Supreme Court Mandates Reporting of Cash Transactions Above ?2 Lakh to Income Tax Department
In a landmark judgment aimed at reinforcing transparency and curbing the circulation of black money, the Supreme Court of India has issued binding directions requiring mandatory reporting of cash transactions exceeding ?2,00,000. The ruling is expected to significantly impact how high-value cash transactions are reported and scrutinized by the authorities, especially during property and legal document registrations.
Background of the Case
The case originated from a civil suit filed by B. Gunashekar and another against RBANMS Educational Institution, a 148-year-old charitable trust. The trial court and the Karnataka High Court had both rejected the appellants’ application to dismiss the plaint under Order VII Rule 11(a) and (d) of the Civil Procedure Code.
The central issue was the claim by the plaintiffs that a payment of ?75 lakh had been made in cash. This raised serious concerns about the legality and transparency of the transaction, prompting the Supreme Court to examine the matter in light of the Income Tax Act.
Court’s Observations on Cash Transactions
The Supreme Court took a critical stance on the claim of large cash payments. It observed that:
“When a suit is filed claiming ?75,00,000 paid by cash, not only does it create suspicion on the transaction, but also displays non-compliance with provisions of the Income-tax Act.”
The Court highlighted that such claims could encourage tax evasion and disrupt the integrity of financial reporting and taxation procedures.
Mandatory Reporting Directions
Invoking Paragraph 18.1 of its judgment, the Court issued mandatory directions to curb misuse of high-value cash transactions:
“Whenever a cash payment of ?2,00,000 or above is claimed in a document presented for registration, the jurisdictional Sub-Registrar shall inform the Income Tax Department.”
This directive makes it compulsory for Sub-Registrars to notify the tax authorities of any registered document where a cash transaction of ?2 lakh or more is mentioned. The objective is to enhance visibility of such transactions and ensure they are not used as a conduit for unaccounted funds.
Implementation and Communication
To ensure systematic enforcement, the Court has instructed the Registrar (Judicial) of the Supreme Court to circulate the judgment to relevant authorities, including:
- District and subordinate judiciary
- Sub-Registrar offices
- Income Tax Department officials
- Other concerned regulatory bodies
These institutions have been directed to communicate and implement the directions at ground level, ensuring strict compliance and regular audits to monitor reporting.
Legal and Financial Implications
This Supreme Court judgment sets a powerful precedent for tax compliance and regulatory oversight. Its major implications include:
- Mandatory notification of high-value cash transactions
- Strengthened checks on black money and unaccounted wealth
- Reinforced cooperation between registration authorities and tax departments
- A legal framework supporting more transparent property and legal document registrations
The judgment is particularly relevant for legal professionals, real estate stakeholders, and individuals engaged in high-value transactions. It is now crucial to avoid the use of large cash payments in documented transactions to stay within the legal framework.
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