{"id":3012,"date":"2016-09-24T13:54:13","date_gmt":"2016-09-24T08:24:13","guid":{"rendered":"http:\/\/www.itatonline.org\/articles_new\/?p=3012"},"modified":"2018-04-23T11:30:26","modified_gmt":"2018-04-23T06:00:26","slug":"a-brief-introduction-to-the-benami-property-prohibition-amendment-act-2016","status":"publish","type":"post","link":"https:\/\/itatonline.org\/articles_new\/a-brief-introduction-to-the-benami-property-prohibition-amendment-act-2016\/","title":{"rendered":"A Brief Introduction To The Benami Property (Prohibition) Amendment Act, 2016"},"content":{"rendered":"<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/www.itatonline.org\/articles_new\/wp-content\/uploads\/Aditya-Ajgaonkar.jpg\" alt=\"aditya-ajgaonkar\" width=\"100\" height=\"124\" class=\"alignleft size-full wp-image-3016\" \/><\/p>\n<p><strong>Advocate Aditya  Ajgaonkar lauds the Benami Property (Prohibition) Amendment Act, 2016 for providing a strong institutional framework for fighting the menace of black money. He states that the amendment has comprehensively set out a mechanism not only for fast detection and investigations but also for effective and speedy dispute resolution and prosecution. He has explained all the salient features of the Amendment in a succinct manner<\/strong> <\/p>\n<p\/>\n An economic offence has multiple layers to it. The commission of a  criminal act for pecuniary gains is merely the tip of the proverbial iceberg. A  parallel economy largely run by anti-social elements or their agents often  involves a copious number of cash transactions. However, the enjoyment of such  illicit money is severely curtailed. The process of converting the proceeds of  crime (black money) into legitimate money (white money) that can be freely used  is called money laundering. A typical money laundering operation consists of  three stages namely placement, layering and integration. In a country like  India where poverty and illiteracy are still rampant, &lsquo;Benami&rsquo; transactions  have historically been perceived as an effective method to both conveniently hide  as well as launder illicit money. Typically &lsquo;Benami&rsquo; transactions especially in  the guise of property and real estate are not only effective in the placement  and layering process of money laundering but due to reduced rates of taxation  on capital gains (subject to the provisions of Sections 45 to 55 of the  Income-tax Act) and the tax exempt nature of sale of agricultural land (subject  to the provisions of Sec. 2(14)(iii)of the Income-tax Act) have also been seen  as the most &lsquo;Tax effective&rsquo; means of integrating the laundered money back into  the economy. Many scholars and studies show that mere punishment is not a  sufficient deterrent for the commission of crime. The underlying principle  behind control of crime in modern day jurisprudence is not to merely put in  place an effective machinery to curb and punish crime, but to minimise or  eliminate the underlying profit objective.<\/p>\n<p\/>\n<p><!--more--><\/p>\n<p><script async src=\"\/\/pagead2.googlesyndication.com\/pagead\/js\/adsbygoogle.js\"><\/script><br \/>\n<!-- responsive --><br \/>\n<ins class=\"adsbygoogle\"\n     style=\"display:block\"\n     data-ad-client=\"ca-pub-6440093791992877\"\n     data-ad-slot=\"6406297397\"\n     data-ad-format=\"auto\"><\/ins><br \/>\n<script>\n(adsbygoogle = window.adsbygoogle || []).push({});\n<\/script><\/p>\n<p>The Indian Legislature has often been criticised for its laid back  approach towards that archaic and antiquated laws that in today&rsquo;s age and date  rapidly get obsolete. In the innovative and highly imaginative world of money  laundering and tax evasion, perpetrators always come up with increasingly  complex transactions in order to dispose of their ill-gotten gains. Merely  plugging the loopholes as they are discovered then, ensures that the  authorities remain two steps behind these perpetrators. In an effort to curb  profits from criminal activities as well as to plug leaks in collection of  taxes, the Legislature has undertaken many comprehensive steps in the recent  past to impose strong deterrents upon and to aid effective action upon economic  offenses. Various laws such as the PMLA (Prevention of Money Laundering Act),  the Companies Act, the Information Technology Act and the Benami Property (Prohibition)  Act, 1998 have seen comprehensive enactments\/amendments to better address  challenges thrown up by technology, globalisation &amp; to provide strong teeth  to the Law enforcement machinery. The Benami Transactions (Prohibition)  Amendment Act, 2016 has introduced a raft of changes to the Benami Property  (Prohibition) Act, 1988.