Violation of Section 269SS and 269ST

Background of Insertion

Various legislative steps have been taken by the Finance Act, 2017 to curb black money by discouraging cash transaction and by promoting the digital economy. These prominently include placing a restriction on cash transaction by the introduction of new sections 269ST & 271DA to the Income-Tax Act

Section 269ST states that no person shall receive an amount of Rs 2 Lakh or more:

  • In aggregate from a person in a day; or
  • In respect of a single transaction; or
  • In respect of transactions relating to one event or occasion from a person.

However, the Central Board of Direct Taxes (CBDT) has clarified that this cash withdrawal limit does not apply for withdrawals from Banks and Post offices.

Even if there is a technical violation of provisions of Section 269SS and Section 269T, as per settled judicial principals, no penalty u/s 271D or 271E is not leviable if,

  • The transaction is duly recorded in books of the parties to the transaction
  • Identity and confirmation of parties to the transaction is on record
  • No black money/tax evasion/malafide intention is involved in the transaction

Thus, if entire transactions of the loans and the acceptance or repayments thereof are shown in the regular books of accounts and assessee was acting in a bonafide belief coupled with genuineness of the transactions, it constitutes a “reasonable cause” within the meaning of section 273 B of the I.T. Act so as to come out of the rigors of penal provisions of section 271D and 272E.

Penalty for failure to comply with provisions of section 269ST, 271DA.

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.
  • Any penalty imposable under sub-section
  • Shall be imposed by the Joint Commissioner.

Penalty for failure to comply with the provisions of section 269SS.271D.

If a person takes or accepts any loan or deposit or specified sum in contravention of the provisions of section 269SS, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit or specified sum so taken or accepted.

Cash Transaction Limit under Income Tax

The following are the main income tax sections that pertain to cash transaction limit:

  • Section 40A(3) and Section 43 – Pertains to Cash Payment
  • Section 269SS and Section 269ST – Pertains to Cash Receipts
  • Section 269T – Pertains to Repayment of Certain Loans / Deposits

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