The Supreme Court on Wednesday ruled that courts must inform the relevant jurisdictional income tax authorities if a suit filed before them involves any claims of cash transactions of ₹2 lakh or more.
In a series of directions relating to cash transactions above ₹2 lakh, the country’s top court also said that whenever a sum of ₹2 lakh or more is “claimed to be paid in cash towards consideration for the conveyance of any immovable property in a document presented for registration”, the sub-registrar must report this to the income tax department in that jurisdiction. The ruling was delivered by a Bench of Justice J B Pardiwala and Justice R Mahadevan.
In all such cases, once the income tax authorities have been informed of a cash transaction of ₹2 lakh or more, the department will have to conduct an inquiry to check whether such a transaction is legal and whether it violates Section 269ST of the Income Tax Act.
Section 269ST prohibits individuals and entities from receiving ₹2 lakh or more in cash from a single source, even if the amount is split into several payments.
Legal experts say this ruling will now make anyone who has accepted large cash payments think twice before bringing a case to court. “Even if the court accepts their claim, they may still have to pay an equal amount as penalty under Section 271DA,” an tax expert said. “This move will act as a strong deterrent against cash dealings and will support the larger goal of moving towards a digital and transparent economy.”
Another tax expert said: “The government has taken several tax and non-tax measures to move towards a cashless economy. This includes the digital payments revolution, adverse tax consequences on high-cash payments such as TDS and disallowance of expenses, digitally implemented GST, etc. The Supreme Court’s directions show that the judiciary is backing legislation already in force to push for a cashless economy.”
In its judgment, the court also said that in cases of cash transactions of ₹2 lakh or more for the registration of immovable property, such as a house or land, any failure by the registration authority to disclose this to the relevant income tax department “shall be brought to the knowledge of the chief secretary of the state/UT for initiating appropriate disciplinary action against such officer who failed to intimate the transactions”.
A copy of the judgment will be sent to the registrar general of all High Courts, the chief secretaries of all states and Union Territories, and the principal chief commissioner of the Income Tax Department, “enabling them to communicate the directions issued by this Court for strict compliance”.
The ruling came in connection with a property dispute involving a charitable trust and individuals claiming ownership of a property in Bengaluru.
The appellant trust had been in possession of the property since 1929, using it for educational and sporting activities. However, the respondent and another individual claimed to have entered into a sale agreement in 2018 with the alleged owners of the property. They argued that they had paid ₹75 lakh in cash as an advance for an agreement to sell.
