In a major move to tighten checks on unaccounted cash transactions and black money, the Supreme Court has directed all courts and sub-registrars across the country to alert Income Tax (IT) authorities if any transaction involving ₹2 lakh or more in cash is reported in legal suits or property registration documents.
The ruling came during a judgment in the case RBANMS Educational Institution vs. B. Gunashekar & Another, where the Court expressed serious concern over a property dispute involving an alleged ₹75 lakh cash payment.
Key Directions:
-
Court Cases Involving Cash Claims
If any civil suit mentions a cash payment of ₹2 lakh or more, the concerned court must inform the local Income Tax Department. The department will then verify if it violates Section 269ST of the Income Tax Act, which prohibits cash transactions above ₹2 lakh. -
Property Registrations
If a document submitted for property registration shows a cash payment of ₹2 lakh or more, the sub-registrar must alert the local Income Tax office. -
Failure to Report
If IT authorities discover such cash payments through other sources and find that the sub-registrar failed to report them, the matter should be escalated to the Chief Secretary of the respective State or Union Territory for disciplinary action. -
Income Tax Department’s Role
On receiving such information, the Income Tax Department must follow due legal procedures to investigate and act accordingly.
The Bench comprising Justice JB Pardiwala and Justice R Mahadevan emphasized that these steps are crucial to enforce Section 269ST of the Income Tax Act, which was introduced to promote digital transactions and reduce black money. Violations of this section can attract penalties under Section 271DA.
Case Background
The case involved RBANMS Educational Institution, a public charitable trust in Bangalore established in 1873, which has held legal possession of a piece of land since 1929. A dispute arose in 2018 when the respondents filed a suit to prevent RBANMS from transferring the property, citing a 2018 agreement to sell the land for ₹9 crore, including ₹75 lakh allegedly paid in cash.
However, the Supreme Court found that the agreement had nothing to do with RBANMS, which lawfully held the property. The agreement was between third parties, and the respondents had no legal right or title to the land.
RBANMS had tried to get the suit dismissed earlier, arguing that an agreement to sell does not create ownership rights. After a series of rejections from lower courts and the High Court, the Supreme Court finally allowed the appeal and dismissed the suit.
Observations
The top court said that allowing baseless property disputes like this one only clogs the judicial system and hampers the functioning of organizations working for public welfare.
The Court also flagged the ₹75 lakh cash payment as a red flag under income tax laws and stressed that plaintiffs in such cases must be ready to explain the source of such large cash amounts.
“Allowing such speculative and baseless litigation is nothing but an abuse of the legal process,” the Court noted, adding that such cases could be used to harass genuine landholders or institutions.
Read More: Supreme Court, Delhi High Court, States High Court, International
