Consequences if banned currency notes accepted after 8th November 2016

By | November 25, 2016
(Last Updated On: November 25, 2016)

Govt of India has banned Old Rs 500 and Rs 1000 Bank Notes w.e.f 09.11.2016 except for certain exempt payments. read Permissible payments with old bank note Date Extended till 15 Dec 2016 with new items added

What are the consequences if I accept banned currency after 8th November?

Any contract in lieu of an illegal consideration would be deemed as void-ab-initio by virtue of Section 24 of Indian Contract Act, 1872. Dealing in a currency which is not a legal tender may be deemed as illegal consideration and if that happens, Assessing Officer may deem that the transaction is unexplained and bring it to tax under Section 68 or 69 or 69A.

Section 24 of Indian Contract Act, 1872

VOID AGREEMENTS

Agreements void, if considerations and objects unlawful in part

24. If any part of a single consideration for one or more objects, or any one or any part of any one of several considerations for a single object, is unlawful, the agreement is void.

Illustration

A promises to superintend, on behalf of B, a legal manufacture of indigo, and an illegal traffic in another articles. B promises to pay to A a salary of 10,000 rupees a year. The agreement is void, the object of A’s promise, and the consideration for B’s promise, being in part unlawful.

Related Post No Cash bill can be raised after 08.11.2016 by accepting old Notes Rs 500, 1000

Q Is it allowed that our customers directly deposit old currency notes of Rs 500 and Rs 1000 for the cash sales price into our bank account ?

On or after November 9, 2016, Rs. 500/1,000 note is not a legal tender. A third party cannot deposit these notes in your account without your permission. If a customer deposits these notes in your bank account directly on or after November 9, 2016, then you will have to explain the source of deposit to the Income-tax Department.

Q can I accept the old notes of Rs. 500/1000 in discharge of old outstanding debt standing in my books of account?

No. Any contract in lieu of an illegal consideration would be deemed as void-ab-initio by virtue of Section 24 of Indian Contract Act, 1872.

Q Can I receive past consideration in old currency or enter into fresh transaction say instance can I make a sale today on credit and receive old currency from debtor before 30 dec. 2016 ?

NO .Any contract in lieu of an illegal consideration would be deemed as void-ab-initio by virtue of Section 24 of Indian Contract Act, 1872.

 

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