The Law and Practice of the Prohibition of Benami Property Transaction Act (Second Edition)

Contents at a glance Acknowledgement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 About the authors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Table of contents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Chapter 1

Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Chapter 2

Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Chapter 3

Prohibition of Benami Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

Chapter 4

Authorities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

Chapter 5

Attachment, Adjudication and Confiscation . . . . . . . . . . . . . . . . . . . . . 73

Chapter 6

Appellate Tribunal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

Chapter 7

Special Courts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105

Chapter 8

Offences and Prosecution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113

Chapter 9

Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117

Chapter 10

The Prohibition of Benami Property Transactions Rules, 2016 . . . . . 131

Chapter 11

Manner of provisional attachment and disposal of confiscated property - Income Tax Act, 1961 . . . . . . . . . . . . . . . . . . . 149

Chapter 12

Money laundering in India. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155

Chapter 13

Pradhan Mantri Jan-Dhan Yojana . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161

Chapter 14

Pradhan Mantri Garib Kalyan Yojana . . . . . . . . . . . . . . . . . . . . . . . . . 175

Chapter 15

The Real Estate (Regulation and Development) Act, 2016. . . . . . . . . 185

ANNEXURES The Benami Transactions (Prohibition) Act, 1988 . . . . . . . . . . . . . . .

Annexure I Annexure II The Benami Transactions (Prohibition) Amendment Act, 2016. . . . . .

Annexure III The Prohibition of Benami Property Transactions Rules, 2016 . . . . .

Annexure IV The Prohibition of Benami Property Transactions Act, 1988 [as amended by Act No.43 of 2016]. . . . . . . . . . . . . . . . . . . . . .

Annexure V CBDT Notification No. 97/2016 dated 25th October, 2016 notifying the Adjudicating Authority and the Appellate Tribunal until specifically established under the Benami Law . . . . . .

225 229 261 269

299

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Annexure VI CBDT Notification No. 98/2016 dated 25th October, 2016 notifying the effective date of the Benami Transaction (Prohibition) Amendment Act, 2016. . . . . . . . . . . . . . . . . . . . . . . . . . . 301 Annexure VII CBDT Notification No. 100/2016 dated 25th October, 2016 notifying the territorial authorities with respective jurisdictions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 303 Annexure VIII Second Schedule of the Income-tax Act, 1961. . . . . . . . . . . . . . . . . . . . 311 Annexure IX Pradhan Mantri Garib Kalyan Deposit Scheme, 2016. . . . . . . . . . . . 337 Annexure X Pradhan Mantri Jan-Dhan Yojana (PMJDY) . . . . . . . . . . . . . . . . . . . 347 Annexure XI The Real Estate (Regulation and Development) Act, 2016. . . . . . . . . 351 Bibliography/Webliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 399

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Table of contents Acknowledgement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 About the authors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Contents at a glance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Chapter 1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 1.1 What is property?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 1.2 Kinds of property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 1.3 Meaning of Benami. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 1.4 History of Benami Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 1.5 Salient features of Benami Transaction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 1.6 Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Chapter 2 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Benami Transaction-Definition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 2.1 Kinds of Benami Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 2.1.1 Having two mutually conclusive facets. . . . . . . . . . . . . . . . . . . . . . . 35 2.1.2 Where property is transferred or held in a fictitious name. . . . . . . . . 36 2.1.3 Where property is transferred/held by a person who is not aware about such property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 2.1.4 Where the person who paid the consideration for property is fictitious/not traceable . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 2.2 Other Benami Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 2.2.1 Un-Registered Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 2.2.2 Transfer of Property Act, 1882 - Sale of Immovable Property. . . . . . 37 2.3 Contracts for sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 2.4 Properties held on the basis of power of attorney. . . . . . . . . . . . . . . . . . . . . . . . 37 2.5 Other definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 2.5.1 Adjudicating Authority [Section 2(1)]. . . . . . . . . . . . . . . . . . . . . . . . 39 2.5.2 Administrator [Section 2(2)] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Appellate Tribunal [Section 2(3)]. . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 2.5.3 2.5.4 Approving Authority [Section 2(4)]. . . . . . . . . . . . . . . . . . . . . . . . . . 40 2.5.5 Attachment [Section 2(5)] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 2.5.6 Authority [Section 2(6)]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 2.5.7 Banking Company [Section 2(7)]. . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 15

