- By ADMIN
- Posted 07 Jul, 2024
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What Happens When Benami Transactions Occur?
Benami transactions, categorized as a serious offense under the Prohibition of Benami Property Transactions Act, 1988, can lead to severe penalties and imprisonment. These transactions occur when:
1. Individuals seek to circumvent legal provisions, like avoiding attachments by any other law,
2. Attempt to evade statutory payments like Income tax demands, GST demands etc,
3. Avoid settling debts owed.
Who are the persons are liable for action/s 53
1. The Benamidar (the person who holds the property on behalf of the Beneficial owner)
2. The Beneficial owner (the person whose benefit the asset was held by the Benamidar)
3. Any other person who abets or induces to enter into the benami transactions
Punishment
In addition to confiscation of property involved in the benami transaction, the above said persons are subject to rigorous imprisonment for a term which shall not be less than 1 year but which may extend to 7 years and also liable for fine of 25% of value of the property
Case Studies:
|
S.No |
Facts |
Analysis & Conclusion |
|
1 |
Mr.A has received cash of Rs.50 lakhs from illegitimate source or undisclosed source. This cash has been deposited into the Bank Account of Mr.B, who purchased a property out of this fund. The market value of the property as on the date of assessment by Income-tax authorities are Rs.1 Crore. During the income tax scrutiny Mr.B proves to the satisfaction of the Assessing Officer that this money belongs to Mr.A. What are the legal consequences in respect of Income-tax and Benami law? |
In the given scenario, the money belongs to Mr.A, since proved, the property can be confiscated by the Government of India and it will become the property of Government. Further, Mr.A and Mr.B is punishable with imprisonment up to 7 years along with fine of Rs.25 lakhs being 25% of market value.
|
|
2 |
In the case 1 above, if the property was held by Mr.A but due to income tax demands, he transfers to a third party Mr.B. What will be the consequences? |
The property will be consfiscated and becomes the property of Government and both Mr.A and Mr.B subject to imprisonment explained in Case 1 above. Additionally they have to pay 25 lakhs penalty. Needless to empahasis, Mr.A is still subject to payment of income-tax demands |
Key takeaways:
One should always follow the relevant laws prevailing to protect the interest on assets and income. The consequences of non-compliances cost substantial and may wipe out your life savings.
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