Cash amount received

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A client received a substantial cash refund of Rs. 6 lacs after a land purchase deal was cancelled. The client is seeking advice on whether they can deposit this cash directly into their bank account. While the seller has provided documentation confirming the cash return, there are significant concerns regarding potential disallowance under Section 269ST of income tax laws, which restricts cash transactions above a certain limit. It is advisable to insist on a cheque or bank transfer for such refunds to avoid future tax complications and scrutiny from income tax authorities.

DIVYESH JAIN

DIVYESH JAIN (Querist)
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12 March 2024 Dear Sir,

One of my client has purchased a land and paid the initial amount by cheque of Rs. 6 lacs. Later on, the deal got cancelled and the seller is willing to return the entire amount by cash of Rs. 6 lacs.

My query is can my client deposit this cash into his bank account and adjust this money against the payment he has made by cheque.

Please help me to resolve the issue.

Thanks,
Divyesh Jain

Nikhil Kaushik

Nikhil Kaushik (Expert)
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12 March 2024 if tomorrow income tax authorities the source of this cash, will the seller accept that he returned the money in cash? if not, then your trouble will be to explain why this amount should not be treated as unexplained income.

DIVYESH JAIN

DIVYESH JAIN (Querist)
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12 March 2024 Yes, the seller has signed the document that he has returned the amount in cash.

Nikhil Kaushik

Nikhil Kaushik (Expert)
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12 March 2024 still it would be disallowed under 269ST. please ask the buyer to insist on cheque/bank transfer.

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