The Benami Transactions Informants Reward Scheme, 2018 (the ‘Scheme’ for brevity’s sake) has been introduced for regulating the grant and payment of reward to a person who is an informant under this Scheme.
A person can be given a reward of up to Rs. one crore for providing specific information of benami property. The identity of the informant shall be kept confidential.
It is not clear why the Central Board of Direct Taxes (CBDT) has delayed the roll out of this Scheme since the Act (as amended in 2016) came into force on 1 November, 2016. Ideally, the CBDT should have come out with this reward scheme in a couple of months, that is by January, 2017 at the latest.
The Act contains no express provision empowering the central government to reward informants who give specific information about benami property leading to their confiscation. Nevertheless, the central government’s power to frame a scheme for rewarding informants of benami property can be inferred from section 28(3) of the Act that empowers the central government to prescribe how confiscated benami properties will be disposed off.
No amnesty from prosecution to the benamidar
Section 6 of the Act prohibits a benamidar from retransferring the benami property to the beneficial owner. If a benamidar refuses to retransfer the benami property and becomes an informant for reward under the Scheme , is there any amnesty from prosecution for him? Sadly, No. The Scheme grants no amnesty from prosecution to a benamidar.
Too much emphasis on the form
The informant will be given a reward only if he furnishes specific, reliable and verifiable information about benami property in the Annexure A form prescribed by the Scheme. The informant shall not be eligible for any reward if he furnishes the information in any other manner, e.g., through letter, e-mail, CD, WhatsApp, SMS, phone, posting on a social networking site or publishing a letter
in the newspaper or any other media. This means semi-literate and illiterate people who have specific, reliable and verifiable information cannot avail the Scheme. For example, a driver of a rich man who holds property in the names of benamidars will never be able to furnishinformation.
An informant will be given a reward only if he satisfies the definition of an ‘informant” i.e. a person, an individual or a group of individuals, who have at a time, given specific information about one or more movable or immovable benami property(ies) of which the fair market value, as defined in the Act, and circle rate, as defined in this Scheme, of immovable property is more than Rs one crore in a single Annexure - A form; (b) furnished in the prescribed form in Annexure - A to the scheme; and (c) has received an ‘informant’ code.
Riddled with legal technicalities
Suppose you mention property X is worth Rs 10 crore in the Annexure A form. Based on your lead, the Department detects other properties also worth Rs 50 crore. Your reward will be only in respect of property X worth Rs 10 crore. You will not be given any reward in respect of other properties detected. Further, an informant must have an Aadhaar card unless he is a foreigner. An informant can be denied a reward on the ground that the “information given was already available with the Income Tax Department”.
Informant cannot sue for reward
The reward under the scheme is an ex-gratia payment, made in the absolute discretion of the competent authority. The decision of the authority shall be final and it shall not be subject to any litigation, adjudication and arbitration except review as provided in the Scheme.
Reward is not tax-free
The reward has not been notified under section 10(17A)(ii) of the Income-Tax Act,1961 as yet. So, it is not tax-free.
The Informant Reward Scheme has come too late; it places too much emphasis on the form in which information is furnished making it unusable by semi-literates; is riddled with too many uncertainties including the absence of approaching the courts for remedy and grants no amnesty from prosecution for the benamidar who wishes to turn an informant for reward. The Scheme, as presently designed, will not incentivise people with information to turn informants.
(The writer is Deputy General Manager, Taxmann.com - publisher of tax and corporate laws)
Updated Date: Jun 22, 2018 13:10 PM