Routing Demonetized Cash Through Third Parties Is a Benami Transaction, but Attachment Must Reflect PMGKY Disclosures

By | May 20, 2026
0 Comment

Routing Demonetized Cash Through Third Parties Is a Benami Transaction, but Attachment Must Reflect PMGKY Disclosures

Issue

  • Whether depositing demonetized currency into a third party’s bank account for subsequent routing back via banking channels qualifies as a Benami transaction involving “property” under the Benami Act.

  • Whether the Adjudicating Authority was justified in confirming a provisional attachment of ₹5 lakhs against the appellant’s primary assets when a substantial portion of that exact routed cash had already been declared, taxed, and locked under the Pradhan Mantri Garib Kalyan Yojna (PMGKY) scheme.

Facts

  • The Transaction: The appellant handed over approximately ₹5 lakhs in demonetized currency to ‘G’, the proprietor of STC.

  • The Routing: ‘G’ deposited this cash into STC’s bank account and subsequently retransferred the money back to the appellant through standard banking channels.

  • The Investigation: The Initiating Officer (I.O.) treated ‘G’ as a benamidar, classified the routed funds as benami property, and provisionally attached the appellant’s bank balances, investments, and physical properties.

  • The Defense: The appellant argued that raw cash does not fit the definition of “property” under Section 2(26), meaning the statutory ingredients of a Benami transaction were not met and the attachment notices were invalid.

  • The PMGKY Declaration: Separately, the appellant declared the ₹5 lakhs received from STC under the PMGKY amnesty scheme. Out of this, they paid ₹2.47 lakhs in taxes/surcharges, locked ₹1.25 lakhs into an interest-free PMGKY bond, and kept the remaining balance of ₹1.27 lakhs.

  • The Attachment Conflict: Despite this tax declaration, the I.O. attached assets up to the full value of ₹5 lakhs along with the PMGKY bond. The Adjudicating Authority later sustained the bank attachment up to ₹5 lakhs while releasing the physical real estate.

Decision

  • Cash is Moveable Property: The court held that cash explicitly constitutes movable property and falls squarely within the broad ambit of “property” defined under Section 2(26) of the Act.

  • Benami Arrangement Confirmed: Routing demonetized cash through a dummy or third-party commercial account to wash it and return it to the beneficial owner fulfills the definition of a Benami transaction under Section 2(9A). ‘G’ acted as a benamidar, making the initial action under Sections 24 and 26 legally sound.

  • Excessive Attachment Overruled: The court ruled that because the appellant had already paid taxes and declared the funds under a government-sanctioned scheme (PMGKY), attaching alternative bank balances up to the full ₹5 lakhs was completely unjustified.

  • Attachment Restricted: The attachment was ordered to be strictly restricted to the remaining liquid balance of ₹1.27 lakhs and the specific PMGKY bond of ₹1.25 lakhs. It could not legally extend to regular independent bank accounts or immovable holdings, delivering a partial victory to the assessee.

Key Takeaways

  • Cash Counted as Property: For the purposes of anti-benami legislation, “property” is interpreted in its widest sense; physical currency or cash deposits cannot escape the Act by claiming they are not structured assets.

  • Banking Laundering Triggers Benami: Using a third party’s business account as a conduit to deposit unexplainable cash during demonetization creates a classic benamidar-beneficial owner relationship.

  • Amnesty Limits Forfeiture Scopes: If an asset owner utilizes an official government disclosure or amnesty scheme (like PMGKY) and clears their tax liability on a disputed sum, recovery officers cannot blindly attach equivalent clean assets. The attachment must narrow down exclusively to the remaining untaxed yield or specific bonds of that scheme.

