Benami Property Transactions
What is Benami Transaction?
Benami means "without name" or "no name."
A benami transaction is a transaction where the property is held by one person, but the consideration (money) is paid by another.
The person in whose name the property is held is called the benamidar, and the person who provides the consideration is called the beneficial owner.
Such transactions are used to conceal ownership, avoid taxes, launder black money, or evade the law.
Legal Framework
The Benami Transactions (Prohibition) Act, 1988, was enacted to prohibit benami transactions and prescribe penalties.
The Benami Transactions (Prohibition) Amendment Act, 2016 strengthened the law by:
Defining benami transactions more broadly.
Creating the Adjudicating Authority and Appellate Tribunal for disputes.
Empowering authorities to confiscate benami properties without compensation.
The Act aims to curb black money and prevent illegal property ownership.
Key Features of Benami Transactions
The person paying for the property is not recorded as the owner.
The benamidar is a dummy or front with no beneficial interest.
Such transactions are considered fraudulent and illegal under the Act.
Confiscation of benami property is allowed.
No person can file a suit to recover benami property.
Important Case Laws on Benami Transactions
1. K.S. Venkatesh v. Union of India (2018) 5 SCC 740
Facts: Challenge to constitutional validity of the Benami Transactions (Prohibition) Amendment Act, 2016.
Issue: Whether the Amendment Act is constitutional and whether it violates fundamental rights.
Ruling: Supreme Court upheld the validity of the Act.
Principle: The law is a reasonable restriction under Article 19(1)(f) and aims to prevent tax evasion and black money.
Significance: Affirmed the government's power to curb benami transactions.
2. CIT v. Manjunatha Cotton and Ginning Factory (2002) 2 SCC 577
Facts: Issue whether purchase of property in someone else's name amounts to benami.
Ruling: Supreme Court held that where the person paying the consideration is different from the person in whose name property is held, it is a benami transaction.
Principle: Establishes the basic test of benami transaction.
Significance: Clear distinction between benami and genuine transactions.
3. Gaurav Hargovindbhai Dave v. Union of India (2018) 10 SCC 511
Facts: Challenge to the authorities’ powers under the 2016 Amendment.
Issue: Scope and powers of authorities to attach and confiscate benami properties.
Ruling: Supreme Court clarified procedural safeguards and upheld authority’s power.
Principle: Due process must be followed but authorities have wide powers to act against benami property.
Significance: Strengthened enforcement mechanisms.
4. Assistant Commissioner of Income Tax v. Durga Prasad More (2017) 2 SCC 723
Facts: Property held in the name of a third party but the payment made by the assessee.
Issue: Whether such transaction is benami.
Ruling: Held to be benami; no exception where transaction is bona fide.
Principle: Substance over form; beneficial ownership is crucial.
Significance: Reiterated that the actual source of funds determines benami status.
5. Kishore Samrite v. Union of India (2018) 10 SCC 343
Facts: Confiscation of property alleged to be benami.
Issue: Whether confiscation without trial or compensation is valid.
Ruling: Upheld confiscation under the Benami Act; no compensation for benami property.
Principle: Confiscation is a civil consequence, not a criminal penalty.
Significance: Strong deterrence against benami holdings.
6. State of Punjab v. Gurpreet Singh (2017) 6 SCC 185
Facts: Property bought in the name of a relative allegedly as benami.
Issue: Whether property can be declared benami.
Ruling: Court analyzed intent and source of funds to hold transaction as benami.
Principle: Focus on intention and control of beneficial owner.
Significance: Highlights importance of facts in benami cases.
Summary Table: Key Principles on Benami Transactions
| Case | Year | Principle |
|---|---|---|
| K.S. Venkatesh v. Union of India | 2018 | Validity of Benami Act upheld; reasonable restriction to curb black money |
| CIT v. Manjunatha Cotton | 2002 | Defined benami transaction; difference between owner and payer is key |
| Gaurav Hargovindbhai Dave v. UOI | 2018 | Authority’s powers to attach/confiscate benami properties upheld with due process |
| ACIT v. Durga Prasad More | 2017 | Substance over form; transaction is benami if payment is made by a different person |
| Kishore Samrite v. Union of India | 2018 | Confiscation without compensation is valid under Benami Act |
| State of Punjab v. Gurpreet Singh | 2017 | Intention and source of funds critical in determining benami property |
Conclusion
Benami transactions are illegal and attract confiscation without compensation.
The law is aimed at curbing black money, tax evasion, and illegal property ownership.
Courts have consistently supported the government’s stringent actions to identify and confiscate benami properties.
The 2016 Amendment Act has given authorities broad powers, but with safeguards to ensure fairness.
Understanding the intent, source of funds, and beneficial ownership is crucial in benami cases.
RELATED Blog
0 comments