Benami Transaction (Prohibition) Bill 2016 :- Key Takeaways

The Benami Transaction (Prohibition) Amendment Bill 2016 passed by Lok Sabha on 27.07.2016

Key takeaways from The Benami Transaction (Prohibition) Amendment Bill 2016 are as follows:

Objective of The Benami Transaction (Prohibition) Amendment Bill 2016  :-

The Benami Transaction (Prohibition) Amendment Bill 2016 passed by Lok Sabha, empowers the Government to confiscate Benami properties held in the name of another person or under a fictitious name to avoid taxation and conceal wealth.

This Bill seeks to amend the law prohibiting benami transactions, holding property in benami and restricting right to recover or transfer property held benami, and providing mechanism and procedure for confiscation of property held benami.

What is benami property  ?

“benami property” means any property which is the subject matter of a benami transaction and also includes the proceeds from such property;

What is  benami transaction ?

“benami transaction” means,—

 (A) a transaction or an arrangement—

(a) 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

(b) the property is held for the immediate or future benefit, direct or indirect, of the person who has provided the consideration,

except when the property is held by—

(i) a Karta, or a member of a Hindu undivided family, as the case may be, and the property is held for his benefit or benefit of other members in the family and the consideration for such property has been provided or paid out of the known sources of income of the Hindu undivided family;

(ii) 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 and any other person as may be notified by the Central Government for this purpose;

(iii) 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 income of the individual;

(iv) 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 descendent 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 income of the individual; or

(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;

Explanation : for the removal of doubts , it is hereby declared that 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 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 the possession of the 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 arrangements has been paid; and

iii) The contract has been registered

Penalty for Benami transaction.

(1) 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.

(2)Whoever is found guilty of the offence of benami transaction ,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.

Fair Market Value of Property on Date of Transaction : As per The Benami Transaction (Prohibition) Amendment Bill, 2016 passed by Lok Sabha, “fair market value”, in relation to a property to mean the price that the property would ordinarily fetch on sale in the open market on the date of the transaction; and where the price is not ascertainable, such price as may be determined in accordance with the rules made under the proposed provision. [Section 2(16)]

Penalty for false information.

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 . ( Section 54 of the proposed Bill)

Use of Income Tax Department

The Benami Transaction (Prohibition) Amendment Bill 2016 passed by Lok Sabha , proposes implementation of the said Act by the existing institutional structure of the Income Tax Department.

Provisional Attachment of Benami Property

Sub-section (3) of the proposed section 24 seeks to provide that where the Initiating Officer is of the opinion that the person in possession of the property held benami may alienate such peroperty, he may, with the previous approval of the Approving Authority, by order in writing, attach provisionally such property in the manner as may be prescribed, for a period not exceeding ninety days form the date of issue of a show cause notice.

Consfication of Benami properties by Government 

Sub-section (1) of the proposed section 27 seeks to provide that where an order is passed in respect of any property under sub-section (3) of section 26 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.

Second proviso to sub-section (1) of the proposed section 27 seeks to provide that the confiscation of the property shall be made in accordance with such procedure as may be prescribed.

Where an appeal has been filed against the order of the Adjudicating Authority, the confiscation of property shall be made subject to the order passed by the Appellate Tribunal under section 46

Possession of the property.

(1) Where an order of confiscation in respect of a property under section 27 (1), has been made, the Administrator shall proceed to take the possession of the property.

(2) The Administrator shall,—

(a) by notice in writing, order within seven days of the date of the service of notice to any person, who may be in possession of the benami property, to surrender or deliver possession thereof to the Administrator or any other person duly authorised in writing by him in this behalf;

(b) in the event of non-compliance of the order referred to in clause (a), or if in his opinion, taking over of immediate possession is warranted, for the purpose of forcibly taking over possession, requisition the service of any police officer to assist him and it shall be the duty of the officer to comply with the requisition.

Management of the properties Confiscated 

Sub-section (1) of the proposed section 28 seeks to provide that the Administrator shall have the power to receive and manage the property, in relation to which an order of confiscation under sub-section (1) of the proposed 27 has been made, in such manner and subject to such conditions, as may be prescribed. Sub-section (3) of the proposed section 28 seeks to provide that the Administrator shall also take such measures, as the Central Government may direct, to dispose of the property which is vested in the Central Government under sub-section (3) of the proposed section 27, in such manner and subject to such conditions as may be prescribed.

