Benami Transactions Amendment Act to curb black money comes into effect

The Benami Transactions (Prohibition) Amendment Act, 2016 came into effect on 1 November 2016. The Act was formulated to curb black money.

An official release of Central Board of Direct Taxes said, after coming into effect, the existing Benami Transactions (Prohibition) Act, 1988 will be renamed as the Prohibition of Benami Property Transactions (PBPT) Act, 1988.

The new legislation provides for seven years imprisonment and fine for those indulging in illegal transactions. The previous Act provided for up to three years if imprisonment or fine or both. It says that properties held as Benami are liable for confiscation by the government without payment of compensation.

The act has amended the definition of benami transactions and establishes adjudicating authorities and an Appellate Tribunal to deal with benami transactions.

Highlights of Benami Transactions (Prohibition) Amendment Act

Definition

It expands the definition of benami transaction by including following

• Transaction is made in a fictitious name

• Owner is not aware of and denies knowledge of the ownership of the property

• Person providing the consideration for the property is not traceable

Earlier, it defined benami transaction as a transaction where a property is held by or transferred to a person, but has been provided for or paid by another person.

Exemptions

Specific cases will be exempted from the definition of a benami transaction. These include cases when a property is held by

• A member of a Hindu undivided family, and is being held for his or another family member’s benefit, and has been provided for or paid off from sources of income of that family

• A person in a fiduciary capacity.

• A person in the name of his spouse or child, and the property has been paid for from the person’s income.

• Section 58 empowers government to exempt the genuine properties of religious organisation like a church or a mosque or a gurdwara or a temple from the action.  But the exemption to such entities cannot be a pretext for tax evasion.

Definition of Benamidar

• It defines benamidar as the person in whose name the benami property is held or transferred, and a beneficial owner as the person for whose benefit the property is being held by the benamidar.

• Under the Act, an Authority to acquire benami properties was to be established by the Rules.

Four Authorities for conducting Inquiry

The Act establishes four authorities to conduct inquiries or investigations regarding benami transactions and they are

• Initiating Officer

• Approving Authority

• Administrator

• Adjudicating Authority

Work of Initiating Officer

• In any case, if he/she believes that a person is a benamidar, he may issue a notice to that person.

• The Initiating Officer may hold the property for 90 days from the date of issue of the notice, subject to permission from the Approving Authority.

• At the end of the notice period, the Initiating Officer may pass an order to continue the holding of the property.

• If an order is passed to continue holding the property, the Initiating Officer will refer the case to the Adjudicating Authority.

Work of Adjudicating Authority

• The Authority will pass an order on whether or not to hold the property as benami after examining all documents and evidence relating to the matter.

• Based on an order to confiscate the benami property, the Administrator will receive and manage the property in a manner and subject to conditions as prescribed.
Appellate Tribunal

• The act also established an Appellate Tribunal that will hear appeals against any orders passed by the Adjudicating Authority

• Appeals against orders of the Appellate Tribunal will lie to the high court.

Penalty

• Rigorous imprisonment from one year to seven years, and a fine which may extend to 25% of the fair market value of the benami property. The previous penalty under the Act for entering into benami transactions was imprisonment up to three years, or a fine, or both.

• Specifies the penalty for providing false information to be rigorous imprisonment of six months up to five years, and a fine which may extend to 10% of the fair market value of the benami property.

• Certain session courts would be designated as Special Courts for trying any offences which are punishable under the Act.

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