PROHIBITION OF BENAMI PROPERTY
TRANSACTIONS ACT, 1988
(AS AMENDED IN 2016)
MAYA MAHESHWARI
Additional Director of Income tax
Direct taxes Regional Training Institute,
Bhopal
Benami Transactions(Prohibition) Act, 1988Small Act with 9 sections only.
 Benami Transactions(Prohibition )Amendment
Act, 2016- enlarged from 9 sections to 72
sections
 Renamed the 1988 Act as Prohibition of
Benami Property Transactions Act, 1988(PBPT)

WHY NOT A NEW BENAMI ACT WHEN SUCH
LARGE AMENDMENTS HAVE BEEN MADE
law can be made retrospective but as per
Article 20 of the Constitution, penal laws
cannot be made retrospective
 giving immunity from 1988 to 2016-Not in
public interest
 New Act would have applied to benami
transactions entered into after 2016 only.

MOTIVES FOR ENTERING INTO BENAMI
TRANSACTION
Defeat the provisions of law.
 Avoid payment of statutory dues.
 Defrauding creditors.
 Avoid payment of taxes.
 To disguise the real ownership to prevent
detection of illegal activity that produced it.

WHO IS BENAMIDAR AND BENEFICIAL OWNER-IN FOLLOWING
INSTANCES, INFERENCE OF A PERSON BEING BENAMIDAR WAS HELD
JUSTIFIED
Uttamchand Jain Vs
CIT(1988) 173 ITR 298(MP)B had no source of income to
make investment in contract
business
CIT Vs G.M Dharia (2000)
243 ITE 104(Kar) -Firm found
bogus and considered as
benami of assessee as other
partners had no experience
Rampal Thakurdin Gupta Vs
CIT(1988) 97 Taxmann
350/234 ITR 304(M.P)Assessee bid for liquor
contract but employer
compelled him to sign papers
Paras & co. Vs CIT(1995)
211 ITR 914 (Raj)-Partners of
assessee firm were members
of HUF, premises of HUF
used and partners ignorant
about business-Firm was
benami of HUF
THE BASIC LAW..
No person shall enter
into any benami
transaction.
In certain cases,
person found guilty
shall be punishable
with rigorous
imprisonment for 1
to 7 years and
shall also be liable
to fine upto 25% of
the FMV of the
property.
Any property, which
is subject matter of
benami transaction,
shall be liable to be
confiscated by the
Central
Government.
BENAMI PROPERTY
any property
which is the
subject matter
of a benami
transaction
also includes
the proceeds
from such
property
“Benami
property”
means ....
"property" means
assets of any
kind, whether
movable or
immovable,
tangible or
intangible,
including
cash, bank
balance,
shares etc.
includes any
where the
right or
property is
interest or
capable of
also includes
legal
conversion
the proceeds
documents or
into some
instruments
other form,
from the
property
evidencing
then the
title to or
property in the
interest in the
converted
property
form
“BENAMI TRANSACTION" MEANS- (A)
A transaction or an arrangement
(a) where a property is
transferred to, or is held
by, a person,
(b) the property is held for
the immediate or future
benefit, direct or indirect,
and the consideration for such
property has been provided, or
paid by, another person; AND
of the person who has provided
the consideration
Consideration paid
by B
Benamidar
Benami
Transaction
Beneficial
Owner
EXCEPTIONS (I)WHEN THE PROPERTY IS HELD BY
a Karta, or a member of
a Hindu undivided family,
and
the consideration for
such property has been
provided or paid out of
the known sources of the
Hindu undivided family.
the property is held for
his benefit or benefit of
other members in the
family and
EXCEPTIONS(II)WHEN THE PROPERTY IS HELD BY
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
any other person as may be notified by the
Central Government for this purpose
EXCEPTIONS(III)WHEN THE PROPERTY IS HELD BY
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
EXCEPTIONS(IV)WHEN THE PROPERTY IS HELD BY
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 descendant
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
“BENAMI TRANSACTION“- OTHER CASES
(B) a transaction or an
arrangement in respect
of a property carried out
or made in a fictitious
name;
ex: entry in books
showing money payable
to ‘Mirchi Seth’’
(C) 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;
Ex: cash deposits in Jan
dhan A/c of labourer
(D) a transaction or an
arrangement in respect
of a property where the
person providing the
consideration is not
traceable or is fictitious;
“POWER OF ATTORNEY” TRANSACTIONS..
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,—
(i) 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;
(ii) stamp duty on such
transaction or
arrangement has been
paid; and
(iii) the contract has been
registered
DIFFERENCE BETWEEN BENAMI AND
SHAM/BOGUS/FICTITIOUS TRANSACTION
Transaction should actually take place and not
merely to have been shown on paper.
 Sree Meenakshi Mills Ltd. Vs CIT(1957) 31 ITR
28, Supreme Court clarified two sets of
transactions
 A sells property to B but sale deed mentions X
as purchaser-Sale genuine-Real purchaser is BX being his benamidar

