Prohibition of Benami Property Transactions Act, 1988.

PROHIBITION OF BENAMI PROPERTY TRANSACTIONS ACT, 1988 (AS AMENDED IN 2016) MAYA MAHESHWARI Additional Director of Income tax Direct taxes Regional Training Institute, Bhopal Benami Transactions(Prohibition) Act, 1988-Small Act with 9 sections only. Benami Transactions(Prohibition )Amendment Act, 2016- enlarged from 9 sections to 72 sections

Renamed the 1988 Act as Prohibition of Benami Property Transactions Act, 1988(PBPT) WHY NOT A NEW BENAMI ACT WHEN SUCH LARGE AMENDMENTS HAVE BEEN MADE law can be made retrospective but as per Article 20 of the Constitution, penal laws cannot be made retrospective giving immunity from 1988 to 2016-Not in public interest New Act would have applied to benami transactions entered into after 2016

only. MOTIVES FOR ENTERING INTO BENAMI TRANSACTION Defeat the provisions of law. Avoid payment of statutory dues. Defrauding creditors. Avoid payment of taxes. To disguise the real ownership to prevent detection of illegal activity that produced it. WHO IS BENAMIDAR AND BENEFICIAL OWNER-IN FOLLOWING

INSTANCES, INFERENCE OF A PERSON BEING BENAMIDAR WAS HELD JUSTIFIED Uttamchand Paras CIT Vs G.M Rampal THE BASIC LAW.. No person shall enter into any benami

transaction. Person found guilty of the offence of benami transaction shall be Any property, which is punishable with rigorous subject matter of benami imprisonment for a term transaction, shall be liable between 1 year to 7 years to be confiscated by the and shall also be liable to Central Government. fine upto 25% of the FMV of the property. BENAMI PROPERTY any property

which is the subject matter of a benami transaction Bena mi propert y means . ... also includes the proceeds

from such property "property" means and where the property is capable assets of any kind, and includes any of conversion into whether movable right or interest or some other form, or immovable, legal documents or then the property tangible or instruments

in the converted intangible, evidencing title to form and also corporeal or or interest in the includes the incorporeal property proceeds from the property BENAMI TRANSACTION" MEANS- (A) A transaction or an arrangement

(a) where a property is transferred to, or is held by, a person, (b) the property is held for the immediate or future benefit, direct or indirect, and the consideration for such property has been provided, or paid by, another person; and

of the person who has provided the consideration Consideration paid by B Tran sfer of Prop erty to

Benamid ar A Benami Transaction rt y e p Pro ene B

he t r fo d l He B f o fit Beneficial Owner

EXCEPTIONS (I)WHEN THE PROPERTY IS HELD BY a Karta, or a member of a Hindu undivided family, and the consideration for such property has been provided or paid out of the known sources of the Hindu undivided family. the property is held

for his benefit or benefit of other members in the family and EXCEPTIONS(II)WHEN THE PROPERTY IS HELD BY 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 any other person as may be notified by the Central

Government for this purpose EXCEPTIONS(III)WHEN THE PROPERTY IS HELD BY 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 EXCEPTIONS(IV)WHEN THE PROPERTY IS HELD BY 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 (C) a transaction or (D) a transaction an arrangement in or an arrangement (B) a transaction or respect of a

in respect of a an arrangement in property where the property where the respect of a owner of the person providing property carried property is not the consideration out or made in a aware of, or, is not traceable or fictitious name; denies knowledge

is fictitious; of, such ownership; BENAMI TRANSACTION- OTHER CASES POWER OF ATTORNEY TRANSACTIONS.. Benami transaction shall not include any transaction involving the allowing of possession of any property to be taken or retained in part performance of a contract referred to in section 53A of the Transfer of Property Act, 1882, if, under any law for the time being in force, (i) consideration for such property has been provided by the person to whom

possession of property has been allowed but the person who has granted possession thereof continues to hold ownership of such property; (ii) stamp duty on such transaction or arrangement has been paid; and (iii) the contract has been registered

DIFFERENCE BETWEEN BENAMI AND SHAM/BOGUS/FICTITIOUS TRANSACTION Transaction should actually take place and not merely to have been shown on paper. Sree Meenakshi Mills Ltd. Vs CIT(1957) 31 ITR 28, Supreme Court clarified two sets of transactions A sells property to B but sale deed mentions X as purchaser-Sale genuineReal purchaser is B-X being his benamidar

