Any transaction of Rs. 2,00,000/- and above in cash to be reported to Income Tax Department – Supreme Court
In a recent judgment, the Hon’ble Supreme Court have directed that whenever Rs. 2,00,000/- and above is paid by cash towards any transaction i.e. immovable property or otherwise, the courts/Sub registrar must intimate the same to the jurisdictional Income Tax Department to verify the transaction and the violation of Section 269ST of the Income Tax Act, if any.
ABCAUS Case Law Citation:
4518 (2025) (04) abcaus.in SC
In the instant case, the appellant was an Educational Institution, established in the year 1873 as a public charitable trust, dedicated to serving first-generation learners from marginalized communities. In 1905, a significant parcel of land was leased to the appellant. Subsequently, in 1929, this property was formally conveyed to the appellant by the Municipal Commissioner. Since then, the appellant had been in continuous possession of the said property, utilizing it for various educational purposes including Pre-University Colleges, first-grade degree colleges, and sporting facilities serving both their institutions and the youth.
In 2018 the respondents filed a suit against the appellant, before the City Civil Court and Sessions Judge, seeking permanent injunction restraining the appellant from creating any third-party interest over the suit schedule property. It was alleged in the plaint that the appellant was trying to manipulate the title deeds of the suit schedule property with an intention to alienate or dispose of the same to third parties.
The respondents claimed to have entered into an agreement to sell in respect of the suit property purportedly executed by certain individuals who, were not parties to the suit. It was claimed that out of total sale consideration of Rs. 9,00,00,000/-, for which, they claim to have paid Rs.75,00,000/- in cash as an advance payment.
The appellant, confronted with this litigation, filed an application under Order VII Rule 11(a) and (d) CPC seeking rejection of the plaint. Both the trial court and the High Court rejected the said application filed by the appellant.
The Hon’ble Supreme Court observed that the respondents claimed to have paid the entire consideration in cash, despite the introduction of Section 269ST to the Income Tax Act in 2017 and the corresponding amendment to Section 271DA.
The Hon’ble Supreme Court observed that the agreement can only create rights against the proposed vendors and not against third parties like the appellant. As the agreement to sell does not create any transferable interest or title in the property in favour of the respondents, as per Section 54 of the Transfer of Property Act, 1882, the attempt of the respondents to disclose the cause of action based solely on an agreement to sell, must fail, as such disclosure cannot be restricted to mere statement of facts but must disclose a legal right to sue.
The Hon’ble Supreme Court further observed that Section 269ST of the Income Tax Act, was introduced to curb black money by digitalising the transactions above Rs. 2,00,000/- and contemplating equal amount of penalty under Section 271DA of the Act. As per the said provisions, action is to be taken on the recipient. However, there is also an onus on the plaintiffs to disclose their source for such huge cash. The Central Government thought it fit to cap the cash transactions and move forwards towards digital economy to curb the dark economy which has a drastic effect on the economy of the country.
The Hon’ble Supreme Court opined that when a suit was filed claiming Rs.75,00,000/- paid by cash, not only does is create a suspicion on the transaction, but also displays, a violation of law.
The Hon’ble Supreme Court observed that though the amendment has come into effect from 01.04.2017, we find from the present litigation that the same has not brought the desired change. When there is a law in place, the same has to be enforced. Most times, such transactions go unnoticed or not brought to the knowledge of the income tax authorities. It is settled position that ignorance in fact is excusable but not the ignorance in law.
Accordingly, their Lordships issued the following directions:
(1) Whenever, a suit is filed with a claim that Rs. 2,00,000/- and above is paid by cash towards any transaction, the courts must intimate the same to the jurisdictional Income Tax Department to verify the transaction and the violation of Section 269ST of the Income Tax Act, if any,
(2) Whenever, any such information is received either from the court or otherwise, the Jurisdictional Income Tax authority shall take appropriate steps by following the due process in law,
(3) Whenever, a sum of Rs. 2,00,000/- and above is claimed to be paid by cash towards consideration for conveyance of any immovable property in a document presented for registration, the jurisdictional Sub-Registrar shall intimate the same to the jurisdictional Income Tax Authority who shall follow the due process in law before taking any action,
(4) Whenever, it comes to the knowledge of any Income Tax Authority that a sum of Rs. 2,00,000/- or above has been paid by way of consideration in any transaction relating to any immovable property from any other source or during the course of search or assessment proceedings, the failure of the registering authority 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.
In view of the above discussion, the appeal was allowed.
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