Section 269ST — Mode of Undertaking Transactions

CHAPTER XX-B — REQUIREMENT AS TO MODE OF ACCEPTANCE, PAYMENT OR REPAYMENT IN CERTAIN CASES TO COUNTERACT EVASION OF TAX

Section 269ST — Mode of undertaking transactions

Case Laws & Commentary — Income-tax Act, 1961 (as amended by the Finance Act, 2026) — bharattax.co Treatise

Status: Live. Inserted by the Finance Act, 2017 (w.e.f. 1-4-2017). Developing case law.

Finance Act, 2026: No amendment by the Finance Act, 2026. Two-lakh cash-receipt cap retained for AY 2026-27.

Mechanism: Bar on receiving Rs. 2,00,000 or more in cash (a) from a person in a day, (b) in a single transaction, or (c) for one event/occasion. Permitted modes as in s. 269SS. Penalty: s. 271DA (100%); relief: s. 271DA(1) proviso "good and sufficient reasons".

Litigation profile: Moderate but rising; Tribunal-led on aggregation; landmark SC directions in RBANMS (2025).

A. COMMENTARY

Genesis and object

Section 269ST was inserted by the Finance Act, 2017 with effect from 1 April 2017, on the recommendation of the Special Investigation Team on Black Money and in the immediate aftermath of demonetisation. Whereas s. 269SS targets only loans, deposits and specified sums, s. 269ST is far wider: it bars the receipt of two lakh rupees or more in cash in respect of any transaction whatsoever — sale of goods, sale of services, gifts, property, anything. It operates on the recipient, not the payer, and is the principal statutory cap on large cash dealings in the economy.

The three limbs

The prohibition bites if a person receives two 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. The three limbs are independent and disjunctive. Limb (a) aggregates all receipts from one person in one day even across several bills; limb (b) catches a single transaction split across several days; and limb (c) catches receipts for one event or occasion (the textbook example being a marriage). The CBDT clarified by Circular No. 22 of 2017 that, in the case of receipts by a non-banking financial company or housing finance company, each loan instalment is not to be aggregated as receipts in respect of a single transaction.

Construction of the limbs in practice

Because the section operates per person and per day / per transaction / per event, the question of aggregation is where the litigation concentrates. Cash sale bills raised on different dates to different customers, none exceeding the limit in a day from one person, cannot be clubbed to manufacture a contravention. Conversely, an attempt to break a single Rs. 5 lakh transaction into three cash receipts on three days is squarely hit by limb (b). The recipient must therefore test every receipt against all three limbs.

Permitted modes and exemptions

As with s. 269SS, the permitted modes are an account payee cheque, account payee bank draft, ECS through a bank account, or a prescribed electronic mode (Rule 6ABBA). The proviso exempts (i) receipts by the Government, banking companies, post office savings banks and co-operative banks; (ii) transactions of the nature referred to in s. 269SS (so that the same receipt is not hit by both sections); and (iii) such persons, classes or receipts as the Central Government may notify. The third limb of the exemption has been used to exempt, among others, certain receipts by banking correspondents, white-label ATM operators and the like (Notification No. 28 of 2017).

Penalty and reasonable cause

Contravention attracts penalty under s. 271DA equal to the amount of the receipt. 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 by s. 271DA(2) the penalty is imposable by the Joint Commissioner. The expression "good and sufficient reasons" performs, for s. 269ST, the same function that "reasonable cause" under s. 273B performs for s. 269SS — note, however, that s. 273B does not in terms list s. 271DA, the reasonable-cause defence being built into s. 271DA itself.

The Supreme Court's directions in RBANMS

In The Correspondence, RBANMS Educational Institution v. B. Gunashekar (2025) — 2025 INSC 490 — the Supreme Court, while rejecting a speculative suit founded on an unregistered agreement to sell supported by an alleged cash advance of Rs. 75 lakh, treated the cash payment as a plain violation of s. 269ST and issued general directions: courts and sub-registrars are to intimate the Income-tax Department of cash transactions of two lakh rupees or more that come to their notice. The decision both underlines the reach of s. 269ST beyond tax assessment and creates a new reporting channel feeding s. 269ST enforcement.