A purports to sell his property to B without
intending that title should pass to B-SHAM
TRANSACTION
 In Former, operative transfer resulting in
vesting of title in the transferee but in latter,
transferor continues to retain the title.

BENAMI TRANSACTIONCONSEQUENCES
PROPERTY
HELD
BENAMI
CONFISCATION (SEC. 5)
LIABLE
Any property, which is subject matter of
benami transaction, shall be liable to be
confiscated by the Central Government.
TO
OFFENCES AND PROSECUTION
Whoever enters into
any benami transaction
shall be punishable
with imprisonment for a
term which may extend
to three years or with
fine or with both. (Sec.
3(2))
Whoever enters into any
benami transaction on and
after the date of
commencement of the Benami
Transactions (Prohibition)
Amendment Act, 2016,
shall, notwithstanding any
thing contained in sub-section
2, be punishable in
accordance with the provisions
contained in Chapter VII. (Sec.
3(3))
OFFENCES AND PROSECUTION- CHAP. VII
Section 53(1) provides that Where any person enters into a benami transaction in order to
defeat the provisions of any law or
to avoid payment of statutory dues
or
to avoid payment to creditors
the beneficial owner, benamidar and any other person who abets or induces any person to enter
into the benami transaction, shall be guilty of the offence of benami transaction. (Sec. 53)
Whoever is found guilty of the offence of benami transaction referred to in s.s.(1)
shall be punishable with/liable to
rigorous imprisonment for 1 to 7 years and
fine upto 25% of the fair market value of the
property. (Sec. 53)
OFFENCES AND PROSECUTION- CHAP. VII
No prosecution shall be
instituted against any
person without the
previous sanction of the
Board.
PROHIBITION OF THE RIGHT TO RECOVER
PROPERTY HELD BENAMI (SEC. 4)
No suit, claim or action to enforce
any right in respect of any property
held benami shall lie
No defence based on any right in
respect of any property held
benami shall be allowed
against the person in whose name
the property is held or against any
other person
whether against the person in
whose name the property is held or
against any other person,
by or on behalf of a person
claiming to be the real owner of
such property.
in any suit, claim or action by or on
behalf of a person claiming to be
the real owner of such property.
PROHIBITION ON RE-TRANSFER OF PROPERTY
BY BENAMIDAR (SEC. 6)
(1) No person,
being a
benamidar shall
re-transfer the
benami property
held by him to the
beneficial owner
or any other
person acting on
his behalf.
(2) Where any
property is retransferred in
contravention of
the provisions of
sub-section (1),
the transaction of
such property
shall be deemed
to be null and void
ATTACHMENT,
ADJUDICATION AND
CONFISCATION
HIERARCHY
Adjudicating Authority
• A chairperson and at least 2 members
• IRS – Commissioner
• ILS- Joint Secretary
Approving Authority
• Additional Commissioner
• Joint Commissioner
Initiating Officer
• Deputy Commissioner
• Assistant Commissioner
Administrator
• Income-tax Officer as defined in Sec. 2(25) of Income-tax Act
ISSUE OF NOTICE (SEC. 24)
Where the Initiating Officer, on the basis of
material in his possession,
has reason to believe that any person is a
Benamidar in respect of a property, he may,
after recording reasons in writing, issue a
notice to the person to show cause
as to why the property should not be treated
as benami property.
A copy of the notice shall also be issued to
the beneficial owner if his identity is known.
If IO is of the
opinion that the
person in
possession may
alienate the
property during the
period specified in
the Notice
He may, with the
previous approval
of AO
By order in writing
attach provisionally
the property for a
period not
exceeding 90 days
from the date of
issue of Notice
ISSUE OF NOTICE (SEC. 24)
The Initiating Officer shall, after making such enquiries
and taking into account all relevant material within a
period of 90 days from the date of issue of notice, if
