Jigar M. Patel
International Tax Attorney
With a view to curb cash transactions and thereby check generation and circulation of black money, Section 269ST came to be introduced providing that subject to specified exceptions, no person shall receive an amount of Rs. 2 lakhs or more, otherwise than by an account payee bank cheque or draft or use of bank ECS or electronic payment modes.
The following amounts shall be considered in computing the aforesaid limit of Rs. 2 lakhs:
- Amounts received in aggregate from a person in a day; or
- Amount received in respect of a single transaction; or
- Amounts received from a person in respect of transactions relating to one event or occasion
In the above regard, it has been clarified by the CBDT that if a person withdraws Rs. 2 lakhs or more from his own bank or post-office account, the same shall not be considered as receipt of amount in cash for purposes of this section.
Implications for sale of goods or services in cash
Even if the seller of goods or provider of services actually deposits the cash so received and duly accounts for the same, the very acceptance of cash by him in violation of the provisions of Section 269ST, would attract a heavy penalty under Section 271DA equivalent to 100% of the amount in violation.
The words “in respect of transactions relating to one event or occasion” also need to be carefully noted. If the invoice value of a sale exceeds Rs. 2 lakhs, no circumvention is permitted by making smaller payments in tranches. Similarly, if an event organizer receives payments under different heads, but in respect of a single event, the ceiling limit of Rs. 2 lakhs will get attracted.
Cash Transactions of Rs. 20,000 or more in Tax Trouble
Section 269SS restricts acceptance and Section 269T checks repayment of loan, deposit or ‘specified sums’ of Rs. 20,000 or more, if made in cash. ‘Specified sum’
includes any advance received in relation to transfer of an immovable property, whether or not the transfer takes place. Non-compliance with the above provisions can attract dire penal consequences under Sections 271D and 271E, prescribing penalty of 100%.
Advances for Property Transactions also in Tax Trap
The implications of the above provisions, more particularly in regard to property transactions are often lost sight of. It is not uncommon to see a seller receive a spot advance of Rs. 50,000 or Rs. 1 lakh in cash, with a view to secure a commitment for a property transaction. Even if such cash amount paid by the buyer is drawn out of his bank account and the seller deposits the same in his bank account or duly acknowledges receipt of the same in the Sale Deed, technically this case can easily get into the trap of 100% penalty of the amount received. In fact, the stringent provisions of these sections get triggered, even in a case where the cash received is finally returned, because the property transaction does not take place.
Saving Grace of ‘Reasonable Cause’
Though Section 273B does offer a respite in a case where it can be proved that the failure to comply was for a reasonable cause, a prudent taxpayer would be well advised to keep in mind that “prevention is better than cure”.
