Penalty for accepting cash Rs. 2 Lakhs or more- Section 271DA
The Government is working towards curtailment of the cash economy and bringing more discipline in the economy by promoting digital transactions. The introduction of section 271DA is one of such steps of the Central Government in this direction. Section 271DA provides for a penalty in the cases where cash is accepted or taken by the payee for an amount equal to or more than Rs. 2 Lakhs. In this article, we will discuss the implications of section 271DA on cash transactions entered into by any assessee.
Section 271DA reads as follows:
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“(1) If a person receives any sum in contravention of the provisions of section 269ST, he shall be liable to pay, by way of penalty, a sum equal to the amount of such receipt: Provided that no penalty shall be imposable if such person proves that there were good and sufficient reasons for the contravention. (2) Any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner.” |
The following points can be derived out of the above:
- Section 271DA is applicable where any person contravenes the provisions of section 269ST.
- The word “a person” shows that the above section applies to all assessees whether it is an individual, HUF, company, firm or whether resident or non-resident.
- Section 271DA prescribes a penalty for an amount equal to the amount of receipt in contravention of section 269ST.
It will be necessary to understand the provisions of section 269ST for a better understanding of section 271DA.
Penalty for accepting cash Rs. 2 Lakhs or more
Section 269ST reads as follows:
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“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 or through such other electronic mode an may be prescribed.” |
Analysis of Section 269ST
Section 269ST was introduced by the Government to curb the black money and tax frauds in the economy. Section 269ST puts a restriction on acceptance of cash Rs. 2 Lakhs or more by any person in India. The effect of this section is that you cannot accept cash Rs. 2 Lakhs or more on a single day from any other person or in respect of a single transaction. There is no restriction in accepting or taking any money through account payee cheque or draft or through electronic modes like NEFT, RTGS, IMPS etc. Even acceptance of gifts in cash exceeding Rs. 2 Lakhs would be hit by this section.
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We will take some examples to understand the section 269ST
For example, You sold goods Rs. 3,50,000 to Mahesh on 01-01-2022 and received Rs. 2,70,000 in cash on the same day and balance by way of cheque on 03-01-2022. Since you have accepted more than Rs. 2 Lakhs on a single day from a person, there is a violation of Section 269ST and therefore liable for penalty under section 271DA for 100% of the amount received i.e. Rs. 2,70,000.
Suppose, you received cash in two tranches: Rs. 1,20,000 on 01-01-2022 & Rs. 1,50,000 on 02-01-2022 and balance by way of cheque on 03-01-2022. Even in this case, you are liable for a penalty u/s 271DA as you have accepted cash more than Rs. 2 Lakhs against a single invoice (transaction).
Let’s change the example: Suppose you sold goods Rs. 1,90,000 on 01-01-2022 & Rs. 1,40,000 on 03-01-2022 under two different invoices to Mahesh. You received Rs. 3,30,000 in cash on 05-01-2022. In this case, you received cash exceeding Rs. 2 Lakhs from Mahesh on a single day, though against two different transactions. Therefore, you are liable for a penalty equal to 100% of the amount accepted in cash i.e. Rs. 3,30,000 in our example u/s 271DA read with section 269ST.
It is to be noted that penalty u/s 271DA shall not be levied if the assessee proves that there was sufficient reason for failure or non-compliance.
Further, there are exceptions where section 269ST & correspondingly section 271DA shall not apply:
- Any receipt of Government
- Any receipt by a banking company, post office saving bank or co-operative bank
- Any transaction covered u/s 269SS (accepting loan or deposits Rs. 20,000 or more)
- Any other notified persons or transactions
Clarification regarding applicability of section 269ST in case of Housing Finance Companies and NBFCs
After the introduction of this section, various representations were sent by NBFCs and HFCs as to whether the provisions of section 269ST (limit of Rs. 2 Lakhs) shall apply to one instalment of loan repayment or for the whole amount of such repayment.
In this context, the CBDT clarified that in respect of receipt in the nature of repayment of the loan by NBFCs or HFCs, the receipt of one instalment of loan repayment in respect of a loan shall constitute a ‘single transaction’ as specified in clause (b) of section 269ST of the Act and all the instalments paid for a loan shall not be aggregated for the purposes of determining the applicability of the provisions of section 269ST.
Thus, if the single loan instalment is less than Rs. 2 Lakhs, it can be paid in cash. All the instalments paid for a loan shall not be aggregated for the purposes of determining the applicability of the limit of Rs. 2 Lakhs prescribed u/s 269ST.
Disclaimer: The above article is meant only for educational purposes and Taxwink is not responsible for any loss or damage caused to any person on account of the use of the above information. Readers are requested to act diligently and under consultation with any professional before applying the information contained in this article.
