SECTION 269ST OF
THE INCOME-TAX ACT, 1961 inserted vide Finance Act, 2017
CASH TRANSACTIONS & MODE OF UNDERTAKING
TRANSACTIONS WHICH SHALL NOT APPLY TO
RECEIPT BY ANY PERSON FROM AN ENTITY REFERRED TO IN PROVISO (i)(b)
OF SECTION 269ST vide CBDT Notification and Press Release dated 5-4-2017
5th April 2017 the Central Govt
notified that the provision of section 269ST shall not apply to receipt by any
person from an entity referred to in sub-clause (b) of clause (i)
of the proviso to section 269ST and such notification be effective from 1st day
of April, 2017.
i.e. , restriction on cash transactions
shall not apply to withdrawal of cash by a person from banks, Co-operative Banks or Post offices. i.e. A
person can withdraw cash in excess of INR. 2,00,000 from Banks, Co-Operative
banks or Post Offices without any restriction u/s 269 ST.
Ministry of Finance has
issued a Press Release on 05th April, 2017.
Various steps to curb
black money by discouraging cash transaction and by promoting digital economy
have been introduced by Finance Act 2017.
i.
Restriction
on cash transaction by sections 269ST & 271DA newly inserted to the
Income-tax Act.
ii.
Providing
that no person (other than those specified therein) shall receive an amount of
two lakh rupees or more,
(a) in aggregate from a person in a day;
(b) in respect of a single transaction; or
(c) in respect of transactions relating to one event or occasion from a person,
(b) in respect of a single transaction; or
(c) in respect of transactions relating to one event or occasion from a person,
(b) otherwise than by
an account payee cheque or account payee bank draft or use of electronic
clearing system through a bank account.
iii.
Providing
for penalty of a sum equal to the amount of such receipt in contravention of
such provision
iv.
Such
restriction is not applicable to any receipt by Government, banking company,
post office savings bank or co-operative bank & also that the restriction
on cash transaction shall not apply to withdrawal of cash from a bank,
co-operative bank or a post office savings bank.
v.
Any capital expenditure in cash exceeding rupees ten
thousand shall not be eligible for claiming depreciation allowance or
investment-linked deduction.
vi.
The
limit on revenue expenditure in cash has been reduced from Rs.20,000 to
Rs.10,000.
vii.
The
rate of presumptive taxation has been reduced from 8% to 6% for the amount of
turnover realized through cheque/digital mode
to promote digital payments in case of small unorganized businesses,
viii.
Restriction
on receipt of cash donation up to Rs. 2000 has been provided on political
parties for availing exemption from Income-tax.
ix.
Any
donation in cash exceeding Rs.2000 to a charitable institution shall not be
allowed as a deduction under the Income-tax Act.
PENALTY Provisions for "Cash"
receipts [Section 271DA]
Section 271DA the
newly inserted section effective from 1-4-2017 provides for penalty for failure
to comply with provisions of section 269ST.
As per Section 271DA provides as follows:
(a)
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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.
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(b)
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Any such penalty shall be imposed by the Joint Commissioner.
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(c)
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The penalty shall not be imposable if such person proves that
there were "good and sufficient" reasons for the contravention.
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If a person receives any amount
in contravention of this section u/s 269ST, he shall be liable for penalty , a
sum equal to the amount of such receipt.
Any penalty imposable under this section shall be imposed by Joint
Commissioner.
It has also been provided that penalty shall not be imposable if such
person proves that there were good and sufficient reasons for the
contravention.
No definition of good &
sufficient reasons.
Perhaps this needs some clarification or suitable amendment in section
271D so as to bring out clearly what all reasons are covered under this expression
of good and sufficient reasons.
The reason is good and sufficient or not has to be seen from the
perspective of the recipient. For Example LIC of India accepts cash or draft in
case the payer's cheque has been returned unpaid due to insufficient funds.
The Time limit for initiating
of penalty proceeding
There is no time limit mentioned for initiation of penalty proceedings
but it should be reasonable after the contravention of such provisions. Section
273A(4) authorizes only Joint Commissioners to reduce or waive any penalty
payable by an assessee, subject to satisfaction of the conditions specified in
it or where satisfied for the reasonableness of good and sufficient cause for
such contravention.
Non Appeal ability of
Penalty imposed by the Joint Commissioner under Section 271DA.
I. Before Tribunal.
Section 253(1)(a) which provides for appeal to the Tribunal against order
passed by CIT(A) has not been amended to cover an order under section 271DA. So
Penalty Order under Section 271DA is not appealable before Tribunal.
II. Before CIT(A).
Section 246A. (1) Any assessee [or
any deductor] aggrieved by any of the following orders (whether made before or
after the appointed day) may appeal to the Commissioner (Appeals) against —
(q) an order imposing
a penalty under Chapter XXI;
Since, penalty u/s 271DA is an order under Chapter XXI and unless the recipient is
an assessee, he cannot file an appeal against the penalty order.
Section 246A does not
apply due to the following reasons:
(a)
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Section 246 applies
to penalty order on a person in his capacity of
i.
Assessee.
ii.
Deductor .
Here, the
person penalized does not receive the penalty order in the capacity of an
assessee so the order is not appealable.
Conclusion: It may be that till any further amendment is done or in
the absence of prohibition clause for an appeal against an order under
section 271DA, the benefit of doubt is given to the assessee and an appeal
against pending order under section 271DA
may be allowed.
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EXAMPLES OF TRANSACTIONS COVERED
Case I:
Cash Receipts (INR)
in respect of same sale transaction on different dates.
Sale Invoice (INR) Issued on April
1,2017
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5,00,000
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5,00,000
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4,00,000
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Cash
received on
a.
April
2,2017
b.
