Justice J.B. Pardiwala, Justice R. Mahadevan, Supreme Court
Courts Must Notify Income Tax Dept. Of Rs. 2 Lakh And Above Cash Transaction Claims In Suits: Supreme Court
|The Supreme Court set aside the Order of the Karnataka High Court, which dismissed the Revision Petition filed by the Appellant for rejection of the plaint.
To verify violation of Section 269ST of the Income Tax Act involving cash transactions of Rs. 2,00,000 and above, the Supreme Court has directed Courts to intimate the jurisdictional Income Tax Department upon the filing of such suits.
The Court stated, “When a suit is 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 Court set aside the Order of the Karnataka High Court, which dismissed the Revision Petition filed by the Appellant against the Order of the Trial Court rejecting an Application filed under Order VII Rule 11(a) and (d) of the CPC for rejection of the plaint.
A Bench of Justice JB Pardiwala and Justice R Mahadevan held, “It is pertinent to recall 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.”
AOR Asmita Singh represented the Appellant, while Advocate Abraham Mathews appeared for the Respondents.
Brief Facts
The Respondents filed a suit seeking a permanent injunction against the basing their claim on an agreement to sell. The Appellant countered by filing an application under Order VII Rule 11 of the CPC to reject the plaint, arguing that the agreement to sell did not confer any proprietary rights to the respondents.
The Trial Court initially rejected the Appellant's application, but the High Court partly allowed a revision petition, leading to a reconsideration of the matter. Upon reconsideration, the Trial Court again rejected the application, and the High Court dismissed the subsequent Civil Revision Petition.
Court’s Reasoning
The Supreme Court noted, “Further, the respondents/plaintiffs claim to have paid the entire consideration of Rs.75,00,000/- in cash, despite the introduction of Section 269ST to the Income Tax Act in 2017 and the corresponding amendment to Section 271 DA. As held by us, the agreement can only create rights against the proposed vendors and not against third parties like the appellant herein.”
The Bench held, “In light of the above discussion, we are of the firm view that the plaint ought to have been rejected under Order VII Rule 11(a) and (d) CPC. Hence, the orders passed by the High Court as well as the trial Court rejecting the application filed by the appellant, cannot be sustained in law and deserve to be set aside.”
Consequently, the Court issued the following directions:
- “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,
- 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,
- 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,
- 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.”
Accordingly, the Supreme Court allowed the Appeal.
Cause Title: The Correspondence, RBANMS Educational Institution v. B. Gunashekar & Anr. (Neutral Citation: 2025 INSC 490)
Appearance:
Appellant: AOR Asmita Singh; Advocates Shivangi Chawla, Shrutika Garg and Pranay Bhardwaj
Respondents: AOR Nishe Rajen Shonker; Advocates Abraham Mathews and S Shivaprasad