The Benami Transactions (Prohibition) Act, 1988 on 19.05.1988 in India was brought into force by government to stop the Benami Transaction where original owner of some property with the intention of curbing the illegal transactions wore a mask of some different person to hide his ownership and to enjoy the property acquired by him from illegal means. This Act has been thereafter substantially amended by The Benami Transactions (Prohibition) Amendment Act, 2016 which came into force with effect from 1st November 2016, and various provisions and authorities have been established to curb benami transactions and confiscate Benami Properties. Under the 2016 Act, the scope of benami transactions has been widened, and the punishment and penalties have been made more stringent.
“Benami Property” means any property which is the subject matter of a benami transaction and it also includes the proceeds received from a property which is part of a Benami Transaction. The definition of property includes assets of any kind, whether movable or immovable, tangible or intangible, corporeal or incorporeal.
"Benami Transaction" means a transaction or an arrangement 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 the property is held for the benefit of the person who has provided the consideration. Whereas when the property is held by a Karta or a member of a Hindu undivided family or by a person standing in a fiduciary capacity for the benefit of another person towards whom he stands in such capacity or any person being an individual in the name of his spouse or child or any person in the name of his brother or sister or lineal ascendant or descend and the same shall not form a benami transaction. Further various other transactions are benami transactions like where a transaction has been made under a fictitious name or where the owner is not aware or denies knowledge of the ownership of the property and the person providing the consideration is not traceable.
The new Act has formed various Authorities like
The Initiating Officer
The Approving Authority
The Adjudicating Authority
These Authorities follow certain specific procedures where they presume that a particular property is a benami property. If Initiating Officer has reason to believe that any person is a benamidar in respect of a property, he can issue a Show Cause Notice and if necessary do the provisional attachment of property. In case he is satisfied that the property is not benami he may revoke provisional attachment otherwise continue provisional attachment or may order provisional attachment and refer the matter to Adjudicating Authority. Adjudicating Authority shall hear the affected persons and pass an order within a year holding whether a property is benami or not. Where adjudicating authority holds property as benami, after hearing affected persons it may pass confiscation order. Thereafter all rights and title in such property shall vest absolutely in the Central Government free of all encumbrances and administrator to take possession of benami property and manage it. Appeals against orders of the Adjudicating Authority may be filed before the Appellate Tribunal (specifically formed in this respect), and if not satisfied with the order of Appellate Tribunal the effected party may go to respective High Court. The Act mandates the Central Government to designate one or more Session Court as Special Court for the trial of an offence punishable under the said Act.
Beneficial owner, Benamidar and any other person who abets or induces any person to enter into benami transaction shall be guilty of the offence committed under Benami Transaction Act-
The property will be confiscated and further imprisonment and fine will levy
In the case of Benami Transaction:-
Imprisonment – not less than 1 yr but may be extended to 7 yrs and
Fine - may extend to 25% of the fair market value of property
In the case of False Information:-
Imprisonment – not less than 6 months but may be extended to 5 yrs and
Fine - may extend to 10% of the fair market value of property
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