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BENAMI PROPERTY:

Benami Property as the name itself suggests, is property without a name; over which a legal ownership cannot be claimed because the real owner has uses a fictitious identity to purchase it. To bring this into a simplified form, the property which has been purchased, is in the name of some other person other than the one who financed for it i.e. the real owner does not buy the property with his real name and identity. The person on whose name the property is purchased is referred as benamdar, the person who financed such purchase is referred as the real owner, the property in issue is the benami property and the transactions related to such property is known as the benami transactions. It is not a two party transaction: there is a buyer, a seller, and the real owner. It becomes a real difficult task to identify and trace the real and legal owner of the property.

Benami Transactions are mainly done for a purpose of evading tax and to hide the real ownership upon the Benami Properties from the banks and creditors.

Otherwise, properties can be transferred under section 5 of the Transfer of Property Act[1] as there is no prohibition, but there is an intention to benefit the other party. Whereas, Benami Transactions are considered, it is just a way to utilize and conceal the black money that people have earned through corrupt practices or through sources unknown. There is no intention to benefit the other party.

In the year 1980, The Hon'ble Supreme Court while dealing with the case of Thakur Bhim Singh vs. Thakur Kan Singh[2] had elaborated the concept of "Benami Transaction" and included primarily 2 types of transactions under its purview. The relevant extract from the judgment:

"The two types of benami transactions which are generally recognized in India are:—

Where a person buys a property with his own money but in the name of another person without any intention to benefit such other person, the transaction is called benami. In that case, the transferee holds the property for the benefit of the person who has contributed the purchase money, and he is the real owner.

The second case which is loosely termed as a benami transaction is a case where a person who is the owner of the property executes a conveyance in favor of another without the intention of transferring the title to the property thereunder. In this case, the transferor continues to be the real owner.[3]

BRIEF BACKGROUND and THE PRESENT DAY SCENARIO:

Earlier as there was no law in India to keep a track on benami transactions and punish the wrongdoers, the 1988 Act was passed to put an end to such transactions. The first legislation in India regarding Benami Properties was passed in the year 1988, The Benami Transactions (Prohibitions) Act. The Act provided that any person entering into the Benami Transactions will be punished by an imprisonment for a term of 3 years which may even extend further, or fine or with both. However, the Act had many loop holes and lacunae such as lack of proper implementation mechanism and no provision for confiscation of benami properties due to which it failed to be very effective in nature. It also became an issue of political agenda in 2014 by the ruling party in Centre, The Bharatiya Janta Party (BJP). This matter became a huge topic for debate and discussion and gained a lot of attention amongst the public even before its insertion. Because the earlier piece of legislation failed to serve its purpose in totality, an amendment was passed in the year 2016, 1^st November by the current Government, The Benami Transactions (Prohibition) Amendment Act 2016. Substantive Powers were added and the power to confiscate the benami properties were also given to the adjudicating authorities. Regarding the punishments the new amendment imposes more rigorous and strict penalties upon individual breaking the law and penalizes with fine up to 25% of the fair market value of the property as well as imprisonment which may extend upto 7 years. . If the Benami Properties are confiscated after following the due procedure of law then the owner shall not be compensated for the same.

Also, alongwith Prohibition on buying Benami Properties, some other steps like Demonetization were taken by the Government regarding the investment of the unaccounted money also referred to as black money, in India. The Benami Act was passed to make an account of all the unaccounted investments to ensure that all the transactions conducted in the real estates are actually made by the actual owner with his own identity and from his known sources of income. The eradicate corruption from its roots, The Amendment Act of 2016 appears to be sufficiently promising to address the lawful sickness that earlier existed in the Act because of its lack of proper implementation and mechanism.

Henceforth, the present legislation will be serving two things of vital importance, i.e. firstly it will be helpful in the prevention and prohibition of benami transactions and secondly, to prevent tax evasion through unlawful and illegal means.

