The provisions of section 269SS and 269T were
brought on the statute by the Finance Act, 1984, with effect from,
01.04.1984. The intention behind bringing the above provisions on the statute
was clarified by the CBDT vide, its Circular No. 387, dated 06.09.1984. The
relevant part of the circular is as under:
"Unaccounted cash found in the
course of searches carried out by the Income Tax department is often explained
by taxpayers as representing loans taken from or deposits made by the various
persons. Unaccounted income is also brought into the books of account in the
form of such loans and deposits, and, taxpayers are also able to get
confirmatory letter from such persons in support of their explanation.
With a view to circumventing this
device, which enables taxpayers to explain away unaccounted cash or unaccounted
deposits, the Bill seeks to make a new provision in the Income Tax Act debarring persons from taking or accepting, after 30.06.1984,
from any other person any loan or deposits otherwise than by an account payee
cheque or account payee Bank draft if the amount of such loan or the aggregate
amount of such loan and deposit is Rs. 10,000 or more. This prohibition will
also apply in cases where on the date of taking or accepting such loan or
deposit, any loan or deposit taken or accepted earlier by such person from the
depositor is remaining unpaid (whether repayment has fallen due or not), and
the amount or the aggregate amount remaining unpaid is Rs. 10,000 or more. The
proposed prohibition would also apply to cases where the amount of such loan or
deposit, together with the aggregate amount remaining unpaid on the date on
which such loan or deposit proposed to be taken, is Rs. 10,000 or more"
Keeping the above circular in view, the Hyderabad Bench
of the Tribunal in case of Industrial
Enterprises v. DCIT (2000) 73 ITD 252 (ITAT Hyderabad) in para
17.2 of its order held as under:
"Provisions
of section 269SS were brought in the statute book to counter the evasion of tax in
certain cases, as clearly stated in the heading of Chapter XX -B of the
Income Tax Act, 1961,
which reads requirement as to mode of acceptance, payment or repayment in certain
cases to counteract evasion of tax legislative. Intention in bringing section
269SS in the Income Tax
Act was to avoid
certain circumstances to tax evasion, whereby huge transactions are made
outside the books of account by way of cash. As far as the case on hand before
us is concerned, there is no case against the assessee-firm that these
transactions had anything to do with evasion of tax or M/s. S.R Associated
Construction Co. (P) Ltd concealment of income. As rightly pointed out by the
Commissioner (Appeals) himself, it may be a case of negligence. But a negligent
person does not have any intention or mensrea to purposely violate any provision
of law, so as to be visited with stringent punishment of heavy penalty".
Finance
is the important part and need of every business. The own capital of a person
may not be always sufficient to meet the needs of finance of the business.
Therefore the Loans and deposits become necessary and important to meet the
financial needs of the business. But while taking loans and accepting deposits
one also has to keep in mind the restrictions imposed under section 269SS and
Section 269T of the Income Tax Act on the mode of taking / Paying such loans and deposits.
Such
provisions regulating the mode of accepting or taking loans or deposits and
mode of repayment of certain loans and deposits are contained under section
269SS and Section 269T of the Income Tax Act 1961.
Section 269SS provides that no person shall take or
accept loan or deposit or specified sum exceeding Rs. 20,000 by any mode other
than account payee cheque or account payee demand draft or use of electricity
clearing system through a bank account or through such other electronic modes
as may be prescribed.
Text of Section 271D
[1][Penalty
for failure to comply with the provisions of section 269SS
271D.
[2][(1)] If a person takes or accepts any
loan or deposit or specified sum in contravention of the provisions of section
269SS, he shall be liable to pay, by way of penalty, a sum equal to the amount
of the loan or deposit [3][or specified sum] so taken or
accepted.
[4][(2) Any penalty imposable under
sub-section (1) shall be imposed by the [5][Joint] Commissioner.]
KEY NOTE
1. Inserted by the Direct Tax (Amendment) Act,
1987, with effect from 01.04.1989.
2. Numbered as sub-section (1) by the Finance
Act, 1990, with effect from 01.04.1990.
3. Inserted by the Finance Act, 20115, with
effect from 01.06.2015.
4. Inserted by the Finance Act, 1990, with
effect from 01.04.1990.
5. Substituted for “Deputy” by the Finance
(No. 2), Act, 1998, with effect from 01.10.1998.
