Section 271DA

Section 271DA — the law in short

What the courts have decided on section 271DA, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• RBANMS Educational Institution v B. Gunashekar Supreme CourtHelps department
  The section 269ST penalty falls on the person who receives the cash. If I am the buyer paying cash for property, am I exposed at all?
  Yes, but on a different footing. The Supreme Court confirmed that under section 269ST, with the penalty in section 271DA, action is to be taken on the recipient - and said in the same breath that there is also an onus on the person paying to disclose the source of such large cash. It then built the machinery by which such a payment reaches the department: a civil court before which a suit claims payment of Rs 2,00,000 or more in cash must intimate the jurisdictional Income-tax Department, and a Sub-Registrar before whom a document reciting cash consideration of that amount is presented for registration must do the same.
• JCIT v Ganesh Agarwal High CourtCuts both ways
  The Assessing Officer sent a proposal to the Joint Commissioner for penalty on my cash receipts. Does the six month limitation run from that proposal or from the notice the Joint Commissioner later issued?
  From the notice. A Division Bench of the Karnataka High Court held that penalty proceedings under section 271DA begin only when the Joint Commissioner issues the notice under section 274, not when the Assessing Officer forwards a proposal, so the six months in section 275(1)(c) run from the end of the month of that notice. But the Court did not leave the Joint Commissioner free to sit on the proposal: it held he must issue the section 274 notice within six months of the end of the month in which he receives it, failing which the proceedings are time-barred. On that footing four of the ten penalty orders fell and six were restored.
• Birmala Projects Pvt Ltd v Ashwani Ahluwalia High CourtCuts both waysNo later treatment found
  We paid Rs 1.5 crore in cash under an agreement. The other side says s.269ST makes the agreement void and our recovery suit is not maintainable. Is it?
  No. The Delhi High Court held that s.269ST merely regulates the mode of a transaction and imposes a fiscal penalty; it does not render the underlying agreement void or unenforceable, and the plea that the plaint was barred by law failed. The Court also recorded that the penalty under s.271DA falls on the recipient of the cash, not the payer, so on the pleaded facts the defendant, not the plaintiff, was the party exposed.
• Vasavi Developers v ACIT, Central Circle 3(2), Hyderabad ITATHelps taxpayerNo later treatment found
  After a search the Additional Commissioner has levied a s.271DA penalty equal to the whole of the cash the Department says we received on flat bookings. Nobody has identified a single payer or a single receipt over Rs 2,00,000. Can the penalty stand?
  No. The Tribunal held that s.269ST is not attracted merely because cash exists or because a cash receipt has been broadly admitted — the Revenue must prove the precise statutory violation, person-wise and transaction-wise, and where it has not, the s.271DA penalty cannot survive. It also held that the AO must record a clear satisfaction of the s.269ST violation in the assessment order itself, failing which the foundational jurisdiction to initiate s.271DA is absent.
• MCM Developers v DCIT, Central Circle-1, Aurangabad ITATHelps taxpayerNo later treatment found
  The assessment order said s.269ST and s.271DA. The AO has now passed a s.154 order changing it to s.269SS and s.271D. Can he do that?
  No. The Tribunal held that mentioning s.269ST together with its own penalty section s.271DA is not a typographical error — it could only have been one if s.269ST had been typed alongside s.271D — so the original assessment order reflected a conscious application of mind. Substituting s.269SS and s.271D for them under s.154 was a change of opinion between two possible legal views, not the correction of a mistake apparent from the record, and the rectification order was quashed.
• Delta Farm Services v ITO ITATHelps taxpayer
  I sell tractors to farmers who pay in cash instalments, and the officer has levied penalty equal to the whole of the cash received for breaching the two lakh limit. Is there any defence?
  Yes, reasonable cause. The Delhi Tribunal deleted the penalty of Rs 4,69,52,797 under section 271DA. The officer never doubted the genuineness of the cash sales and never alleged that unaccounted money was being routed back. The firm had identified every buyer with Aadhaar, land records and Form 60, accounted for every receipt and filed its statements of specified financial transactions. Section 269ST had come in from 1 April 2017 and this was the first year, and the firm's belief that cash below Rs 2 lakh could be taken at any one time was plausible on the language of the section. Penalty is quasi-criminal and is not for a technical or venial breach.
• Finesse International Design Pvt Ltd v Addl. CIT ITATHelps taxpayerNo later treatment found
  The Addl. CIT says we split one customer's bill into two so each stayed under Rs 2,00,000. Is that a s.269ST violation?
  On these facts the Tribunal deleted the s.271DA penalty, holding that where a customer bought several genuinely different items and separate invoices were raised for them, the breach was at most technical or venial and Hindustan Steel applied. But read the order for what it does not say: it never identifies which of the three limbs of s.269ST the Department invoked, and it does not deal with the 'in a day' limb, which aggregates everything received from one person in one day irrespective of how many bills were raised.
• Prashanth Fertility Research Centre Pvt Ltd v JCIT ITATHelps taxpayer
  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.
• Statutory position — the block charge: sixty per cent under section 113, interest at one and a half per cent, and a flat fifty per cent penalty under section 158BFA(2) CBDT Circulars & InstructionsCuts both ways
  What will a block assessment actually cost my client, and is there any way to keep the penalty off?
  Tax at sixty per cent of the total undisclosed income of the block period under section 113, plus surcharge under the proviso; interest under section 158BFA(1) at one and a half per cent per month where the block return is late or not filed; and a penalty under section 158BFA(2) of a sum 'equal to fifty per cent of tax so leviable' on the undisclosed income determined by the Assessing Officer. The first proviso to section 158BFA(2) gives complete immunity from that penalty, and from penalty under sections 271AAD(1), 271D, 271DA and 271E for the block period, if four conditions are met — the return was furnished under section 158BC(1)(a), the tax on it was paid or the seized money offered for adjustment, evidence of payment accompanied the return, and no appeal is filed against the assessment of the income shown in the return.
• CBDT Circular 22/2017 CBDT Circulars & InstructionsHelps taxpayerNo later treatment found
  We take loan repayments in cash instalments. Do the instalments add up against the two lakh limit?
  Not for NBFCs and HFCs. The Board has clarified that each instalment of loan repayment is a single transaction, so instalments received against one loan are not aggregated when testing the two lakh rupee ceiling in s.269ST.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.