The term “Benami” is derived from Urdu meaning “no name” or “without a name”, and the term Benami Transaction in context with property transactions refers to the act of holding properties in the name of someone else while retaining actual ownership and benefits. The property involved is registered under some fictitious name and is held by someone who has paid for the property. This property is held for either some prospect or benefit.
The most important Act governing benami transactions in India is the Benami Transactions (Prohibition) Amendment Act, of 2016, which modified and strengthened the parent Act, the Benami Transactions (Prohibition) Act, of 1988. It details an elaborate framework for the prohibition against benami transactions and lays down procedures for identifying, attaching, and confiscating benami properties.
The process of attachment of Property involved in a Benami Transaction is an important aspect of the enforcement of the Benami Act under the Enforcement Directorate. The proceedings start with the Initiating Officer issuing show cause notice to the beneficial owners of the property if he is presented with reasons to suspect that the property involved in the manner is benami. If the Initiating Officer believes that it is necessary to prevent the transfer or alienation of the property, he may provisionally attach it for 90 days from the date of notice. This attachment constrains the property and it cannot be transferred, disposed of, or dealt with in any manner during investigation. After all lawful proceedings and investigation the attachment is confirmed in cases where the property is held to be benami and further steps for confiscation of property are taken. An aggrieved party may prefer an appeal before the Appellate Tribunal within 45 days from the order of the Adjudicating Authority.
Further appeal to the High Court and then the Supreme Court lies.
⦿ The property attached in the Benami transaction must be treated as a frozen asset, that is it should not be involved in any purpose of mortgaging, buying, and selling.
⦿ All proceedings against the property under attachment shall be stayed till removal or forfeiture of that property.
⦿ The rights of third parties who have acquired the property in good faith and for adequate consideration may be protected, subject to certain conditions.
⦿ Layering and the use of often complex shell companies in benami transactions make tracing of ultimate beneficial ownership very difficult.
⦿ Quite often, powerful individuals involved in benami transactions challenge attachments through long-drawn legal battles.
⦿ Complicated issues relating to jurisdiction create problems like attachment in the case of cross-border transactions, especially concerning benami properties.
⦿ Attachment cases involving properties whose fair market value has to be ascertained are quite contestable, more so those involving unique or high-value assets.
⦿ Protection of genuine transactions from attachment by declaring such transactions as benami is quite a difficult task for the authorities.
⦿ Some notable impacts so far with the implementation of the amended Benami Act and increased focus on attaching benami properties are the deterrence of attachment of property, a threat discouraging performing benami transactions, and recovering large sums of undisclosed wealth through attachment and confiscation of benami properties.
⦿ The action against Benami properties has helped to an extent bring cleanliness in the real estate sector.
⦿ Some high-profile cases of politicians and businessmen have brought public attention to the cases of benami properties.
⦿ Attachment of benami properties has helped in cleaning the mess of black money from the economy.
⦿ Technology is fast being used to make the identification and attachment of benami properties more effective.
⦿ Advanced analytics tools are being used to slice and dice large datasets to identify suspicious transaction patterns.
⦿ Several government databases, including land records, tax returns, and details of banking information, are being integrated to arrive at a comprehensive view of property ownership and transactions.
⦿ There have been deliberations on using blockchain to create tamper-proof property records, which would further make it difficult to hold benami transactions in the future.
⦿ As benami transactions frequently assume international dimensions, India has been working to consolidate its cooperation with other countries. The information exchange agreements that India has signed with several countries provide for automatic exchange of financial information.
⦿ These treaties assist in gathering evidence and enforcing attachments in cases associated with cross-border benami transactions.
⦿ With increasing experience and resources, the enforcement agencies are likely to be more stringent in attaching and identifying benami properties.
⦿ With experience in its implementation, further legislative amendments might be brought in to plug loopholes or to iron out practical issues in the Benami Act.
⦿ A bigger role for Artificial Intelligence and Machine Learning in detecting complicated patterns in benami transactions.
⦿ Continued public education about the risks and consequences of benami transactions would help reduce their prevalence.
Property attachment is, therefore, an important weapon in the arsenal for fighting black money and tax evasion in general in India. Though the process is ridden with numerous challenges, it already makes a commendable impact on the deterrence of such transactions and recovering undisclosed wealth. With changes in implementation mechanisms and technology underway, property attachment will become easier to carry out, thereby bringing transparency and accountability into the property market and the economy at large for India. If you struggle to get the right information on the Attachment of property involved in the Benami Transaction, consult with CA Manoj K Pahwa, where the prominent team will address all your queries.