Kerala HC Rules: Cash Transactions Over Rs 20,000 Illegal Without Valid Explanation

The Kerala High Court ruled that debts from cash transactions exceeding Rs 20,000, violating the Income Tax Act, are not legally enforceable unless justified. The decision overturned a man's conviction in a cheque dishonor case, emphasizing the need to curb illegal cash operations and support the 'digital India' initiative.

In a significant decision, the Kerala High Court has declared that a debt resulting from cash transactions over Rs 20,000, which breach the Income Tax Act, is not legally enforceable unless a valid explanation is provided. This move forms part of the larger effort to curb illegal cash transactions and support India's digital transformation.

Justice P V Kunhikrishnan delivered the ruling while examining an appeal from an individual previously convicted in a cheque dishonor case. The accused had been sentenced to one year and fined Rs 9 lakh for a cheque dishonored due to insufficient funds, an offence under section 138 of the Negotiable Instruments Act.

The High Court's decision emphasized the importance of discouraging large cash transactions without documentation, aligning with the nation's goal to limit shadow economies. The court's ruling highlights the necessity for accountability in cash dealings and aims to support the digital India initiative championed by the Prime Minister.

(With inputs from agencies.)