Section 271DB | Penalty for contravening provisions of section 269SU

The present article covers the penalty provisions of section 271DB of the Income Tax Act. It also explains the connecting provisions of section 269SU of the Income Tax Act and also provides a list of the prescribed mode of electronic payments referred to under section 269SU.

It is pertinent to note here that Section 269SU was inserted with effect from 1^st November 2019, with an aim to curb black money and taking a step further towards cash less economy. The penalty under section 271DB would be imposed in case the specified person fails to comply with the provisions of section 269SU.

Provisions of section 271DB of Income Tax Act, 1961

The provisions of section 271DB states as under –

1. The provision applies to the person who is required to provide a facility for accepting payment through the prescribed electronic mode referred to in section 269SU of the Income Tax Act.

2. If the person fails to provide the facility as mentioned above, he would be liable to pay the penalty under provisions of section 271DB.

3. However, no penalty would be imposable, even in case of failure, if the person proves the good and sufficient reason for the failure.

4. The penalty under section 271DB can be imposed only and only by the Joint Commissioner of the Income Tax.

Effective date of applicability of penalty provisions of section 271DB

The Central Board of Direct Taxes vide circular no. 32/2019 dated 30^th December 2019, has clarified that no penalty shall be levied under section 271DB of the Income Tax Act if the person installs and operationalizes the facility for accepting payment through the prescribed electronic modes on or before 31^st January 2020.

However, in case of failure, the penalty provisions of section 271DB shall be applicable from 1^st February 2020.

Understanding provisions of section 269SU of the Income Tax Act

As seen penalty under section 271DB can be levied only in case the person contravenes provisions of section 269SU. Thus, it is equally essential to understand the provisions of section 269SU.

Applicability of provisions of section 269SU

1. The provisions of section 269SU are made effective from 1^st November 2019.

2. The provisions of section 269SU are applicable only to the person carrying on the business.

3. The provisions apply only if the total sales / total turnover / gross receipts of the business exceed INR 50 Crores during the immediately preceding previous year.

If the person satisfies all the above conditions, then the provisions of section 269SU get applicable. In such a case, the person is required to provide the facility for accepting payment through prescribed electronic mode (in addition to the facility of other electronic modes of payments).

Mode of payment for the purpose of section 269SU

Rule 119AA of the Income Tax Rules was inserted vide notification no. 105/2019-Income Tax dated 30^th December 2019. Please note rule 119AA was made effective from 1^st January 2020. As per rule 119AA of the Income Tax Rules following is the mode of payment for the purpose of section 269SU –

1. Debit Card Powered by RuPay.

2. UPI i.e. Unified Payments Interface / BHIM-UPI.

3. UPI QR Code i.e. Unified Payments Interface Quick Response Code / BHIM-UPI QR Code.

Penalty prescribed under section 271DB of Income Tax Act

In case of failure, the penalty under section 271DB of the Income Tax Act would be imposed to the extent of INR 5000 per day till the failure continues. However, it is important here to note that the penalty would be effective only from 1^st February 2020.

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