Government constitutes inter-departmental task force to crack down on benami firms

The Union Government has constituted inter-departmental task force comprising members of various regulatory Ministries and enforcement agencies to crack down on benami firms.

It is first major post-demonetisation move undertaken by Government for unearthing black money from shell companies used for large-scale money laundering and tax evasion.

Key Facts

The task force will be headed by Revenue Secretary and Corporate Affairs Secretary to monitor the actions taken by various agencies.

The involved agencies will invoke the stringent Benami Transactions (Prohibition) Amendment Act, 2016 against the shell companies and freeze their accounts and strike off the names of dormant companies.

It will also initiate disciplinary action against professionals abetting the companies and entry operators, who are used to launder unaccounted-for incomes into the banking system for projecting them as white money.

There are about 15 lakh registered companies in India, but only 6 lakh of them file their annual returns. It has raised suspicion that a large number of these companies are indulging in financial irregularities. During a small sample analysis of such companies conducted by Government has found that Rs.1,238 crore in cash was deposited in these entities during the November-December 2016 period, after demonetisation. It also has been found that 560 beneficiaries have laundered money to the extent of Rs. 3,900 crore with the help of 54 professionals, who have been identified by the Government.

Lok Sabha passes Benami Transactions (Prohibition) Amendment Bill, 2015

The Lok Sabha has passed comprehensive Benami Transactions (Prohibition) Amendment Bill, 2015 to curb domestic black money.

The comprehensive amendment bill seeks to amend and strengthen Benami Transaction (Prohibition) Act, 1988 in terms of legal and administrative procedure.

Key Features of Bill 

• The Bill seeks to 
• (i) Amend the definition of benami transactions to widen the scope for legal action 
• (ii) Specify penalties for entering into benami transactions and 
• (iii) establish adjudicating authorities and Appellate Tribunal to deal with benami transactions. It add other transactions which qualify as benami, such as property transactions where: 
• (i) the owner is not aware or denies knowledge of the ownership of the property, 
• (ii) transaction is made in a fictitious name 
• (iii) person providing the consideration for the property is not traceable. 
• The Bill also adds provisions to establish an Appellate Tribunal in order to hear appeals against any orders passed by the Adjudicating Authority. Appeals against orders of the Appellate Tribunal will lie to the high court. The Bill specifies the penalty for providing false information.
• The punishment includes rigorous imprisonment ranging from 6 months up to 5 years, and a fine which may extend to 25% of the fair market value of the benami property. 
• It also intends to effectively prohibit benami transactions and consequently prevent circumvention of law through unfair practices. It empowers the Union Government to confiscate benami property by following due procedure. Therefore it promotes equity across all citizens. 
• The Bill provides immunity under the Benami Act to those who declare their benami properties under income declaration scheme. 

What is a ‘benami’ transaction? 

In literally sense benami means ‘nameless’ or ‘without a name’. The benami transaction refers to property purchased by a person in the name of some other person. In such transactions, the person who pays for the property is directly or indirectly ultimate beneficiary of the property in the future.