My client is charged under s.271DA. Can I rely on s.273B reasonable cause?
No — s.271DA is not one of the sections listed in s.273B. The defence to a s.271DA penalty is the proviso to s.271DA(1) itself, which excuses the contravention where the person proves that there were good and sufficient reasons for it. In this case a hospital that took cash above Rs 2,00,000 from foreign patients who had no banking or card facilities in India succeeded under that proviso, the Tribunal noting that the transactions were genuine, none was outside the books, and the contravention was a very small fraction of turnover.
Decided by the ITAT (V. Durga Rao, Judicial Member and Manoj Kumar Aggarwal, Accountant Member) on 2023-05-17, reported as I.T.A. No.389/Chny/2022; Assessment Year 2018-19; Income Tax Appellate Tribunal, Chennai 'C' Bench. It bears on section 271DA, section 269ST of the Income Tax Act 1961, in Cash Transaction Limits, Penalty and How Tax Law Is Read matters.
Practitioners habitually plead s.273B against every penalty in Chapter XXI. Section 273B lists s.271D and s.271E but not s.271DA and not s.271DB — those two carry their own provisos in identical language, 'good and sufficient reasons'. The distinction is worth getting right in the reply itself, because a reply framed on s.273B invites the answer that the section does not apply. The substance of the two tests is close, and this Tribunal itself slipped into calling it 'reasonable cause' in the same paragraph in which it applied the proviso, but the pleading should be correct. The facts also show what actually works: an identified counterparty who could not use banking channels, receipts fully recorded in the books, and a de minimis proportion of turnover.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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The assessee runs a fertility research centre and hospital. Cash receipts above Rs 2,00,000 during the financial year 2017-18 were identified as contravening s.269ST and a penalty under s.271DA was levied by the Joint Commissioner. The receipts were from patients who were foreign nationals and who did not have banking facilities in India, so they were unable to pay their bills by cheque or debit card. All the receipts were recorded in the books of account, the Department did not allege that any transaction was not genuine, and no transaction was found outside the books.
The penalty levied under s.271DA was deleted. The proviso to s.271DA(1) provides that no penalty is imposable if the person proves that there were good and sufficient reasons for the contravention, and on these facts the assessee had such reasons (para 8).
The Tribunal set out s.271DA in full, including sub-section (2) which reserves the imposition of the penalty to the Joint Commissioner, and then applied the proviso. Its route was: the assessee is a hospital; it raised the payment after serving patients who were foreign nationals; those patients could not pay by cheque or debit card because they had no banking facilities in India; in those circumstances there was cause to accept cash; the contravention was a negligible fraction of the total turnover of the company; the Department did not say that the transactions were not genuine; and no transaction was found outside the books of account (para 8).
As per the above section 271DA of the Act, the proviso provides that no penalty can be levied if there is a good and sufficient reason for the contravention.
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Handle my notice → Ask a CA on WhatsAppNo — s.271DA is not one of the sections listed in s.273B. The defence to a s.271DA penalty is the proviso to s.271DA(1) itself, which excuses the contravention where the person proves that there were good and sufficient reasons for it. In this case a hospital that took cash above Rs 2,00,000 from foreign patients who had no banking or card facilities in India succeeded under that proviso, the Tribunal noting that the transactions were genuine, none was outside the books, and the contravention was a very small fraction of turnover. This was decided by the ITAT (V. Durga Rao, Judicial Member and Manoj Kumar Aggarwal, Accountant Member) and bears on section 271DA, section 269ST of the Income Tax Act 1961. It is reported as I.T.A. No.389/Chny/2022; Assessment Year 2018-19; Income Tax Appellate Tribunal, Chennai 'C' Bench. Practitioners habitually plead s.273B against every penalty in Chapter XXI. Section 273B lists s.271D and s.271E but not s.271DA and not s.271DB — those two carry their own provisos in identical language, 'good and sufficient reasons'. The distinction is worth getting right in the reply itself, because a reply framed on s.273B invites the answer that the section does not apply. The substance of the two tests is close, and this Tribunal itself slipped into calling it 'reasonable cause' in the same paragraph in which it applied the proviso, but the pleading should be correct. The facts also show what actually works: an identified counterparty who could not use banking channels, receipts fully recorded in the books, and a de minimis proportion of turnover. If it applies to you, the first step is this: Plead the proviso to s.271DA(1) — 'good and sufficient reasons' — not s.273B, and set out the reasons receipt by receipt.