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2.5.8 2.5.9 2.5.10 2.5.11 2.5.12 2.5.13 2.5.14 2.5.15 2.5.16 2.5.17 2.5.18 2.5.19 2.5.20 2.5.21 2.5.22 2.5.23 2.5.24 2.5.25 2.5.26 2.5.27 2.5.28 2.5.29 2.5.30

Benami Property [Section 2(8)]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Benamidar [Section 2(10)]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Bench [Section 2(11)]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Beneficial Owner [Section 2(12)]. . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Board [Section 2(13)]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Director [Section 2(14)]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Executor [Section 2(15)] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Fair Market Value [Section 2(16)]. . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Firm [Section 2(17)]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 High Court [Section 2(18)]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Initiating Officer [Section 2(19)]. . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Member [Section 2(20)]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Notification [Section 2(21)]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Partner [Section 2(22)]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Partnership [Section 2(23)]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Person [Section 2(24)] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Prescribed [Section 2(25)] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Property [Section 2(26)]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Public Financial Institution(Section 2(27)] . . . . . . . . . . . . . . . . . . . . 48 Special Court [Section 2(28)]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Transfer [Section 2(29)]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Trustee [Section 2(30)]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Interpretation clause [Section 2(31)] . . . . . . . . . . . . . . . . . . . . . . . . . 50

Chapter 3 Prohibition of Benami Transactions . . . . . . . . . . . . . . . . . . . . . . . 51 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 3.1 Prohibition on Benami Transactions (Section 3). . . . . . . . . . . . . . . . . . . . . . . . . 51 3.2 Prohibition of the right to recover property held benami (Section 4). . . . . . . . . 53 3.3 Property held benami liable to be confiscated (Section 5) . . . . . . . . . . . . . . . . . 56 3.4 Prohibition on re-transfer of property held benami (Section 6) . . . . . . . . . . . . . 56 3.5 FAQs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Chapter 4 Authorities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 4.1 Adjudicating authority (Section 7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 4.2 Composition of adjudicating authority (Section 8). . . . . . . . . . . . . . . . . . . . . . . 60 4.3 Qualification for appointment of chairperson and members (Section 9). . . . . . . 60 4.4 Benches of adjudicating authority (Section 10) . . . . . . . . . . . . . . . . . . . . . . . . . 61 4.5 Power of adjudicating authority (Section 11). . . . . . . . . . . . . . . . . . . . . . . . . . . 61 4.6 Term of office of the chairperson and members (Section 12). . . . . . . . . . . . . . . 62

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4.7

Terms and conditions of services of chairperson and members of adjudicating authority (Section 13). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 4.8 Removal of chairperson and members of adjudicating authority (Section 14) . . . 63 4.9 Member to act as chairperson in certain circumstances (Section 15). . . . . . . . . 63 4.10 Proceedings not to be invalidiated for any vacancy (Section 16). . . . . . . . . . . . 64 4.11 Officers and employees of the adjudicating authority (Section 17) . . . . . . . . . . 65 4.12 Authorities and jurisdiction (Section 18). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 4.13 Powers of the authorities (Section 19). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 4.14 Officers to assist in inquiry (Section 20). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 4.15 Power to call for information (Section 21). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 4.16 Power to impound documents (Section 22). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 4.17 Power of authority to conduct inquiry (Section 23) . . . . . . . . . . . . . . . . . . . . . . 70 4.18 FAQs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 Chapter 5 Attachment, Adjudication and Confiscation . . . . . . . . . . . . . . . . 73 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 5.1 Attachment of Benami Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 5.2 Adjudication of Benami Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 5.3 Confiscation of Benami Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 5.3.1 Confiscation and vesting of benami property. . . . . . . . . . . . . . . . . . . 81 5.3.2 Management of the property confiscated. . . . . . . . . . . . . . . . . . . . . . 82 5.3.3 Possession of confiscated property. . . . . . . . . . . . . . . . . . . . . . . . . . . 83 5.4 FAQs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 Chapter 6 Appellate Tribunal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 6.1 Establishment of Appellate Tribunal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 6.2 Composition of Appellate Tribunal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 6.3 Qualification for appointment of Chairman and other members. . . . . . . . . . . . . 88 6.4 Terms and conditions of services of Chairperson and members of Appellate Tribunal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89 6.5 Term of office of Chairperson and members. . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 6.6 Removal of Chairperson and members from office in certain circumstances. . . 90 6.7 Vacancy etc. not to invalidate proceedings of Appellate Tribunal . . . . . . . . . . . 91 6.8 Resignation and removal of Chairperson and member. . . . . . . . . . . . . . . . . . . . 91 6.9 Members to Act as Chairperson in certain circumstances. . . . . . . . . . . . . . . . . . 92 6.10 Staff of Appellate Tribunal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 6.11 Procedure and power of Appellate Tribunal . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 6.12 Distribution of business amongst the benches of the Appellate Tribunal. . . . . . 95 6.13 Power of Chairperson of Appellate Tribunal to transfer cases . . . . . . . . . . . . . . 95 17

