Demonetized Cash Routed Through Third-Party Account Constitutes Benami Transaction: SAFEMA Appellate Tribunal

Case Overview

Case: Smt. Saryu Miglani Vs Initiating Officer
Forum: Appellate Tribunal Under SAFEMA, New Delhi
Provision Invoked: Section 46(2) of the Prohibition of Benami Property Transactions Act, 1988
Challenged Order: Order dated 27.07.2018 passed by the Adjudicating Authority
Decision Date: 30.04.2026
Outcome: Appeal Partly Allowed

Background and Factual Matrix

The present matter originates from a search and inquiry conducted during the post-demonetization period. The Deputy Director of Income Tax (Investigation)-II, Ghaziabad, on 18.01.2017, brought to the notice of the Initiating Officer, Benami Prohibition Unit, Kanpur, that Account No. 05190100000698 maintained with J&K Bank, Ghaziabad, belonging to M/s Shyama Trading Company — operated as a proprietorship by Shri Ghanshyam Patel — had been used to deposit demonetized currency amounting to Rs. 30,00,000/-. This deposited sum was thereafter distributed across five different bank accounts, one of which belonged to the appellant, Smt. Saryu Miglani, who received a transfer of Rs. 5,00,000/-.

During the search proceedings on 18.01.2017, Shri Ghanshyam Patel recorded his statement under Section 134(4) of the Income Tax Act, 1961, and made a significant admission — that the transactions conducted through the account of M/s Shyama Trading Company were not carried out by him personally. Instead, he disclosed that Shri Rahul Choudhary had been operating the account using pre-signed cheques obtained from him. He further stated that any deposits made in the said account after 01.11.2016 did not belong to him.

On the basis of these disclosures and the material on record, the Initiating Officer formed the belief that Shri Ghanshyam Patel was acting as a benamidar within the meaning of Section 2(10) of the Prohibition of Benami Property Transactions Act, 1988 (PBPT Act), and that the amount of Rs. 5,00,000/- transferred to Smt. Saryu Miglani constituted benami property under Section 2(8) of the Act.

Notices and Preliminary Proceedings

Pursuant to his findings, the Initiating Officer issued a notice dated 18.05.2017 under Section 24(1) of the PBPT Act to Shri Ghanshyam Patel, treating him as the benamidar, and simultaneously forwarded a copy to Smt. Saryu Miglani as the alleged beneficial owner.

In her reply dated 07.06.2017, Smt. Saryu Miglani put forward the following contentions:

  • The amount of Rs. 5,00,000/- received from M/s Shyama Trading Company had been declared under the Pradhan Mantri Garib Kalyan Yojana, 2016 (PMGKY) during the Income Tax search conducted at Ghaziabad.
  • She had surrendered the said amount appearing in her Axis Bank account (Account No. 913010031261865, Karkardooma, Delhi), which had originally been transferred from J&K Bank, Ghaziabad, under Section 199C(1) for PMGKY, 2016 on 24.03.2017.
  • She had complied with the scheme in accordance with Circular No. 2 of 2017 dated 18.01.2017, paid the applicable tax, surcharge, and penalty, and filed Form-I declaration on 08.03.2017 under Section 199C of the Finance Act, 2016.

Statements of Shri Sandeep Miglani (on behalf of Smt. Saryu Miglani) and Shri Ghanshyam Patel were recorded by the Initiating Officer on 02.08.2017.

Following his inquiry, the Initiating Officer concluded it was a fit case for adjudication and passed a Provisional Attachment Order covering the bank balance, investments, movable and immovable property of Smt. Saryu Miglani to the extent of Rs. 5,00,000/-, which included:

  • Rs. 1,25,000/- deposited in the PMGKY deposit scheme account at Andhra Bank
  • An immovable property at 2819/5, Gali Chailpuri, Kinari Bazar, Delhi-06 (admeasuring 33 sq. yards)

The Provisional Attachment Order was passed with the prior approval of the approving authority, JCIT (BPU), Kanpur, and the matter was referred to the Adjudicating Authority as Reference No. R-92/2017.

Order of the Adjudicating Authority

After examining the reference, supporting documents, and hearing both the benamidar (Shri Ghanshyam Patel) and the beneficial owner (Smt. Saryu Miglani), the Adjudicating Authority, while partially accepting the case of the authorities, released the attached immovable property but confirmed the attachment of the Axis Bank account to the extent of Rs. 5,00,000/-.

Dissatisfied with this outcome, Smt. Saryu Miglani filed the present appeal before the Appellate Tribunal. A cross-appeal was also filed by the Department against the release of the immovable property, which was noted to be dealt with separately.

Submissions of the Appellant Before the Appellate Tribunal

During the course of arguments, the learned counsel for the appellant made the following admissions and submissions: