Benami Transactions– everything you need to know about these transactions

According to the reports– the number of Benami Transaction have touched peak over the past few years which has raised the concerns of the government. The Government of India is clear to deal with menace of black money and post closure of Income Declaration Scheme (IDS 2016) is expected to come down harshly on tax evaders and those hiding their wealth in Benami Transactions. This point was one of the main election promise in the ruling party’s 2014 election manifesto

The two words— (Benami) (Transaction) have grabbed a lot of attention but what does it mean? Let’s find out….

What is Benami Transaction?

The word “Benami” originated from the Persian vocabulary and its literal meaning is “property without a name”.
Under section 2(a) of the Benami (Prohibition) act, 1988, states- any transaction in which the property is transferred to one person for a consideration paid or provided by another person.

In layman language, Benami property means a property which is bought by one person (who invested the money) in the name of another person (the person who has not invested in the property). The person who has purchased the property is not bound to provide any interest related to the property– to the person on whose name the property is actually bought. The person whose name is written on the property papers is known as the “Benamdar” and the so-called property is known as “Benami property”.

Introduction of the Benami Act 1988–

The Benami Act 1988 was introduced by the government to eradicate the malpractices widespread. The act prohibited all the Benami and furzee transactions. Though the act allowed deals in the name of daughter and wife.

Following were the punishments under the Benami Act 1988-

Section 3 of the act penalises the person who has proved to be guilty- with imprisonment for a term which may extend up to 3 years / fine or both.

Furthermore—-

1. No person should enter in the Benami Transactions.
2. Nothing in subsection (1) shall apply to the property by any person in the name of his wife or unmarried daughter and it shall be presumed unless the contrary is proved, that the said property has been purchased for the benefit of the wife or unmarried daughter
3. Whoever enters in the Code of Criminal Procedure 1973 (2 of 1974), an offence under this section shall be non-cognizable and non-bailable.

Who has to bear the burden of the proof?

According to the Benami Transactions (Prohibition) Act, 1988 the burden of the proof lies on the person who is claiming and/or asserting that the transaction is the kind of aforesaid transaction i.e. a Benami transaction.

The above act had to face criticism as it wasn’t considered efficient enough to deal with Benami Transaction. According to the 130th Law Commission Report submitted recommendation were–

• All kind of property must be covered under the Benami property.

• The new law must declare that entering into the Benami Transaction is an offence except when a father / husband transfers the property in the name of his daughter / wife.

• The omission of section 94 of the Act, 1882.

• Acquisition of the property in the same procedure as provided in Chapter XXA of the act, 1961.

Thus after implementing the mentioned recommendations- the Benami Transaction (Prohibition) act came alive on 5th September 1988.

Post creation of the Benami Transaction (Prohibition), 1988 there was a massive delay in the implementation of the act which led to the flourishing of black money. Clearly, the lack of black letter was not the reason behind that but non-implementation of an enacted statute was the real reason.

Benami Transaction (Prohibition) Bill, 2016

There have been various recent instances where people invest their unaccounted money and purchase property in the name of a fictitious or non-existent person. To put a halt on this situation Benami Transaction (Prohibition) Bill, 2016 came into existence. The aim of this bill is to effectively eradicate Benami transaction and also to prevent the evasion of law by illegal activities. The Benami Transaction (Prohibition) Bill, 2016 was enforced on 10th August 2016.

Following are the (few) changes imposed in the Benami Transaction (Prohibition) Bill, 2016

• There will be imprisonment from 1 years to seven years or fine or both. In the previous bill imprisonment was restricted to three years.
• The penalty for providing false information to be rigorous imprisonment of 6 moths to five years and a fine which may extend to 25% of the fair market value of the Benami property.
• According to the bill, there will be four authorities investigating the Benami transaction- (a) Initiating Officer (b) Approving Authority (c) Administrator (d) Adjudicating Authority.

I hope you learned a thing or two about the Benami Act… If you have any questions write into us in the comment section below..

You may like to read: https://www.itrtoday.com/high-value-transactions-to-attract-income-tax-scrutiny/