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6.14 Decision to be by majority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 6.15 Members etc to be public servant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 6.16 Bar of jurisdiction of Civil Courts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 6.17 Appeals to Appellate Tribunal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 6.18 Rectification of Mistake. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98 6.19 Right to representation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98 6.20 Appeals to High Court. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 6.21 FAQs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 Chapter 7 Special Courts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 7.1 Definition of Special Courts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 7.2 Application of Code of Criminal Procedure, 1973 to proceedings before Special Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107 7.3 Appeal and revision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 7.4 FAQs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 Chapter 8 Offences and Prosecution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 8.1 Penalty for Benami Transaction (Section 53 of the Act). . . . . . . . . . . . . . . . . . 113 8.2 Penalty for false information (Section 54) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114 8.3 Previous sanction (Section 55) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114 8.4 FAQs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115 Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117 Chapter 9 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117 9.1 Repeal of provisions of certain acts (Section 56 of the Act). . . . . . . . . . . . . . . 117 9.2 Certain transfers to be null and void (Section 57). . . . . . . . . . . . . . . . . . . . . . . 118 9.3 Exemption (Section 58). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118 9.4 Power of central government to issue directions, etc (Section 59). . . . . . . . . . 119 9.5 Application of other laws not barred (Section 60) . . . . . . . . . . . . . . . . . . . . . . 120 9.6 Offences to be non-cognizable (Section 61). . . . . . . . . . . . . . . . . . . . . . . . . . . 120 9.7 Offences by companies (Section 62). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120 9.8 Notice, etc not to be invalid on certain grounds (Section 63). . . . . . . . . . . . . . 122 9.9 Protection of action taken in good faith (Section 64). . . . . . . . . . . . . . . . . . . . 122 9.10 Transfer of pending cases (Section 65). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123 9.11 Proceedings, etc against legal representative (Section 66). . . . . . . . . . . . . . . . 124 9.12 Act to have overriding effect (Section 67) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125 9.13 Power to make rules (Section 68). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125 9.14 Laying of rules and notificationS before parliament (Section 69). . . . . . . . . . . 127 18

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9.15 Power to remove difficulties (Section 70). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128 9.16 Transitional provision (Section 71). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128 9.17 Repeal and savings (Section 72 of the Act). . . . . . . . . . . . . . . . . . . . . . . . . . . . 129 9.18 FAQs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129 Chapter 10

The Prohibition of Benami Property Transactions Rules, 2016. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131 10.1 Scope and extent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131 10.2 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132 10.3 Setting up the legislative framework. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 10.3.1 Designating the chairperson and the member of the adjudicating authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 10.3.2 Power and duties of the authorities. . . . . . . . . . . . . . . . . . . . . . . . . . 133 10.3.3 Power of the appellate tribunal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135 10.3.4 Power of the appellate tribunal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136 10.4 Furnish information to the authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136 10.5 Attachment and management of benami property. . . . . . . . . . . . . . . . . . . . . . . 138 10.5.1 Temporary attachment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138 10.5.2 Confiscation of benami property . . . . . . . . . . . . . . . . . . . . . . . . . . . 138 10.5.3 Receive and manage benami property. . . . . . . . . . . . . . . . . . . . . . . 140 10.5.4 Process of transfer of benami property. . . . . . . . . . . . . . . . . . . . . . . 140 10.6 Manner of determination of fair price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141 10.7 Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142 10.8 FAQs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142 10.9 Prescribed forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145 Chapter 11

Manner of provisional attachment and disposal of confiscated property - Income Tax Act, 1961. . . . . . . . . . . . . . . . 149 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149 11.1 Provisional attachment of benami property in the interest of the revenue . . . . 150 11.2 Attachment of movable property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150 11.3 Sale of movable property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151 11.4 Attachment of immovable property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152 11.5 Sale of immovable property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152 11.6 Judicial precedents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153 Chapter 12 Money laundering in India. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155 12.1 Statutes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156 12.2 Salient Features of the Statutes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156 19

