Clarification on Legality of UPI Receipts Against Cash and Cyber Cell Hold

Question

► Dear Sir, I seek your advice on the legality and implications of certain transactions undertaken in the course of my business, and the subsequent action taken by the Cyber Cell. Facts of the case: 1. I run a wholesale business and operate through a current account. 2. At times, certain individuals approach me requesting cash. In such cases, they transfer an equivalent amount to me through UPI into my current account, and I hand over the same value in cash. 3. These transfers are not against supply of goods or services but purely for the exchange of UPI transfer against cash. 4. The amounts involved are regular and substantial, though not received in a single day from the same person. For instance, one individual transferred a total of around ₹1,13,000 in parts (₹40,000, ₹18,000, etc.), for which I provided equivalent cash. 5. Recently, the Cyber Cell has put a hold on such funds in my bank account and has not yet issued a No Objection Certificate (NOC) for release of the amount. My queries are: Whether receiving money by UPI and handing out equivalent cash is legal under Indian law. Whether any provisions of the Income-tax Act (e.g., Section 269ST restricting cash transactions beyond ₹2,00,000), FEMA, PMLA, or the RBI Act are violated by such practice. Whether such transactions could be treated as unauthorised money transfer/banking activity. What legal remedy is available for release of the amount held by the Cyber Cell if NOC is delayed or denied. Whether Section 457 CrPC (regarding disposal of property by Criminal Court) is relevant for seeking release of the held funds. Possible risks or penalties for continuing such practice in the future. Your professional guidance will help me understand the legal position clearly and decide on the appropriate course of action. Sincerely, Aliasgar

Answer 1

Dear Sir, as per your query,

What you are essentially doing is accepting money into your current account through UPI transfers into your current account and handing out cash without any sale of goods or services. This resembles unauthorized money transfer activity like informal banking.

Section 269ST of the Income Tax Act, 1961 restricts receipt of Rs. 2 lakhs or more in cash per person per day and per transaction. Penalty imposed is 100% of the amount transacted. In your case, Cyber Cell has frozen your account and is withholding an NOC. They suspect your account was used for some suspicious transaction.

Steps you can take:

1. Approach the Cyber Cell: Submit a written application to the concerned cyber cell and provide business documents like GST returns, invoices and bank statement. Keep a written acknowledgment of the application.

2. Approach the concerned Bank where the account is maintained: Seek a proper clarification from the bank authorities regarding freeze of your account.

3. File an application under CRPC: You can file an application before the Magistrate and seek release of frozen funds.

For further clarification and details, feel free to contact our Team.

Clarification on Legality of UPI Receipts Against Cash and Cyber Cell Hold

1 Answer