The assessee runs a fertility research centre and hospital. Cash receipts above Rs 2,00,000 during the financial year 2017-18 were identified as contravening s.269ST and a penalty under s.271DA was levied by the Joint Commissioner. The receipts were from patients who were foreign nationals and who did not have banking facilities in India, so they were unable to pay their bills by cheque or debit card. All the receipts were recorded in the books of account, the Department did not allege that any transaction was not genuine, and no transaction was found outside the books. The matter was decided on 2023-05-17 by the ITAT (V. Durga Rao, Judicial Member and Manoj Kumar Aggarwal, Accountant Member). On those facts the ITAT held as follows. The penalty levied under s.271DA was deleted. The proviso to s.271DA(1) provides that no penalty is imposable if the person proves that there were good and sufficient reasons for the contravention, and on these facts the assessee had such reasons (para 8).
The Tribunal set out s.271DA in full, including sub-section (2) which reserves the imposition of the penalty to the Joint Commissioner, and then applied the proviso. Its route was: the assessee is a hospital; it raised the payment after serving patients who were foreign nationals; those patients could not pay by cheque or debit card because they had no banking facilities in India; in those circumstances there was cause to accept cash; the contravention was a negligible fraction of the total turnover of the company; the Department did not say that the transactions were not genuine; and no transaction was found outside the books of account (para 8). In the words reproduced by the source cited on this page: "As per the above section 271DA of the Act, the proviso provides that no penalty can be levied if there is a good and sufficient reason for the contravention."
It was decided by the ITAT on 2023-05-17 and is reported as I.T.A. No.389/Chny/2022; Assessment Year 2018-19; Income Tax Appellate Tribunal, Chennai 'C' Bench. Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 271DA, section 269ST, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The penalty levied under s.271DA was deleted. The proviso to s.271DA(1) provides that no penalty is imposable if the person proves that there were good and sufficient reasons for the contravention, and on these facts the assessee had such reasons (para 8). It arises in Cash Transaction Limits, Penalty and How Tax Law Is Read matters, on section 271DA, section 269ST of the Income Tax Act 1961, and was decided by V. Durga Rao, Judicial Member and Manoj Kumar Aggarwal, Accountant Member. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Prove the counterparty's inability to pay through banking channels with documents: passport or visa copies, absence of an Indian bank account, refusal of card, and the like. Show that every receipt was recorded in the books and offered to tax, and quantify the contravention as a proportion of turnover. Ask the Department to identify the limb of s.269ST relied on and to show that the amount from each single person crossed Rs 2,00,000 on the day, in the transaction, or for the event. Check that the penalty was imposed by the Joint Commissioner as s.271DA(2) requires.
Validity check could not be completed. Validity check could not be completed. I did not locate any later decision considering this order and did not check whether the Revenue appealed. The proposition that s.271DA is not covered by s.273B is a reading of the two sections, not a holding of this Tribunal — the Tribunal applied the proviso without deciding the point, and used the phrase 'reasonable cause' loosely in the same paragraph. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
Para 8 was read verbatim, together with the extract of s.271DA that immediately precedes it, and the signature block. Para 7, read verbatim on a later pass, records six instances of cash acceptance which the Assessing Officer held to contravene s.269ST and a penalty of Rs.15,29,855/-. The date of the inspection (June 2018) is from the report's narrative and is not quoted. The appeal number I.T.A. No.389/Chny/2022 comes from the page header rendering and was not re-verified against the printed caption. The sentence in para 8 reading 'the contravention is not even less than 0.1% of the total turnover' is garbled as printed; the sense the Tribunal plainly intended is that the contravention was less than 0.1 per cent of turnover. The proposition that s.271DA is not listed in s.273B was verified against the department's current s.273B text at incometaxindia.gov.in/w/section-273b-38 (Year: 2025), which enumerates ss.271D and 271E but neither s.271DA nor s.271DB. Note that the unsuffixed /w/section-273b page is a Year-2000 archive and must not be used. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The penalty levied under s.271DA was deleted. The proviso to s.271DA(1) provides that no penalty is imposable if the person proves that there were good and sufficient reasons for the contravention, and on these facts the assessee had such reasons (para 8).
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