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Stay away from Benami transactions

Published: 29 Jan 2018

Post demonetization, many persons and entities possessing millions and billions of unaccounted/unsecured cash deposited such cash into banks through others with the objective to escape from IT surveillance and safeguard themselves from getting punished for violation of the laws.

However, government is in no mood and intent to let so-called tax evaders go unnoticed, unpunished and unaccounted for possessing illegitimate cash and persons acted as proxies and facilitated tax evaders to survive the IT surveillance and escape from getting punished for tax evasion.

With this in mind, the government has issued strict directives to Income Tax (IT) Department to reject all revised IT returns involving unsecured and unaccounted cash and amended the Benami Act (Act) to invoke the said Act on tax evaders and people abetted tax evaders in tax evasion to punish them with jail imprisonment.

In this background, income-tax department is warning people to ‘Keep away from Benami transactions’ – the idea is to restrict people from accommodating benami transactions or acting as a proxy for others.

The punishment for indulging in benami transactions is imprisoned for a period of 7 years.

In a circular on the subject, IT department labelled possessing ‘black money’ as a ‘crime against humanity’ and urged honest citizens to back-up the government labors to curtail the black money and succor government in fetching tax evaders and punish them.

Key points issued in the circular to educate everybody to stay away from benami transactions are as follows:

·       Consequences of being involved in benami transactions is Benamidar (Person holding property for the benefit of actual owner), beneficiary (who actually paid consideration) and persons who abet and induce benami transactions will be prosecuted and if proved guilty will be punished with imprisonment upto 7 years along with fine upto 25 percent of fair market value of benami property.

·       For furnishing false information to IT authorities, concerned person will be prosecuted and may be imprisoned upto 5 years along with fine upto 10 percent of fair market value of benami property.

·       Benami property may be attached and sequestered by the government.

According to official records, the IT department attached benami assets worth Rs. 1,833 crore across the country, issued 517 notices and made 541 attachments, from November 2016 to October 2017.

It is evident from the statistics that nobody will be spared for involving in benami transactions and tax evaders will not be able to escape from the radar of IT department and without being punished for tax evasion.

One should remember the fact that IT department is fully armored with all tools to hunt down tax evaders mercilessly and ruthlessly for violating the laws and should not take lightly the powers conferred on IT department. Taxpayer’s who ignores IT department powers have to pay a hefty price for such ignorance.

It is high time for tax payers to sustain clean record of tax payments and preserve the status of owing no liability to the government in making payments owed to the government or else they have to face the prosecution proceedings and go to jail for tax evasion.

Research inputs by Paruchuri Baswanth Mohan


About the author :

Bhumesh Verma is a lawyer with over 2 decades of experience in advising domestic and international clients on corporate transactions (M&A, Venture Capital, Private Equity, Startups, corporate advisory, etc.) and features in "The A-List - India's Top 100 Lawyers" by India Business Law Journal. He keeps writing frequently on FDI, M&A and other corporate matters and is a guest faculty as well. He can be reached at bhumesh.verma@corpcommlegal.com.

Firm: Addleshaw Goddard

Practice Area: Trade & Customs

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