Mumbai: The law to curb benami deals, where faceless persons, slum dwellers, and poor labourers in tribal villages, hold properties worth crores on behalf of the real owners who mask their identities, may be made sterner.
A panel constituted by the Central Board of Direct Taxes (CBDT) has recommended that officials must have access to the Aadhaar database, state property registries, and the 'Parivahan' data of vehicles and diving license, while the law should be amended to confiscate other assets of the actual beneficiaries if a benami asset is untraceable.
The committee, which gave its report 10 days ago, has suggested that 'dummy directors' in ' shell companies' housing benami assets should be spotted. Tax officials should probe companies where half or more directors have no income, majority shareholders do not file tax returns, and unsecured loans far exceed the share capital.
In benami transactions, the consideration for a property purchase is paid by one person, but the purchase is made in the name of a third person or a fictitious person.
Benamidars with no PAN, Bank Account
The report makes a strong case for linking the I-T department's 'Insight' portal with Aadhaar database. Key information like PAN, bank accounts, property purchases, and demat accounts is linked to Aadhaar. But, knowing about a person from 'Insight' is possible only if the person has a PAN. 'Benamidars' (or, fronts) often have no PAN. Most registries of properties and documents on vehicles and bank accounts mention the Aadhaar numbers. When the property value is below '30 lakh, PAN may not be mentioned. Besides, benamidars can be farmers who don't have PANs.
It would be of great value, says the report, if benami processing units can access Aadhaar data through Insight. "If there is a privacy concern, the access can be restricted to 'view only' details of Aadhaar-linked immovable properties and bank accounts. Information on bank account(s) where PAN is missing in the KYC documents could be obtained from Aadhaar database," said an official privy to the details.
According to Ashish Karundia, founder of the CA firm Ashish Karundia & Co, while the law may seem stringent, the proposed steps would address loopholes and interpretational ambiguities. "These initiatives align with ongoing efforts like digitisation of land records and the use of data shared by various agencies," said Karundia.
The Prohibition of Benami Property Transactions Act, 1988, came into operation on November 1, 2016.
"The report recommends sharing of tax records pertaining to additions made under Sections 68 (unexplained cash credits), 69 (unexplained investments), 69A (unexplained money) with the Benami wing especially in cases where the first appellate authority has confirmed such additions. Such data dissemination with the Benami wing could trouble taxpayers," said Ashish Mehta, partner at Khaitan & Co.
Focusing on Shell Cos
The committee has suggested:
"Shell companies have been the focus for the I-T. Data gathered from action on entry providers was circulated. However, often the standard approach in invoking provisions of section 68, 69, 69A of the I-T Act leads to judicial precedent in favour of taxpayers. This benefits genuine people as well as wrong doers. A new policy should not give blanket powers. The I-T Act 2025 may enable uniform disclosure norms to track benami transactions through reporting under IT Act," said Siddharth Banwat, partner at the CA firm S Banwat & Associates LLP.
A panel constituted by the Central Board of Direct Taxes (CBDT) has recommended that officials must have access to the Aadhaar database, state property registries, and the 'Parivahan' data of vehicles and diving license, while the law should be amended to confiscate other assets of the actual beneficiaries if a benami asset is untraceable.
The committee, which gave its report 10 days ago, has suggested that 'dummy directors' in ' shell companies' housing benami assets should be spotted. Tax officials should probe companies where half or more directors have no income, majority shareholders do not file tax returns, and unsecured loans far exceed the share capital.
In benami transactions, the consideration for a property purchase is paid by one person, but the purchase is made in the name of a third person or a fictitious person.
Benamidars with no PAN, Bank Account
The report makes a strong case for linking the I-T department's 'Insight' portal with Aadhaar database. Key information like PAN, bank accounts, property purchases, and demat accounts is linked to Aadhaar. But, knowing about a person from 'Insight' is possible only if the person has a PAN. 'Benamidars' (or, fronts) often have no PAN. Most registries of properties and documents on vehicles and bank accounts mention the Aadhaar numbers. When the property value is below '30 lakh, PAN may not be mentioned. Besides, benamidars can be farmers who don't have PANs.
It would be of great value, says the report, if benami processing units can access Aadhaar data through Insight. "If there is a privacy concern, the access can be restricted to 'view only' details of Aadhaar-linked immovable properties and bank accounts. Information on bank account(s) where PAN is missing in the KYC documents could be obtained from Aadhaar database," said an official privy to the details.
According to Ashish Karundia, founder of the CA firm Ashish Karundia & Co, while the law may seem stringent, the proposed steps would address loopholes and interpretational ambiguities. "These initiatives align with ongoing efforts like digitisation of land records and the use of data shared by various agencies," said Karundia.
The Prohibition of Benami Property Transactions Act, 1988, came into operation on November 1, 2016.
"The report recommends sharing of tax records pertaining to additions made under Sections 68 (unexplained cash credits), 69 (unexplained investments), 69A (unexplained money) with the Benami wing especially in cases where the first appellate authority has confirmed such additions. Such data dissemination with the Benami wing could trouble taxpayers," said Ashish Mehta, partner at Khaitan & Co.
Focusing on Shell Cos
The committee has suggested:
- States should mandatorily provide login rights for downloading property documents;
- Real-time use of suspicious transaction reports flagged by the Financial Intelligence Units to nab mule accounts;
- Profiling private vault account holders as some may be benamidars.
- Tracking cryptocurrency transfers;
"Shell companies have been the focus for the I-T. Data gathered from action on entry providers was circulated. However, often the standard approach in invoking provisions of section 68, 69, 69A of the I-T Act leads to judicial precedent in favour of taxpayers. This benefits genuine people as well as wrong doers. A new policy should not give blanket powers. The I-T Act 2025 may enable uniform disclosure norms to track benami transactions through reporting under IT Act," said Siddharth Banwat, partner at the CA firm S Banwat & Associates LLP.
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