Cash receipts amounting to Rs.3.00 lakhs per day can be invite problems in Income Tax

The recent budget 2017 proposes to bring in force Section 269ST in view of curtailing black money transactions by penalizing Penalty for Cash Receipts exceeding Rs 3 lakhs although the procedure can be pretty problematic.

Details of the Section 269ST – Penalty for Cash Receipts exceeding Rs 3 lakhs – its implications:

The present Government of India had already started devising various ways in order to check the mammoth amount of black money transactions that is presently prevailing in India. Since the black money transactions cannot be routed through banks and other financial institutions due to identity verification and other security related issues, therefore, most of these transactions happen with hard cash.

This never comes under the purview of income tax and stays hidden inside the homes of the unscrupulous people indulging in such transactions. As a result, a large amount of revenue by way of tax is blocked due to these black money transactions, which hinders the development of the whole country because the same cannot be utilized for the betterment purposes. Hence, the Section 269ST has been proposed to check these cash transactions although the same has been done in an extremely strict manner that can tell upon the daily lives of the common people as well.

Section 269ST is proposed to check cash transactions

In order to dive into the details of the after effects that the proposed Section 269ST can have on the common people, it will be wise to go through the actual text of the said section. The Section 269ST goes as under:

“No person shall receive an amount of three 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:

Provided that the provisions of this section shall not apply to—

(i) Any receipt by—

(a) Government;

(b) Any banking company, post office savings bank or co-operative bank;

(Ii) Transactions of the nature referred to in section 269SS;

Explanation.—for the purposes of this section,—(iii) Such other persons or class of persons or receipts, which the Central Government may, by notification in the Official Gazette, specify.

(a) “Banking company” shall have the same meaning as assigned to it in clause (i) of the Explanation to section 269SS;

(b) “Co-operative bank” shall have the same meaning as assigned to it in clause (ii) of the Explanation to section 269SS.’.”

Even Genuine Transactions in Cash would be affected by Section 269ST

The righteous aim of the Section 269ST is definitely unquestionable but the manner in which it has been presented seems to create troubles for the common people. This is because there can be several occasions that may require transacting in cash even for genuine purposes because electronic modes of payment may not always suffice for all kinds of needs or in some cases, cash may be the only available option for transacting as even today, majority of the people in India are still transacting in cash. But, cash receipts amounting to Rs. 3.00 lakhs can now pose a problem for individuals.

Some of the cash transactions that will come in preview of section 269ST are as follows:

1. In case of marriages, even though the gifts received are free from income tax, yet, on an individual basis, if a person receives in cash or kind, individual amounts that may finally amount to Rs.3.00lakhs will be falling under the Section 269ST.
2. While paying for the bills in hospitals, often due to restricted card limit and less available amount in the bank, a person may need to borrow money from friends and relatives. In such cases as well, if the amount of money is Rs.3.00 lakhs or above, the Section 269ST comes into the picture no matter how emergency the situation may be.
3. Many barter exchanges take place in cash that may frequently exceed Rs.3.00lakhs. And, now cash receipts amounting to Rs.3.00 lakhs or more per day can lead to serious problem.
4. Even if a person is withdrawing cash from own bank account also, Section 269ST will come into play.
5. Any and every nature of sale proceeds done by otherwise diligent taxpayers may also suffer by getting notices from the I-T department under Section 269ST no matter how authentic the transaction is or how meticulously, the concerned individual maintains the book of accounts.
6. Even the digital payment methods like those of mobile wallets, credit card, debit card, Rupay card or AADHAR based payment systems will be victims here as neither a bank or a clearing system is coming into the picture here as mentioned in the Section 269ST. In that case, even if the transactions are not made in cash and rather done electronically also, the same would be covered under the provisions of section 269ST.

In short, in all the above-mentioned cases as well as any other allied scenarios, Section 269ST can cover with its clutches by penalizing heavy amounts unless proper and perfect reasons are provided for the nature of transactions.

Penal Provisions for violating rules under section 269ST of Income Tax Act

The penalty for violating the laid down rules of Section 269ST is covered under Section 271DA that goes as under:

“271DA – Penalty for failure to comply with provisions of section 269ST

“271DA. (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.”

“It is also proposed to consequentially amend the provisions of section 206C to omit the provision relating to tax collection at source at the rate of one per cent. Of sale consideration on cash sale of jewellery exceeding five lakh rupees.”

The penalty, as mentioned here, is proposed to be levied by the Joint Commissioner.

Do You have Adequate Supporting reasons for transactions in Cash? You may be exempted from Penalty

Yet again, it has been stated that the concerned persons held for penalty shall be exempted from the same provided they are able to present adequate supporting reasons for the transactions. Unlike the penalty provisions of the Section 273B where ‘reasonable reason’ or ‘reasonable cause’ is being stated, the Section 271DA specifically emphasizes upon ‘good and sufficient reasons’. This is the major distinguishing factor that can actually make the difference. 1^st April, 2017 is the date of effect of all these amendments.

Related Read- Penalty u/s 271 of Income Tax Act, 1961