AUTHORITIES UNDER THE PROHIBITION OF BENAMI TRANSACTIONS ACT, 1988

[DR.MARIAPPAN GOVINDARAJAN]

The Prohibition of Benami Transactions, 1988 (‘Act’ for short) was enacted with the objective to prohibit benami transactions and the right to recover property held benami and for matters connected therewith or incidental thereto.

Benami transaction

Section 2(9) of the Act defines the expression ‘benami transaction’ as-

• 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, except when the property is held by-

• a Karta, or a member of a Hindu undivided family, as the case may be, and the property is held for his benefit or benefit of other members in the family and the consideration for such property has been provided or paid out of the known sources of the Hindu undivided family;
• a person standing in a fiduciary capacity for the benefit of another person towards whom he stands in such capacity and includes a trustee, executor, partner, director of a company, a depository or a participant as an agent of a depository under the Depositories Act, 1996 (22 of 1996.) and any other person as may be notified by the Central Government for this purpose;
• any person being an individual in the name of his spouse or in the name of any child of such individual and the consideration for such property has been provided or paid out of the known sources of the individual;
• any person in the name of his brother or sister or lineal ascendant or descendant, where the names of brother or sister or lineal ascendant or descendent and the individual appear as joint-owners in any document, and the consideration for such property has been provided or paid out of the known sources of the individual; 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;
• a transaction or an arrangement in respect of a property where the person providing the consideration is not traceable or is fictitious;

The explanation to this section clarifies that the benami transaction shall not include any transaction involving the allowing of possession of any property to be taken or retained in part performance of a contract referred to in section 53A of the Transfer of Property Act, 1882, if, under any law for the time being in force, -

• consideration for such property has been provided by the person to whom possession of property has been allowed but the person who has granted possession thereof continues to hold ownership of such property;
• stamp duty on such transaction or arrangement has been paid; and
• the contract has been registered.

Omission

Section 8 to 17 were omitted by the Finance Act, 2021.  The said sections provides the following-

• Section 8 – Composition of Authority;
• Section 9 – Qualifications for appointment of Chairperson and Members.
• Section 10 – Constitution of Benches of Adjudicating Authority
• Section 11 – Power of Regulating Authority to regulate its own procedure;
• Section 12 – Term of office of Chairperson and members of Adjudicating Authority;
• Section 13 – Terms and services of Chairperson and Members of Adjudicating Authority;
• Section 14 – Removal of Chairperson and Members of Adjudicating Authority;
• Section 15 – Member to act as Chairperson in certain circumstances;
• Section 16 – Vacancies etc., not to invalidate proceedings of Adjudicating Authority;
• Section 17 – Officers and employees of the Adjudicating Authority.

Authorities

Section 18 of the Act provides the list of authorities for the purposes of this Act.  They are-

• The Initiating Officer;
• The Approving Authority;
• The Administrator; and
• The Adjudicating Authority.

Initiating Officer

The initiating Officer is an Assistant Commissioner or a Deputy Commissioner as defined in clauses (9A) and (19A) respectively of section 2 of the Income-tax Act, 1961.

Approving Authority

The Approving Authority is an Additional Commissioner or a Joint Commissioner as defined in clauses (1C) – Additional Commissioner and (28C) – Joint Commissioner, respectively of section 2 of the Income-tax Act, 1961.

Administrator

The Administrator means an Income-tax Officer as defined in clause (25) of section 2 (Income Tax Officer) of the Income-tax Act, 1961.

Adjudicating Authority

Section 7 of the Act provides that the Central Government shall, by notification, appoint one or more Adjudicating Authorities to exercise jurisdiction, powers and authority conferred by or under this Act. 

The Finance Act, 2021 amended section 7 of the Act.  According to amendment Section 7 provides that the competent authority authorised under section 5 (1 ) of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 shall be the Adjudicating Authority to exercise jurisdiction, powers and authority conferred by or under this Act.  The said amendment came into effect from 01.07.2021.

Section 5 of the above said Act provides that the Central Government may, by order published in the Official Gazette, authorise as many officers of the Central Government (not below the rank of a Joint Secretary to the Government), as it thinks fit, to perform the functions of the competent authority under this Act.   The competent authorities shall perform their functions in respect of such persons or classes of persons as the Central Government may, by order, direct.

Powers of the Authorities

The authorities shall exercise all or any of the powers and perform all or any of the functions conferred on, or, assigned, as the case may be, to it under this Act or in accordance with such rules as may be prescribed.

Section 19(1) of the Act provides that the Authorities under this Act shall have the same powers as are vested in a Civil Court under the Code of Civil Procedure, 1908 while trying a suit in respect of the following matters-

• discovery and inspection;
• enforcing the attendance of any person, including any official of a banking company or a public financial institution or any other intermediary or reporting entity, and examining him on oath;
• compelling the production of books of account and other documents;
•  issuing commissions;
• receiving evidence on affidavits; and
•  any other matter which may be prescribed.

The persons summoned under this Act shall attend before the Authority in person or through Authorized agent as any authority under this Act.  The concerned person shall state the truth upon any subject respecting which they are examined or make statements, and produce such documents as may be required.

Every proceeding under this Act shall be deemed to be a judicial proceeding within the meaning of Section 193 and 228 of the Indian Penal Code.  The Authority concerned may requisition the service of any police officer or of any officer of the Central Government or State Government or of both to assist him for all or any of the purposes. It shall be the duty of every such officer to comply with the requisition or direction.

List of officers to assist the Authorities

Section 20 of the Act provides that the following officers shall assist the authorities in the enforcement of this Act,-

• income-tax authorities;
• officers of the Customs and Central Excise Departments;
• officers appointed under section 5(1) of the Narcotic Drugs and Psychotropic Substances Act, 1985;
• officers of the stock exchange recognised under section 4 of the Securities Contracts (Regulation) Act, 1956;
• officers of the Reserve Bank of India constituted under section 3(1) of the Reserve Bank of India Act, 1934;
• police;
• Enforcement Officers appointed under section 36 (1) of the Foreign Exchange Management Act, 1999;
•  officers of the Securities and Exchange Board of India under section 3 of the Securities and Exchange Board of India Act, 1992;
• officers of any other body corporate constituted or established under a Central or a State Act; and
• such other officers of the Central Government, State Government, local authorities or banking companies as the Central Government may, by notification, specify, in this behalf.

Powers of Authorities

To call for information

Section 21 gives powers to The Initiating Officer or the Approving Authority or the Adjudicating Authority to require any officer of the Central Government or State Government or a local body or any person or officer who is responsible for registering and maintaining books of account or other documents containing a record of any transaction relating to any property or any other person to furnish any information in relation to any person, point or matter as in his opinion shall be useful for or relevant for the purposes of this Act.  Such shall furnish such information to any authority under this Act in such form and manner as may be prescribed.

Impounding of documents

Section 22 of the Act provides that where any books of account or other documents are produced before the authority in any proceedings under this Act and the authority in this behalf has reason to believe that any of the books of account or other documents are required to be impounded and retained for any inquiry under this Act, it may impound and retain the books of account or other documents for a period not exceeding 3 months from the date of order of attachment made by the Adjudicating Authority.  The retention of the books and documents may be extended beyond 3 months if the Authority records the reasons in writing.

In case of initiating Officer, he shall obtain approval of the Approving Authority within a period of 15 days from the date of initial impounding and seek further approval of the Approving Authority for extending the period of initial retention, before the expiry of the period of initial retention, if so required.  The retention shall not exceed 30 days. 

Return of documents

The owner of the documents shall be entitled for copy of such documents.  After the expiry of the retention period the documents shall be returned to the person from whom they were impounded.  The said documents may be transferred to any other party on the approval of Approving Officer or Adjudicating Authority.

To conduct enquiry

Section 23 of the Act provides that the Initiating Officer, after obtaining prior approval of the Approving Authority, shall have power to conduct or cause to be conducted any inquiry or investigation in respect of any person, place, property, assets, documents, books of account or other documents, in respect of any other relevant matters under this Act.