How are benami transactions brought to light?

MAULIK MADHU | Updated on January 16, 2018 Published on December 04, 2016


The government has upped the ante on bringing to book those who have parked their unaccounted wealth in benami assets.

But, how do the tax authorities sniff out such cases, to start with? Vijay Dalmia, Advocate, Vaish Associates Advocates, provides some insight. Typically, such transactions get noticed when the tax department runs a search for high-value transactions. So, suppose someone has bought a property worth ₹1 crore in his driver’s name and this property gets shortlisted in the search. The tax authorities will then look into the benamidar’s (driver’s) income sources to ascertain whether he can afford such a purchase. Once that possibility is ruled out, they will set out to find the actual owner.

Benami properties also get uncovered when a dispute crops up between the legal owner (the servant, for instance) and the real owner (the person who has made the payment). In such a situation, the real owner may approach the court for relief. But, if the property is held to be benami by the court, it will dismiss the suit and inform the tax department about it.

According to Amit Maheshwari, Managing Partner, Ashok Maheshwary and Associates, usually, the starting point to unearth benami properties is search and seizure operations. When tax authorities conduct a raid, property papers in the names of other individuals are found in the safe keeping of the person whose house is being raided. This automatically raises suspicion.

What's changed with the new Benami Act

1. For the parties to a benami property deal

* Imprisonment up to seven years

* Fine up to 25 per cent of the property value

* Confiscation of benami property by the government

2. Those facilitating a benami deal also to be punished

3. Those providing false information to the authorities also to be penalised

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Published on December 04, 2016
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