Keep Away From Benami Transactions, Warns Income Tax Department

Keep Away From Benami Transactions, Warns Income Tax Department

The taxman is the nodal department to enforce the Benami Act in the country

New Delhi: The Income Tax Department on Wednesday warned people to “keep away” from benami transactions, cautioning that violations under the newly enacted law invites criminal prosecution and rigorous imprisonment up to seven years. The department put out its alert in a public advertisement published in leading national dailies.

Titled “Keep Away from Benami Transactions”, it described black money as a “crime against humanity” and urged “conscientious citizens to help the government in eradicating it”.

“Benamidar (in whose name benami proper is standing), beneficiary (who actually paid consideration) and persons who abet and induce benami transactions are prosecutable and may face rigorous imprisonment up to 7 years besides being liable to pay fine up to 25 per cent of fair market value of benami property,” the I-T advertisement said.

The tax department attached benami assets worth Rs. 1,833 crore across the country, issued 517 notices and made 541 attachments, from November 1, 2016 to October 2017.

The department started initiating action under the new Benami Transactions (Prohibition) Amendment Act, 2016 from November 1, 2016.

The advertisement added that “persons who furnish false information to authorities under Prohibition of Benami Property Transactions Act, 2016, are prosecutable and may be imprisoned up to 5 years besides being liable to pay fine up to 10 per cent of fair market value of benami property”.

It added that benami property “may be attached and confiscated by the government” and that this action will be in in addition to prosecution under the Income Tax Act of 1961 for tax evasion charges.

The Income Tax Department is the nodal department to enforce the Benami Act in the country.


A benami property can be solely bought for personal benefit



I had bought a flat and added my wife as a joint holder, but she did not make any payment towards it. In my Will, can I bequeath 100% of the property, or since my wife is the joint holder, only 50%?

—Ravindra Gupta

As per the provisions of the Benami Transactions (Prohibition) Act, 1988, when a property is transferred to a person for a consideration, paid or provided by another person, then such a transaction is known as a benami transaction.

The person in whose name the property is recorded, becomes the real owner and the person who actually paid the consideration is prohibited from bringing any kind of action to recover such property. Benami transactions are prohibited by law and are punishable under the Act.

But an exception is given under section 3(2) of the Act, for transactions where the property is purchased by any person in the name of his wife or unmarried daughter. Section 3(2) also provides that, unless the contrary is proved, there is a presumption that such property had been purchased by such person for the benefit of the wife or the unmarried daughter.

Thus, a person who has purchased such a property in the name of his wife or unmarried daughter can, by appropriate evidence, prove that the property was not purchased for the benefit of his wife or unmarried daughter, and assert his true ownership rights in the property.

So, if the husband is able to prove that the property he purchased, in his wife’s name, is for his sole benefit, then he can claim the property completely, and can dispose it as per his wish. (Please see Nand Kishore Mehra v. Sushila Mehra (AIR 1995 SC 2145) and Nand Kishore Mehra v. Sushila Mehra (80 (1999) DLT 670.)

In such a situation, the intention of the husband will be ascertained from the surrounding facts and circumstances, to determine the real ownership. Some of these would be: the source of purchase money; the nature and possession of the property, after the purchase; the motive or reason for giving the transaction a benami colour; the custody of title deeds after the sale; and the conduct of parties concerned in dealing with the property after the sale, including whether the husband accounted for the property in his own tax returns and not that of his wife.

Thus, if you are able to prove that the property was not purchased for the benefit of your wife, and it was always intended that the real ownership lies with you, you would have the right to bequeath the entire property in your Will to a person of your choice. You should specifically state in your Will that the property was purchased out of your personal funds and that your wife’s name was added only for convenience and not purchased for her benefit.

Maintain appropriate records that are available to your executor and heirs, to prove your real ownership of the property, if your Will is challenged.