The Supreme Court has issued directions for strict implementation of the Rs.2 lakh limit on cash transactions, which was introduced by the government under the Finance Act, 2017, and came into effect from April 1, 2017.
New Delhi: The Supreme Court emphasized on Wednesday that once a law is enacted, it must be enforced, expressing concern over the inadequate implementation of the Finance Act 2017, which set a limit of Rs 2 lakh on cash transactions.
In a series of directives, the court ordered that whenever a suit is filed involving cash payments exceeding this limit, the courts must inform the relevant Income Tax authority to take appropriate legal action. The Finance Act 2017 banned cash transactions of Rs two lakh or more starting from April 1, 2017.
A bench consisting of Justices JB Pardiwala and R Mahadevan was reviewing a case regarding the ownership of a property, where it was claimed that Rs 75 lakh was paid in cash as an advance on April 10, 2018.
The Supreme Court noted that such litigation not only raises suspicions about the transaction but also indicates a breach of the law.
The court stated that whenever a suit is filed claiming cash payments of Rs two lakh or more for any transaction, the courts must notify the jurisdictional Income Tax Department to verify the transaction and check for violations of Section 269ST of the Income Tax Act.
The bench remarked,
“Though the amendment has come into effect from April 1, 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,”
The justices pointed out that many such transactions often go unnoticed or are not reported to the income tax authorities. They reiterated that while ignorance of fact may be excusable, ignorance of the law is not.
The court explained that Section 269ST of the Income Tax Act was introduced to combat black money by promoting digital transactions for amounts over Rs two lakh, with penalties outlined in Section 271DA of the Act.
“The Central Government thought it fit to cap the cash transactions and move forward towards digital economy to curb the dark economy which has a drastic effect on the economy of the country. It will be useful to refer to the Budget Speech during the introduction of the Finance Bill, 2017…”
The bench further noted that when the Bill was passed, the cash limit was set at Rs two lakh instead of the initially proposed Rs three lakh.
They added,
“When a suit is filed claiming Rs 75,00,000 paid by cash, not only does it create suspicion on the transaction, but also displays a violation of law,”
The Supreme Court directed that any information received from the court or other sources regarding such transactions must be reported to the jurisdictional Income Tax authority, which should then take appropriate actions in accordance with the law.
“Whenever a sum of Rs two lakh and above is claimed to be paid by cash towards consideration for the 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.”
The court also stated that if any Income Tax Authority becomes aware of a cash payment of Rs two lakh or more in a property transaction from any source or during search or assessment proceedings, the failure of the registering authority to report this must be communicated to the Chief Secretary of the State or Union Territory to initiate appropriate disciplinary action against the responsible officer.