<\/p>\n<p\/>\n  The Original Benami Transactions (Prohibition) Act, 1998 (hereinafter  referred to as the &lsquo;principal act&rsquo;) was woefully inadequate to address the  menace of rampant Benami transactions in a country with widespread poverty and  illiteracy. &lsquo;Benami Transaction&rsquo; as defined by the original enactment meant  &ldquo;any transaction in which property is transferred to one person for a  consideration paid or provided by another person&rdquo; with exceptions provided for  coparceners in a Hindu Undivided Family &amp; a person holding property in a  fiduciary capacity subject to the conditions laid down by Sec. 4(3)(a). This  definition was not only generic but it also lent itself to ambiguities in  interpretation. With merely 9 Sections, it relied heavily on secondary  legislation in the form of rule making powers conferred by Sec. 8 for  enforcement of the provisions of the Act. Though the Act provided for  acquisition of Benami properties, via Sec. 5, neither did it explicitly make  holding Benami properties a criminal offence under the Act itself nor did it  set up a comprehensive mechanism for administration of the Act, preferring to  rely therefore on secondary legislation and other existing laws.<\/p>\n<p\/>\n  The Statement of Objects &amp; Reasons to the Benami Transactions  (Prohibition) Amendment Bill, 2015 states that it was found that the provisions  of the Benami Transactions (Prohibition) Act, 1988 were inadequate to deal with  Benami transactions as the Act did not contain any specific provision for  vesting of confiscated property with the Central Government, have any provision  for an appellate mechanism against an action taken by the authorities under the  Act, while barring the jurisdiction of a civil court, confer the powers of the  civil court upon the authorities for its implementation or provide for adequate  rule making powers. Further, the Bill also sought the implementation of the  said Act by the existing institutional structure of the Income Tax Department.<\/p>\n<p\/>\n  The provisions of Sec. 4 the Benami Property (Prohibition) Act, 1988  (hereinafter referred to as the amending Act) substantially expanded on the  definitions provided by the principal Act. Besides introducing new definitions,  it has also comprehensively overhauled the definitions provided by the  principal Act.<\/p>\n<p\/>\n  &bull; Section 4 of the amending  Act defines &lsquo;Benami Transactions&rsquo;. A &ldquo;Benami transaction&quot; 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 immediate or future  benefit, direct or indirect, of the person who has provided the consideration  OR a transaction or an arrangement in respect of a property carried out or made  in a fictitious name; OR a transaction or an arrangement in respect of a  property where the owner of the property is not aware of, or, denies knowledge  of, such ownership; OR a transaction or an arrangement in respect of a property  where the person providing the consideration is not traceable or is fictitious.  However, Sec. 2(9)(A) also provides for the exceptions 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 sub-sections (i-iv).<\/p>\n<p\/>\n  &bull; Section 4 of the amending  Act defines &lsquo;Property&rsquo;. The principal 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 amending Act expands the definition  of &lsquo;Property&rsquo; 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. Importantly, it also  includes within the definition of property any of the proceeds from the  property.<\/p>\n<p\/>\n  The principal Act, being enacted in 1988 also suffered from limitations  imposed by developing technology as well as legal jurisprudence. Though the  Financial Memorandum of the 2015 Bill also sought the implementation of the  said Act by the existing institutional structure of the Income Tax Department,  the legislature in its wisdom has seen it fit to comprehensively set out  Authorities 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)]<\/p>\n<p\/>\n  &bull; The Initiating Officer<\/p>\n<p\/>\n  &bull; Approving Authority<\/p>\n<p\/>\n  &bull; Administrative Authority<\/p>\n<p\/>\n  &bull; Adjudicating Authority<\/p>\n<p\/>\n  It has specifically been provided  by Sec. 19(1) that the authorities shall have all the powers as vested with a  civil court under CPC (Code of Civil Procedure) while trying a suit with  respect to discovery and inspection, enforcing the attendance of any person for  examination under oath, compelling production of books of account and other  documents, issuing commissions, receiving evidences on affidavits and for any  other prescribed matters.<\/p>\n<p\/>\n  The Act also provides that the  following officers shall assist the authorities in the enforcement of this Act  subject to Sec. 20 of the Amending Act:-<\/p>\n<p\/>\n  &bull; Income Tax Authorities<\/p>\n<p\/>\n  &bull; Customs and Central  Excise Department Officers<\/p>\n<p\/>\n  &bull; Narcotics Drugs and  Psychotropic Substances Act Officers<\/p>\n<p\/>\n  &bull; Officers of a recognised  stock exchange<\/p>\n<p\/>\n  &bull; Officers of Reserve Bank  of India<\/p>\n<p\/>\n  &bull; Police<\/p>\n<p\/>\n  &bull; Officers of Enforcement  under Foreign Exchange Management Act<\/p>\n<p\/>\n  &bull; Officers of Securities  and Exchange Board of India<\/p>\n<p\/>\n  &bull; Officers of any &lsquo;body  corporate&rsquo; constituted or established under State of Central Act<\/p>\n<p\/>\n  &bull; Officers of the Central  Government, State Government, local authorities or banking companies notified  by Central Government for the purpose of this Act.