provisional attachment has been made, either
Pass an order - with the prior
approval of the Approving Authoritycontinuing the provisional
attachment of the property till
passing of order by Adjudicating
Authority under section 26(3). OR
Revoke the provisional attachmentWith prior approval of the Approving
Authority.
Where Provisional attachment has not been made
Pass an order provisionally attaching the property with prior approval
of AO till passing of order by Adjudicating Authority u/s 26(3)
Decide not to attach the property with prior approval of AO
REFERENCE TO APPROVING AUTHORITY ((SEC.
24 (5))
Where the Initiating Officer passes an
order for the provisional attachment of
the property,
he shall, within 15 days from the date
of the attachment,
draw up a statement of the case and
refer it to the Adjudicating Authority
ADJUDICATION (SEC. 26)
On receipt of a
reference u/s.
24(5), the
Adjudicating
Authority shall,
within a period of
thirty days of
reference
issue notice to
benamidar/
beneficial owner/
any interested party
including a banking
company/ any
person making claim
over the property, to
furnish such
documents,
particulars or
evidence as is
considered
necessary.
The notice shall
provide a period of
not less than 30
days to furnish the
information
sought.
ADJUDICATION (SEC. 26)
The Adjudicating Authority shall, after—
considering the reply, if any, to the notice
issued
making such inquiries and calling for such
reports or evidence as it deems fit
provide an opportunity of being heard to
the person specified as a
benamidar therein,
the Initiating Officer,
any other person who claims to
be the owner of the property,
and, thereafter, pass an order within one year from the end of the month in which reference was recd—
holding the property not to be a benami property
and revoking the attachment order
holding the property to be a benami property and
confirming the attachment order
CONFISCATION (SEC. 27)
Where an order is passed in respect of any property
u/s. 26(3)
holding such property to be a benami property,
The Adjudicating Authority shall, after giving an
opportunity of being heard to the person
concerned,
make an order confiscating the property held to be
a benami property.
CONFISCATION (SEC. 27)
Where an order
of confiscation
has been made
under subsection (1),
all the rights and
title in such
property shall
vest absolutely
in the Central
Government free
of all
encumbrances
and no
compensation
shall be payable
in respect of
such
confiscation.
• Where appeal has been filed against order of Adj. Authority,
confiscation of property shall be made subject to the order of
the Appellate Tribunal
• Copy of the order will be sent to the Authorised officer(ITO
authorised by the Adj Authority)
• For immovable property, he will issue notice to Central Govt. or
State Govt having jurisdiction for regn. of such property/notice
at the site/make proclamation for confiscation
For movable property, AO will issue
notice to person holding custody
Equivalent amount of FDR may be kept
as security
Cash/ govt securities/ bullion/
jewellery in a locker or in the form of
FDR in SBI or any nationalized bank
Shares/Debentures/MF/ other
instruments to be transferred in
favour of Administrator
Money lying in Bank or FI to be
transferred and credited to the
account of the Administrator
APPEAL TO THE APPELLATE TRIBUNAL
Within 45 days from the date of the Order.
 Grounds of objection to the Order should be
clear.
 As far as possible, appeal to be decided within
one year from the last date of the month in
which appeal is filed.
 To pass final order and affirm, vary or reverse
the order of Adj Authority

SOME QUESTIONS
Whether Benami transaction, if benamidar is
only a money lender?
 No only a sham transaction.
 Will penal provisions apply on Name lender
 No
 Does use of Black Money in purchase of
property make it Benami?
 No

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