Post Supreme Court ruling, all the criminal prosecution or confiscation proceedings initiated under under Benami Transaction Prohibition Act before October 25, 2016 will now be treated as null and void. The Income Tax Department is yet to arrive at a number of such cases as on this particular date.

However, proceedings initiated during or after demonetisation including for cash deposited in benami bank accounts or cases filed on or after October 25, 2016 could see more and more people coming forward to accept the guilt and pay the penalty. At the same time, taxman may reopen cases involving benami transactions.

Though the Income Tax Department has not given details about total number of cases identified and prosecution initiated under the Act, a written answer by Finance Minister Nirmala Sitharaman on July 2, 2019 in Rajya Sabha said till May 31, 2019, show-cause notices under the Prohibition of Benami Property Transactions Act, 1988 issued in over 2,100 cases involving benami properties valued at over ₹9,600 crore.

‘More admission likely’

Ashoo Gupta, Partner, Shardul Amarchand Mangaldas & Co, said the Supreme court’s order on the Benami properties Act 2016, will provide relief to litigants of ongoing cases who were being subjected to the harsher punishments of the 2016 amendment. “Setting aside of the Section 3(2) by the apex court could also lead to more admission of guilt by ‘benamidars’ who may accept the economic consequences in order to end prosecution,” he said.

Paras Nath, Partner, Tax & Regulatory Services, T R Chadha & Co LLP said that the Apex Court has held that the provision of Section 3(2) of the Benami Property Act, 1988 as unconstitutional for being manifestly arbitrary as it is violative of Article 20(1) of the Constitution. “As an effect of Section 3(2) of the unamended 1988 Act is declared as unconstitutional, Section 3(2) of the 2016 Act also becomes unconstitutional,” he said.

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