APPELLATE TRIBUNAL SAFEMA , NEW DELHI
Harvinder Pal Miglani
v.
Initiating Officer, ACIT, Benami Prohibition Unit*
BALESH KUMAR and Rajesh Malhotra, Member
FPA-PBPT-150/KNP/2018
APRIL  30, 2026
Ashwani Kr. Uppal, Ankit Sharma, Amir Kr. Uppal and Ms. Akshita, Advs. for the Appellant. Manmeet Singh Arora, SPP for the Respondent.
ORDER
Rajesh Malhotra :- The present appeal u/s 46 (2) of the Prohibition of Benami Property Transactions Act, 1988, is filed by the appellant against the order u/s 26(3) dated 27.07.2018 passed by the Adjudicating Authority in Reference No. R-90/2017, whereby account of the appellant in Khatri Co-operative Urban Bank Ltd., Karkardooma, Delhi,-92 vide account No. 4/4233 was confirmed for attachment to the extent of Rs. 5,00,000/-, whereas the immovable properties in lieu of said amount were released.
2. As per the allegations, Deputy Director of Income Tax (Inv.)-II/Ghaziabad, on 18.01.2017 informed the O/o the Initiating Officer, Benami Prohibition Unit, Kanpur that A/c No. 05190100000698 maintained with J&K Bank, Ghaziabad, pertaining to M/s. Shyama Trading Company, Prop. Shri Ghanshyam Patel had been used for deposit of the de-monetized currency to the extent of Rs.30,00,000/-, which was subsequently transferred to five other accounts, including the account of the present appellant.
Shri Ghanshyam Patel in his statement recorded u/s 134(4) of the Income Tax Act, 1961 during the course of search on 18.01.2017 informed that the transactions in the said bank account of M/s. Shyama Trading Company have not been made by him, but it is done by Shri Rahul Choudhary, who obtained pre-signed cheques of Shri Ghanshyam Patel. He also stated that the deposits made in the account of M/s. Shyama Trading Company after 01.11.2016 was not belonging to him.
In view of the facts & material available in the possession of the Initiating Officer, he had reason to believe that Shri Ghanshyam Patel was a benamidar within the meaning of Section 2(10) of the PBPT Act, in whose name benami transactions were made through the Bank account of M/s. Shyama Trading Company and thereafter the amount was transferred to the different beneficial owners. Out of the said amount, sum of Rs. 5,00,000/- was transferred to the account of Sh. Harvinder Pal Miglani (herein appellant) and the same is benami property as per Section 2(8) of the PBPT Act.
Accordingly, notice dated 18.05.2017 u/s 24(1) of the PBPT Act was issued by Initiating Officer to Shri Ghanshyam Patel and copy to the beneficial owner, Sh. Harvinder Pal Miglani. On 07.06.2017, Sh. Harvinder Pal Miglani filed reply and the statement of Shri Sandeep Miglani (on behalf of Sh. Harvinder Pal Miglani) and Shri Ghanshyam Patel were recorded by Initiating Officer on 02.08.2017.
The reply filed by Sh. Harvinder Pal Miglani is as under : –
(a) The amount so received from M/s Shyama Trading Company (Proprietor Shri Ghanshyam Patel) amounting to Rs. 5,00,000/-has been declared under Pradhan Mantri Garib Kalyan Yojna, 2016, during the course of search conducted by the Income Tax Department, Ghaziabad.
(b) Sh. Harvinder Pal Miglani has surrendered amount of Rs. 5,00,000/- appeared in bank account number 4/4233 at Khatri Cooperative Urban Bank Ltd., Karkardooma, Delhi-92 which is transferred from the bank account No. 0519010100000698 at J&K Bank, Ghaziabad, under section 199C(1) for Pradhan Mantri Garib Kalyan Yojna, 2016 on 24.03.2017 as per clarification on taxation and investment regime for Pradhan Mantri Garib Kalyan Yojna, 2016 vide Circular number 2 of 2017 dated 18.01.2017 and paid tax, surcharge and penalty as per the scheme and made a declaration in Form-I on 06.03.2017 as per provisions of section 199C of the Finance Act, 2016.
It is pertinent to mention here that no provisional attachment had been made by the Initiating Officer u/s 24(3) of the PBPT Act, 1988. After issue of notice u/s 24(1), enquiries have been made and evidence was gathered by the Initiating Officer. After taking into account all the relevant materials, Initiating Officer concluded that it is a fit case for referring to the Adjudicating Authority for adjudication of the benami property. Accordingly, Initiating Officer passed order for provisional attachment of the bank balance, investments, movable and immovable property of the beneficial owner, Sh. Harvinder Pal Miglani to the extent of Rs. 5,00,000/-, till the passing of order by the Adjudicating Authority u/s 26(3) of the PBPT Act. The deposit of Rs. 1,25,000/- made to Pradhan Mantri Garib Kalyan Yojna deposit scheme account in Andhra Bank was also provisionally attached. The details of the immovable properties are as under:
(i) 1/3rd share of 248 AGCR Enclave, Delhi -92; (admeasuring 200 sq. yards) and
(ii) 1/2 share of G-45, Seelampur, Delhi-53 (admeasuring 80 sq. yards) were also provisionally attached to protect the siphoned amount of Rs. 5,00,000/-.
The said Provisional Attachment Order was stated to be passed by the Initiating Officer with prior approval of the approving authority i.e. JCIT (BPU), Kanpur. Thereafter, Reference no. R-90/2017 was sent to the Adjudicating Authority for confirmation.
The Adjudicating Authority being satisfied with the allegations made in the reference along with the relied upon documents, issued the notices to benamidar, Shri Ghanshyam Patel and beneficial owner Sh. Harvinder PalMiglani. They filed their respective replies which are reproduced in para 20 of the impugned order from page 19-25. The rejoinder filed by the Initiating Officer is also reproduced in the said para from page 26-33.
After hearing the rival submissions, the Adjudicating Authority set aside the attachment qua the immovable properties, except the attachment of the bank account for recovery to the extent of Rs. 5,00,000/-, which was confirmed and thereby reference was partly allowed.
Aggrieved by the said order, beneficial owner, Sh. Harvinder Pal Miglani filed the present appeal and the cross appeal is also filed by the Department against the impugned order for release of immovable properties, which will be dealt separately.
3. During the arguments, Ld. Counsel for the appellant admitted the fact that he was in possession of cash of Rs. 5,00,000/- on the date of de-monetization i.e. 08.11.2016, which was handed over to Shri Ghanshyam Patel, Prop. of M/s. Shyama Trading Company on 12.11.2016. After the deposit of said cash amount in the account of M/s. Shyama Trading Company, the same was transferred back into the account of the appellant on the same date. He contended that there was no benami transaction, as the amount was handed over with an intention of converting the de-monetized currency into new legal tender, and hence, there was no intention to create benami property, as defined in Section 2(9) of the PBPT Act. He stressed that whether the particular transaction is benami or sham depends upon the intention of the parties entering into any kind of arrangement. He argued that in the present case the real intention was to route the demonetised bank notes through the account of M/s. Shyama Trading Company for the purpose of conversion, as the amount was received by the appellant on the same day. Accordingly, he contended that transaction can be labelled as sham transaction, but not as the benami transaction, as it was the unaccounted money with the appellant. He pointed out that out of the said amount of Rs. 5,00,000/-, appellant has already deposited Rs. 2,47,500/- as tax under Pradhan Mantri Garib Kalyan Yojna @ 49.5% and 25% of the amount i.e. Rs. 1,25,000/- was deposited in the Interest Free Bond of Pradhan Mantri Garib Kalyan Yojna. Hence, the only balance of Rs.1,27,500/- (i.e. 25.1%) remained with the appellant.
He argued that the Adjudicating Authority wrongly held that the act of depositing demonetized currency notes/cash in the Bank Account of M/s Shyama Trading Co., and thereafter, transferring back the same through RTGS in the bank account of appellant company is a benami transaction, within the meaning of Section 2 (9) (A) of the PBPT Act.
He further argued that form of demonetized currency notes does not constitute property, within the meaning of Section 2 (26) of the PBPT Act. Even otherwise, the deposit of cash in the third party’s account do not constitute benami transaction as defined in Section 2(9)(A) of the PBPT Act which provide that the following conditions must be fulfilled cumulatively.
(a) Where the property is transferred, or is held by a person, and further the consideration for such property has been provided, or paid by another person and
(b) The property is held for the immediate or future benefit, directly or indirectly of the person who has provided the consideration.
He stressed that the Adjudicating Authority erred in ignoring the following guidelines laid down by the High Court and the Supreme Court of India for treating a particular transaction as benami transaction, as mentioned below: –
