The Supreme Court directed the sub-registrars to report cash payments of Rs. 2 lakh and above in property deals to the income tax department.
The bench of Justice J.B. Pardiwala and Justice R. Mahadevan has observed that when the Bill was passed, the permissible limit was capped under Rupees Two Lakhs, instead of the proposed Rupees Three Lakhs. 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 bench stated that 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.
The bench deemed it necessary to issue the following directions:
- Courts to Alert Tax department on High-Value Cash Claims in Civil Suits for Possible Section 269ST Breach
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.
- Dept. to Initiate Action as per Law Upon Receipt of Information on High-Value Cash Transactions
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.
- Sub-Registrars to Notify Income Tax Authorities on Cash Payments of Rs. 2 Lakh and Above in Property Registrations, Action to Follow Due Process
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.
- Failure of Sub-Registrars to Report High-Value Cash Transactions to Be Escalated to Chief Secretary for Disciplinary 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.
Background
The appellant, R.B.A.N.M.S. Educational Institution, is a public charitable trust established in 1873 to serve first-generation learners from marginalized communities in Bangalore. In 1905, it was leased a parcel of land known as the “Sappers Practice Ground,” which was later formally conveyed to it in 1929. The appellant has since continuously used the property for educational and sporting purposes.
In 2018, the respondents filed a suit (O.S. No. 25968/2018) before the City Civil Court, Bangalore, seeking a permanent injunction to restrain the appellant from creating third-party interests over the property. They claimed to have entered into an agreement to sell the land for ₹9 crore and paid ₹75 lakh as advance. They alleged the appellant was manipulating title deeds to sell the property.
The appellant filed an application under Order VII Rule 11(a) and (d) of the CPC, seeking rejection of the plaint on the grounds that the respondents were only agreement holders, not owners, and had no legal right to the property. The trial court rejected the application on 03.06.2020.
The appellant challenged this in C.R.P. No. 205 of 2020. The High Court allowed the petition in part and directed the trial court to reconsider the application within three months.
However, upon reconsideration, the trial court again rejected the application on 11.06.2021. The appellant’s second revision (C.R.P. No. 130 of 2021) was also dismissed by the High Court. The appellant has now filed the present appeal before the Supreme Court.
Conclusion
The court stated that the directions of this judgment shall be intimated by the Registrars of the High Courts, the Chief Secretaries of the States/Union Territories and the Principal Chief Commissioner of Income Tax Department to the District Judiciary, the officials of the registration department and the jurisdictional officers under the Income Tax Department respectively, so as to facilitate the conduct of periodical audit.
Case Details
Case Title: The Correspondence, RBANMS Educational Institution Versus B. Gunashekar & Another
Case No.: Civil Appeal No. 5200 Of 2025
Date: April 16, 2025
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