DEFINING PAKISTAN LAW: Even before to the British Empire, it was common practice in the Indo-Pak Subcontinent to purchase property under a name other than one’s actual name. Such transactions were later labeled as “Benami Transactions,” with the “Benamidar” being the person holding the asset in their name. The Persian terms “Bay” for “without” and “Nami” for “name” are the origin of the word “benami,” which signifies a transaction carried out or an action conducted on behalf of another person.1
In Pakistan, holding real estate was still supposedly a prevalent practice to protect it from creditors or to fend off claims from other family members. Holding properties in a fictional person or people’ name was a common practice used to apparently conceal illegal assets and escape taxes.
A law dealing with tax evasion and black money involved in the real estate sector was introduced in the Majlis-e-Shoora of the National Assembly because assets obtained through illicit means lead to corruption, malpractices, and being used to finance terrorism. Pakistan, a signatory, adopted the UNCAC and passed the Benami Transactions (Prohibition) Act, 20172 (Benami Act), both of which are anti-corruption laws.
The Benami Act is exempt from application in cases where a person has purchased a property for the benefit of, among others, a spouse, children, siblings, lineal ascendants, or linear descendants, or a joint owner of any officially registered property3.
The Act empowered the Federal Board of Revenue (FBR) to seize any assets that were proven to have been acquired through benami transactions, whether they were movable or immovable, tangible or intangible, corporeal or incorporeal, and to punish beneficial owners and benamidar who assisted in such transactions.
Benami Act was enacted primarily to address issues with corruption, tax evasion, and money laundering as well as to promote openness in the buying and selling of real estate. Benami Transactions (Prohibition) Rules, 20194 were established by the Federal Government in order to strengthen the real estate market, combat the benami threat, eradicate financial crime, and intensify the fight against white-collar crime.
The Federal Government designates one or more Adjudicating Authorities5 to exercise jurisdiction under the Benami Act by publishing a notice in the Official Gazette. The Adjudicating Authority is bound by the Code of Civil Procedure, 1908 (Act V of 1908), which is based on the notions of natural justice and is subject to additional Benami Act restrictions.
To exercise the authority granted or delegated by the Benami Act, Commissioner of Inland Revenue (CIR) will act as the “Approving Authority”;
(ii) The Deputy Commissioner of Internal Revenue (DCIR), who will act as the “Initiating Officer,” will have certain authority and perform certain duties.
(iii) The duties of the Assistant Commissioner of Internal Revenue (ACIR)
A transaction must contain two necessary components in order to be deemed benami. The first requirement is that the ostensible owner and the purchaser must have an express or implied agreement for the purchase of the asset in the ostensible owner’s name for the benefit of the person who must make payment, and the second requirement is that a transaction between the real purchaser and seller was entered into to which the ostensible owner was not a party. The factors listed below are essential elements for classifying a transaction as a benami transaction.
The source of thought
- Whose possession the original title deed and other papers in evidence originated from;
- Who is in possession of the contested asset?
- The intent behind a benami transaction.
Benami assets are those acquired in a person’s name who, based on his financial situation, is unable to buy them with his own money9.
Under the Benami Act, engaging in a benami transaction is a crime that carries a lengthy prison sentence10. Such an offense is prosecutable before a Special Court11 rather than an Accountability Court. The Benami Act gives provisions precedence over anything that is in conflict with any other currently in effect law, including the National Accountability Ordinance of 1999.
A show-cause notice is given to a benamidar based on information in the initiating officer’s possession and his reasons for believing that the individual is a benamidar, asking them to explain why the asset listed in the notice should not be classified as benami. If the initiating officer believes that the owner of the benami asset (the benamidar) may alienate from the benami asset within the time frame specified in the show cause notice, the initiating officer may grant an order for the provisional attachment of the benami asset. Within 60 days of issuing the attachment of asset order, the initiating officer creates a statement of the case and refers the matter to the adjudicating authority.
After completing the necessary paperwork and following the established procedure, the adjudicating authority may either confirm or set aside the attachment order. Within 45 days of the adoption of the attachment order, anyone who feels wronged by the Adjudicating Authority’s decision may file an appeal with the Federal Appellate Tribunal16. The High Court will hear appeals of the Federal Appellate Tribunal’s ruling.
When an asset is seized, all rights and titles to it belong to the federal government free from any liens, and there is no need to pay compensation. Any rights that a third party may have created in a confiscated benami asset are void.
When a confiscation order17 for a benami asset has been made, the federal government names a receiver by order that is published in the official gazette.
administrators with the authority to receive and administer the benami asset that has been seized. The Administrator notifies the relevant registration authorities responsible for keeping track of the ownership of seized benami assets to post a notice to that effect on the confiscated asset.
Beneficial owner, benamidar, and anyone else who encourages someone to engage in a benami transaction or holds a benami asset to circumvent the letter or spirit of any law, avoid paying statutory dues and taxes, or fail to pay creditors is guilty of the offense of a benami transaction and will be fined and punished.