The Benami transactions (prohibition) amendment act - Nutshell

Object:

• To define benami transaction
• To establish adjudicating authorities and an Appellate Tribunal to deal with benami transactions, and
• To specify the penalty for entering into benami transactions. 

Benami transaction:-

- A transaction, where a property is held by or transferred to a person, but has been provided for or paid by another person; and

- The property is held for the immediate or future benefit, direct or indirect, of the person, who has provided the consideration;

- Other transactions; where: (i) the transaction is made in a fictitious name, (ii) the owner is not aware of denies knowledge of the ownership of the property, or (iii) the person providing the consideration for the property is not traceable.

Exemption:-

A property is held by:

1. a member of a Hindu undivided family, and is being held for his or another family member’s benefit, and has been provided for or paid off from sources of income of that family;
2. a person in a fiduciary capacity;
3. a person in the name of his spouse or child, and the property has been paid for from the person’s income; and
4. the properties stand in the name of sister or brother or lineal ascendant or descendant along with individual name 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

Who is benamidar?

The person in whose name the benami property is held or transferred, and a beneficial owner as the person for whose benefit the property is being held by the benamidar. 

Authorities to conduct:-

1. Initiating Officer, (Assistant Commissioner or a Deputy Commissioner under Income Tax Act, 1961)
2. Approving Authority,  (an Additional Commissioner or a Joint Commissioner under Income Tax Act, 1961)
3. Administrator (Income-tax Office under Income Tax Act, 1961) and
4. Adjudicating Authority (Central Govt to appoint). 

If an Initiating Officer believes that a person is a benamidar, he may issue a notice to that person.  The Initiating Officer may hold the property for 90 days from the date of issue of the notice, subject to permission 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.

If an order is passed to continue holding the property, the Initiating Officer will refer the case to the Adjudicating Authority.  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 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 within 60 days.

Penalty:

For entering into benami transactions is rigorous imprisonment of one year up to seven years, and a fine which may extend to 25% of the fair market value of the benami property. 

The Act  also specifies the penalty for providing false information to be rigorous imprisonment of six months up to five years, and a fine which may extend to 10% of the fair market value of the benami property.

No sanction:-

No previous sanction is necessary for prosecution. (so freely initiate action against Govt employee)

Bar of civil courts:

No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which any of the authorities, an Adjudicating Authority or the Appellate Tribunal is empowered by or under this Act to determine, and no injunction shall be granted by any court or other forum in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act

Special Courts:

Certain sessions courts would be designated as Special Courts for trying any offences which are punishable under the Bill. 

Transaction null and void:

All kind of property transfers, after issuing notice by Initiating officer or the confiscation order by the central govt, shall be deemed to be null and void.