A purports to sell his property to B without intending that title should pass to B-SHAM TRANSACTION In Former, operative transfer resulting in vesting of title in the transferee but in latter, transferor continues to retain the title. BENAMI TRANSACTIONCONSEQUENCES PROPERTY HELD BENAMI LIABLE TO CONFISCATION (SEC. 5)

Any property, which is subject matter of OFFENCES AND PROSECUTION OFFENCES AND PROSECUTIONCHAP. 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. (Sec. 53) Whoever is found guilty of the offence of benami transaction referred to in sub-section (1) 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. (Sec. 53) OFFENCES AND PROSECUTION- CHAP. VII 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 . (Sec. 54) No prosecution shall be instituted against any person in

respect of any offence under sections 3, 53 or section 54 without the previous sanction of the Board. PROHIBITION OF THE RIGHT TO RECOVER PROPERTY HELD BENAMI (SEC. 4) PROHIBITION ON RE-TRANSFER OF PROPERTY BY BENAMIDAR (SEC. 6) (1) 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. (2) Where any property is retransferred in contravention of the provisions of sub-section (1), the

transaction of such property shall be deemed to be null and void ATTACHMENT, ADJUDICATION AND CONFISCATION HIERARCHY Adjudicating Authority IRS Commissioner ILS- Joint Secretary Approving Authority Additional Commissioner Joint Commissioner Initiating Officer

Deputy Commissioner Assistant Commissioner Administrator Income-tax Officer as defined in Sec. 2(25) of Income-tax Act ISSUE OF NOTICE (SEC. 24) 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.

A copy of the notice shall also be issued to the beneficial owner if his identity is known. If IO is of the opinion that the person in possession may alienate the property during the period specified in the Notice He may, with the previous approval

of AO By order in writing attach provisionally the property for a period not exceeding 90 days from the date of issue of Notice ISSUE OF NOTICE (SEC. 24) The Initiating Officer shall, within a period of 90 days

from the date of issue of notice Decide - With prior approval of the Approving Authoritynot to go ahead with the matter. pass an order - with the prior approval of the Approving Authority- for the provisional attachment of the property

Where Provisional attachment has not been made Pass an order provisionally attaching the property with prior approval of AO till passing of order by Adjudicating Authority u/s 26(3) Decide not to attach the property with prior approval of AO REFERENCE TO APPROVING AUTHORITY ((SEC. 24 (5)) Where the Initiating Officer passes an order for the provisional attachment of

the property, he shall, within 15 days from the date of the attachment, draw up a statement of the case and refer it to the Adjudicating Authority ADJUDICATION (SEC. 26) On receipt of a issue notice, to reference u/s. 24(5), the Adjudicating

Authority shall, within a period of thirty days furnish such documents, particulars or evidence as is considered necessary. The notice shall provide a period of not less than 30 days to furnish the

information sought. ADJUDICATION (SEC. 26) The Adjudicating Authority shall, after considering the reply, if any, to the notice issued making such inquiries and calling for such reports or evidence as it deems fit provide an opportunity of being heard to the person specified as a benamidar therein,

the Initiating Officer, any other person who claims to be the owner of the property, and, thereafter, pass an order holding the property not to be a benami property and revoking the attachment order holding the property to be a benami property and confirming the attachment order

CONFISCATION (SEC. 27) Where an order is passed in respect of any property u/s. 26(3) 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. CONFISCATION (SEC. 27)

Where an order of confiscation has been made under subsection (1), 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. Where appeal has been filed against order of Adj. Authority, confiscation of property shall be made subject to the order of the Appellate Tribunal Copy of the order will be sent to the For immovable property, he will issue

notice to Central Govt. or State For movable property, AO will issue notice to person holding custody Sell the property if liable to speedy and natural decay with leave of Equivalent amount of FDR may be kept as security Cash/ Shares/Debentures/MF/ other instruments to be transferred in

Money lying in Bank or FI to be transferred and credited to the account of the Administrator APPEAL TO THE APPELLATE TRIBUNAL Within 45 days from the date of the Order. Grounds of objection to the Order should be clear. As far as possible, appeal to be decided within one year from the last date of the month in which appeal is filed. To pass final order and affirm, vary or

reverse the order of Adj Authority SOME QUESTIONS Whether Benami transaction, if benamidar is only a money lender? No only a sham transaction. Will penal provisions apply on Name lender No Does use of Black Money in purchase of property make it Benami? No

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