April
4,2017
c.
April
6,2017
d.
April
8,2017
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1,50,000
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50,000
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50,000
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1,50,000
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1,00,000
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70,000
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1,50,000
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20,000
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40,000
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NIL
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NIL
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40,000
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Received
through Bank Tfr., Account Payee Cheque or DD.
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50,000
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3,30,000
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2,00,000
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Total
Cash Received
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4,50,000
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1,70,000
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2,00,000
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Whether Section 269ST Applicable
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Applicable,
since total receipts in respect of sale transaction on 1st April
2017 exceeds threshold limit of INR. 2,00,000 u/s 169ST.
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Not Applicable,
Since Total Cash receipts does not
exceed threshold limit of INR. 2,00,000 u/s 269ST.
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Applicable,
since total receipts in respect of sale transaction on 1st April
2017 are equal to threshold limit of INR. 2,00,000 u/s 169ST.
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Penalty leviable u/s 271DA
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4,50,000
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NIL
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2,00,000
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Case II:
Cash Received on
same event / occasion i.e. Marriage/Birthday etc.
Situation I:
Cash Received
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Situation II:
Cash Received
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Cash Gift
from A
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1,40,000
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2,00,000
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Cash Gift
from B
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1,25,000
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1,50,000
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Cash Gift
from C
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1,75,000
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2,10,000
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Total Cash Received
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4,40,000
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5,60,000
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Whether Section 269ST Applicable
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Not Applicable since total
amount received from a person does not exceed INR. 2,00,000.
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Applicable, since total
amount received from a person exceed INR. 2,00,000.
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Penalty Leviable u/s 271DA
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NIL
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4,10,000
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This condition shall be examined on the basis of total
cash receipts from a person on a same event or occasion such as Birthday,
Marriage, Anniversaries etc. Therefore, even though total cash receipts from
all on an event/occasion may be higher than INR 2,00,000 but Section 269ST
shall be attracted only when cash receipts from a person on a same
event/occasion exceed INR 2,00,000.
Penalty in respect
of Gifts also: As per Income Tax Act, Gift u/s
56 received from relatives are exempt
without any ceiling limit . However, with introduction of Section 269ST, cash
gifts in exceeding INR 2,00,000 shall be liable for Penalty @100% of the amount
received even though it is otherwise exempt under Income Tax Act,1961.
This clause covers situations where in the event like
marriage, payments are received for different categories like catering,
decoration, marriage hall etc. All these transactions must be lower than
specified limit of INR 2,00,000 otherwise penalty @ 100% of the amount of
receipt shall be attracted u/s 271DA.
Frequently asked
questions with respect to cash transactions under Section 269ST & 271DA.
1. Section 269 ST is
applicable on Whom ?
Ans. Section 269
ST is applicable on all persons whether
a Company, LLP, Partnership
Firm, HUF's , Trust etc , except the
following :
i.
Government
ii.
Any banking company
iii.
Post office savings banks
iv.
Co-operative banks
v.
Any other person as
notified by the Central Government
2. What types of receipts are covered u/s 269
ST?
Ans. All types of receipts are covered whether
Capital or Revenue u/s 269ST. However, those receipts where payment made by the
other party is covered u/s 269SS, then Section 269St will not be applicable on
such transactions.
3. Does Section 269 ST prescribe any Penalty on
Payer of cash exceeding INR 2,00,000?
Ans. Section 269ST
impacts the payee only not the payer. It is the payee or recipient who is made
liable for violation of section 269ST in the form of penalty u/s 271D @ 100% of the amount. Section 269 ST does not prescribe
any penalty for making payments above threshold limit of INR 2,00,000 as
explained in Case II of Example.
4. Whether
Section 269 ST will be applicable even if a person provides two
different services to a same Person for
a consideration exceeding INR 2,00,000 & the same is received in cash.
Ans. If a person has provided different
services to a same person in respect of same event occasion for a consideration
exceeding INR 2,00,000 & same is
received in cash, then such a transaction shall be covered u/s 269ST &
Penalty will be leviable u/s 271DA for receipt of cash exceeding INR 2,00,000.
Even, if a person provides different services to a same
person in respect of separate events/ occasions then also Section 269ST will be
applicable & penalty will be leviable u/s 271DA.
5. Whether any
drawings of cash from Banks, Cooperative Banks or Post Office Savings Bank
attract provisions of Section 269ST
& 271DA?
Ans. As per CBDT
Press Release dated 5th April, 2017, restriction u/s 269ST shall not apply to
withdrawal of cash from Bank, Cooperative Banks or a Post Office Savings Bank
Account.
6. Can a person
receive gifts from relatives on occasion of marriage exceeding INR 2,00,000
which were otherwise exempt under Income Tax Act,1961 without attracting the
provisions of Section 269ST?
Ans. All gifts
received by a person from relatives are
exempt from tax. However, after April 1, 2017 , all cash gifts received by a
person exceeding INR 2,00,000 will attract Provisions of Section 269ST & a
penalty of 100% of the amount of receipt
shall be leviable u/s 271DA.
This means that a person can receive gift of any amount from
a relative as defined under section 56. But with the introduction of section 269ST one limitation
will be imposed on cash gifts received even from relatives exceeding Rs. 2 Lakhs in respect of single event or
occasion.
7. If once penalty is imposed u/s 271DA, can an
appeal against such order be made?
Ans. As per Section 246A, penalty u/s 271DA
is an order under Chapter XXI and if the
recipient is an assessee, he can file an appeal against the penalty order. However,
there is no explicit prohibition on appeal against a penalty order u/s 271DA.
Therefore, an appeal can be made against an order u/s 246A.
Contributed by Tanveer Alam ( CA Finalist at Sandeep Ahuja & Co.)
