In the past few years, the government has taken major crackdown step towards an end black money dealing through various measures such as the black money act, demonetization, Income Disclosure scheme and Benami Act. Where a person’s own name is not used instead of that the name of another person or fictitious person is used which is called the Benami transactions or Benami Property. In Hindi translation “Benami” means without the name. The prohibition of the Benami transactions Act came into force on 1 January 2016.
OBJECTIVES OF THE ACT-
The primary objective of the act is to establish adjudicating authorities and provide for authorities to deal with benami transactions.
To prevent evasion of tax by illegal practices.
To amend the definition of the benami property or transactions.
To specify the penalty related to all benami transactions.
WHAT IS BENAMI PROPERTY?
A benami property means a property that is purchased on the name of another person. Any property whether it is movable or immovable, tangible or intangible, which has been the subject matter of a benami transaction is called a Benami property. The person on whose name the property is purchased (holder) is called Benamidar.
WHAT IS BENAMI TRANSACTION?
A benami transaction is defined under section 2(9) of the Act. A benami transaction is one where the property is held in one person’s name, but all funds for acquisition have been provided by another person’s name and it is held in a fictitious name or the owner of the property is not aware or also denies having knowledge of such ownership.
The Act prescribes certain exceptions to benami transaction under section 2(9): -
A person standing in a fiduciary capacity for the benefit of another, including an executor, a partner, any trustee, director of the company, a depository participant or agent.
Karta or his family member’s benefit.
A brother, sister and lineal ascendant or descendant.
A person for the benefit of his child or spouse.
Click here to read more about "Ancestral property"
AMENDMENTS AND IMPLEMENTATION OF THE ACT
The main weakness of the previous Act was that there was a lack of institutional machinery to carry out benami transactions procedures and due to various deficiencies in the act. Therefore, the amendment creates the required institutional arrangements for the implementation of the law. The amendment Bill, 2016 seeks to establish four authorities to conduct inquiries or investigations relating to all benami transactions:
Initiating Officer
Adjudicating Authority
Administrator and
Approving Authority
This act gives the Initiating Officer the inquire to any person, place, documents or property in the course of investigation in which any matter related to a benami property transaction. The authorities will have the same powers as the civil courts under the Civil Procedure Code, 1908
THE PROCEDURE FOLLOWED BY THE AUTHORITY
First, Issue of show Causes Notice by initiating officer when he has reason to believe that any person is a benamidar in respect to any property.
The effect of alienation after notice.
Provisional attachment of property, if it is requiring.
Continuing provisional attachment whereas not satisfied that the property is not benami and refer a statement of the case to Adjudicating Authority.
The adjudicating officer is to hear the affected person and pass holding order whether the property is benami or not.
Authority will decide within a year if the property is benami.
Where adjudicating authority pass the order that the property is benami, hear that affected person and pass confiscation order, in which all rights and title of such property shall vest absolutely in the government free of all encumbrances.
Administration to take possession of benami transaction. Appeals against order of the Appellate tribunal will be at High court with jurisdiction.
PENALTIES FOR BENAMI TRANSACTIONS
There are following sections determine the situation and the penalties regarding Benami transactions:
SECTION 53
As per section 53 of the Benami transactions prohibition Amendment Act 2016, a person who enters into a benami transaction with the intention to defeat the provisions of any existing laws or to avoid any payment to creditors or any statutory dues. Whoever is found guilty of the offense of benami transaction shall be punishable with the rigorous imprisonment for a term up to 1 year which may be extended to seven years and shall also be liable for a fine which may extend to 25% of the present market value of the property.
SECTION 54
As per section 54 of the Benami transactions prohibition Amendment Act 2016, provides a penalty for false information. This section says any individual who is required to furnish information under this act knowingly provides any false information or furnishes any false documents to any official authority in any of the proceedings under this act, shall be punishable with rigorous imprisonment for the term which shall not be less than 6 months which may be extend to 5 years and shall also be liable to pay an amount as fine or both that may be extended to 10% of the fair market value of the property.
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