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12.3 Linkage between Prevention of Money Laundering Act and Prohibition of Benami Property Transaction Act . . . . . . . . . . . . . . . . . . . . . . . 160 Chapter 13 Pradhan Mantri Jan-Dhan Yojana . . . . . . . . . . . . . . . . . . . . . . . . 161 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161 13.1 Documents required to open an account under PMJDY. . . . . . . . . . . . . . . . . . 162 13.2 PMJDY account opening forms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162 13.3 Eligibility. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163 13.4 Ineligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163 13.5 Benefits under PMJDY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163 13.6 Small account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164 13.7 Change of old accounts under PMJDY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164 13.8 Contact details of PmjdY officials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165 13.9 Reserve bank of india’s notification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165 13.10 FAQs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165 Chapter 14 Pradhan Mantri Garib Kalyan Yojana. . . . . . . . . . . . . . . . . . . . . 175 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175 14.1 Salient features of explanatory note on provisions of the taxation and investment regime for PMGKY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175 14.1.1 Opportunity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175 14.1.2 Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176 14.1.3 Tax, surcharge, penalty and deposit under PMGKY . . . . . . . . . . . . 176 14.1.4 Time limits for declaration and making payment. . . . . . . . . . . . . . . 176 14.1.5 Form for declaration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176 14.1.6 Filing of declaration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177 14.1.7 Declaration not eligible . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177 14.1.8 Invalid declaration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177 14.1.9 Non-refundable taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177 14.1.10 Effect of valid declaration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178 14.2 Salient features of PMGKDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178 14.2.1 Applicability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178 14.2.2 Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178 14.2.3 Forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178 14.2.4 Subscription and mode of investment account. . . . . . . . . . . . . . . . . 178 14.2.5 Effective date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179 14.2.6 Application(s). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179 14.2.7 Authorised bank(s). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179 14.2.8 Nomination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180 14.2.9 Transferability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180 14.2.10 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180 20

Table of contents

14.2.11 Tradability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180 14.2.12 Repayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180 14.2.13 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181 14.3 FAQs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181 Chapter 15 The Real Estate (Regulation and Development) Act, 2016. . . . 185 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185 15.1 DefinItions (Section 2 of RERA). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185 15.2 Registration of real estate project and registration of real estate agents (Section 3 to 10 of RERA). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193 15.3 Functions and Duties of Promoter (Section 11 to 18 of RERA). . . . . . . . . . . . 196 15.4 Rights and duties of allottee (Section 19 of RERA). . . . . . . . . . . . . . . . . . . . . 201 15.5 The Real Estate Regulatory Authority (Section 20 to 40 of the RERA). . . . . . 203 15.6 Central advisory council (Section 41 and 42). . . . . . . . . . . . . . . . . . . . . . . . . . 208 15.7 The Real Estate Appellate Tribunal (Section 43 to 58). . . . . . . . . . . . . . . . . . . 208 15.8 Offences penalties and adjudication (Section 59 to 72) . . . . . . . . . . . . . . . . . . 215 15.9 Finance, accounts, audits and reports (Section 73 to 78 of RERA) . . . . . . . . . 219 15.10 Miscellaneous (Section 79 to 92 of the RERA) . . . . . . . . . . . . . . . . . . . . . . . . 220

Annexure I Annexure II Annexure III Annexure IV Annexure V

Annexure VI

Annexure VII

Annexure VIII Annexure IX Annexure X Annexure XI

ANNEXURES The Benami Transactions (Prohibition) Act, 1988 . . . . . . . . . . . . . . . 225 The Benami Transactions (Prohibition) Amendment Act, 2016. . . . . . 229 The Prohibition of Benami Property Transactions Rules, 2016 . . . . . 261 The Prohibition of Benami Property Transactions Act, 1988 [as amended by Act No.43 of 2016]. . . . . . . . . . . . . . . . . . . . . . 269 CBDT Notification No. 97/2016 dated 25th October, 2016 notifying the Adjudicating Authority and the Appellate Tribunal until specifically established under the Benami Law . . . . . . 299 CBDT Notification No. 98/2016 dated 25th October, 2016 notifying the effective date of the Benami Transaction (Prohibition) Amendment Act, 2016. . . . . . . . . . . . . . . . . . . . . . . . . . . 301 CBDT Notification No. 100/2016 dated 25th October, 2016 notifying the territorial authorities with respective jurisdictions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 303 Second Schedule of the Income-tax Act, 1961. . . . . . . . . . . . . . . . . . . . 311 Pradhan Mantri Garib Kalyan Deposit Scheme, 2016. . . . . . . . . . . . 337 Pradhan Mantri Jan-Dhan Yojana (PMJDY) . . . . . . . . . . . . . . . . . . . 347 The Real Estate (Regulation and Development) Act, 2016. . . . . . . . . 351

Bibliography/Webliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 399 21

Chapter 1

Introduction

“Property has it duties as well as its rights.”

