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• GS 3 || Economy || Public Finance || Taxation

Why in news?

Maharashtra deputy cm 1,000 crore assets seized

Present Context:

• The Income Tax (I-T) Department on Tuesday provisionally attached several assets linked to Maharashtra Deputy CM Ajit Pawar under the Prohibition of Benami Property Transactions Act, 1988.
• The central agency has attached properties linked to the NCP leader worth over Rs 1,000 crore located in various states.
• These include a SSK, a resort in Goa, an office and a residential property in Delhi.
• The I-T department has provisionally attached 27 pieces of land across Maharashtra — combined value of the land is estimated to be around Rs 500 crore.
• All these properties are believed to be owned by Ajit Pawar and other members of his family.

All about Benami Property:

What is a benami transaction?

• The word benami means “without a name”.
• In simple terms, a benami transaction refers to any transaction made by a person without using his name or by using the name of another person.
• There is a popular perception that benami transactions are used to disguise the real ownership for reasons, including tax avoidance, maintaining secrecy, creating personal wealth at the expense of business, parking unaccounted money etc.

The Act:

• The Benami Transactions (Prohibition) Act, 1988 (‘Old Act’) was introduced to prohibit benami transactions and to recover the property held as benami.
• The Act contained nine sections; however, the rules, regulations and procedures for the implementation of the law could not be framed, which made it ineffective.
• In particular, there were no regulations relating to the confiscation of property.
• In July 2016, the government decided to amend the Old Act and “The Benami Transactions (Prohibition) Amendment
• Act, 2016″ (“the Act”) was enacted.
• This Act came into force from 1 November 2016.
• The amended law contains 72 sections.

Salient features of Prohibition of Benami Property Transaction Act, 1988 (PBPT Act):

• The PBPT Act defines benami transactions, prohibits them, and makes it illegal to engage in them. Violations of the PBPT Act are punishable by imprisonment and a monetary fine. The PBPT Act prevents the real owner from recovering property held benami from benamidar.
• The definition of a benami transaction has been expanded to encompass a transaction conducted under a fake name in which the owner is unaware of or denies knowledge of the property’s ownership, or the person supplying the compensation for the property is untraceable.
• Benami properties are subject to seizure by the government without payment of compensation.
• The PBPT Act establishes an appeals system in the form of an Adjudicating Authority and an Appellate Tribunal.

Key Highlights Benami Transactions (Prohibition) Amendment Act, 2016

• Benami Transactions (Prohibition) Amendment Act of 2016 (Benami Transactions (Prohibition) Amendment Act of 2016 (Benami Transactions (Prohibition).
• Individuals who engage in benami transactions may face up to seven years in prison and a fine.
• False information is punishable by up to 5 years in prison and a fine.
• Benami properties are subject to government expropriation without compensation.
• The initiating officer may issue an order allowing the property to be held indefinitely, after which the case will be referred to the Adjudicating Authority, who will analyse the facts and issue a decision.
• Appeals against Adjudicating Authority orders will be heard by the Appellate Tribunal. Appellate Tribunal orders can be appealed to the High Court.

Implications:

• Financial transactions and black money are quite common in real estate, with serious consequences. The government has the ability to control the layering that occurs when a significant amount of black money is converted to white.
• This can help to keep property price inflation in check. We may see home price corrections now that PBPT is in effect.
• It will limit the use of fictitious owners and increase transparency in the real estate business.
• It will increase the confidence of lenders, particularly banks, as well as private individuals.
• The modification will have a stronger impact on larger-scale Benami transactions in agricultural property.
• A large amount of land inventory may become accessible to the government, which might be used for low-cost housing schemes.
• A new era of professionalism will be inaugurated.

Process of Implementation:

• The process for the Benami transaction will be started by the initiating officer, who will be an Assistant Commissioner. The case will be referred to the adjudicating authority established under the bill by the initiating officer.
• After hearing the claimed violation, the competent adjudicating authority will issue an order within a certain time frame.
  • Benamidar
  • Beneficial Owner
  • Any other interested parties including bank companies
  • Any other person who makes a claim with respect to property
• There is a provision that gives the adjudicating authority civil court-like powers.
• There is a provision for the establishment of an appellate tribunal to hear appeals from all adjudicating authority orders.
• The properties held as Benami will be confiscated after the final instructions of the adjudicating body.
• Central government officers will be in charge of managing and disposing of confiscated property.

Concerns:

• Harassment could be a possibility.
• Genuine transactions being labelled Benami because to a lack of clear titles, especially in rural regions, is a source of concern.
• After Benami transactions have occurred, the Act only has a post-facto effect.

Mains oriented question:

Last year, the Prohibition of Benami Property Transactions Act (PBPT Act) went into effect. Critically analyze its characteristics and significance. (200 words)