The Initiating Officer, as defined under the Prohibition of Benami Property Transactions Act, 1988 (“Act”), after following the due process of law under Section 24 of the said Act has power under Section 24 (3) of the said Act, with previous approval of the Approving Authority, to provisionally attach the property for which he has reason to believe that the same is a benami property, for a period not exceeding ninety days from the date of notice issued under Section 24 (1) of the Act. The main condition under Section 24(3) is that the Initiating Officer should be of the opinion that the person in possession of the property held benami may alienate the property during the period of show cause notice.

Under Section 2(19) of the Act, Initiating Officer means Assistant Commissioner or a Deputy Commissioner as defined under clauses (9A) and (19A) respectively of section 2 of the Incometax Act, 1961. This makes it clear why the term “Income Tax Department” has been used in respect of attachment of property under the Prohibition of Benami Property Transactions Act, 1988.

As per the provisions of the Act, the person in whose name the property is held is called “benamidar” and the person for whose benefit the property is held by benamidar is called “beneficial owner”. However, to fall under the provisions of the Act, there has to be a beneficial owner, i.e., a person for whose benefit the property is held by the said person i.e., benamidar. Without such a person, the provisions of the Act cannot be attracted. The definition of “benami transaction” makes it amply clear that, subject to certain exceptions, “benami transaction” means a transaction or arrangement:

a. where a property is transferred to, or is held by, a person, and the consideration for such property has been provided, or paid by, another person; and

b. the property is held for the immediate or future benefit, direct or indirect, of the person who has provided the consideration

Therefore, the person who is holding the said property is said to be a benamidar and the person who has provided the consideration and for whose benefit the property is held is said to be a beneficial owner.

However, it is interesting to note that the identity of the beneficial owner may or may not be known. Hence, even if it is proved that the alleged benami property is held for the benefit of a person other than the benamidar, whether his identity is known or not, the provisions of the Act may be applicable subject to other provisions of the Act.

In addition, the principles governing the determination of the question whether a transfer is a benami transaction or not as laid down by the Hon’ble Supreme Court of India in the case of Bhim Singh v. Kan Singh, AIR 1980 SC 727 may be summed up as under:

  1. The burden of showing that a transfer is a benami transaction lies on the person who asserts that it is such a transaction;
  2. If it is proved that the purchase money came from a person other than the person in whose favour the property is transferred, the purchase is prima facie assumed to be for the benefit of the person who supplied the purchase money, unless there is evidence to the contrary;
  3. The true character of the transaction is governed by the intention of the person who has contributed the purchase money; and
  4. The question as to what his intention was has to be decided on the basis of the surrounding circumstances, the relationship of the parties, the motives governing their action in bringing about the transaction and their subsequent conduct etc.

Hence, provisional attachment is an initial step taken by the Initiating Officer on his opinion & belief and is further subject to Section 24 (4) of the Act. Where the provisional attachment has been made under Section 24 (3), the Initiating Officer, under Section 24 (4) after making such inquires and calling for such reports or evidence as he deems fit and taking into account all relevant materials, within a period of ninety days from the date of issuance of show cause notice, shall:

a. either pass an order continuing the provisional attachment of the property with the prior approval of the Approving Authority, till the passing of the order by the Adjudicating Authority under sub-section (3) of section 26;

b. or revoke the provisional attachment of the property with the prior approval of the Approving Authority

In case the Initiating Officer passes an order continuing the provisional attachment of the property, he shall within fifteen days from the date of attachment draw up a statement of the case and refer it to the Adjudicating Authority under Section 24(5).

Thereafter, the proceedings will take place before the Adjudicating Authority under Section 26 and Section 27 of the Act. The order of the Adjudicating Authority is further subject to the appeals, if filed, before the Appellate Tribunal under Section 46 and before High Court under Section 49 of the Act.

Therefore, provisional attachment of the properties allegedly held benami is an initial step taken by the Initiating Officer and is subject to the procedure laid down by law under The Prohibition of Benami Property Transactions Act, 1988.