Thomas Drummond

INTRODUCTION The name of “The Benami Transactions (Prohibition) Act, 1988” has now changed to “The Prohibition of Benami Property Transactions Act, 1988”. This change in the name was pursuant to the enactment of “The Benami Transactions (Prohibition) Amendment Act, 2016”. This new legislation provides for procedures and the appellate mechanism against the orders of the Adjudicating Authority. “The Benami Transactions (Prohibition) Amendment Act, 2016” is the outcome of “The Benami Transactions (Prohibition) Amendment Bill, 2015”, which was introduced in the Lok Sabha on 13 May, 2015. It was passed by both houses of Parliament and received the ascent of the President of India on 10 August, 2016. The Benami Transactions (Prohibition) Amendment Act, 2016 came into force w.e.f. 1 November, 2016. As per provisions of sec 68 of the Act, the Central Government framed the Prohibition of Benami Transactions Rules, 2016 to carry out the provisions of the Act, which come into force w.e.f. the 1 day of November, 2016.

1.1

WHAT IS PROPERTY?

There are many definitions and interpretations of the word “property”. It could include something as basic as a shirt and as important as the house in which you reside.

It could be: •

a corporeal property (which includes land, chattels etc); or

an incorporeal property (which includes patents, copyrights etc).

• In its widest sense, property includes a person’s legal rights, of whatever description. In older days, a master’s servant or a person’s child used to be the master’s property however in today’s world, this view is obsolete. Among material things, the most important distinction is that between movables and immovables.

Under law, both kinds of property are recognised and are afforded protection under various legal statutes. There are some traditional rights assigned to a property, for instance, the owner of the property has:

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•

control over the property,

•

right to take benefit (if any) out of the property,

•

right to transfer or sell the property,

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right to exclude others from the use of that property.

• The Transfer of Property Act, 1882 is the first practical law in India to cover real estate and is a complete code of law for transacting in immovable property. This Act validates the transfer of property by way of acts of the parties itself and not by the operation of law. For a transfer to be effective, the transferor must have a valid interest in the property, whether vested or contingent. A transfer of property may have conditions, covenants or restraints attached to it. Apart from the above, there are additional conditions to make an immovable property transaction legally valid.

For instance, a transferee must be competent to transfer (i.e. he should not be a minor and should be mentally fit) and the transfer can be made only to living persons.

1.2

KINDS OF PROPERTY

Property can be broadly divided into two categories: 1.

Movable property; and

2.

Immovable property

Movable property Section 3(36) of the General Clauses Act defines movable property as: “Movable property shall mean property of every description, except immovable property”.

Section 2(9) of the Registration Act, 1908 defines property as: “Moveable property includes standing timber, growing crops and grass, fruit upon and juice in trees, and property of every other description, except immovable property.”

So, the words “movable property” is intended to include corporeal property of every description, except land and things attached to the earth or permanently fastened to anything, which is attached to the earth.

Immovable property According to sec 3 of the Transfer of Property Act, 1882:

“Immoveable property does not include standing timber, growing crops or grass.”

Regarding buildings these constitute immovable property and machinery, if embedded in the building for the beneficial use of the owner or occupier of the

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Introduction

Building. Therefore this machinery is deemed to be a part of the building and the land on which the building is situated.

Under the General Clauses Act 1897, “immovable property” is defined as follows: “Immovable property shall include land, benefits to arise out of land and things attached to the earth, or permanently fastened to anything attached to the earth”.

As per sec 2(6) of the Registration Act, 1908: “Immovable Property includes land, building, hereditary allowances, rights to ways, lights, ferries, fisheries or any other benefit to arise out of land, and things attached to the earth or permanently fastened to anything which is attached to the earth but not standing timber, growing crops nor grass”.

To attract the protection of law from property which belongs to an individual, the ownership vested in that individual has to be clear and unquestionable. If this ownership is subject to any doubt then the law will not provide the required protection for the concerned property.

