[Opinion] Sale of Goods – Maintaining Identity of Customers

CA Vinay V. Kawdia – [2023] 151 taxmann.com 107 (Article)

Introduction

The Reserve Bank of India (RBI) decided to withdraw Rs 2000 currency note from circulation and urged people to exchange or deposit the Rs 2,000 note in banks by September 30, 2023. It has further been clarified that till 30.09.23 it continues to be a legal tender. With this announcement rather than depositing these notes in to bank accounts, for one reason or another, people are preferring to spend these notes in the market. Traders are also seeing opportunity in this public mindset to increase their sales/recover the debtors. At the same time, they are afraid of stringent customer KYC norms while selling goods/services in cash. Especially jewellers/bullion traders are confused about the applicability of Income Tax Act and Prevention of Money Laundering Act in this regard. What are the extant rules in force?

The Income Tax Rules, 1962

Transactions in relation to which PAN is to be quoted in all documents for the purpose of clause (c) of sub-section (5) of section 139A are listed under Rule 114B of the Rules. There are total 18 type of transactions mentioned under Rule 114B. The general category is listed at sr. No. 18 of the table under Rule 114B as follows:

It has further been clarified that, any person who does not have a PAN and who enters into any transaction specified in this rule, he shall make a declaration in Form No. 60 giving therein the particulars of such transaction.

To put it simply, as far as Income Tax rules are concerned, every sale transaction of amount exceeding Rs. 2 Lacs (either in cash or otherwise) shall require quoting PAN of customer on the sale bill. This is irrespective of nature of business.

Further, any person who is liable for audit under section 44AB of the Income Tax Act is liable to report, on yearly basis, all his transactions involving receipt of cash payment exceeding two lakh rupees for sale of goods or services of any nature as above in Form 61A electronically.

It is interesting to note that, Section 269ST of Income Tax Act applies to transactions of receipt of money of Two Lakh rupees or more and there is equivalent penalty u/s 271DA of the Act on receipt of cash payments of rupees Two lakhs or above, in the circumstances as specified in clause (a) to (c) of S. 269ST(1).

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