Here’s a detailed breakdown of Penalty under Section 271DA of the Income Tax Act, 1961, for failure to comply with Section 269ST (cash transaction limits):
1. Overview of Section 271DA
- Purpose: Penalizes recipients of cash exceeding ₹2 lakh in violation of Section 269ST, which restricts large cash transactions to curb black money and promote digital payments.
- Penalty Amount: 100% of the cash receivedin contravention (e.g., receiving ₹3 lakh in cash attracts a ₹3 lakh penalty).
2. When Does the Penalty Apply?
Section 271DA is triggered if a person receives cash exceeding ₹2 lakh:
- In a single day(aggregate from one person).
- For a single transaction(e.g., a single invoice).
- For transactions linked to one event/occasion(e.g., wedding expenses paid in installments).
Exemptions:
- Transactions via account payee cheque/draft, ECS, or other electronic modes.
- Receipts by banks, government bodies, or notified entities.
3. Key Judicial Interpretations
- Technical vs. Intentional Violations: Courts may waive penalties for “technical breaches” (e.g., genuine transactions recorded in books).
- Example: Gifts from close relatives with documented proof may not attract penalties.
- Bona Fide Belief: Penalty may be avoided if the recipient proves “good and sufficient reasons” (e.g., urgent business needs).
4. Comparison with Related Penalties
| SECTION | VIOLATION | PENALTY |
| 271DA | Receiving cash >₹2 lakh | 100% of receipt amount |
| 271D | Accepting loans >₹20k cash | 100% of loan amount |
| 271E | Repaying loans >₹20k cash | 100% of repayment amount |
5. How to Avoid Penalty?
- Use Digital Payments: For amounts ≥₹2 lakh, prefer bank transfers/cheques.
- Maintain Records: Document transactions (e.g., gift deeds, invoices) to prove genuineness.
- Claim Exceptions: Show compliance with exemptions (e.g., banking channels).
6. Recent Developments
- Supreme Court Ruling (2025): Courts must report cash transactions ≥₹2 lakh to tax authorities, emphasizing strict enforcement.
- CBDT Clarification: Loan repayments in installments <₹2 lakh per tranche are allowed in cash