Immovable property from time immemorial has always had a value attached to it because it is a source of food and shelter for human beings and other flora and fauna.

Immovable property is also a type of asset which does not grow but given the nature of demand and supply it actually shirks, in a manner of speaking. It is a known fact that the human race over centuries has been expanding in some countries more than the other and this rapid growth has put tremendous pressure on the resources which are available for the use of human beings living in those countries. In view of this tremendous need, the value of immovable property has grown by leaps and bounds in such countries.

Right to property is our constitutional right. At the inception of the Constitution under Article 19(f), the Right to Property was a fundamental right and therefore, it was placed at a very high pedestal. Article 19(1)(f),along with Article 31 of the Constitution, (which now stands repealed) prevented the Government from depriving a person of his property without the “authority of the law” and further stated that such law should provide “for compensation for the property taken possession of or acquired and either fixes the amount of compensation, or specifies the principles on which, and the manner in which, the compensation has to be determined and given”. In case of the landmark judgement of the Hon’ble Supreme Court in Kesava Nanda Bharti v State Of Kerala - AIR 1973 SC 1461, the Supreme Court declared that the Parliament had no right to amend the basic structure of the Indian Constitution. That’s why this case is said to be “the Case that saved Indian Democracy”. By the 44th amendment, the Right to Property ceases to be a fundamental right and became a legal right vide Article 300A of the Indian

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Constitution. Article 300A was inserted to affirm that no person shall be deprived of his property save by authority of law.

With passage of time, the immovable property can often be bought and sold many times. This sale and purchase creates a chain of documents which sets out the pattern of ownership of that immovable property as long as there is a proper flow in the chain of title which is based on the ownership [of an immovable property], there is typically no room for dispute. However, if there is a doubt at any point on the title/ownership, then the property will not have a saleable value because it may be disputed. This dispute will arise if another party has an interest in the property and hence, any buyer of such property will not be able to have peaceful and quiet possession of such property.

The ownership of an immovable property is also disputed when individuals and organisations deliberately create third party interest to avoid paying revenue to the government. This is perpetrated by buying an immovable property in the name of a third property who does not pay the price of such property. Often this method is used by organisations to defraud their creditors by siphoning off the money of organisations to buy property in the name of unrelated parties. This has been recognised as a crime and government has also enacted a law to address this issue.

It is also important to highlight that this kind of transaction has been prevalent since the British rule was prevalent in India. It has been implemented very sporadically and there is a huge land bank which could be classified as benami property.

1.3

MEANING OF BENAMI

The word “benami” is Persian word which means “no name” or “without name”.

The benami property transaction is the transaction of property where one person buys the property in the name of another person or in the name of fictitious person.

That another person or fictitious person does not pay the consideration for the property. The real owner of the transacted property is the person who provides the consideration of the property. The person in the name of whom the property is transferred or held is known as benamidar whereas the beneficial owner is the person who paid the consideration and with whom the real title rests and he thus enjoys the property. Benami transactions are not only confined to purchase of property but it also applies in cases of lease and mortgage.

Benami transactions are being taken place to commit fraud, to evade tax, to avoid political or social risks and to utilize black money into productive use.

1.4

HISTORY OF BENAMI TRANSACTIONS

Benami transactions were common in India since long. In 1778, in the matter of Gopeekrist Gosain v Gunga Persaud, 1854 (6) M.I.A 53, Lord Justice Knight Bruce of Privy Council had held that benami transaction is a custom of a country

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Introduction

and law of the country must recognize it. The law therefore will allow the actual owner of the property to claim his ownership and enjoy the fruits of the property.

In 1882, sections 81 and 82 of the Indian Trust Act, 1882 gave legal status to the practice of benami transactions. Further, in case of Radhakrishnan v Union of India, AIR 1959 Bom 102, the Hon’ble Court held as follows: “Now it is true that under section 81 and 82 of the Trusts Act a benamidar holds the property for and on behalf of the real owner in consequence of which there would be a resulting trusts in respect of the property in favour of the real owner. But then, it would be fallacious to urge from those sections that the legal ownership in such property vests in the benamidar as it does in the case of trustee. What those sections really mean is that the benamidar is in a fiduciary relationship with the real owner and therefore has all the obligations of a person in such fiduciary position towards real owner. A benamidar is no more than an ostensible owner of the property he holds benami, though his acts in certain circumstances would be binding upon the real owner.�

Having been supported by the judiciary, the benami transactions defrauded the public revenue without any restriction.