Power to Call for Records from Registrar of property of States 

Sub-section (2) of the proposed section 21 seeks to provide that the officer of the Central Government or State Government or a local body or any person or officer who is responsible for registering and maintaining books of account or other documents containing a record of any transaction relating to any property or any other person shall furnish such information and in such form and manner as may be prescribed to any authority under this Bill. Accordingly, it is proposed to empower the Central Government to make rules in this regard for the pruposes of this provision.

Adjudicating Authorities

Clause 9 of the Bill empowers the Central Government to appoint one or more persons not below the rank of Commssioner of Income-tax and Joint Secretary to the Government of India as Adjudicating or Adjudicating Authorities.

It is also proposed to appoint four Adjudicating Authorities each in Delhi, Kolkata, Chennai and Mumbai with necessary officers, staff and employees to assist them in discharge of their duties.

Appointment by Central Government

Clause 9 of the Bill proposes to insert Chapter III to VII in the Act. The Proposed section 9 seeks to provide for qualifications for appointment of Chairperson and Members of the proposed section 9 that the Chairperson and other Members of the Adjudicating Authority shall be appointed by the Central Government in accordance with the rules made in this regard.

Sub-section (1) of the proposed section 13 seeks to provide that the salary and allowances payable to, and the other terms and condtions of service of the Chairperson and other Members of the Adjudicating Authority shall be such as per the rules made in this regard by the Central Government

Appellate Tribunal to hear Appeals

The clause 9 in the proposed section 30 empowers the Central Government to establish an Appellate Tribunal to hear appeals against the orders of the Adjudicating Authority. Clause 9 empowers the Central Government to provide the Appellate Tribunal with such officers and employees as the Central Government may deem fit.

Sub-section (1) of the proposed section 46 seeks to provide that any person, including the Initiating Officer, aggrieved by an order of the Adjudicating Authority may prefer an appeal in such form along with such fees, as may be prescribed, to the Appellate Tribunal against the order passed by the Adjudicating Authority within a period of 45 days from the date of the order.

It is proposed to constitute three Benches of the Appellate Tribunals at Delhi, Mumbai and Chennai. It is also proposed to appoint for each Bench of the Appellate Tribunal one officer of the rank of Joint Secretary to the Government of India, two Directors and four Assistant Directors with necessary staff and employees to assist such Bench

Clause (i) of sub-section (2) of the proposed section 40 seeks to provide that the Appellate Tribunal shall have, for the purposes of discharging its functions under this Act, the same powers as are vested in a civil court under the Code of Civil Procedure, 1908 while trying a suit, in respect of any other matter than those listed in items (a) to (h) of the said subsection (2).

The proposed section 33 seeks to provide that the salary and allowances payable to and the other terms and conditions of service of the Chairperson and other Members of the Appellate Tribunal shall be such, as may be prescribed.

The proposed section 35 seeks to provide for removal of Chairperson and Member of the Appellate Tribunal in certain circumstances. Sub-section (2) of the said section seeks to provide that the Chairperson or Judicial member shall not be removed from office except by an order made by the Central Government after an inquiry made by Chief Justice of the High Court. Sub-section (4) of the said section seeks to provide that the Central Government may regulate the procedure for inquiry referred to in sub-section (2) in the manner as may be prescribed.

Sub-section (3) of the proposed section 39 seeks to provide that the salaries and allowances and other conditions of service of the officers and employees of the Appellate Tribunal shall be such as may be prescribed.

Powers of Authorities

The proposed section 18 seeks to provide for authorities and their jurisdiction under the Act. The proposed sub-section (2) provides that the authorities shall exercise all or any of the powers and perform all or any of the functions conferred on, or, assigned, as the case may be, to it under this Act or in accordance with such rules as may be made by the Central Government in this regard.

Clause (f) of sub-section (1) of the proposed section 19 seeks to provide that the authorities shall, for the purposes of this Bill, have the same powers as are vested in a civil court under the Code of Civil Procedure, 1908 while trying a suit in respect of any other matter which may be prescribed. Accordingly, it is proposed to empower the Central Government to make rules in this regard

Download The Benami Transaction (Prohibition) Amendment Bill 2016 passed by Lok Sabha on 27.07.2016

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