BRIEF STUDY ON THE BENAMI TRANSACTIONS (PROHIBITION) AMENDMENT ACT, 2016

BRIEF STUDY ON THE BENAMI TRANSACTIONS (PROHIBITION) AMENDMENT ACT, 2016

 Meaning of Benami Transactions:

“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—

  • 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;
  • 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;
  • 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;
  • 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;

 

For example: Mr. A purchased the property on any fictitious name such as X or Mr. A purchased the property on the name of his any friend or relative so that his accounts cannot be traced or,

Suppose the records shows that Mr. A is holding a piece of land in some city but while investigation Mr. A denied for the ownership of that property.

Generally, Property purchased in cash under which the accounts were intractable comes under the purview of this act.

The person on whose name the property has been registered is called Benamidar.

Consequences of this Act:

Benami transactions after the commencement of this act:

Whoever enters into any benami transaction on and after the date of commencement of the Benami Transactions (Prohibition) Amendment Act, 2016, shall, notwithstanding anything contained in sub-section (2), be punishable in accordance with the provisions contained in Chapter VII.”;

Retransferring the property:

  • No person, being a benamidar shall re-transfer the benami property held by him to the beneficial owner or any other person acting on his behalf.
  • Where any property is re-transferred in contravention of the provisions of sub-section (1), the transaction of such property shall be deemed to be null and void.

The above  shall not apply to a transfer made in accordance with the provisions of section 190 of the Finance Act, 2016.”.

Chapter VII

  • Where any person enters into a benami transaction in order to defeat the provisions of any law or to avoid payment of statutory dues or to avoid payment to creditors, the beneficial owner, benamidar and any other person who abets or induces any person to enter into the benami transaction, shall be guilty of the offence of benami transaction.
  • Whoever is found guilty of the offence of benami transaction referred to in above point shall be punishable with rigorous imprisonment for a term which shall not be less than one year, but which may extend to seven years and shall also be liable to fine which may extend to twenty-five per cent of the fair market value of the property.
  • Any person who is required to furnish information under this 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 per cent of the fair market value of the property .

Powers of the Authorities:

Power to call for information:

They shall have power to require any officer of the Central Government or State Government or a local body or any person or officer who is responsible for registering and maintaining books of account or other documents containing a record of any transaction relating to any property or any other person to furnish any information in relation to any person, point or matter as in his opinion shall be useful for or relevant for the purposes of this Act.

Power of authority to impound documents:

Where any books of account or other documents are produced before the authority in any proceedings under this Act and the authority in this behalf has reason to believe that any of the books of account or other documents are required to be impounded and retained for any inquiry under this Act, it may impound and retain the books of account or other documents for a period not exceeding three months from the date of order of attachment made by the Adjudicating Authority under sub-section (3) of section 26.

The period for retention of the books of account or other documents may be extended beyond a period exceeding three months where the authority records in writing the reasons for extending the same.

Procedure before and after exercising the power of impounding documents:

Where the authority impounding and retaining the books of account or other documents, he shall obtain approval of the Approving Authority within a period of fifteen days from the date of initial impounding and seek further approval of the Approving Authority for extending the period of initial retention, before the expiry of the period of initial retention, if so required.

The period of retention of the books of account or other documents shall in no case exceed a period of thirty days from the date of conclusion of all the proceedings under this Act.

The person, from whom the books of account or other documents were impounded, shall be entitled to obtain copies thereof.

On the expiry of the period specified in the act, the books of account or other documents shall be returned to the person from whom such books of account or other documents were impounded unless the Approving Authority or the Adjudicating Authority permits their release to any other person.

Power of authority to conduct inquiry:

The Initiating Officer, after obtaining prior approval of the Approving Authority, shall have power to conduct or cause to be conducted any inquiry or investigation in respect of any person, place, property, assets, documents, books of account or other documents, in respect of any other relevant matters under this Act.

Notice for property involved in benami transaction:

  • Where the Initiating Officer, on the basis of material in his possession, has reason to believe that any person is a benamidar in respect of a property, he may, after recording reasons in writing, issue a notice to the person to show cause within such time as may be specified in the notice why the property should not be treated as benami property.
  • Where the property is held jointly by more than one person, the Adjudicating Authority shall make all endeavours to serve notice to all persons holding the property but where the notice is served on anyone of the persons, the service of notice shall not be invalid on the ground that the said notice was not served to all the persons holding the property.
  • No notice, summons, order, document or other proceeding, furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid, or shall be deemed to be invalid merely by reason of any mistake, defect or omission in the notice, summons, order, document or other proceeding if the notice, summons, order, document or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act.

                                    Provisional Attachment of property:

Where the Initiating Officer is of the opinion that the person in possession of the property held benami may alienate the property during the period specified in the notice, he may, with the previous approval of the Approving Authority, by order in writing, attach provisionally the property in the manner as may be prescribed, for a period not exceeding ninety days from the date of issue of notice.

Confiscation and vesting of benami property:

Where an order is passed in respect of any property under the act, holding such property to be a benami property, the Adjudicating Authority shall, after giving an opportunity of being heard to the person concerned, make an order confiscating the property held to be a benami property:

Provided where an appeal has been filed against the order of the Adjudicating Authority, the confiscation of property shall be made subject to the order passed by the Appellate Tribunal under section 46.

Where an order of confiscation has been made ,all the rights and title in such property shall vest absolutely in the Central Government free of all encumbrances and no compensation shall be payable in respect of such confiscation.

Any right of any third person created in such property with a view to defeat the purposes of this Act shall be null and void.

Where no order of confiscation is made upon the proceedings under this Act attaining finality, no claim shall lie against the Government.

Possession of the property:

Where an order of confiscation in respect of a property mentioned above, has been made, the Administrator shall proceed to take the possession of the property.

The Administrator shall,—

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;

In the event of non-compliance of the order referred to in above point, 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.

 

-Atul Khurana

For, any queries in the above article, The author may be contacted at 98888-55340, or mail him at atulkhurana@icai.org

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Comments (2)

  • Aman Mourya Reply

    Nicely written with example, even very easy for a lay man to understand it. Good work Atul. Keep writing more and more

    January 13, 2017 at 9:42 am
  • Kiran Reply

    Helpful?…

    January 13, 2017 at 12:25 pm

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