What is 269STof the Income Tax Act?

Last Updated at: December 31, 2019
841
What is 269st of the Income Tax Act__

The Indian economy’s most significant threat to date is the circulation of black money in the market. Many taxpayers use cash-only transactions to evade tax and their responsibility towards the economy. A large number of cash transactions means a large amount of tax loss. Cash transactions are very hard to track down and also facilitates the circulation of black money in the economy. Hence, the government of India introduced 269ST of the Income Tax Act with effect from April 2017. This is to put an end to illegal cash transactions and curb the usage of black money in the market.

269ST of the Income Tax: Introduction

Before 269ST was introduced, 269SS and 269T were considered as a step to curb the usage of black money in the market and restrict cash transactions. However, it was not considered as successful as it was perceived to be. 269ST of the Income Tax restricts a cash transaction of a sum of Rs.2 lakhs or above in a single day by any individual.

  • No cash amount above or equal to Rs.2 lakhs can be accepted from a single person in one day.
  • In the case of a single transaction, a person cannot pay the amounts exceeding the sum of Rs.2 lakhs. The person cannot split the sum into smaller part payments. And the other party which concerns will not accept the same.
  • Related to a single event or occasion, the cash received from different sources related to the same event or occasion in part payment or smaller values cannot exceed the sum of Rs.2 lakhs in one day. The amount exceeding the pre-defined cash limit can be paid through cheques, drafts or employing ECS (Electronic Clearing System) through a bank account.

Exceptions in 269ST of the income tax

The provisions of 269ST do not apply to

  • Government
  • Banking company, co-operative banks, and post office
  • Transactions of the nature mentioned in 269SS of the income tax
  • In the case of any person, class of person, or receipt in the official gazette by the central government. specifies
(1) Notification No. 28/2017, dated 5.4.2017 specified

For exercising, powers conferred by clause (iii) of the proviso to section 269ST of the Income-tax Act, 1961, the Central Government notifies 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 i.e., receipt from any post office, savings bank or co-operative bank.

(2) Notification No. 57/2017, dated 3.7.2017 specified

By exercising the powers conferred by clause (iii) of the provision to section 269ST of the Income-tax Act, 1961, the Central Government specified that the provision of section 269ST would not be applicable under following conditions:

  • Cash received by a business correspondent on behalf of a banking company or co-operative bank, according to the guidelines issued by the RBI
  • Cash transactions are done by an ATM operator from retail outlet sources on behalf of a banking company or co-operative bank, according to the guidelines issued by the RBI under the Payment and Settlement Systems Act, 2007;
  • The cash received from an agent by the issuer of a pre-paid payment instruments, following the authorization issued by the RBI under the Payment and Settlement Systems Act, 2007;
  • Cash transactions are done by a company or a financial institution that issues credit cards against bills for which payments are due in respect of a single or multiple credit cards;
  • Cash received that is excluded from the total income under income tax act 1961clause (17A) of section 10.

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The penalty in case of infringement of the provision

  • If an individual receives any sum that violates the provision of the act, then it shall be liable to pay by way of penalty the amount equal to the number of receipts.
  • No penalty will be imposed if the person can provide a valid, sufficient, and good reason for such receipt.
  • All the penalty is imposed under sec 271DA by the Joint commissioner.

However, the sum of the penalty imposed would be 100% of such receipt in violation of the act.

Implications of 269ST of the Income Tax Act 

The government of India introduced this activity to keep a check on the circulation of black money in the market. And also to promote digital payments. The following things should be kept in mind to prevent violations of the act.

  • All the transactions should be verified.
  • All the payments should be matched with the transactions.
  • Date of each payment and transactions.
  • Details of the payment made against the bills and also verifying the date of the debt.
  • Details of the payee and the bills against which the payments are made.

Examples of a violation:

  1. X sells some worth Rs. 5 lakh to Mr Y and accepts the cash payment of Rs 2.5 lakh on the same day against the bill. It is a clear case of violation of 269ST, and the penalty will be imposed under sec 271DA.
  2. Against the same bill of Rs 5 lakh, if the cash payment accepted amounted to Rs 2 lakh, it also results in the violation of the act.
  3. For the same amount and the same bill issued to Mr Y, if Mr X accepts the payment in parts from Mr Y and his relatives, amounting to Rs 2 lakh or above on the same day, it violates the income tax act.

Few cases where it was reported that 269ST had been violated, but the concerned courts found enough evidence to dismiss the case. Because the involved parties were able to provide valid reason and could prove the nature of the transaction as genuine.

  1. Bombay High Court in CIT vs. Triumph International Finance
  2. ITAT Pune in case of Muslim Urban co-op credit society ltd vs. Income Tax Department (Pune)
  3. Gauhati High court in case of Bhagwati Prasad Bajoriya 183 CTR 484

 

 

0

What is 269STof the Income Tax Act?

