Can case be filed under benami property

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The Benami Transactions (Prohibition) Amendment Act, 2016 is a modified version of older Benami Transactions (Prohibition) Act 1988 and was tabled in Lok Sabha last year by Finance Minister Arun Jaitley. The same is passed by the Lok Sabha on 27th July and Rajya Sabha on 2nd August this year respectively. The rules and provisions of the Benami Transactions (Prohibition) Act made effective from 1st November, 2016 and is now renamed as Prohibition of Benami Property Transactions Act, 1988 (PBPT Act).

Benami means a “Property without a Name”. Here property includes movable, immovable, tangible, intangible, any right or interest, or legal documents, even gold or financial securities could qualify to be benami.

In the layman term Benami Transaction is a transaction where the property is purchased in the name of the person who has not paid for it. The person who has rendered the required money for the said transactions is not named in the transaction but the property is held for the immediate or future benefit, direct or indirect, of the person who has provided its payment. For example if you want to buy a piece of land but don’t want your name to be appeared in the deal then you can buy the same in the name of your sister. This is called benami transaction because you have paid the money but the owner is your sister.

The act defines the benami transaction as a transaction or an arrangement where a property is held by or transferred to a person, but has been provided for or paid by another person.

This practice has started mainly due to superstition where some names or alphabets were considered lucky and some unlucky. Another reason was to hide family affairs from public eye or to evade wealth tax.
This concept is used widely by con people to do fraudulent activities. For instance if Mr A is highly indebted, he would purchase property in the name of Mr Z, so that Mr A’s creditors could not attach such property for recovery.

This malpractice is also adopted by corrupt Government official who take bribe in kind such as land, properties, cars, jewellery etc. Since they cannot directly get these on their or their family member’s name, the same is done in name of their in-laws, cousins, close friends etc.

There are instances where an individual may acquire property from the known source of income in the name of his wife or unmarried daughter for the benefits of rebates or interest charged on home loan, or for saving charges of property registration or stamp duty or for saving taxes on rental income from the property etc. These types of transactions cannot be termed as benami transaction. But determination of the actual status of the property lies with the competent authorities, however few factors which shall be taken into considerations are:

Sources of the fund which were used for making the payment for the property is disclosed by the buyer or not.
Intention behind buying property in the name of another person i.e. spouse, children, siblings etc.
Actual Possession of the property and custodian of the documents of the property.
Disclosure of the income from the property, if any, while filing income tax return.
If above questions lead to the fact that property is purchased to take various benefits under government schemes, interests, rebates etc. and not to hide black money or any fraudulent activities, the said property will not be treated as benami property.

As per the new law of Prohibition of Benami Property Transactions Act (PBPT Act), the guilty person shall be punishable with rigorous imprisonment for not less than one year which may be on severity of the offence extended to seven years. He shall also be charged with a fine which may extend to 25 percent of the fair market value of the benami property. Under the old law, the violation of the act would lead to imprisonment up to three years, or a fine, or both.

The New Law also has a provision of penalty for providing false information. Any person, required to furnish information under this Act, intentionally provided false information or document to any authority shall be punishable with rigorous imprisonment for not less than six months which may be on severity of the offence extended to five years. He shall also be charged with a fine which may extend to 10 per cent of the fair market value of the benami property. However, no prosecution shall be initiated against any person under this law without the prior approval of Central Board of Direct Taxes (CBDT).

The point to ponder is that benami transactions are not confined only to purchases, leasing of immovable property in the name of another person or mortgaging property for a fictitious consideration is also considered as a benami transaction and is subject for prosecution under Benami Transaction Act.

Advocate Siddhant Sharma LawRato