Text
of Section 269SS
[1][Mode of Taking or Accepting Certain Loans
deposits and specified sum
No
person shall take or accept from any other person (hereafter referred to as the
depositor), any loan or deposit or any specified sum otherwise than by an
account payee cheque or account payee bank draft or use of electricity clearing system
through a bank account [2][or through such other electronic mode
as may be prescribed] if,
(a)
the amount of such loan or deposit or the aggregate amount of such loan
and deposit ; or
(b) on the date of taking or accepting
such loan or deposit, any loan or deposit taken or accepted earlier by such
person from the depositor is remaining unpaid (whether repayment has fallen due
or not), the amount or the aggregate amount remaining unpaid ; or
(c)
the amount or the aggregate amount referred to in clause (a) together
with the amount or the aggregate amount referred to in clause (b),
is twenty thousand rupees or more :
Provided that the provisions of this section shall not
apply to any loan or deposit taken or accepted from, or any loan or deposit
taken or accepted by,
(a)
Government ;
(b) any banking company, post office
savings bank or co-operative bank ;
(c) any corporation established by a
Central, State or Provincial Act ;
(d) any Government Company as defined in
clause (45) of section (45) of section 2 of the Companies Act, 2013 (18 of
2013);
(e) such other institution, association or
body or class of institutions, associations or bodies which the Central
Government may, for reasons to be recorded in writing, notify in this behalf in
the Official Gazette :
Provided further that the provisions of this section shall not apply to
any loan or deposit or specified sum, where the person from whom the loan or
deposit or specified sum is taken or accepted and the person by whom the loan
or deposit or specified sum is taken or accepted are both having agricultural
income and neither of them has any income chargeable to tax under this Act.
Explanation : For the purposes of this
section,
(i) banking company means a company to which the
Banking Regulation Act, 1949 (10 of 1949), applies and includes any bank or
banking institution referred to in section 51 of that Act ;
(ii) co-operative bank shall have the
meaning assigned to it in Part V of the Banking Regulation Act, 1949 (10 of
1949) ;
(iii) loan or deposit means loan or
deposit of money.
(iv) Specified sum” means any sum of money receivable, whether as
advance or otherwise, in relation to transfer of an immovable property, whether
or not the transfer takes place.]
KEY
NOTE
1. Substituted by the Finance Act, 1984, with
effect from 01.06.2015.
2. Inserted by the Finance (No. 2) Act, 2019,
with effect from 01.09.2019.
Consequences
of contravention of section 269SS
Contravention of the provisions of section
269SS will attract penalty under section 271D. Section 271D of Income Tax Act
1961 provides that if a loan or deposit or specified sum is accepted
in contravention of the provisions of section 269SS then a penalty equivalent
to the amount of such loan or deposit or specified sum may be levied by
the Joint commissioner.
EXAMPLE:
If Mr “X” has a credit balance of a loan of Rs. 18,000 from
Mr “Y”. Now in this case Mr “X” cannot take loan in excess of Rs 1,999 more
from Mr “Y” except with an account payee cheque or
account payee bank draft or use of electricity
clearing system through a bank account or through such other electronic mode as
may be prescribed.
Nature of default
Accepting
or taking any loan or deposit in contravention of provisions of section 269SS
i.e. acceptance of loan or deposit of
Rs. 20,000/- or more otherwise than by an account payee cheque or account payee bank draft or
use of electricity clearing system through a bank account or through such other
electronic mode as may be prescribed.
Quantum of Penalty under Section 271D
For
defaults under Section 271D, an assessee will be penalized with an amount which
is equal to the loan or deposits taken or accepted.
MINIMUM
PENALTY:
Amount
equal to the loan or deposit taken or accepted.
MAXIMUM
PENALTY:
Same
as minimum i.e. amount equal to the loan or deposit taken or accepted.
Approval of Joint Commissioner [Section
271D(2)]
Section
271D(2) provides that penalty shall be imposed by Joint Commissioner. Joint
Commissioner has been defined in section 2(28C) of the Act.
When penalty may not be imposed as per section 273B, if there is
reasonable cause
As per section 273B,
no penalty shall be imposable on the person or the assessee for any failure
referred to in section 271D, if he proves that there was reasonable cause for
the said failure.
Order
appealable before Commissioner (Appeal)
An appeal can be filed under section 246A(1)(n)
before Commissioner (Appeal) against order imposing penalty under section 271D.
In case of penalties above Rs. 20,000/-,
penalty be reduced by Rs. 20,000
‘If any loan is
there exceeding Rs. 20,000 and any penalty is to be imposed, permissible amount
of Rs.20,000 has to be adjusted. – [CIT v. Ajanta Dyeing & Printing
Mills (2003) 164 ITR 505 : 130 Taxman 442
(Raj)]
That
is, in case penalty is for accepting cash loan of Rs.1,00,000/- then in such
case penalty of Rs.80,000/- should only be levied, as Rs.20,000/- is allowed
amount of accepting cash loan.
Penalty proceedings under section 271D
be construed to have been initiated only after the JCIT issues Show cause
notice
The
CBDT issued Circular No. 09/DV/2016 dated 26.04.2016, wherein it was stated
that penalty proceedings under section 271D be construed to have been initiated
only after the Joint Commissioner issues Show cause notice under section 274 read with section 271D of
the Act.