841

The Indian economy’s most significant threat to date is the circulation of black money in the market. Many taxpayers use cash-only transactions to evade tax and their responsibility towards the economy. A large number of cash transactions means a large amount of tax loss. Cash transactions are very hard to track down and also facilitates the circulation of black money in the economy. Hence, the government of India introduced 269ST of the Income Tax Act with effect from April 2017. This is to put an end to illegal cash transactions and curb the usage of black money in the market.

269ST of the Income Tax: Introduction

Before 269ST was introduced, 269SS and 269T were considered as a step to curb the usage of black money in the market and restrict cash transactions. However, it was not considered as successful as it was perceived to be. 269ST of the Income Tax restricts a cash transaction of a sum of Rs.2 lakhs or above in a single day by any individual.

  • No cash amount above or equal to Rs.2 lakhs can be accepted from a single person in one day.
  • In the case of a single transaction, a person cannot pay the amounts exceeding the sum of Rs.2 lakhs. The person cannot split the sum into smaller part payments. And the other party which concerns will not accept the same.
  • Related to a single event or occasion, the cash received from different sources related to the same event or occasion in part payment or smaller values cannot exceed the sum of Rs.2 lakhs in one day. The amount exceeding the pre-defined cash limit can be paid through cheques, drafts or employing ECS (Electronic Clearing System) through a bank account.

Exceptions in 269ST of the income tax

The provisions of 269ST do not apply to

  • Government
  • Banking company, co-operative banks, and post office
  • Transactions of the nature mentioned in 269SS of the income tax
  • In the case of any person, class of person, or receipt in the official gazette by the central government. specifies
(1) Notification No. 28/2017, dated 5.4.2017 specified

For exercising, powers conferred by clause (iii) of the proviso to section 269ST of the Income-tax Act, 1961, the Central Government notifies 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 i.e., receipt from any post office, savings bank or co-operative bank.

(2) Notification No. 57/2017, dated 3.7.2017 specified

By exercising the powers conferred by clause (iii) of the provision to section 269ST of the Income-tax Act, 1961, the Central Government specified that the provision of section 269ST would not be applicable under following conditions:

  • Cash received by a business correspondent on behalf of a banking company or co-operative bank, according to the guidelines issued by the RBI
  • Cash transactions are done by an ATM operator from retail outlet sources on behalf of a banking company or co-operative bank, according to the guidelines issued by the RBI under the Payment and Settlement Systems Act, 2007;
  • The cash received from an agent by the issuer of a pre-paid payment instruments, following the authorization issued by the RBI under the Payment and Settlement Systems Act, 2007;
  • Cash transactions are done by a company or a financial institution that issues credit cards against bills for which payments are due in respect of a single or multiple credit cards;
  • Cash received that is excluded from the total income under income tax act 1961clause (17A) of section 10.

Get free legal advice now

The penalty in case of infringement of the provision

  • If an individual receives any sum that violates the provision of the act, then it shall be liable to pay by way of penalty the amount equal to the number of receipts.
  • No penalty will be imposed if the person can provide a valid, sufficient, and good reason for such receipt.
  • All the penalty is imposed under sec 271DA by the Joint commissioner.

However, the sum of the penalty imposed would be 100% of such receipt in violation of the act.

Implications of 269ST of the Income Tax Act 

The government of India introduced this activity to keep a check on the circulation of black money in the market. And also to promote digital payments. The following things should be kept in mind to prevent violations of the act.

  • All the transactions should be verified.
  • All the payments should be matched with the transactions.
  • Date of each payment and transactions.
  • Details of the payment made against the bills and also verifying the date of the debt.
  • Details of the payee and the bills against which the payments are made.

Examples of a violation:

  1. X sells some worth Rs. 5 lakh to Mr Y and accepts the cash payment of Rs 2.5 lakh on the same day against the bill. It is a clear case of violation of 269ST, and the penalty will be imposed under sec 271DA.
  2. Against the same bill of Rs 5 lakh, if the cash payment accepted amounted to Rs 2 lakh, it also results in the violation of the act.
  3. For the same amount and the same bill issued to Mr Y, if Mr X accepts the payment in parts from Mr Y and his relatives, amounting to Rs 2 lakh or above on the same day, it violates the income tax act.

Few cases where it was reported that 269ST had been violated, but the concerned courts found enough evidence to dismiss the case. Because the involved parties were able to provide valid reason and could prove the nature of the transaction as genuine.

  1. Bombay High Court in CIT vs. Triumph International Finance
  2. ITAT Pune in case of Muslim Urban co-op credit society ltd vs. Income Tax Department (Pune)
  3. Gauhati High court in case of Bhagwati Prasad Bajoriya 183 CTR 484

 

 

0

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