BENAMI PROPERTY TRANSACTIONS ACT 1988

By CA Ved MittalVed & Associates

205 Jagdamba Tower, Preet Vihar,Delhi 110092

9811011665, 011-22456788

BENAMI PROPERTY TRANSACTIONS ACT 1988

Color and texture in Benami transaction Act 1988.

Assent to the President of India on 10th August 2016.

Came into force w.e.f. 1st November 2016.

72 Sections divided into VIII chapters

Presently called Benami Transactions (Prohibitions) Amendment Act 2016.

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1988

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Why Benami Transactions are a common phenomenon?

To commit fraud on creditors

To avoid certain political and social risks

To desire to evade tax thereby committing fraud on state

And the most common to put black money into more productive use.

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MEANING OF BENAMI TRANSACTIONS

Purchase or holding properties in name of another.Source of money is not provided by the property

holder.Person providing consideration is not traceable.A property transaction is carried out in fictious name.No intention to give benefit to the property holder.Real owner is not aware of the transactions or denies

ownership.Property is for future benefit, direct or indirect, for

person paying consideration.Transactions includes arrangements.

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If Benami Property has changed its color or form, even then it will be considered as Benami Property.

“Property” means any kind of assets whether movable or immovable; tangible or intangible; or corporeal or incorporeal; or includes any rights or interests in such property.

“Held By” as used in definition, covers property held even before 1988. Held means actual possession, legal title, right to hold or claim.

“Benamidar” means person who is the holder of property. “Beneficial Owner” means the person getting benefit from

such property.

•“Benami Property” means any property which has been the subject matter of Benami Transactions and also include proceeds from such property.

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EXCEPTIONS OF BENAMI TRANSACTIONS

Property in name of Karta or member of HUF and consideration is paid from known sources of income of HUF.

Property is name of Trustee and consideration is paid from known sources of income of Trust.

Property held in a fiduciary capacity such as Trustee, Executor, Partner, Director, Depository, Depository’s Agent and other notified by Government.

Property acquired in name of Spouse or child and consideration is paid from known sources of income of individual.

Property acquired in name of brother, sister, lineal ascendant or descendant, or jointly and consideration is

paid from known sources of income of individual.

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MEANING OF PERSON

IndividualHindu Undivided FamilyCompanyPartnership Firm including LLPAssociation of Persons/Body of

IndividualsArtificial Judicial Person

Property held through Power of Attorney

If the purchase of property is through power of attorney(POA) and the following steps has been taken-Paid the consideration by beneficial owner.Possession in control of beneficial owner.Sale of Agreement/GPA in name of beneficial ownerLawful transfer of property

then it will not be considered as benami property.

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Legal Structure

Authority Functions

Initiating Officer Notice and Attachment of the property

Approving Authority Notice to furnish evidence

Adjudicating Authority Confiscation and vesting of property

Administrator Possession and Management of confiscated

propertyAppellate Tribunal Hears Appeals against

orders of Adjudicating Officer

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Authorities

“Initiating Officer” means Assistant and Deputy Commissioners of Income Tax.

“Adjudicating Authority” means Enforcement Directorate (ED) under Prevention of Money Laundering Act 2002.

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ATTACHMENT, ADJUDICATION AND CONFISCATION

The copy of notice will also be issued to beneficial owner if his identity is known.

The Initiating Officer may hold the property for 90 days from the date of issue of the notice, with approval 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 with the approval from the Approving Authority

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

If an Initiating Officer believes that a person is a benamidar, he may issue a show cause notice to benamidar asking why the property should not be treated as benami property.

ATTACHMENT, ADJUDICATION AND CONFISCATION

The Adjudicating Authority will examine all documents and evidence relating to the matter and then pass an order on whether or not to hold the property as benami.

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.

The Act also seeks to establish an Appellate Tribunal to hear appeals against any orders passed by the Adjudicating Authority. Appeals against orders of the Appellate Tribunal will lie to the high court (Special Court).

Central Government will set up the Special Court under the supervision of Chief Justice of the High Court.

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PENALTY

For guilty of offence of Benami Transaction• Penalty upto 25% of the fair market value of the Property• Rigorous imprisonment for minimum 1 year upto 7 years

For false information• Penalty upto 10% of the fair market value of the property• Rigorous imprisonment for mimimum 6 months upto 5

years

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Database creation by demat of property and linking with Aadhaar and PAN no.

Collecting Information from registration authority, private builders, authorities like DDA, etc.

Comparing Source of Income from IT return

Conducting enquiries and Inspection

Issuing notice and Attachment of property if found suspicious

Plan to Implement

Impact on Real Estate Market

Actual user/owner will be purchase the property.Rate of property will be slashed down.Minimum black money to be consumed.Disputed Property cannot be sold and brought

which reduces the property disputes.Corruption money will not be utilised in Real Estate

sector anymore.Lead to Incremental tax revenue to government.

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Impact on Income Tax

After the issue of notice under sec. 24 of Benami transaction Property Act , transfer of the property shall be null and void.

Notice will be issued under section 148/ 197(c).Time of limitation as per the notice.Penalty under 270A Tax will be recovered from sale of property

which was attached.Proceedings will be carried under section 281 A

of the Income Tax Act.

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THANK YOU