Machinery for Adjudication & Confiscation under the Prohibition of Benami Property Transactions Act (PBPT Act)

1. The Enforcement Machinery under the PBPT Act consists of the following authorities:
        the Initiating Officer
        the Approving Authority
        the Administrator
        the Adjudicating Authority.
2. The Initiating Officer (IO) is the Assistant Commissioner of IncomeTax (Benami Prohibition) or the Deputy Commissioner of IncomeTax (Benami Prohibition) at the respective Headquarters at Ahmedabad, Surat, Bengaluru etc.
3. It is the IO who sets the confiscation process in motion by issuing a show cause notice (SCN) under section 24(1) of the PBPT Act to the benamidar as well as the beneficial owner. Manner of service of SCN should be as per section 25.
4. The IO provisionally attaches property in show cause notice for a period not exceeding 90 days, pending inquiry pursuant to SCN, with the previous approval of Approving Authority, if he has reasons to believe the property may be alienated during inquiry. – Section 24(3). If after inquiry he is satisfied that the property mentioned in SCN is not benami, he revokes provisional attachment with the prior approval of the Approving Authority. If he had not provisionally attached the property in question, then he decides not to attach it with the prior approval of the Approving Authority.
5. If after inquiry he is satisfied that the property mentioned in SCN is benami, he continues provisional attachment with prior approval of Approving Authority. If he had not provisionally attached it, he does so with prior approval of Approving Authority. – Section 24(4).
6. He has to complete his inquiry culminating into continuing provisional attachment or revoking it or provisionally attaching or deciding not to provisionally attach as above within 90 days—Section 24(4).
7. The IO shall within 15 days of attachment under section 24(4) refer a case to Adjudicating Authority for adjudication and confiscation proceedings – Section 24(5).
8. The Finance (No. 2) Act, 2019 has amended sub-section (3) of section 24 with effect from 01.09.2019 so as to provide that instead of attaching the property for a period of 90 days from the date of notice, the said property may be attached for a period of 90 days from the last day of the month in which notice was issued.
9. The Finance (No. 2) Act, 2019 has amended sub-section (4) of section 24 with effect from 01.09.2019 so as to provide that instead of passing an order within a period of 90 days from the date of issue of notice under sub-section (1), the said order shall be passed within a period of 90 days from the last date of the month in which notice under subsection (1) was issued.
10. The existing provisions of section 24(4) of the PBPT Act provide for passing of order by the Initiating Officer while existing provisions of section 24(5) provide for making of reference by the Initiating Officer. However, no exclusion is provided for the period during which the proceedings are stayed by the Court. In order to provide for the exclusion and adequate time to pass the order or make the reference, Finance (No. 2) Act, 2019 has amended section 24 so as to exclude the time on account of stay granted by any court from the period of time provided under sub-section (4) for passing of order under that sub-section. The new first proviso inserted by the Finance (No. 2) Act, 2019 at the end of section 24 provides that if after exclusion of the period of stay if the remaining period is less than 30 days, the remaining period shall be deemed to extend to 30 days for passing order under sub-section (4). These amendments will take effect from 1st September, 2019.
11. The Finance (No. 2) Act, 2019 has amended section 24(5) so as to exclude the time on account of stay granted by any court from the period of time provided under sub-section (5) (15 days from the date of attachment) to refer the order passed under sub-section (4) to the Adjudicating Authority. [New Explanation to section 24(5)] If after exclusion of the period of stay, the period of limitation referred to in sub-section (5) available to the Initiating Officer to refer the order of attachment to Adjudicating Authority is less than seven days, such remaining period shall be deemed to be extended to seven days. These amendments (new time-limits) will apply with effect from 01.09.2019.
12. Section 23 of the PBPT Act relates to the power of IO to conduct or cause to be conducted any inquiry or investigation in respect of any person, place, property, assets, document, books of account in respect of any matter under this Act. Such inquiry or investigation can be conducted or caused to be conducted after obtaining the prior approval of the Approving Authority.
13. The Finance (No. 2) Act, 2019 amended section 23 retrospectively with effect from 01.11.2016 by inserting an Explanation which clarifies that “For the removal of doubts, it is hereby clarified that nothing contained in this section shall apply and shall be deemed to have ever applied where a notice under sub-section (1) of section 24 has been issued by the Initiating Officer.”
14. The Explanatory Memorandum to the Finance (No. 2) Bill, 2019 clarifies that the purpose of this retrospective amendment is “to clarify that no prior approval of the Approving Authority would be required in cases where notice under section 24(1) has been issued”.
15. The Approving Authority means Joint Commissioner Income-Tax (Benami Prohibition) or the Additional Commissioner of IncomeTax (Benami Prohibition) at the respective Headquarters at Ahmedabad, Surat, Bengaluru etc.
16. The Approving Authority’s function is to issue prior approvals of provisional attachment or revoking the same and for inquiry or investigation by IO when he conducts the same without issuing SCN under section 24(1).
17. The Adjudicating Authority is appointed by the Central Govt. under section 7 of the PBPT Act. Sections 8 to 17 deal with Composition of Authority, Qualifications for Chairperson and Members, Constitution of Benches, Removal of Chairperson and Members etc.
18. Section 26 deals with procedure to be followed by the Adjudicating Authority for adjudication whether property involved in matter referred by IO. Section 27 deals with confiscation of property adjudged benami under section 26.
19. The Finance (No. 2) Act, 2019 has amended sub-section (7) of section 26 with effect from 01.09.2019 so as to provide that in computing the period of one year for passing an order, the period during which the proceeding is stayed by an order or injunction of any court shall be excluded. If after exclusion of the period of stay the remaining period is less than 60 days, the remaining period shall be deemed to extend to 60 days. 20. The Explanatory Memorandum to the Finance (No. 2) Bill, 2019 explains the amendment as under: “The existing provisions ….of section 26(7) provide for passing of order by the Adjudicating Authority. However, no exclusion is provided for the period during which the proceedings are stayed by the Court. In order to provide for the exclusion and adequate time to pass the order or make the reference, it is proposed to suitably amend the provisions …..This amendment will take effect from 1st September, 2019” 21. Section 19 deals with power of authorities mentioned in section 18 to issue summons etc. and section 21 deals with their powers to call for information. Section 22 deals with their power to impound documents. 22. With a view to ensure compliance with the summons issued and information required to be furnished under the PBPT Act, the Finance (No. 2) Act, 2019 has inserted a new section 54A in the PBPT Act so as to provide for levy of penalty of rupees twenty five thousand for failure to comply with the summons issued or to furnish information under section 19 or section 21 respectively of the PBPT Act. This amendment will take effect from 1st September, 2019. 23. Section 28 deals with powers of Administrators to manage confiscated properties. 24. With a view to ensure compliance with the summons issued and information required to be furnished under the PBPT Act, the Finance (No. 2) Act, 2019 has inserted a new section 54A in the PBPT Act with effect from 1-9-2019 so as to provide for levy of penalty of rupees 25,000 for failure to comply with the summons issued or to furnish information under section 19 or section 21 respectively of the PBPT Act. The penalty shall be imposed by the authority who had issued the summons or called for the information. In order to provide for appellate and rectification remedies against an order imposing penalty under new section 54A, consequential amendments have been made in section 30, section 46 and section 47 of the PBPT Act with effect from 01.09.2019. 

Also Read:

New Benami Law

Appeals and Rectification Remedies Under Benami Act