Supreme Court  Directs Courts & SRO to report Suits / Deeds of Cash Transaction Above ₹2 Lakh to Income Tax Authorities [Read Order]

The Supreme Court ordered courts and registration authorities to notify the Income Tax Department of any cash transactions above ₹2 lakhs, in a landmark decision intended to combat tax fraud and black money.

Since 1929, the Appellant Trust, the Correspondence RBANMS Educational Institution, has owned the contested land and used it for athletic and educational purposes. Nonetheless, the Respondent and another person asserted that they had signed a sale agreement with the property's purported owners in 2018, affirming their ownership rights and stating that they had paid Rs. 75 Lacs in cash as an advance for the sale agreement.

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After bringing a permanent injunction suit against the Appellant-trust, the Respondent filed an application under Order VII Rule 7 CPC to have the complaint dismissed for lack of cause of action and legal barre. After the appellant's plea was denied by the trial court, it filed a civil revision petition, which the Karnataka High Court likewise denied.

The issue in question was a property dispute between people vying for ownership of a Bangalore property and a charitable trust. Infractions of tax regulations were also discussed, including those involving cash transactions that exceeded the amount allowed by Section 269ST of the Income Tax Act of 1961.

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The Court opted to inform the relevant Income Tax Department to verify if Section 269ST of the Income Tax Act, 1961 (IT Act) has been violated in the event that a case is filed claiming that a transaction involving the payment of Rs. 2 Lacs or more was completed.

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In order to stop cash transactions in real estate transactions from going unreported, the Court ordered the Sub-Registrar to notify the Income Tax Department if any document submitted for registration (such as a sale agreement) specifies a cash payment of Rs. 2,00,000 or more. The Court ruled that the Chief Secretary of the State/UT will take disciplinary action against officials who failed to disclose such transactions.

The court noted that the Respondent erred in requesting a permanent injunction against the Appellant rather than the vendor, to whom they allegedly paid an advance of Rs. 75 lacs in cash in contravention of Section 269ST of the IT Act.

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The bench ruled that in order to confirm the transaction and any potential violations of Section 269ST of the Income Tax Act, the courts must notify the relevant Income Tax Department whenever a petition is filed alleging that cash payments totaling Rs. 2,00,000 or more were made for any transaction. Following the legal due process, the jurisdictional income tax authority will take the necessary actions if it receives such information from the court or another source.

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The Court granted the appeal, dismissing the lawsuit on the grounds that it would be a waste of judicial time to rule on a case that was riddled with flaws, false accusations, and speculative litigation.

To Read the full text of the Order CLICK HERE

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