Understanding Benami Transactions (Prohibition) Act, 2017

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One of the common ways to evade tax in Pakistan is through investment in properties via 'benami transactions'.
  
A benami transaction is one where the property is held in the name of person other than that who actually takes the benefit of the property.

One should not mix the definition of benami transaction with a gift. The difference between benami transaction and a gift is that the beneficial owner in case of a gift is the one to whom the property was transferred, whereas, in case of a benami transaction the beneficiary of the property is other than the owner of the title of the property.

The origin of benami transactions into the subcontinent unlike any where else in the world is due to the reason then after the invasion by the East India Company the properties of the Indians were often seized and in order to protect their properties the benami transactions came into existence, however, by the passage of time these transactions became the hub for parking the black money.

A perfect example of a benami transaction nowadays is also a very common practice where the rich often keeps the property in the name of their servants. 

In order to discourage the practice the Benami Transactions Prohibition Act, 2017 was passed through national assembly on 16 February 2017 and the purpose of implementation of same is to provide a mechanism and procedure to discourage the benami transactions and to confiscate the property held as binami.

Benami transaction shall not include the following:

1)     a gift;

2)     The property in the name of trust; and

3)  Property held in the name of immediate family members including spouse children and siblings

Furthermore, a benami property also includes any proceeds attached to the Transfer of Property.

Currently, under the Income Tax Ordinance, 2001 the burden of proof for the title of property remains on the Income Tax Department, whereas, in the Benami Transaction Prohibition Act 2017 the onus of proof for the title of the property is on the owner of the property.

The initiating officer after obtaining prior approval of the approving authority shall have power to conduct any inquiry or investigation in respect of any person under this act and where he has material information and reason to believe that such person is a benamidar and after recording reasons may issue a Show Cause Notice as to why such property should not be treated as benami property and confiscated.

Where the person fails to justify or is unable to give reasonable explanation the initiating officer is authorized to attach the said property after issuing an order as prescribed under sections 22 and 24 of the Benami Transactions Prohibition Act, 2017.

Provided further, that where an appeal has been filed against the order of the adjudicating authority the confiscation of property shall be made subject to the order passed by the Tribunal under Section 44 of the Benami Transactions Prohibition Act 2017.

An administrator shall be appointed by the adjudicating authority having power to receive and manage the property in relation to which the order of confiscation has been served

As regards the Authorized Representatives the following persons can appear in front of the Appellate Tribunal:

·        The relative of the appellant in any manner; or
·        A legal practitioner in title to practice in any Civil Court; or
·         Chartered accountant or Cost and Management Accountant; or
·         Any person who has acquired such educational qualifications as the board may prescribe

Where a person enters into a benami transactions to avoid payment of statutory dues or to creditors such a person shall be punishable with rigorous imprisonment for a term not less than 1 year up to 7 years and shall also be liable to find up to 25% of the fair market value of the property.

Furthermore, in case of submission of false information the person shall be punishable for rigorous imprisonment between 6 months to 5 years and shall also be liable to a fine upto 10% of the fair market value of the property.

In order to successfully identify the benami transactions the government has also announced appropriate rewards for the whistleblower as prescribed by the board in notification of the official gazette.

Comments

  1. William mark15 February 2018 at 21:31

    I have read your blog post on. Thank you very much for sharing this awesome post. I will visit again to read more post.Benami Transaction a transaction or an arrangement in respect of a property carried out or made in a fictitious name.

    ReplyDelete
  2. IS Gulati25 September 2018 at 01:11

    Great Info. Thank You For Sharing....

    ReplyDelete
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