of sixty days from the date of communication of the decision or order of the Appellate Tribunal to him on any question of law arising out of such order.
The High Court may entertain any appeal after the said period of sixty days, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the period specified.
Chapter VI provides for constitution of special Courts. The Central Government, in consultation with the Chief Justice of the High Court, may appoint one or more Courts of Session as Special Court or Special Courts for such area or areas or for such case or class or group of cases, by notification, for trial of an offence punishable under this Act.
The Special Court shall not take cognizance of any offence punishable under this Act except upon a complaint in writing made by—
(i) the authority; or
(ii) any officer of the Central Government or State Government authorized in writing by that Government by a general or special order made in this behalf.
Anyone found a guild of entering into a Benami transaction would be liable for rigorous imprisonment for a minimum of 1 Year to maximum of 7 years and Financial Penalty of up to 25% of the fair market value of the property.
If anyone gives incorrect information or explanation in response to an inquiry to any authority, he shall be punishable with Rigorous imprisonment of minimum 6 months to maximum of 5 years and Financial penalty up to 10% of the fair market value of the property.