Amended Benami Act is a step to curb flow of black money

Source: The Hitavada      Date: 17 May 2017 09:55:16

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

By CA Kailash Jogani,

After demonetisation of high denomination notes, the Prime Minister has said many time that the Government next target is Benami property and in a further crackdown on the parallel economy that has affected the Indian economy adversely, the Central Board of Direct Taxes (CBDT) on November 1, 2016 has notified the Benami Transactions (Prohibition) Amendment Act, 2016. The Board has posted many officers in Benami Property Cell to administer the law.


The law regarding Benami Property Act was first enacted in the year 1988. The Benami Transactions (Prohibition ) Act, 1988 was a act with only 9 sections. It was never implemented in true sense as neither the rules were framed nor any authority was specified to administer the law. Now, the present Government has amended the 1988 Act drastically called the Benami Transactions (Prohibition) Amendment Act, 2016.

The total number of sections has gone to 72. A question may be occurring in everybody’s mind is that why has a new law not been enacted instead of amending the 1988 Act. The 1988 Act also had the provision for prosecution. Had a new Act with a similar provision come about, its penal provisions would be applicable only to the Benami transactions entered into on or after November 1, 2016. Any law can be made retrospective, but under Article 20 of the Constitution of India penal laws cannot be retrospective and this is the reason why a new law was not enacted.


As per section 2(9) of the Act, Benami transaction means:
A. A transaction or arrangement, 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 the property is held for the immediate or future benefit, direct or indirect, of the person who has provided the consideration.


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;Some exceptions are provided in the Act for transactions not considered as Benami.


The exceptions are:

1. The property held by member of Hindu Undivided Family (HUF) for the benefit of any member of HUF and consideration for such property has been paid out of the known source of HUF.


2. The property held by a person standing in a fiduciary capacity for the benefit of the another person for whom he stand in such capacity.


3. The property held by a person being an individual in the name of his spouse or in a name of any child of such individual and the consideration for such property has been provided or paid out of the known sources of an individual.


4. The property held by any person in the name of his brother or sister or lineal ascendant or descendant, where the name of brother or sister or lineal ascendant or descendant and the individual appear as the joint owner in any document and the consideration for such property has been provided or paid from the known source of the individual.


It is clear that whenever the property has been acquired in the name of spouse/child and the consideration therefore, is not paid out of the known source of the individual, then the transaction will become Benami transaction. In case of civil servants, politicians, bureaucrats, etc., whenever search is made and property in the name of spouse/child is found, then the same will amount to involve Benami transaction if they are not from known source.


The concept of Benami transaction under the Amendment Act is much wider and also includes “ arrangements” under its ambit. Benami transaction also include transactions carried out in fictitious names or where the person providing the consideration is not traceable.


The Act also empowers the Central Government to confiscate any Benami property.


In the Act, the role and jurisdiction of several authorities namely the initiating officer, the approving officer, the administrator and the adjudicating authority are clearly defined.

The authorities are vested with the same powers as that of a Civil court under the code of Civil Procedure, 1908.
The amendment act provides wide powers to the authorities in relation to calling for information from, impounding records of, any person including from any officer of the Government. The approving officer, administrator and the initiating officer are from Income Tax Department. Adjudicating authority means the adjudicating appointed u/s 7 of the Act.


The consequences of Benami transactions are very harsh.
Whosoever enters into any Benami transaction will be punishable with the imprisonment for a term which may extend to three years or with fine or with both.
From November 1, 2016 whosoever enters into Benami transactions is also liable for penalties and confiscation of the Benami property.


Where any person enters into a Benami transaction in order to defeat the provisions of any law or to avoid the 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 Benami transaction will be guilty of the offence of the Benami transactions.


He or she will be punishable with a rigorous imprisonment for a term which will not be less than one year, but which may extend to seven years and will also be liable to fine which may extend to 25 per cent of the fair market value of the property.


Further, if any person who is required to furnish information under the Act knowingly give false information to any authority or furnishes any false document in any proceedings under this Act will be punishable with rigorous imprisonment for a term which will not be less than six months.


It may extend to five years and will also be liable to fine which may extend to 10 per cent of the fair prevalent market value of the property.


The enactment of the amended Act is a major step by the Government to curb the flow of black money, however it is also equally important to protect all the genuine commercial transactions from the ambit of the amended Benami Act.

(The author is practising chartered accountant and President of Nagpur Chamber of Commerce Limited)