THE EVOLUTION

Post November, 2016, the Benami Property Transactions Act, 1988 has been substantially amended from the existing 9 sections to the amended 71 sections in the Act.

The old Benami Transactions (Prohibition) Act 1988, had several loopholes such as lack of proper implementation machinery, absence of appellate mechanism, lack of provision with centre for vesting confiscated property etc. To plug the loopholes and replace old toothless act, the current Benami Transactions (Prohibition) Amendment Act, 2016 with appropriate claws and stringent provisions to adequately curb such transactions.

The provisions of Sec. 4 of the amended Act substantially expanded on the definitions provided by the old Act. The old act provided for the definition of ‘benami property’ to mean any transaction in which property is transferred to one person for a consideration paid or provided by another person whereas the present definition in its wider gamut provides that a Benami transaction is one in which property is held by one person but amount for the same is provided by another. A property that is held in the name of spouse or child for which the amount is paid out of known sources of income is not Benami. Similarly, in the case of a Karta or member of a HUF, family members and lineal descendants or a fiduciary as long as they satisfy the conditions set out in subsections (i-iv), transfer of a property by way of partial execution of the contract, in accordance with the Transfer of Property Act, 1882, transaction by way of the General Power of Attorney Holder done pursuant to the contract between the Parties, and where the circumstances in which the GPA is issued can be explained, holding a property in the joint name/as joint holder shall not be considered benami property in circumstances where the source of funds can be provided for, as and when required.

The true character of a transaction is governed by the intention of the person who contributed the purchase money and the question as to what his intention was, has to decided by:

• Surrounding circumstances
• Relationship of the parties
• Motives governing their action in bringing about the transaction and
• Their subsequent conduct.

All the four factors stated may have to be considered cumulatively.

The old Act had defined property to mean property of any kind, whether movable or immovable, tangible or intangible, and included any right or interest in such property. The amended Act expands the definition of ‘Property’ to further include within its ambit assets that can be corporeal or incorporeal, any rights or interest or legal documents or instruments evidencing title to or interest in the property and if the property is capable of conversion then the property in the converted form including Gold and financial security.

The Authorities set out for the implementation of the Act, the composition of the said authorities, the Jurisdiction exercised by the said authorities and the powers thereof (Chapter III Amending Act). The Authorities set out for the purposes of this Act are [Sec. 18(1)]

• The Initiating Officer
• Approving Authority
• Administrative Authority
• Adjudicating Authority

The Act also provides that the Officers viz. Income Tax Authorities, Customs and Central Excise Department Officers, Narcotics Drugs and Psychotropic Substances Act Officers, recognised stock exchange, Reserve Bank of India, Police, Foreign Exchange Management Act etc. shall also be involved, which automatically shall enable the authorities to have access to a vast database of information and resources provided for by virtually all the major regulatory/investigating bodies.

The Initiating Officer has been empowered to issue a show cause notice to a Benamidar based on material in his possession after recording his reasons in writing with a copy to be sent to the beneficial owner if traceable. Since all property transactions are now being undertaken mentioning the Permanent Account Number (PAN) and the details of the property has to be declared under the Income Declaration Scheme (IDS), it is easier for the authorities to track all such transactions. Additionally, the digitization of land records in itself provides for the details of any particular transaction as well as the property owner to the authorities thus enabling them to take appropriate action accordingly. After making inquiries and calling for reports and evidence within a period of ninety days of issuing the show cause notice the Initiating Officer has the power to provisionally attach the Benami property.

Further, whoever is found guilty of committing the said offence shall be punishable with a minimum of one-year rigorous imprisonment but which may extend to up to seven years along with a fine which may extend to 25% of the fair market value of the property.

In addition, if any person required to furnish information under this act knowingly gives false information or provides a false document, the person shall be punishable with a minimum of six months rigorous imprisonment but which may extend up to five years along with a fine which may extend to 10% of the fair market value of the property. There are provisions regarding setting up of Special Courts for trial of offences under the Act.

The intent behind the amendment of the legislature is to bring in fairness and transparency in the dealings of the property as well as bring in effective and speedy dispute resolution and prosecution as well as streamlining the property segment and thus the amendments are a step in the right direction and laudable.