Section 55 of the Benami Act: Previous Sanction for Prosecution
Section 55 of the Prohibition of Benami Property Transactions Act, 1988 creates a mandatory sanction requirement before prosecution can be instituted for specified offences under the Act. The provision applies to offences under sections 3, 53 and 54.
Current position: The law now requires previous sanction of the competent authority. The earlier reference to the Board was replaced with effect from 1 September 2019.
Section 55 - Previous sanction
No prosecution can be instituted against a person for an offence under section 3, section 53 or section 54 unless previous sanction has first been obtained from the competent authority.
The statutory text should be read from the current version of the Prohibition of Benami Property Transactions Act, 1988 on India Code.
What does "previous sanction" mean?
"Previous sanction" means that the prescribed approval must exist before the prosecution is instituted. Section 55 therefore operates as a statutory precondition for prosecution in relation to the offences specifically listed in the section.
The provision does not itself determine whether the alleged offence is proved. Its function is to require authorization from the legally designated competent authority before prosecution for the specified offences is instituted.
Who is the competent authority under Section 55?
The Explanation to Section 55 defines "competent authority" as any of the following officers, as defined in section 2 of the Income-tax Act, 1961:
- Commissioner;
- Director;
- Principal Commissioner of Income-tax; or
- Principal Director of Income-tax.
These offices correspond to clauses (16), (21), (34B) and (34C), respectively, of section 2 of the Income-tax Act, 1961.
2019 amendment to Section 55
Section 55 was amended by the Finance (No. 2) Act, 2019 with effect from 1 September 2019. The amendment substituted the expression "competent authority" for "Board" and inserted the Explanation defining the competent authority.
Accordingly, older material stating that prosecution under Section 55 requires the previous sanction of the Board does not reflect the current wording of the provision.
Offences covered by the sanction requirement
Section 3 - Prohibition of benami transactions
Section 3 contains the statutory prohibition relating to benami transactions. Section 55 expressly includes an offence under section 3 within the previous sanction requirement.
Section 53 - Penalty for benami transaction
Section 53 deals with the offence and punishment where a person enters into a benami transaction for the purposes specified in that provision. A prosecution for an offence under section 53 is subject to Section 55.
Section 54 - Penalty for false information
Section 54 applies where a person who is required to furnish information under the Act knowingly gives false information to an authority or furnishes a false document in proceedings under the Act. Prosecution under section 54 also requires previous sanction under Section 55.
Practical effect of Section 55
- The section applies before prosecution is instituted.
- It is confined to offences under sections 3, 53 and 54.
- The sanction must come from an officer falling within the statutory definition of competent authority.
- The current provision should not be described as requiring sanction of the Board.