News: Benami property deals under taxman's lens, issues hundreds of notices-12-03-2021
As various government departments start sharing data with each other, the income tax department has started going after benami properties, or real estate assets bought under pseudo or fake names.
A few weeks back, a Mumbai-based small business owner received a notice from the income tax department enquiring about the money spent on buying a multi-crore apartment in the city. The tax officials are investigating how the business owner, who earns about Rs 60,000 per month, could afford an apartment worth Rs 3.1 crore — that too without a housing loan. They suspect that this probably is a “benami” property, where the actual investor is someone else.
As various government departments start sharing data with each other, the income tax department has started going after benami properties, or real estate assets bought under pseudo or fake names. In what seems to be a trigger following a data-analytics-based investigation, the tax department has started issuing notices to owners of many such “benami” properties.
There are mainly four types of real estate transactions that are under the taxman’s lens, department insiders told ET. First are those where properties are bought under a fake or a different name. Second types of notices are issued to individuals where investigators have found that the properties were purchased from money earned through illegal means. Notices are also being issued to individuals who concealed that they own real estate property in their income tax returns. Tax officials are also questioning transactions where it is suspected that cash or black money may have changed hands.
“Digitisation of land records and property records has led to a significant rise in detection of benami properties,” said Rajesh Narain Gupta, managing director of law firm SNG Partners. “The second order effect is that with the help of artificial intelligence and block chain, the tracing of title will be efficient and the frauds in real estate and banking will be checked.” A directive from the union government to check benami ownership may have caused this drive from the income tax department, tax experts said.
The tax department is said to have mapped certain areas across India and found wealthy individuals owning farm lands through dummy representatives and shell companies. “The tax department’s scrutiny seems to be on several fronts, from checking whether the money used for buying property is legal to going after individuals who may not have provided information around the real estate they own in tax returns. This seems to be a scrutiny around identifying and bringing benami properties across India under tax net,” said Paras Savla, partner, KPB & Associates, a tax advisory.
As per the probe by the investigation unit that sits within the Ministry of Finance, it was found that many property owners may have used money earned through illegal means such as peddling drugs to purchase the assets. In a number of cases, officials have issued orders for freezing such properties. Intelligence units have also invoked the Narcotic Drugs and Psychotropic Substances Act in several cases. According to insiders, the notices are also a result of a data-mining exercise by the tax department.