The burden of showing that the transfer is a benami transaction lied on the person who asserts that it is such a transaction.
If it is provided that the purchase money came from a person other than the person in whose favour the property is transferred, the purchase is prima facie assumed to be for the benefit of the person who supplied the purchase money, unless there is evidence to the contrary.
The true character of the transaction is governed by the intention of the person who has contributed the purchase money; and
The question as to what is his intention was has to be decided on the basis of the surrounding circumstances, the relationship of the parties, the motives governing their action in bringing about the transaction and their subsequent conduct etc.
He further argued that notice under Section 24 (1) of the PBPT Act issued to M/s Shyama Trading was invalid because no property was held as benami by him being already transferred to the appellant as reflected in the bank statement.
In support of his contention, Ld. Counsel for the appellant relied upon following judgments:-
(i) In case T. Raja v. K. Visakh (PBPTA – AT)/Appeal no. FPA-PBPT-31/CHN/2018 & six other appeals passed by this Appellate Tribunal on 31.10.2018, wherein it is held as under:-
36. Even the Adjudicating Authority has not considered the reply filed by the appellant properly. The impugned order is unsustainable as it punishes the appellants for wanting to defeat the purpose of demonetization, which has no direct nexus with the Act and is beyond the purview of the Act.
42. The existence of the “benami” transaction has to be proved by the authorities i.e. the person who alleges the transaction (Sitaram Agarwal v. Subrata Chandra, (2008) 7 S.C.C. 716). The authorities have failed to discharge the burden of proof. The authority has purely gone on the premise that cash is transferred from one person to another, with an object to defeat demonetization. This is insufficient to establish a “benami” transaction.
43. The transaction where cash is paid to person in lieu of a future promise cannot be a “benami” transaction as there is no lending of name. There can be no “benami” transaction if the future benefit is due from the person who is also the holder of property.
44. The impugned order is not sustainable as it punishes the appellants for wanting to defeat the purpose of demonetization, which has no direct nexus with the Act and is beyond the purview of the Act.
(ii) In case Rachakonda Srinivas Rao v. Initiating Officer, BPU (SAFEMA – New Delhi)/Appeal no. FPA-PBPT-874/HYD/2019 passed by this Appellate Tribunal on 09.01.2025, wherein it is held as under:-
12. We note that out of the total sale consideration of Rs.70.77 Lakhs for the impugned property only Rs.9 Lakhs was paid by the alleged Benamidar. The interested party M/s ICON Constructions has also maintained that the Benamidar has not acquired any rights, interest and title to the impugned property. Therefore, M/s ICON Constructions continue to remain owner and in possession of the impugned property. In view of this, the applicability of Section 2 (9) (A) is doubtful as neither the impugned property was transferred to the alleged Benamidar nor the impugned property was held by the alleged Benamidar. Even if we accept that there were cash infusions into the bank accounts of the alleged Benamidar, there is no evidence on record as to show that such infusions were made by the Beneficial Owner.
(iii) In case Smt. Ranjana Roy v. Initiating Officer (SAFEMA – New Delhi)/Appeal no. FPA-PBPT- 2420/KOL/2025 passed by this Appellate Tribunal on 12.02,2026, wherein it is held as under:-
8. On the basis of the aforementioned verification exercise, It is clear that the seized Jewelleries were not being held as benami by the alleged Benamidar Smt Ranjana Roy. Even for the four items of Jewellery the subsequent submissions made by the Appellant do not appear to be afterthought. Her submissions that these Jewelleries were obtained from her own sources of funds appear to be correct. We also observe that Shri Animesh Banerjee had disclosed subsequently the entire Jewellery purchased from M/s SENCO Gold showroom under Pradhan Mantri Gareeb Kalyan Yojana, 2016. Ld. counsel for the Appellant pleaded that Shri Animesh Banerjee made aggregate disclosure of Rs 2,47,00,000 [Rs 60,62,191 held in cash + Bank balance of Rs 1,86,37,809 received from sale of entire Jewellery purchased from M/s Senco Gold showroom at Gariahat under the PMGKY, 2016 and the same has been accepted by the income tax Department. In the light of the Verification Report, we are unable to sustain the attachment of the seized Jewellery under PBPTA as benami Property.
