Will new benami law be given retrospective effect? Delhi HC asks I-T dept

HC posed the queries to the I-T dept while hearing Delhi Health Minister Satyendra Jain's plea

The Delhi High Court on Wednesday asked the Income Tax department whether it intended to examine under the new benami law all accommodation entries made prior to 2016 when it came into effect.

The process adopted by an individual or company to bring unaccounted money back to their business without paying any tax on the same is termed as 'accommodation entries'.

Justice Vibhu Bakhru said if the newly amended benami law was being interpreted by the tax department in such a manner as to give it retrospective effect from 1988, when the legislation was first enacted, then it would lead to reopening of 20-30-year-old cases, many of which would have gone all the way to the Supreme Court.

"You have to take a clear stand on how this Act would be administered," the court told the tax department and added that the issue would have "huge ramifications".

It also asked the department whether assets held now by a company, in which accommodation entries have been made in the past, would be construed as being a benami transaction under the Prohibition of Benami Property Transactions Act 2016.

The court posed the queries to the I-T department while hearing Delhi Health Minister Satyendra Jain's plea against the authority's decision to attach some assets on the ground that they were allegedly linked to him.

The I-T department has also registered a case against Jain under the new Prohibition of Benami Property Transactions Act.

The CBI, too, has registered a case against Jain on the I-T department's recommendation.

According to Jain's plea, the alleged benami transactions, from the proceeds of which the attached assets were claimed to have been purchased, took place between 2011 to March 31, 2016 and therefore, the amendment which came into effect in November 2016 would not apply.

His lawyers sought that either the proceedings under the benami law stay or the tax authorities be directed not to pass a final order till his petition in the high court is finally decided.

The court, however, declined to grant any interim relief, saying let the department proceed in the way they want.

During the arguments, the tax department, represented by Additional Solicitor General (ASG) Sanjay Jain, contended that Jain had funded four companies in which he used to be a director prior to his election, and they, in turn, had bought land from the proceeds.

Hundreds of bighas of land and other assets worth over Rs 30 crore, allegedly purchased in and around Delhi by the four firms, have been provisionally attached by the department under the new benami law which carries a maximum punishment of up to seven years of rigorous jail term and a hefty penalty.

The assets were initially provisionally attached on February 27 and the order was extended on May 24 by the I-T department till the time the adjudicating authority took a final decision.

The court asked the I-T department whether it had any material in the instant case to show that the assets in question were being held by the companies for the benefit of someone else, who was not a shareholder like Jain.

Jain has claimed that he was only a minority shareholder in the companies at one point and that he has sold his shares in the entities.

The court also said that if the I-T department finds such assets, bought from proceeds of benami transactions, in the hands of a company, it should tax it there and not in the hands of the shareholder.