CBDT’s
Circular No. 09/DV/2016, dated 26.04.2016
Subject:- Commencement of limitation
for penalty proceedings under sections 271D and 271E of the Income tax Act,
1961 – reg.
It has been brought to the notice of the Central Board
of Direct Taxes (hereinafter referred to as the Board) that there are
conflicting interpretations of various High Courts on the issue whether the
limitation for imposition of penalty under sections 271D and 271E of the Income
tax Act, 1961 (hereafter referred to as the Act) commences at the level of the
Assessing Officer (below the rank of Joint Commissioner of lncome Tax.) or at
level of the Range authority i.e. the Joint Commissioner of Income Tax./Addl.
Commissioner of Income Tax.
Some High Courts have held that the limitation commences
at the level of the authority competent to impose the penalty i.e. Range Head
while others have held that even though the Assessing Officer is not competent
to impose the penalty, the limitation commences at the level of the Assessing
Officer where the Assessing Officer has issued show cause notice or referred to
the initiation of proceedings in assessment order.
2. On careful examination of the matter, the Board is of
the view that for the sake of clarity and uniformity, the conflict needs to be
resolved by way of a “Departmental View”.
3. The Hon’ble Kerala High Court in the case of
Grihalaxmi Vision Addl. Commissioner of Income Tax, Range 1, Kozhikode, vide
its order dated 08.07.2015 in ITA Nos. 83 & 86 of 2014, observed that,
“Question to be considered is whether proceedings for levy of penalty, are
initiated with the passing of the order of assessment by the Assessing Officer
or whether such proceedings have commenced with the issuance of the notice
issued by the Joint Commissioner. From statutory provision, it is clear that
the competent authority to levy penalty being the Joint Commissioner.
Therefore, only the Joint Commissioner can initiate proceedings for levy of
penalty. Such initiation of proceedings could not have been done by the Assessing
Officer. The statement in the assessment order that the proceedings under
Section 271D and E are initiated is inconsequential. On the other hand, if the
assessment order is taken as the initiation of penalty proceedings, such
initiation is by an authority who is incompetent and the proceedings thereafter
would be proceedings without jurisdiction. If that be so, the initiation of the
penalty proceedings is only with the issuance of the notice issued by the Joint
Commissioner to the assessee to which he has filed his reply.”
4. The above judgment reflects the “Departmental View”.
Accordingly, the Assessing Officers (below the rank of Joint Commissioner of
Income) may be advised to make a reference to the Range Head, regarding any
violation of the provisions of section 269SS and section 269T of the Act, as
the case may be, in the course of the assessment proceedings (or any other
proceedings under the Act). The Assessing Officer, (below the rank of Joint
Commissioner of Income Tax) shall not issue the notice in this regard. The
Range Head will issue the penalty notice and shall dispose/ complete the
proceedings within the limitation prescribed under section 275(1)(c) of the
Act.
5. Where any High Court decides this issue contrary to
the “Departmental View”, the “Departmental View” thereon shall not be operative
in the area falling in the jurisdiction of the relevant High Court. However,
the CCIT concerned should immediately bring the judgment to the notice of the
Central Technical Committee. The CTC shall examine the said judgment on
priority to decide as to whether filing of SLP to the Supreme Court will be
adequate response for the time being or some legislative amendment is called
for.
6. The above clarification may be brought to the notice
of all officers.
Time limit as per
section 275 for imposing penalty under section 271D
The power to initiate penalty proceedings under section 271D rests with
JCIT only. Accordingly, the time limit for imposing penalty as provided by
section 275 of the Act will be reckoned from the point when JCIT initiates the
penalty proceedings.
Section 275 provides
time limits for different situations, Viz.
(a) Where appeal is preferred against the relevant assessment order or other
order in the course of which penalty proceeding is initiated (clause a); or
(b) Where the assessment order is subject matter of revisions under section
263 or 264 of the Act (clause b); or,
(c) In other matters (clause c)
In the instant case, where question is with regard to imposing penalty
under section 271D, there is no as such connection with the assessment of the
income as assessee; as penalty under this section is independent of the income
being assessed. Thus, no matter the assessment order of the assessee is in
appeal, penalty under this section i.e. 271D is to be levied as per clause (c)
of section 275(1) i.e.
(a) within the end of financial year in which proceedings, during the course
of which action for imposing penalty were initiated, gets completed
(b) within the end of six months from the end of the month in which penalty
proceedings were initiated, whichever is later
To this effect CBDT came out with the circular (reproduced herein under)
wherein it was directed that provision of clause (c) of section 275(1) be made
applicable in penalty matters of section 271D & 271E, and had further
instructed to withdraw related appeals.