Accordingly, he submitted that the immovable properties are rightly released by the Adjudicating Authority, but the impugned order also needs to be set aside for the for attachment of the account to the extent of Rs.5,00,000/-.
4. On the other hand, Ld. Counsel for respondent Department controverted the submissions made by the Ld. Counsel for appellant on each and every aspect, which will be reflected in our discussions and findings in the following paras.
5. After hearing the rival submissions, we have given our thoughtful consideration to the same. Before discussion & findings, we will like to highlight the important statutory provisions under PBPT Act, 1988. Word “Property” is defined under as-
Section 2 (26) “Property” means assets of any kind, whether movable or immovable, tangible or intangible, corporeal or incorporeal and includes any right or interest or legal documents or instruments evidencing title to or interest in the property and where the property is capable of conversion into some other form, then the property in the converted form and also includes the proceeds from the property.
Section 2(10) defines the term “Benamidar” as under:
“Benamidar” means a person or a fictitious person, as the case may be, in whose name the benami property is transferred or held and includes a person who lends his name;
We are of the view that cash is a movable property, which can be used to buy any other movable or immovable property. In the present case, the cash of Rs. 30,00,000/- was handed over to Sh. Ghanshyam Patel. He deposited the demonetized currency on different dates in the account of his proprietorship concern M/s Shyama Trading Company.
Therefore, there is clear transfer/holding of the amount with M/s Shyama Trading Company on behalf of the appellant and thereby, lend his name to the said cash. Accordingly, respondent no.2 M/s Shyama Trading is clearly a Benamidar in present case.
Now, coming to the definition of “Benami Transaction” as defined u/s 2(9)(A) of the PBPT Act, same is reproduced as under:
(a) Where the property is transferred, or is held by a person, and further the consideration for such property has been provided, or paid by another person and
(b) The property is held for the immediate or future benefit, directly or indirectly of the person who has provided the consideration.
Clause (a) of Section 2(9)(A) has two parts. As far as first part of clause (a) is concerned, the same is already discussed by us in the definition of “benamidar”. Now coming to second part of clause (a) (further the consideration for such property has been provided, or paid by another person), we are of the view that cash is a pure liquid asset and same is a movable property as per aforementioned definition of “property” under Section 2(26) of the PBPT Act.
Hence, cash is a property. Further, as per the definition of ‘consideration’ as provided under section 2(d) of the Indian Contract Act, 1872:
“Section-2(d) When, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise”.
In contract law, consideration refers to the exchange of value between parties that makes a promise enforceable. Consideration is an important element to fulfill the entire requirements of a legitimate contract. If the promised consideration fails to materialize, it can result in a breach of contract. In a benami transaction, the consideration (payment or value exchanged) for a property is provided by one person, but the property is legally held by another, who is the benamidar, the person in whose name the property is registered/transferred. This means the benamidar does not own the property, but holds it on behalf of the real owner, the beneficial owner, who paid the consideration. During demonetization, there were many instances of persons depositing old notes into their bank accounts, which in fact belonged to another person and then exchanging with new notes or giving transfer entries. The definition of property under the benami act is very wide and also includes cash. Hence, such a transaction would also be termed as a benami transaction.
