Benami property means any property which is the subject matter of a benami transaction and includes proceeds (money received) from such property. Such a transaction means where a property is held by a person (benamidar) and consideration has been paid by another person (beneficial owner). The property is held for the immediate or future benefit, directly or indirectly for the person who has paid the consideration.
Prohibition of benami tranactions
Any property , which is subject matter of bnami transactions, shall be liable to be confiscated by the central government. No benamidar shall re-transfer the benami property held by him to the beneficial owner or to any other person acting on his behalf. If, in any case, property is transferred then such transaction is null and void.
Attachment, adjudication and confiscation
Where the initiating officer of the income tax department (IO) has reason to believe that any person is a benamidar in respect of a property , he may, after recording reasons in writing , issue a notice to the person to show cause within stipulated time why the property should not be treated as benami property. Notice is also served to the beneficial owner if his identity is known. If the IO is of the opinion that the person holding the benami property may alienate the property during the notice period, then he may provisionally attach such benami property for a period not exceeding 90 days from date of notice. The IO, after making such inquires within 90 days of notice, pass an order continuing the provisional attachment of the property, otherwise provisionally attach the property. He will revoke the provisional attachment of the property (in case already attached), otherwise decide not to attach property.
Offences and prosecution
The beneficial owner, benamidar and any other person who induces any person to enter into benami transactions shall be guilty of the offence of benami transactions. Such person shall be punishable with rigorous imprisonment for at least one year which may extend to seven years and liable to fine which may extend to 25% of the Fair Market Value of the property. If any person who is required to furnish information under this Act knowingly gives false information to any authority, then he shall be punishable with rigorous imprisonment for at least six months which may extend to five years and liable to fine which may extend to 10% of the FMV of the property.
Extracted from Tax Guru