Finance Act, 2026

The Finance Act, 2026 makes no change to section 269ST or to s. 271DA. The two-lakh cash-receipt cap and its penalty are retained for assessment year 2026-27.

B. STATUTORY TEXT (verbatim)

Reproduced verbatim from the Income-tax Act, 1961 as amended up to the Finance Act, 2025.

Mode of undertaking transactions.

269ST. No person shall receive an amount of two 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 or through such other electronic mode as may be prescribed:

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;

(iii) such other persons or class of persons or receipts, which the Central Government may, by notification in the Official Gazette, specify.

Explanation.—For the purposes of this section,—

(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.

C. AUTHORITIES

Section 269ST is a comparatively young provision (2017); the case law is still developing and is dominated by Tribunal decisions on aggregation and "good and sufficient reasons", with the Supreme Court's RBANMS directions as the leading higher-court pronouncement. Citations should be verified against the full reports.

Cluster 1 — Higher-court pronouncement and reach

The Correspondence, RBANMS Educational Institution v. B. Gunashekar (2025) 2025 INSC 490 (SC)

Holding: A cash advance of Rs. 75 lakh towards a property purchase is a plain violation of s. 269ST. The Court directed that courts and sub-registrar offices intimate the Income-tax Department of cash transactions of Rs. 2,00,000 or more, so that s. 269ST contraventions are surfaced for action.

Significance: First Supreme Court engagement with s. 269ST; expands enforcement through a judicial/registry reporting obligation and confirms the section's reach into civil property dealings.

Use: Leading authority; reproduce the operative directions when advising on large cash property advances.

Cluster 2 — Aggregation: the three limbs

Whether several cash receipts may be clubbed to cross the two-lakh threshold is the core battleground; the limbs are disjunctive and fact-sensitive.

ITAT (Bangalore) — cash sales to different persons on different dates

Holding: Cash receipts of less than Rs. 2,00,000 from different persons on different dates cannot be aggregated to allege a single-transaction or one-day contravention; where no receipt from one person in a day crossed the limit, s. 269ST is not attracted and penalty under s. 271DA was deleted.

Ratio: Limb (a) aggregates only receipts from the same person in the same day; cross-person, cross-date clubbing is impermissible.

ITAT — single transaction split over several days

Principle: Conversely, a single transaction whose consideration is received in cash in instalments across several days is hit by limb (b), the aggregation being by reference to the transaction and not the day. The two propositions together fix the boundary of the section.

ITAT — cash bills raised on different occasions not to be aggregated

Holding: Cash sale bills raised on different occasions cannot be aggregated to allege a Rs. 2 lakh single-transaction violation; each bill is a separate transaction unless shown to be a device to split one transaction.

Cluster 3 — "Good and sufficient reasons" / bona fide belief (s. 271DA proviso)

ITAT (Bangalore) — cash on sale of ancestral agricultural land; bona fide belief

Holding: Penalty under s. 271D / s. 271DA deleted where cash was received on sale of ancestral agricultural land under a bona fide belief that the transaction was outside the bar; absence of intent to evade and full disclosure constituted good and sufficient reason.

Use: Illustrates the reasonable-cause analogue built into s. 271DA(1) proviso.

ITAT — cash deposit by a party from a remote location

Holding: Section 271DA penalty deleted where the cash was received from a party situated in a remote location with limited banking access; the practical impossibility of routing the receipt through banking channels was a good and sufficient reason.

Penalty not to be levied mechanically

Principle: Tribunals have repeatedly held that s. 271DA penalty cannot be levied mechanically; the proviso requires the authority to consider the explanation, and a genuine, disclosed, non-evasive receipt with a satisfactory reason for the cash mode will ordinarily escape penalty.

Cluster 4 — Procedure (read with the s. 269SS line)

Procedural principles developed under ss. 271D / 271E are applied to s. 271DA by analogy; the competent authority is the Joint Commissioner.

Competent authority and recording of satisfaction

Principle: Penalty under s. 271DA is imposable by the Joint Commissioner (s. 271DA(2)); the satisfaction and limitation principles of Jai Laxmi Rice Mills (SC) and Grihalakshmi Vision (Ker) — developed for ss. 271D / 271E — guide the procedure for s. 271DA as well, pending direct higher-court authority on s. 271DA procedure.