The Benami Act 2016

Suspect cash: I-T dept warns violators will face max 7 year jail

Warning people against depositing their unaccounted old currency in someone else’s bank account, the tax department has decided to slap charges under the newly enforced Benami Transactions Act against violators that carries a penalty, prosecution and rigorous jail term of a maximum seven years

Benami Property Act to be effective from November 1

New Delhi: The new law to prohibit benami transactions, which also provides for up to 7 years imprisonment and penalty for those indulging in such activities, will come into effect from November 1.

With a view to curb the menace of black money, Parliament in August had passed the Benami Transactions (Prohibition) Act, after assurance from Finance Minister Arun Jaitley that genuine religious trusts will be kept out of the purview of the legislation.

“The rules and all the provisions of the Benami Transactions (Prohibition) Act shall come into force on November 1, 2016. After coming into effect, the existing Benami Transactions (Prohibition) Act, 1988, shall be renamed as the Prohibition of Benami Property Transactions Act, 1988,” a CBDT statement said.

While the existing law provides for up to three years of imprisonment or fine or both for carrying out benami transactions, the amended legislation would provide for seven years imprisonment and fine.

The Act defines benami transactions, prohibits them and further provides that any violation is punishable with imprisonment and fine. The PBPT Act prohibits recovery of the property held benami from benamidar by the real owner.

“Properties held benami are liable for confiscation by the government without payment of compensation,” it said.

An appellate mechanism has been provided under the Act in the form of Adjudicating Authority and Appellate Tribunal.

A Joint or Additional Commissioner of I-T, an Assistant or Deputy Commissioner and a Tax Recovery Officer in each Principal CCIT Region have been notified to perform the functions and exercise the powers of the Approving Authority, Initiating Officer and Administrator, respectively under the Act, the statement said.

While the 1988 Act has nine sections, the amended law would have 71 sections.

“There is Section 58 under the law which clearly states that in case of charitable or religious organisation properties, the government has power to exempt those,” Jaitley had said responding to concerns of some Parliament members about the applicability of the amended law on properties in the name of holy books and deities.

“If there is a genuine property which belongs to a church or a mosque or a gurdwara or a temple, section 58 says that the government has the power to exempt it,” he had said.

The Benami Transactions (Prohibition) Amendment Act, 2016 came into effect on Tuesday.

Here are 5 things you need to know about the Act:

1) The Benami Transactions (Prohibition) Amendment Act, 2016 is an amendment of the older Benami Transactions (Prohibition) Act 1988. It was first introduced in the Lok Sabha last year, on May 13 by Finance Minister Arun Jaitley, and was then referred to by a Standing Committee on Finance.

The Committee submitted its report on April 28 and following that, it was passed in the Lok Sabha and Rajya Sabha on July 27 and August 2 respectively. On Friday, the Central Board for Direct Taxes (CBDT) notified that the provisions of the Benami Act would come in effect from November 1, 2016. The CBDT stated that after coming into effect, the Benami Transactions (Prohibition) Act, 1988 will be renamed as the Prohibition of Benami Property Transactions Act, 1988 (PBPT Act), stated CBDT through a press release on Friday. The Government extensively explained the Act, through a report released in August, in its public journal Gazette of India.

2) How is Benami Transaction defined in the Act?

The report stated that the Act defines a benami transaction, as a transaction where in a property is held by or transferred to a person, but has been provided or paid by another person. The definition also includes property transactions where i) a transaction been made under a fictitious name; ii) the owner is not aware or denies knowledge of the ownership of the property; iii) the person providing the property is not traceable.

3) What are the charges under this Act?

Earlier, any violation of the Act would lead to imprisonment of up to three years, or a fine, or both. Now, under the amended Act, any offender would stand to be punished with imprisonment of up to seven years and be charged a fine which may extend to 25% of the fair market value of the benami property. If any false information is provided, it would lead to imprisonment for a time period of six months to five years and a fine of up to 10% of the fair market value of the benami property, will be charged, stated the Gazette report.

4) Who are the authorities in charge and what are their roles?

According to the government release, there are four authorities who will conduct inquiries or investigations i) Initiating Officer, (ii) Approving Authority, (iii) Administrator, and (iv) Adjudicating Authority.

An Initiating Officer can issue a notice to any benamidar on suspicion. The officer may then hold the property for 90 days from the day the notice was issued, subject to permission from the Approving Authority. Upon the end of the 90 day period, the Initiating Officer may pass an order to continue holding the property following which, he/she may refer the case to the Adjudicating Authority. The Adjudicating Authority will then examine all the documents and evidence, and then pass an order on whether the property will be held as benami.

Based on this order, the Administer will receive and handle the property subject to conditions as prescribed. A Joint /Additional Commissioner of Income-tax, an Assistant / Deputy Commissioner of Income-tax, and a Tax Recovery Officer would be notified to perform the functions and exercise the powers of the Approving Authority, Initiating Officer and Administrator, respectively.

5) Why is an Appellate Tribunal formed?

An Appellate Tribunal will hear appeals against any orders passed by the Adjudicating Authority while appeals against orders of the Appellate Tribunal will go to the high court. The Tribunal, has a maximum time period of one year, from the last day of the month in which the appeal is filed, to hear and finally decide the appeal . The Appellate Tribunal will consist of a Chairperson and at least two other Members of which one shall be a Judicial Member and other shall be an Administrative Member, stated the report.

Benami Property Transactions Prohibition Act comes into force: Curbing Black Money

The Benami Transactions (Prohibition) Amendment Act, 2016, which is designed to curb all the black money came into effect on Tuesday. Although it was passed by the Parliament in August.

As per the amendment of the 1988 Benami Transactions Act, the new amended law provides for up to seven years of imprisonment and fine for those indulging in such transactions, as compared to the earlier law which provided for up to three years of imprisonment or fine or both.

“The rules and all the provisions of the Benami Transactions (Prohibition) Act, came into force on November 1, 2016. After coming into effect, the existing Benami Transactions (Prohibition) Act, 1988 is renamed as the Prohibition of Benami Property Transactions (PBPT) Act, 1988,” a Central Board Of Direct Taxes statement here said last week.

The main aim of the amendment is to strengthen the act, be it in terms of legality or admin procedure.

To be precise, benami (without a name) property refers to property purchased by a person in the name of some other person. The person on whose name the property has been purchased is called the benamdar and the property so purchased is called the benami property. The person who finances the deal is the real owner.

The PBPT Act prohibits recovery of the property held benami from benamdar by the real owner.

As per the Act, properties held benami are liable for confiscation by the government, without payment of any compensation.

An appellate mechanism has been provided under the act, in the form of an adjudicating authority and appellate tribunal.

According to the government, the four authorities who will conduct inquiries or investigations are the Initiating Officer, Approving Authority, Administrator and Adjudicating Authority.

“Section 58 under the law clearly states that in case of charitable or religious organisation properties, the government has the power to grant exemption,” Finance Minister Arun Jaitley said, while reassuring parliament that properties in the name of genuine religious trusts will be kept out of the purview of the legislation

Brief Highlights of the Act:

* Up to seven years’ imprisonment and fine for indulging in benami transactions

* Furnishing false information is punishable by imprisonment up to five years and fine

* Properties held benami are liable for confiscation by government without compensation

* Initiating Officer may pass an order to continue holding the property and may then refer case to Adjudicating Authority

* Adjudicating Authority will then examine evidence and pass an order

* Appellate Tribunal will hear appeals against orders of Adjudicating Authority

* High Court to hear appeals against orders of Appellate Tribunal.