In the beginning of 19th century, a few provisions were made under various statutes to defeat the menace of benami transactions like: In the Code of Civil Procedure, 1908, sec 66 provides that no suit shall be maintained against any person claiming the title under a purchase certified by the Court in such a manner, as may be prescribed, on the ground that the purchase was made on behalf of the plaintiff or on behalf of someone claiming through the plaintiff.

Under the Transfer of Property Act, 1882, sec 41 deals with transfer by ostensible (superficial) owner and provides that if an ostensible transferor transfers the property for a consideration, it shall not be voidable on the ground that the transferor was not authorized to do so. Section 53 of the same Act makes the transfers made with intent to defraud or delay the creditors, to be voidable.

In 1976, Parliament took the issue and introduced sec 281A in the Income Tax Act, 1961, prohibiting institution of suits to enforce rights relating to any property held benami, if a notice in the prescribed form has not been given to the Commissioner of Income Tax within one year from the date of acquisition of the property.

Despite the above mentioned provisions under various statutes, there was still a need to bring legislation to prohibit benami transactions effectively.

The Law Commission vide its 57th report suggested that benami transactions though should not be made an offence, the law should refuse to recognize the benami transactions. The law should provide benamidar as the real owner. By doing so, benami transactions would be discouraged. Based on the recommendations of Law Commission, in the year 1988, the President of India, while accepting the 27

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recommendations of Law Commission of India promulgated an ordinance on 19th May 1988, namely “Benami Transactions (Prohibition of the Right to Recover Property) Ordinance, 1988”.

Before enactment of the Benami Transactions (Prohibition of the Right to Recover Property) Ordinance, 1988 into an Act, the Law Commission was again requested to give its views on proposed legislation. The Law Commission vide its 130th report submitted several other recommendations on the issues to the Government. Finally, the Benami Transactions (Prohibition of the Right to Recover Property) Ordinance, 1988 was converted into an Act, namely the Benami Property Transactions (Prohibition) Act, 1988 by introduction of a Bill in the Parliament. The Act came into force on 5th September, 1988 barring a few sections of the Act which came into effect on 19 May 1988.

The objective of the Act was to prohibit benami transactions and prohibit recovering property held benami. This Act, however, could not be enforced, since the rules to the Act were never framed.

The Benami Transactions (Prohibition) Bill, 2011 To provide teeth to the Benami Property Transactions (Prohibition) Act, 1988 another Bill namely “The Benami Transactions (Prohibition) Bill, 2011” was introduced in the Lok Sabha on 18 August, 2011 by the Ministry of Finance. This Bill was to replace the Benami Property Transactions (Prohibition) Act, 1988.The Bill defines certain necessary terms including benami transactions. It provides for certain authorities to enforce the provisions of Bill. The Bill prohibits persons entering into benami transactions and the benami property is liable to be confiscated by the Central Government. If the benami property is claimed by the Central Government then no compensation was payable. The Bill also prohibits the right of person claiming to be a beneficial owner of the property. Further, the Bill prohibits the retransfer of such property to the real owner and also provides for penalty for benami transactions and for furnishing false information. The Bill was referred to the Standing Committee of Parliament on finance for its comments. Though the Standing Committee submitted its report in 2012, this Bill lapsed because of dissolution of 15th Lok Sabha.

The Benami Transactions (Prohibition) Amendment Bill, 2015 Though the Benami Transactions (Prohibition) Act, 1988 become an Act, it was ineffective because of various infirmities as reported by the Standing Committee of Parliament on finance during 2015. While taking into consideration the infirmities of the Act of 1988, the Benami Transactions (Prohibition) Amendment Bill, 2015 was introduced in the Lok Sabha on 13 May, 2015 to seek amendment in the Benami Transactions (Prohibition) Act, 1988. This Bill seeks to:

28

•

amend definition of benami transactions,

•

establish adjudicating authorities and Appellate Tribunal,

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•

Introduction

specify penalty for persons entering into benami transactions; and

confiscation of benami property without paying compensation. • The Benami Transactions (Prohibition) Amendment Bill, 2015 has been passed by the Parliament and the Benami Transactions (Prohibition) Amendment Act, 2016 come into effect on 1 November, 2016. The Central Government in exercise of powers conferred under sec 68 of the Prohibition of Benami Property Transaction Act, 1988 made the relevant Rules known as the Prohibition of Benami Transactions Rules, 2016 to carry out the provisions of the Act.

