[Opinion] Can Unexplained Cash Be Treated as Benami Property?

Vinay V. Kawdia – [2026] 187 taxmann.com 545 (Article)

With reference to Yoosaf N A v. Initiating Officer (BPU) [2026] 186 taxmann.com 645 (SAFEMA – New Delhi) (SAFEMA – New Delhi) (SAFEMA – New Delhi) (SAFEMA – New Delhi) (SAFEMA – New Delhi) (SAFEMA – New Delhi), dated 14 May 2026, and the developing law on how the PBPT Act, 1988 and the Income-tax Act, 1961 fit together

I. Introduction

On 14 May 2026, the Appellate Tribunal under the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 [SAFEMA] at New Delhi decided Yoosaf N A v. Initiating Officer (BPU) [2026] 186 taxmann.com 645 (SAFEMA – New Delhi) (SAFEMA – New Delhi) (SAFEMA – New Delhi) (SAFEMA – New Delhi) (SAFEMA – New Delhi) (SAFEMA – New Delhi) Two holdings stand out. First, loose cash that a person cannot account for can be treated as ‘benami property’ under the Prohibition of Benami Property Transactions Act, 1988 (the “PBPT Act”). Second, the fact that the person is willing to offer that cash to income tax does not stop benami proceedings — because Section 60 says the Act applies in addition to other laws.

The decision lands at a busy moment. Through late 2025 and the first half of 2026 the Tribunal has handed down a run of orders that keep widening the reach of the benami law. This article reads Yoosaf N A(supra) against that backdrop. The argument is simple, and it is worth stating up front rather than leaving it to the end:

The outcome is probably right; the reasoning reaches too far. It is fair that a person who cannot explain a large pile of cash should not be able to keep it merely by offering it to tax. But the order gets there by treating “unexplained cash” as if it were, by itself, a benami transaction. It is not. A benami finding needs three things the statute and the Supreme Court insist on: a real transaction or arrangement in respect of property, two distinct roles (a benamidar who lends his name and a beneficial owner for whom the property is held), and proof of intention. A pocketful of cash, without more, supplies none of these. Where the facts do show that structure, both the Income-tax Act and the PBPT Act can apply. Where they do not, the unexplained-money provision of the Income-tax Act — Section 69A — is the tool that actually fits.

II. The Facts and What the Tribunal Held

The facts are short:

• On 27 March 2017, the appellant Shri Yoosaf N A and Shri Jamsheer P K were stopped during a routine vehicle check at Kunnamangalam. The police recovered cash of Rs. 50,13,000. The appellant could not explain its source on the spot, and the cash was seized.
• The seized cash was produced before the Judicial First Class Magistrate, Kunnamangalam, who — on a claim petition by the Income-tax Department — handed it to the Department on 4 December 2017.
• In a statement under Section 131 of the Income-tax Act (24 April 2017) and an affidavit, the appellant claimed the cash as his own, said it had been pooled from friends and relatives for an intended purchase of land at Koduvally, and offered to declare the whole amount as income for AY 2017-18 and pay the tax. Shri Jamsheer P K filed an affidavit disclaiming any interest in the cash.
• The appellant never produced the contributors’ particulars or affidavits. Treating the consideration-providers as untraceable, the Benami Prohibition Unit invoked Section 2(9)(D); a Provisional Attachment Order followed under Section 24(4)(b)(i) on 12 March 2018; a writ petition was dismissed by the Kerala High Court; and the Adjudicating Authority confirmed the attachment under Section 26(3) on 25 March 2019.

On appeal, the Tribunal answered four questions against the appellant:
(1) cash is ‘property’ under Section 2(26) and can be ‘benami property’ under Section 2(8);
(2) a benami transaction needs only two parties — a benamidar and a beneficial owner;
(3) the Initiating Officer’s inability to trace the source of the cash, on its own, attracts Section 2(9)(D); and
(4) Section 60 lets PBPT proceedings continue despite the offer to pay tax under the Income-tax Act.

