New Ruling On Benami Law May Unearth Old Deals

Context: The Appellate Tribunal on Disputes in Benami Matters has ruled that “Held” used in the Benami Act 2016 also covers the proceeds of crime committed before 2016, and is currently being held or possessed by the beneficiary. 

News:

Tribunal Decision Regarding Benami Property:

• The tribunal has decreed that the possession of a Benami property following the 2016 amendment to the Benami Act of 1988 would be considered a Benami transaction.
• If higher courts uphold this interpretation, it may carry substantial consequences, potentially subjecting previous transactions to legislation that was previously invalidated by the Supreme Court. The avenue for challenging this ruling lies with both the High Court and the Supreme Court.

Benami Definition (2016 Act):

A benami transaction refers to a situation or agreement in which a property or assets, such as stocks, is ostensibly "transferred" to or is officially "held" by one individual, while the actual consideration for such property has been furnished or paid by another individual. Consequently, the individual holding the asset is not the genuine beneficial owner of the property.

Benami Transactions (Prohibition) Amendment Act 2016 :

1. Expanded Definition:

• Introduced the concept of "held" in addition to "transferred" in defining benami transactions.

2. Increased Penalties:

• Elevated the imprisonment term from 3 to 7 years.
• Imposed fines up to 25% of the value of the benami property.

3. Confiscation of Property:

• Instituted the confiscation of properties acquired through benami transactions.

4. Strengthened Administrative and Legal Procedures:

•  Established designated officers for investigation and adjudication:
•  Initiating Officer
•  Approving Authority
•  Administrator
•  Adjudicating Authority
•  Streamlined procedures and established an Appellate Tribunal for appeals.

5. Impact of the Legislation:

• The income tax department issued numerous notices and initiated criminal prosecutions against companies and individuals.
•  Properties were confiscated using the retrospective clause of the new law.

6. Supreme Court Judgment (August 2022):

• Declared the retrospective application of the benami law as unconstitutional.

7. Present Tribunal Ruling:

• Asserts that the existence of a transaction, demonstrated by the holding of an asset post-November 2016, would be considered a continuation of the offense under the law.