1.5

SALIENT FEATURES OF BENAMI TRANSACTION

There are a number of reasons which has given rise to benami transactions, amongst the salient are: A.

Dual control: The immovable property in itself is a centre and state subject as per The Indian Constitution, 1949. This has given rise to a plethora of laws which are applicable on central laws as well as in different states.

Therefore, apart from a central legislation, there can be a state legislation which governs the immovable property. Due to two sets of control recording of title for immovable property, it is not as streamlined as it would have been if all titles of immovable property is centralised and recorded in one data.

B.

Chaotic records: Immovable property has been recorded at the level of local administrative offices where such records are maintained in a very chaotic manner due to lack of resources.

C.

Different units of measurement: It is also noteworthy that the units of measurements in different states method of keeping the records and payment of stamp duty are so varied that it is very difficult for the common man to transact for an immovable property as there is no one single modus operandi which can be used across the country.

D.

Different practices: Given the aforesaid reasons, often benami transactions due to the prevailing differences in the manner of acquiring property in various parts of the country, has also helped in giving rise to benami transactions.

1.6

OBJECTIVES

The Act provides a legislative framework for seizing properties, which are being used as a mechanism to park unaccounted money. This would help in achieving the twin objectives of strictly enforcing the law against the defaulters who have bought benami properties in a systematic and effective manner and also, help in inducting the money used to buy these properties back into the financial network. There was certain lacuna in the existing law prior to the enactment of this Act.

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Some of them are: (a)

Lack of a strong legislative infrastructure.

(b)

No appellate mechanism was available.

(c)

Lack of a well organised implementation mechanism along with teeth to actually enforce the penalties against the law breakers.

(d)

Authority to actually seize benami property etc.

To address these issues, the Act now provides the following provisions: Under the Act, four authorities have been established to conduct inquiries or investigations regarding benami transactions: (1)

The Initiating Officer;

(2)

The Approving Authority;

(3)

Administrator, and

(4)

Adjudicating Authority.

At the outset if an Initiating Officer is of the opinion that a person owns a benami property, he/she may issue a notice to that person. The Initiating Officer may hold the property for 90 days from the date of issue of the notice, subject to obtaining a written permission from the Approving Authority. Upon the completion of the notice period, the Initiating Officer may pass an order to continue the holding of the property.

If an order is passed to continue holding the property, the Initiating Officer will then refer the case to the Adjudicating Authority. The Adjudicating will consequently examine all documents and evidence relating to the matter and then pass an order on whether or not to hold the property as it is classified as benami.

The Act also provides for setting up an Appellate Tribunal to hear appeals against any orders passed by the Adjudicating Authority. Appeals against orders of the Appellate Tribunal will then be escalated to the High Court.

Further, the Act provides for strong penal provisions which empower the implementing authority. The penalty under the Act has been increased to rigorous imprisonment of one year up to seven years, and a fine which may extend to 25% of the fair market value of the benami property. Additionally, the penalty for providing false information about a benami property has been set out, as rigorous imprisonment of six months up to five years, and a fine which may extend to 10% of the fair market value of the benami property. To fast track these proceedings, the Act seeks to designate Special Courts for trying any offences which are punishable Act and to which the Code of Criminal Procedure 1973 would be applicable.

The Act has also given the power to the Administrator who is actually an Income Tax Officer representing the Government to receive and manage the property in a manner and subject to conditions as prescribed, subject to an order passed to confiscate benami property.

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Introduction

The long term benefits of the reforms introduced under this Act are manifold. Some of these benefits are detailed hereunder: •

The much needed transparency in the real estate area will get a fillip as the wrong owners would get removed and going forward the deterrents created by a strong legislation would discourage such practices.

•

There is an artificial hype created in prices of property by individuals and organisations by using this route of benami transactions. With this step, only more and more of the end users would be typically buying and selling properties and this would provide a much needed correction to the prices of property.

•

As the ownership of property will become more certain and easy to ascertain, it will help the financial institutions to provide credit to the buyers on better terms and conditions.

•

Further, for the sellers it would be easier to sell, since, the ownership issues would stand reduced, instilling confidence in the buyers.

•

On macro front, for the government, the fight against removing illgotten funds from the economic system would get a boost; and

•

This would also help other ancillary sectors like the construction industry etc to grow, by acquiring clean properties at better rates and deliver these benefits to the consumers.

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