The Delhi High Court has asked the Income Tax Department to take a strong and clear stand on the administration of the Prohibition of Benami Property Transaction Act of 2016. The finer points of the law were discussed during the hearing of Delhi Health Minister Satyendra Jain’s plea against the IT department’s decision to attach the assets of a private firm on the grounds of them being benami transactions.
According to Justice Vibhu Bakhru, if the recently amended law would be accepted by the IT Department with retrospective effect from 1988, it will lead to huge ramifications as old cases lying idle for 20-30 years would have to be reopened.
The court also sought clarification from the Department if accommodation entries made in the past that are now part of a company’s assets would be regarded as benami transactions under the new Act.
The details of Minister Satyendra Jain’s case
The IT Department has attached land purchased by the private firm and registered a case against Mr Jain under the Benami Property Transaction Act 2016 stating that he used his influence as the director of four firms to buy large swathes of property worth 30 crores in and around Delhi. If found guilty under the law, he would have to face a seven-year rigorous jail term, along with a heavy penalty.
The assets were attached on Feb 27, 2017, and extended by the IT Department till the final decision is taken by an adjudicating authority.
The defence lawyers of Jain had stated that the alleged benami transactions were carried out between 2011 and March 2016 – long before the amendment in the Benami Act came into effect, so the law could not be applied in this particular case. Mr Jain has sought interim relief from the IT Department’s proceedings until the decision on his high court petition is given.
Court’s viewpoint and decision
Though the court has not granted any interim relief to the petitioner and stated that the IT Department could carry out the proceedings as they deem fit, it asked the Department if it had any proof to show that the assets being held by the private firms belonged to the individual. This query was given Mr Jain’s claim that he was only a minority shareholder in these companies and had sold off his shares several years ago.
The Delhi High Court has suggested to the IT Department that, if in future, it identifies similar transactions wherein assets owned by private companies have been purchased from proceeds that were benami transactions, then such assets should be taxed as company property and not traced back to the shareholder or investor.
