New Delhi: India's Income Tax Department on Friday cautioned those engaging in 'benami' (proxy) transactions that they stand to face Rigorous Imprisonment (RI) of up to 7 years and would also invite prosecution under the Income Tax Act.
"Do not enter into benami transactions," the department warned citizens through newspaper advertisements issued on Friday, given that the Benami Property Transactions Act is "now in action from November 1, 2016."
"Persons who furnish false information to authorities under the Benami Act are prosecutable and may be imprisoned up to 5 years besides being liable to pay fine up to 10 per cent of fair market value of benami property," it said.
"Benamidar (in whose name benami or proxy property is standing), beneficiary (who actually paid consideration) and persons who abet and induce benami transactions are prosecutable and may get RI up to 7 years besides being liable to pay fine up to 25 per cent of fair market value of benami property," it added.
The department also said that benami property "may be attached and confiscated by the government" and these actions are in "addition to actions under other laws such as Income Act, 1961".
The Benami Transactions (Prohibition) Amendment Act, 2016, designed to curb black money was passed by Parliament in August last year.
The new law is an amendment of the 1988 Benami Transactions Act, which provided for up to only three years of imprisonment or fine or both.
The amendments aim to strengthen the act in terms of legal and administrative procedure.
The benami property refers to property purchased by a person in the name of some other person.
The person in whose name the property has been purchased is called the benamdar and the property so purchased is called the benami property. The person who finances the deal is the real owner.
The act prohibits recovery of the property held benami from benamdar by the real owner.
Under the act, properties held benami are liable for confiscation by the government, without payment of compensation.
An appellate mechanism has been provided under the act, in the form of an adjudicating authority and appellate tribunal.