## Benami Property: Disclosure Requirements in Financial Statements

Where proceedings are initiated or pending against a company under the law relating to prohibition of benami transactions, specific disclosures must be made in the financial statements.

### What Is a Benami Transaction?

A 'benami' transaction is one where a property is held by one person (the benamidar) but the real beneficial ownership lies with another person (the beneficiary). Such transactions are prohibited under the Prohibition of Benami Property Transactions Act, 1988.

### When Is Disclosure Triggered?

Disclosure is required when proceedings have been initiated or are pending against the company for holding benami property.

### Required Disclosures (6 Elements)

#	Disclosure Required
1	Details of the property — including the year of acquisition
2	Amount (value of the property)
3	Details of beneficiaries
4	If property is not in the books — state this fact with reasons
5	If the company is involved as an abetter or as transferor — provide details of such involvement
6	Nature of proceedings, current status, and the company's view on outcome

### Auditor's Responsibility

The auditor must:

Enquire whether any proceedings are pending under benami transaction laws
If yes, verify all six disclosure elements are made in the financial statements
Report under CARO (if applicable) regarding benami property matters

Worked example

### Example 1

Q (based on Q27): False Limited holds property recorded neither in its books nor disclosed in financials, and proceedings are pending under benami laws. As consultant, what disclosures do you advise?

A: False Limited must make the following disclosures in the financial statements:

1. Details of the property (description, location, year of acquisition)

2. Amount/value of the property

3. Details of the beneficiaries (who actually owns/benefits from the property)

4. Since the property is NOT in the books — state this fact explicitly along with the reasons for non-recording

5. If False Limited is involved as abetter or transferor — provide details of its role

6. Nature of proceedings under the Prohibition of Benami Property Transactions Act, current status of proceedings, and management's view on the likely outcome

Non-disclosure is itself a regulatory violation and the auditor should qualify the report if disclosures are incomplete.

⚠️ Common exam mistakes

Listing only 3-4 disclosure points and missing 'company's view on proceedings' and 'details of beneficiaries'
Not mentioning the requirement to explain WHY property not in books when it is off-balance sheet
Forgetting to include the abetter/transferor scenario — company may have facilitated the transaction even if not the beneficiary
Confusing benami disclosure requirements with general related-party transaction disclosures — these are different frameworks

Reference:

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Benami Property – Disclosure Requirements in Financial Statements

Worked example

⚠️ Common exam mistakes