People intending to park their unaccounted money in real estate under the nose of the tax authorities are known to engage in benami transactions
The Centre on Wednesday approved the creation of an adjudicating authority and an appellate tribunal to expedite cases related to benami transactions in the future.
This move may help in a more efficient administration of cases referred to the newly formed adjudicating authority and a swift disposal of appeals filed against the order of authority before the tribunal.
A benami transaction is one where the property is held by a person, but funds to acquire it have been provided by another person for whose benefit the property is held. People who intend to park their unaccounted money in real estate, dodging tax authorities, are known to engage in these transactions.
The Finance Ministry told the Rajya Sabha in July that provisional attachment was made in over 1,600 cases of properties under the Benami Transactions (Prohibition) Act, 1988, which include land, flats, shops, vehicles and deposits in bank accounts.
The ministry said the value of properties is over Rs 4,300 crore, including immovable properties worth more than Rs 3,400 crore.
The approved adjudicating authority, along with three additional branches, will provide the first review of administrative action under the Act for which the tribunal will provide an appellate mechanism.
Income Tax officials will be appointed for the two bodies, which will be headquartered in Delhi. Benches of adjudicating authority, however, may be set up in Kolkata, Mumbai and Chennai.
The government can confiscate benami properties under the Act without payment of any compensation. The law was originally enacted in 1988 by the Congress government and notified by the Narendra Modi government in 2016.
In this amendment, violations were made punishable with an imprisonment of seven years and a fine of up to 25 percent of the fair value of the asset.
Also, the term ‘property’ now includes movable, immovable, tangible and intangible properties.
The Benami Act, the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 and the recently passed Fugitive Economic Offenders Act, 2018 are expected to help the government counter black money in and outside the country.“Since there was no adjudicating officer earlier, the aggrieved party could not approach a higher authority against the findings of the ground level officer or to an appellate tribunal if he is not happy with the decision of the adjudicating authority. The trail is now complete,” Sanjay Sanghvi, Tax Partner at Khaitan & Co told Mint. He said there are checks in place within the Act to avoid categorisation of genuine property as benami.