The avoidance and prohibition of Benami Transactions are very essential and critical for the economic growth of the nation. No one should do the act indirectly which he is supposedly not allowed to do directly. One should not derive benefit arising out of the loopholes in the legal system. Laws made are meant to be followed uniformly as its purpose is for the betterment and upliftment of the society as a whole.

WHICH PROPERTY CAN BE TERMED AS A BENAMI PROPERTY?

Section 4(8) of the Benami Transactions (Prohibition) Amendment Act[4] states that—

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

Under Section 4(9) of the Benami Transactions (Prohibition) Amendment Act states that—

“benami transaction” means –

1. a transaction or an arrangement—
2. a property which is transferred to, or is held by, a person, and the consideration for such property has been provided or paid by some another person: and
3. The property is held by the immediate or future benefit, direct or indirect, of the person who has provided the consideration.

Exceptions to these are, i.e. transactions not considered as benami properties are:

1. The property held by a Karta, or a member of Hindu undivided family, or
2. A person standing in a fiduciary relationship, or

• Any individual who purchases the property in the name of his/her spouse or children with the known sources of income, or

1. Any individual who purchases the property in the name of his brother or sister or in the name of his lineal ascendant or descendent and the individual also appears as the joint owner of the property with the known sources of income
2. A transaction in respect of a property carried out or made in a fictitious name, by not disclosing his real name or identity.
3. A transaction in respect of a property where the owner of the property is not aware of, or, denies knowledge of such ownership.
4. A transaction in respect of a property where the person providing the consideration is not traceable or is fictitious.

AUTHORITIES EMPOWERED TO TAKE ACTIONS:

1. The Initiating Officer
2. The Approving Authority

• The Administrator

1. The Adjudicating Authority

POWER OF AUTHORITIES:

The authorities shall have the same powers as are vested in a civil court under the Code of Civil Procedure, 1908.

1. Discovery and inspection
2. Enforcing the attendance of any person and examining him on oath. The persons summoned is bound to come to the court.

• Power of the court to call for/ furnish any information regarding books of accounts and other necessary documents

1. Power of the authorities to conduct enquiry and investigations
2. Issuing commissions
3. Receiving evidence on affidavits

• May issue a notice for attachment of properties involved in benami transactions
• Confiscation and possession of Benami Properties

1. Any other matter as may be prescribed.

PUNISHMENT:

The Benami Transactions (Prohibition) Act, 2016 penalizes the offender with a fine up to 25% of the fair market value of the property as well as imprisonment which may extend upto 7 years.

PROVISION OF APPEAL:

If the parties are not satisfied with the decisions taken by the Adjudicating Authority, then they can file for appeal before the Appellate Tribunal. Further appeals can also be made to the Hon’ble High Court within 60 days from the order given by the Tribunal.

CONCLUSION:

This Act is being applied to Politicians of repute too. Nobody can escape from the clutches of the law. Law treats all the offenders equally and nobody stands as an exception to it.

In a very recent case, the Former Chief Minister of Bihar and RJD Chief Mr. Lalu Prasad Yadav was alleged to have a lot many properties and plots in Delhi, Patna and some other parts of Bihar of which there is no accountability. The Income Tax Department has charged Lalu Prasad including his wife, son, son-in-law and daughter under the new and stringent act of Benami Transactions and Prohibitions Act and issued an attachment order against the assets with its benami deal probe. As per the provisions of the Act, if the assets attached are held as benami properties after the final prosecution of the owner, then the government can confiscate the property without the payment of confiscation. Charges for evading the tax will also be put under the Income Tax Act, 1961.

Author - Khyati Dhuparr & Associate - Shristi Keshri

[1] The Transfer of Property Act 1882

[2] (1980) 3 SCC 72

[3] https://www.legallyindia.com/views/entry/evolution-of-concept-of-benami-transaction-in-india-a-brief-analysis

[4] Benami Transactions (Prohibition) Amendment Act 2016

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