₹80 lakh cash loan row:
Madras HC refuses to force PAN disclosure, sends papers to I-T dept
Feb 24, 2026
Synopsis
The Madras High Court has sent case files concerning an Rs 80 lakh cash loan to the Income Tax Department for scrutiny. The court ruled that the lender does not need to disclose his PAN number. This action follows a borrower's request for tax investigation into the large cash transaction. The court's decision aims to curb black money transactions.
On January 7, 2026, the Madras High Court ruled that the lender of a cash loan can’t be asked to provide his PAN number to the Income Tax Department. However, the court did allow for the case files to be sent to the tax department for detailed scrutiny of the huge amount of cash.
In this case, the lender had given a cash loan of Rs 80 lakh based on a promissory note to a borrower. However, the borrower failed to to repay the loan and instead initiated legal action, requesting that the lender’s PAN be submitted to the tax department and that the case be sent for detailed scrutiny.
Meanwhile, the lender is atively working on recovering the loan, and that case is still pending with the trial court. The Madras High Court’s focus was solely on the issues regarding the PAN and the case files issue.
The background of the Rs 80 lakh cash loan
On June 21, 2016, Mr Venkateshan had lent Rs 80 lakh in cash to Mr Sait at 12% interest per annum. Though Sait had signed a promissory note assuring that he would repay the money, he failed to do so. Since Mr Sait did not repay the loan, Venkateshan filed a case for recovery of money based on the promissory note.
The borrowers initiated a case asking Venkateshan to disclose his PAN number and also requested that a copy of the plaint and other documents be forwarded to the relevant Income Tax Authorities to look into a possible breach of Section 269 ST of Income Tax Act. The trial court approved his application.
Dissatisfied with this decision, Venkateshan appealed to the Madras High Court. On January 7, 2026, Venkateshan partly won the case and the high court directed that he doesn’t have to provide his PAN to the tax department, but instructed the court officer to share the case files with the tax department for their scrutiny.
Madras High Court analysis and discussion
The Madras High Court gave this judgement ([2026] 182 taxmann.com 845 (Madras)) on January 7, 2026.
Section 269 ST of Income Tax Act (an extract)
[269ST. Mode of undertaking transactions.—No person shall receive an amount of two lakh rupees or more— (a) in aggregate from a person in a day; or (b) in respect of a single transaction; or (c) in respect of transactions relating to one event or occasion from a person, otherwise than by an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account…
The Madras High Court said that a perusal of the above tax provision would establish no person shall receive an amount of Rs 2 lakh or more after coming into force of the said Act and violation of the same would result in penalty under Section 271 DA of Income Tax Act and he shall be liable to pay, by way of penalty, a sum equivalent to amount of such receipt.
The provision was introduced by the government to curb black money by digitalizing the transaction above Rs 2,00,000.
Supreme Court directions already exists
Supreme court precedent: The Correspondent, RBANMS Educational Institution v. B.Gunashekar and another reported in Correspondence, RBANMS Educational Institution v. B. Gunashekar [2025] 173 taxmann.com 586/304 Taxman 612 (SC)/2025 INSC 490
The Madras High Court said that in the above mentioned judgment, the Supreme Court after referring to the above said provision issued following guidelines. The relevant portion reads as follows:
"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. 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 a settled position that ignorance in fact is excusable but not the ignorance in law. Therefore, we deem it necessary to issue the following directions:
(A) 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,
(B) 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,
(C) 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,
(D) 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"
The Madras High Court said that therefore, it is clear that whenever a suit is filed with a claim of more than Rs 2 lakh and the amount was said to have been paid in cash towards the suit transaction, the court shall intimate the same to the jurisdictional Income Tax Department to verify the transaction and violation of Section 269 ST of Income Tax Act.
The Madras High Court did not give its judgement on whether this Rs 80 lakh cash existed in the lender’s ITR.
The Madras High Court said that the Supreme Court with the noble object of abolishing black money transaction, issued general guidelines to Courts in India to intimate such kind of heavy cash transaction to the jurisdictional Income Tax Authorities.
Though the present suit transaction had taken place before the introduction of Section 269ST of the Income Tax Act, even in the absence of the said provisions, this kind of heavy cash transaction requires consideration by the Income Tax Department.
The Madras High Court said they do not want to interfere with the order passed by the trial court directing the Ministerial Officer of the Court to intimate the suit transaction to the Income Tax Department by forwarding the copies of the plaint documents.
Lender need not share his PAN with income tax department
The Madras High Court said that as far as the direction issued by the trial court to reveal the PAN number of the petitioner is concerned, in the guideline issued by the Supreme Court in the above mentioned case, no such direction is given and the petitioner cannot be compelled to reveal his PAN number to the respondents.
Therefore, the Madras High Court said that the direction issued by the trial court to the petitioner to reveal his PAN number to the respondents is set aside and that portion of the impugned order is modified.
The Madras High Court said: “The direction issued by the trial Court to forward the copy of the plaint and the plaint documents to the jurisdictional Income Tax Authority is confirmed.”
Madras High Court judgement
In view of the discussions made earlier, the Civil Revision Petition is partly allowed by setting aside the portion of the impugned order directing the petitioner to reveal his PAN number to the respondents.
The other portion of the direction issued by the trial Court directing the Ministerial Officer of the Court to forward the copy of the plaint along with documents to the jurisdictional Income Tax Authority is confirmed.
No costs. Consequently, connected miscellaneous petition is closed.
[The Economic Times]
