New Delhi: Cases related to benami transactions may be resolved quicker in the future with the Union cabinet on Wednesday approving the creation of two bodies—an adjudicating authority and an appellate tribunal.

The approval is expected to lead to effective and better administration of cases referred to the adjudicating authority and speedy disposal of appeals filed against the order of the authority before the appellate tribunal.

A benami transaction is one where a property is held in one person’s name, but the funds for acquisition have been provided by another person, for whose benefit the property is held. Therefore, the property is not held in the name of the real owner, but in somebody else’s name.

Benami transactions are usually undertaken by people who want to park their unaccounted cash in real estate, in order to dodge tax authorities.

In July this year, the finance ministry informed the Rajya Sabha that provisional attachment has been made in more than 1,600 cases of properties under the Benami Transactions (Prohibition) Act, 1988.

These include plots of land, flats, shops, vehicles, deposits in bank accounts, fixed deposits, etc. “The value of properties under attachment is more than 4,300 crore including immovable properties of more than 3,400 crore," the finance ministry said.

While the proposed adjudicating authority along with three additional branches would provide the first-stage review of administrative action under the Benami Act, the tribunal would provide an appellate mechanism for the order passed by the authority under the Act.

Officers and employees at the two bodies will be drawn from existing income tax officials of the same rank. While both bodies will be headquartered in Delhi, benches of the adjudicating authority may sit in Kolkata, Mumbai and Chennai.

The Benami Act, originally enacted in 1988 by the Congress government but amended and notified by the Narendra Modi government in 2016, gives the government powers to confiscate benami properties.

The 2016 amendment made violations punishable with imprisonment of up to seven years and a fine of up to 25% of the fair value of the asset.

It also states that benami properties can be confiscated by the government without payment of compensation. The term “property" now covers movable, immovable, tangible and intangible properties.

This Act, along with the stringent Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, to penalize those with unaccounted wealth abroad and the Fugitive Economic Offenders Act, 2018, which allows a designated special court to declare a person as a fugitive economic offender and to confiscate their property, including ‘benami’ ones, will help the government in its fight against black money both within and outside the country.

Sanjay Sanghvi, tax partner at Khaitan & Co said it is a significant decision by the government as things will move faster now if a property is declared benami. “Since there was no adjudicating officer earlier, the aggrieved party could not go to a higher authority against the findings of the ground level officer or to an appellate tribunal if he is not happy with the decision of the adjudicating authority. The trail now is complete," he added.

Sanghvi said there are checks and balances within the Benami Act to avoid categorization of genuine property as benami property.

“Before they hold a property as benami, they will issue a show cause notice asking one to explain his position," Sanjay Sanghvi added.

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