Courts & SROs Must Report To Income Tax Authorities If Suits/Deeds Mention Cash Transactions Above ₹2 Lakh: Supreme Court

In a significant ruling aimed at combating black money and tax evasion, the Supreme Court today (April 16) directed courts and registration authorities to report cash transactions exceeding ₹2 lakhs to the Income Tax Department. The Court ruled that whenever any suit is filed claiming that a consideration of Rs. 2 Lacs or above is paid towards a transaction, then it becomes obligatory upon the Court to intimate the jurisdictional Income Tax Department for verification whether there's a violation of Section 269ST of the Income Tax Act, 1961 (IT Act). Further, the Court directed the Registering authorities that if any document is presented for registration (like a sale agreement) mentions a cash payment of Rs. 2,00,000 or more, the Sub-Registrar must inform the Income Tax Department to prevent unreported cash transactions in real estate deals. Also, the Court held that failure of officials to report such transactions will lead to disciplinary action by the Chief Secretary of the State/UT. “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. Therefore, we deem it necessary to issue the following directions. (A) 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, (B) 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, (C) 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, (D) 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 this regard, the Court directed the Registrar (Judicial) “to circulate a copy of this Judgment to the Registrar General of all the High Courts, the Chief Secretaries of all the States / Union Territories, and the Principal Chief Commissioner of Income Tax Department, enabling them to communicate the directions issued by this Court for strict compliance.” To recall, Section 269ST was introduced to the IT Act via 2017 Amendment which prohibits any person from receiving an amount of Rs. 2,00,000 or more in cash for a single transaction, or in aggregate from a person in a day, or for transactions relating to one event/occasion. It 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. The only permissible modes for such transactions are account payee cheque/bank draft, or Electronic clearing system (bank transfer, UPI, etc.), and only transactions involving government, banks, post offices, and co-operative banks are exempted from the purview of Section 269ST of IT Act. The Court noted that although the Section 269ST was introduced in good faith but it had not brought the desired change in law. Background The bench comprising Justices JB Pardiwala and R Mahadevan heard the case that involved a property dispute concerning a charitable trust and individuals claiming rights over a property in Bangalore. Also it touched upon violations of tax laws, particularly concerning cash transactions exceeding the permissible limit under Section 269ST of the Income Tax Act, 1961. The Appellant Trust was in possession of the disputed property since 1929, utilizing it for educational and sporting purposes. However, the Respondent and another individual claimed to have entered into a sale agreement in 2018 with the alleged owners of the property, asserting rights over it, and claiming that they had paid Rs. 75 Lacs as consideration in cash as an advance for an agreement to sell. The Respondent's filing of the permanent injunction suit against the Appellant-trust led it to file an application under Order VII Rule 7 CPC seeking dismissal of the suit on the grounds ...

Courts & SROs Must Report To Income Tax Authorities If Suits/Deeds Mention Cash Transactions Above ₹2 Lakh: Supreme Court

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Yash Mittal

Courts & SROs Must Report To Income Tax Authorities If Suits/Deeds Mention Cash Transactions Above ₹2 Lakh: Supreme Court

Yash Mittal

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Yash Mittal

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