III. The Order in Context

It helps to place the order against the recent case law, because that context shows both what Yoosaf N A says and what it leaves unsaid.

A. The Delhi High Court on the Section 24(1) threshold

In Shyamsundar Sharma v. ACIT/Initiating Officer, Benami Prohibition Unit-2, Delhi [2025] 181 taxmann.com 447 (Delhi), dated 19 November 2025, the Delhi High Court looked closely at the “reason to believe” standard in Section 24(1). It held the standard sits higher than mere suspicion yet falls short of a prima facie case, and that the Initiating Officer must have specific material that indicates a benami transaction. A writ court will not weigh whether the material is enough, but it can check that relevant material exists and connects to the reasons recorded.

On the facts there, the threshold was met: an income-tax search had turned up Excel sheets identifying the petitioner as a benamidar, backed by statements of beneficial owners. The takeaway is useful for our purposes: a Section 24(1) notice needs positive material pointing to a benami transaction — not just the absence of a good explanation for holding cash.

B. Demonetisation routing cases and Section 2(9)(A)

A parallel set of Tribunal decisions deals with demonetisation-era cash routing. In Smt. Mina Kiranbhai Shah v. Initiating Officer, BPU [2025] 180 taxmann.com 708 (SAFEMA – New Delhi), Rs. 71.50 lakh of demonetised cash was routed through dummy accounts of M/s Shiv Traders before reaching the appellant. The Tribunal upheld attachment, reasoning that a later Section 148 assessment cannot undo a benami transaction that happened earlier — otherwise anyone could defeat benami proceedings simply by declaring the sum as undisclosed income and paying tax on it.

The same point, elaborated, runs through the various demonetisation cases decided on 30 April 2026 — Darshan Lal Miglani v. Initiating Officer, ACIT [2026] 186 taxmann.com 232 (SAFEMA – New Delhi), Harvinder Pal Miglani v. Initiating Officer, ACIT [2026] 186 taxmann.com 233 (SAFEMA – New Delhi), and Smt. Sheetal Chandna v. Initiating Officer, ACIT Benami Prohibition Unit [2026] 186 taxmann.com 236 (SAFEMA – New Delhi). In each case, demonetised currency was handed over to one Shri Ghanshyam Patel (Proprietor, M/S Shyama Trading Company), who banked it and then remitted the equivalent back to the appellant by RTGS. The Tribunal found this squarely within Section 2(9)(A): a clear benamidar (Shyama Trading), cash that is ‘property’ under Section 2(26), and consideration and property meeting in a cash-for-cash exchange. It pointedly moved away from T. Raja v. K. Visakh [2018] 100 taxmann.com 256/[2019] 260 Taxman 225 (PBPTA – AT), which had read cash out of the Act.
The detail that matters: in every demonetisation case, the Tribunal could point to a benamidar in whose hands the cash demonstrably rested for a measurable period, and a beneficial owner to whom the value came back. There was, in short, a real benami structure.

C. Architectural benami in corporate and shell-company structures

The picture is the same in the corporate cases. In Initiating Officer v. Narendra Lamba [2026] 184 taxmann.com 585 (SAFEMA – New Delhi), land bought in an agriculturist’s name was funded by two trusts under MoUs (the fiduciary-capacity exception in Section 2(9)(A)(ii) did not help, because the benamidar was acting both as a fiduciary and for his own benefit). In Swagatma Enclave (P.) Ltd. v. Initiating Officer [2026] 185 taxmann.com 441 (SAFEMA – New Delhi), cash from bogus purchase bills was pushed in through shell companies controlled by Shri Mahaveer Lunia. In Adesh Ventures LLP v. Initiating Officer [2026] 185 taxmann.com 447 (SAFEMA – New Delhi), an LLP with negligible capital funnelled betting proceeds into shares and mutual funds. In each, there was a named beneficial owner, an identifiable benamidar, and a traceable money trail.

D. The first principles the courts keep returning to

Strip away the facts, and the courts say the same three things again and again. These three threads — drawn from the Supreme Court and, recently, the Delhi High Court — are the backbone of the analysis that follows.

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