<\/p>\n<p\/>\n  The powers listed out in Chapter III are comprehensive and a far cry  from merely providing for framing of Rules as set out by the &lsquo;Principal Act&rsquo;&rsquo;.  Besides vesting substantial powers in the hands of the Authorities under this  Act, it also explicitly provides for active assistance by officers of every  major Government body 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. This shall enable the  authorities to carry out in-depth investigations and provide water tight cases  for attachment and prosecution.<\/p>\n<p\/>\n  The Principal Act enabled the Central Government by notification in the  Official Gazette to make rules to make necessary rules to carry out the  purposes of this Act by providing an authority competent to acquire properties  [Sec. 8(2)(a)], prescribing the manner in which and procedure to be followed  for acquisition of properties [Sec. 8(2)(a)] and other providing for other  matter which is required to be or may be prescribed for carrying out the  purposes of the Act. However, Chapter IV of the Amending Act puts in place  specific provisions with regards to Attachment, Adjudication and Confiscation.<\/p>\n<p\/>\n  Sec. 24 of the Amending Act empowers the Initiating Officer 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. It further empowers him, if he is under the opinion that the  Benami may alienate the said property, to attach the said property with  previous approval of the Approving Authority for a period not exceeding ninety  days. 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 if not already done  and if provisional attachment is already done, the Initiating Officer has the  power to pass an order continuing the attachment until the Adjudicating  Authority passes the order in the matter. However, if the said provisional  attachment is done or continued by the Initiating officer as per Sec. 24(4), he  shall have to draw up a statement of the case and refer it to the Adjudicating  Authority within 15 days.<\/p>\n<p\/>\n  Chapter V provides for the setting up of the Appellate Tribunal that  shall ordinarily sit in Delhi or at any other place the Central Government will  decide in consultation with the Chairperson of the Appellate Authority. The  Tribunal shall not be bound by procedure laid down by the Code of Civil  Procedure but shall have powers to regulate its own procedure. It shall also  have the powers vested in a Civil Court under Code of Civil Procedure in  respect of matters enumerated by Sec. 40(2) of the Amending Act. The orders of  the Appellate Tribunal are appealable before the High Court within a period of  60 days only on questions of law.<\/p>\n<p\/>\n  However, secondary legislation  and rules have inherent limitations and suffer from a multitude of legal  challenges. Measures put in place for preventing money laundering and tax  evasion or other criminal or anti-social activities via &lsquo;Benami Transactions&rsquo;  needed to fulfil a dual purpose, of preventing the beneficial owners of the  &lsquo;Benami&rsquo; properties from actually benefiting from the transaction as well as by  prosecution. An obvious shortcoming of the &lsquo;Principal Act&rsquo; was that it did not  explicitly make entering into a &lsquo;Benami&rsquo; Transaction a crime by itself. In  order to rectify this shortcoming, Chapter VII of the Amending Act states that  any person entering into a Benami Transaction in order to defeat the provisions  of any law or to avoid payment of statutory dues or to avoid payment to  creditors, as the beneficial owner or as the Benamidar and any other person who  abets or induces any person to enter into a Benami transaction shall be guilty  of the offence of &lsquo;Benami Transaction&rsquo; [Sec 53(1)]. 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 [Sec.  53(2)]. 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 [Sec 54]. However, Sec. 55 of the  amending Act also provides that no prosecution shall be instituted against any  person in respect of any offense u\/s 3, 53 or 54 without prior sanction of the  board. The Provisions of 53(2) and 54 clearly seek to bring out the fact that  indulging in, abetting or assisting a Benami Transaction is taken as a serious  offense by the Government of India and the punishment is now commensurate with  the crime.<\/p>\n<p\/>\n  Chapter VI of the Amending Act provides for Special Courts to be set up  for trial of offences under the Act. Such Courts shall be constituted by the  Central Government in consultation with the Chief Justice of the High Court by  notification and the Special Court so constituted shall take cognizance of an  offence punishable under the Act only upon a written complaint made by the  Adjudicating Authority or an officer authorized by the State or Central  Government. Though the Appellate Tribunal is not bound by the Code of Civil  Procedure, the Code of Criminal Procedure shall apply to prosecution  proceedings before the Special Court. If the accused is charged of other  offenses under Code of Criminal Procedure at the same trial, the Special Court  will have the jurisdiction to try him for all such other offences.<\/p>\n<p\/>\n  The Amending Act has 71 Sections as opposed to 9 Sections that  constituted the Principal Act. This amendment is not only comprehensive, but  also critical in an era where technology and other advancements demand a strong  institutional framework in fighting the menace of black money and the murky  parallel economies that characterize countries that have laws that are  typically ineffective and law administrations that are inefficient. The  amendment has comprehensively set out a mechanism not only for fast detection  and investigations but also for effective and speedy dispute resolution and  prosecution. The constitution of the Tribunals shall greatly enhance the speed  of dispute resolutions as opposed to overburdened civil courts bound by the  rules of the Civil Procedure Code where a suit typically take a number of years  to reach its logical conclusion. On the prosecution side, by setting up Special  Courts that shall exclusively look after matters under this Act, the speed of  disposal of criminal trials shall also be enhanced. The effectiveness of the  amended Act shall be gauged by its performance over time, however it is a giant  stride in the right direction. <\/p>\n<p\/>\n<script async src=\"\/\/pagead2.googlesyndication.com\/pagead\/js\/adsbygoogle.js\"><\/script><br \/>\n<!-- responsive --><br \/>\n<ins class=\"adsbygoogle\"\n     style=\"display:block\"\n     data-ad-client=\"ca-pub-6440093791992877\"\n     data-ad-slot=\"6406297397\"\n     data-ad-format=\"auto\"><\/ins><br \/>\n<script>\n(adsbygoogle = window.adsbygoogle || []).push({});\n<\/script><\/p>\n<table width=\"103%\" border=\"1\" cellpadding=\"5\" cellspacing=\"0\" bgcolor=\"#FFFFCC\">\n<tr>\n<td><strong>Disclaimer: <\/strong>The  contents of this document are solely for informational purpose. It does not  constitute professional advice or a formal recommendation. While due care has  been taken in preparing this document, the existence of mistakes and omissions  herein is not ruled out. Neither the author nor itatonline.org and its  affiliates accepts any liabilities for any loss or damage of any kind arising  out of any inaccurate or incomplete information in this document nor for any  actions taken in reliance thereon. No part of this document should be  distributed or copied (except for personal, non-commercial use) without  express written permission of itatonline.org<\/td>\n<\/tr>\n<\/table>\n<div class=\"journal2\">\nReproduced with permission from the AIFTP Journal<\/div>\n<p><script async src=\"\/\/pagead2.googlesyndication.com\/pagead\/js\/adsbygoogle.js\"><\/script><br \/>\n<!-- link-ad --><br \/>\n<ins class=\"adsbygoogle\"\n     style=\"display:block\"\n     data-ad-client=\"ca-pub-6440093791992877\"\n     data-ad-slot=\"3536175798\"\n     data-ad-format=\"link\"><\/ins><br \/>\n<script>\n(adsbygoogle = window.adsbygoogle || []).push({});\n<\/script><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Advocate Aditya  Ajgaonkar lauds the Benami Property (Prohibition) Amendment Act, 2016 for providing a strong institutional framework for fighting the menace of black money. He states that the amendment has comprehensively set out a mechanism not only for fast detection and investigations but also for effective and speedy dispute resolution and prosecution. He has explained all the salient features of the Amendment in a succinct manner<\/p>\n<div class=\"read-more\"><a href=\"https:\/\/itatonline.org\/articles_new\/a-brief-introduction-to-the-benami-property-prohibition-amendment-act-2016\/\">Read more &#8250;<\/a><\/div>\n<p><!-- end of .read-more --><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[1],"tags":[36],"class_list":["post-3012","post","type-post","status-publish","format-standard","hentry","category-articles","tag-the-benami-transactions-prohibition-amendment-act-2016"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/itatonline.org\/articles_new\/wp-json\/wp\/v2\/posts\/3012","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/itatonline.org\/articles_new\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/itatonline.org\/articles_new\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/itatonline.org\/articles_new\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/itatonline.org\/articles_new\/wp-json\/wp\/v2\/comments?post=3012"}],"version-history":[{"count":0,"href":"https:\/\/itatonline.org\/articles_new\/wp-json\/wp\/v2\/posts\/3012\/revisions"}],"wp:attachment":[{"href":"https:\/\/itatonline.org\/articles_new\/wp-json\/wp\/v2\/media?parent=3012"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/itatonline.org\/articles_new\/wp-json\/wp\/v2\/categories?post=3012"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/itatonline.org\/articles_new\/wp-json\/wp\/v2\/tags?post=3012"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}