Benami Transactions Current Affairs

Government constitutes inter-departmental task force to crack down on benami firms

The Union Government has constituted inter-departmental task force comprising members of various regulatory Ministries and enforcement agencies to crack down on benami firms.

It is first major post-demonetisation move undertaken by Government for unearthing black money from shell companies used for large-scale money laundering and tax evasion.

Key Facts
  • The task force will be headed by Revenue Secretary and Corporate Affairs Secretary to monitor the actions taken by various agencies.
  • The involved agencies will invoke the stringent Benami Transactions (Prohibition) Amendment Act, 2016 against the shell companies and freeze their accounts and strike off the names of dormant companies.
  • It will also initiate disciplinary action against professionals abetting the companies and entry operators, who are used to launder unaccounted-for incomes into the banking system for projecting them as white money. 
Background

There are about 15 lakh registered companies in India, but only 6 lakh of them file their annual returns. It has raised suspicion that a large number of these companies are indulging in financial irregularities. During a small sample analysis of such companies conducted by Government has found that Rs.1,238 crore in cash was deposited in these entities during the November-December 2016 period, after demonetisation. It also has been found that 560 beneficiaries have laundered money to the extent of Rs. 3,900 crore with the help of 54 professionals, who have been identified by the Government.

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Benami Transactions (Prohibition) Amendment Act, 2016 comes into force

The Benami Transactions (Prohibition) Amendment Act, 2016, designed to curb black money and passed by parliament in August 2016, came into effect.

The new law amended the Benami Transactions Act, 1988 and renamed as the Prohibition of Benami Property Transactions (PBPT) Act, 1988. The amendment act also to strengthen the parent Act in terms of legal and administrative procedure.

What is benami transaction?

The benami (without a name) transaction refers to property purchased by a person in the name of some other person.  The person on whose name the property has been purchased is called the benamdar and the property so purchased is called the benami property. The person who finances the deal is the real owner.

Key Highlights Benami Transactions (Prohibition) Amendment Act, 2016

  • Persons indulging in benami transactions may face up to 7 years’ imprisonment and fine.
  • Furnishing false information is punishable by imprisonment up to 5 years and fine
  • Properties held benami are liable for confiscation by government without compensation
  • Initiating Officer may pass an order to continue holding property and may then refer case to Adjudicating Authority which will then examine evidence and pass an order.
  • Appellate Tribunal will hear appeals against orders of Adjudicating Authority. High Court can hear appeals against orders of Appellate Tribunal.

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