6. In the present case, Sh. Ghanshyam Patel took the demonetized currency notes from appellant to deposit the same in the bank account of his Prop. Concern M/s Shyama Trading and thereafter, to return the same by way of RTGS/through banking channel, so as to project the same as legal business transaction. Since cash can be used for purchasing any property and any property can be sold to get cash, under such situation, cash is consideration for the other property and vice-versa. A property can be exchanged with any property without involving any cash. In this situation both the properties are consideration for each other. Now, the issue arises whether cash for cash will be consideration for each other. Our answer is yes. For example, one is giving high value denomination currency notes to another to get currency notes of small denomination; giving cash to another to keep it in safe custody for some particular period (under apprehension of raid or anything) and to return on demand; Indian Govt. Currency with any Foreign Currency; to change the demonetized currency notes to new currency notes; loan with or without interest etc. Therefore, where cash is involved, we cannot segregate the word ‘consideration’ in the form of cash, from the word ‘property’ in the form of cash. Hence, under this situation both the words consideration and property stand merged with each other and are interchangeable.
In the present case, admittedly the cash of Rs.30 lakhs was provided by the beneficial owners i.e. appellant & his family members to Sh. Ghanshyam Patel of M/s Shyama Trading Company. Even otherwise, said cash was deposited by the benamidar in his bank account which was given by the beneficial owners and at this stage of transition, the demonetized cash of appellant becomes consideration and the amount held in the bank account of the benamidar becomes the property. Therefore, both the parts of clause (a) of section 2 (9) A of PBPT Act, are discernible.
Now, coming to clause (b) of section 2 (9) A of PBPT Act, which is also covered in the present case, as the said amount from the bank account of benamidar was later-on transferred to the account of appellant Sh. Harvinder PalMiglani, on different dates. It is immaterial whether the said property is held for a sufficient long period, or, immediately transferred after serving the purpose. The fact that property is retransferred to the beneficial owner after completion of the purpose for which it was given to benamidar, the provisions of the PBPT Act are clearly attracted and it does not exonerate any party for conducting the benami transaction.
In view of our analysis in the above sub-paras, we do not agree with the view taken by our predecessor in case T. Raja (supra), being against the statutory provisions and nonappreciation of the same, as apparent from paras 36, 42 to 44.
Similarly, facts of the case Rachakonda Srinivas Rao (supra) are distinguishable from the present case, as the sale deed was not executed in favour of the alleged Benamidar and thus property was never transferred.
The case Ranjana Roy (supra) relied upon by appellant is also not helpful to the appellant, as in the said case on the basis of verification report, it was found by the Income Tax Department that appellant is not the holder of the jewellery as benamidar.
Accordingly, this is a clear case of Benami Transaction.
7. As the value of the Benami Transaction was for the sum of Rs. 5,00,000/-. Out of the said amount of Rs. 5,00,000/-, appellant has already deposited Rs. 2,47,500/- as tax under Pradhan Mantri Garib Kalyan Yojna @ 49.5% and 25% of the amount i.e. Rs. 1,25,000/- was deposited in the Interest Free Bond of Pradhan Mantri Garib Kalyan Yojna. Hence, the only balance of Rs.1,27,500/- (i.e. 25.1%) remained with the appellant was utilised by him. Accordingly, the respondent can attach the account of the appellant Sh. Harvinder Pal Miglani to the extent of Rs.1,27,500/-, plus the bond amount of Rs.1,25,000/-. If the amount of Rs.1,27,500/- is not available in the account of appellant, then respondent is at liberty to trace out the trail of said amount by doing further investigation and thereby attach the same.
Accordingly, the impugned order needs to be modified, as above.
8. In sequel to our discussion & findings in the preceding paras no.5 to 7, the present appeal is hereby partly allowed and thereby, the impugned order dated 27.07.2018 is modified to the extent of attachment for sum of Rs. 2,52,500/- (Rs.1,27,500/-, plus the bond amount of Rs.1,25,000/-), as mentioned in preceding para no.7. Consequences to follow accordingly.
Appeal Partly Allowed.