Takes
or accepts any loan or deposit-Business of civil construction-Adjustment of
loan towards sale of flat– Provision is held to be applicable–levy of penalty
under section 271D is held to be justified
Tribunal rejected the contention of the
assessee that cash was towards capital contribution of various projects was not
supported by any evidence. Tribunal held that provision is held to be
applicable in respect of adjustment of loan towards sale of flats
,accordingly the levy of penalty is held to be justified. (Related
Assessment years : 2012-13, 2014-15) – [Golla Narayana Rao v. ACIT (2019) 198 TTJ
407 : 176 DTR 201 : 174 ITD 67 (ITAT Visakha)]
Takes or accepts any loan or deposit –
Journal entries – Penalty under section 271D cannot be levied if the
transactions are bona fide,genuine and reasonable cause -No substantial
question of law Dismissing the appeal of the revenue the
Court held that for accepting or repaying the loan or deposit by passing
journal entries, penalty cannot be levied, if the transactions are bona
fide,genuine and have a reasonable cause.No substantial question of law.
(Related Assessment year : 2009-10) – [CIT
v. Lodha Properties Development (P) Ltd (2019) 412 ITR 316 : (2018) 304 CTR 811
: 165 DTR 227 (Bom), CIT v. Adinath Builders (P) Ltd (2019) 412 ITR 316 :
(2018) 304 CTR 811 : 165 DTR 227 (Bom), CIT v. Adinath Hi-Tech Builders (P) Ltd
(2018) (2019) 412 ITR 316 : 304 CTR 811 : 165 DTR 227 (Bom), CIT v.
Asthavinayak Real Estate (P) Ltd (2019) 412 ITR 316 : (2018) 304 CTR 811 : 165
DTR 227 (Bom), CIT v. Lodha Bulders (P) Ltd (2019) 412 ITR 316 : (2018) 304 CTR
811 : 165 DTR 227 (Bom), CIT v. Lodha Crown Buildmart (P) Ltd (2019) 412 ITR
316 : (2018) 304 CTR 811 : 165 DTR 227 (Bom)
KEY
NOTE :
v Lodha
Properties Development (P) Ltd v. ACIT (2014) 163 TTJ 778 : 106 DTR 226 (ITAT
Mumbai) is affirmed
v SLP
of revenue is dismissed CIT v. Adinath Builders (P) Ltd ( 2018) 409 ITR 14 (St)
: (2019) 261 Taxman 168 (SC)
Penalty
under section 271D for contravention of section 269 SS not leviable if assessee
provides reasonable cause
If there existed reasonable cause for the assessee accepting the loans
in cash, penalty levied by the Addle. CIT
under section 271D of the Act was deleted. - [Venkata Narayana Raju Pasuparthy v. Addl. CIT – Date of Judgement :
10.05.2019 (ITAT Hyderabad)]
It
was upheld the penalty levied under section 271D on account of violation of
provision of section 269SS for receipt of cash from unsecured creditor (being
promoter & director), holding that the assessee-company had failed to prove
with reasonable cause for such receipt. It was noted that (i) the assessee
company had failed to show reasonable cause that the emergency funds in form of
cash deposited by Dr. AMA (promoter & director) were for business
exingencies as the cash flow produced by assessee clearly negated such claim
and (ii) In the assessment order of one Mr. J which was made pursuant to search,
a finding was given that the unaccounted income of Mr. J had been routed
through Dr. AMA and deposited into the accounts of assessee which were
laundered and then withdrawn by Dr. AMA and returned to Mr.J and thus,
unaccounted income in respect of loan transaction were traced as unaccounted
income of J. Vasan. – [Healthcare (P) Ltd
v( Addl CIT (2018) 54 CCH 262 (ITAT Delhi)]
As per the
provisions of section 273B penalty under section 271D shall not be imposable on
the person or the assessee, as the case may be, for any failure referred to in
the said provisions, if he proves that there was a reasonable cause for the
said failure. Considering the totality of the facts of the case in the instant
case, we are of the opinion that when the assessee has let out the hotel
building on a daily basis, when the tenants had no bank account at Shrirampur
and the genuineness of the transaction has not been doubted, a fact not
controverted by the Revenue, therefore, there was a reasonable cause on the
part of the assessee for accepting such security deposit in cash. Under these
circumstances, we are of the considered opinion that it is not a fit case for
levy of penalty under section 271D of the Act. We accordingly set-aside the
order of the CIT(A) on this issue and the penalty is directed to be deleted. – [Sanjay
Ramchandra Phand v. Addl. CIT – Date of Judgement : 26.12.
2013 (ITAT Pune)]
Mode
Of receipt of loan and deposits-Not offering reasonable cause–levy of penalty
under section 271D is held to be justified
Dismissing the appeals the Court held that
the assessees did not bring on record their financial position, the details of
any time bound purchase orders that were required to be executed and did not
correlate the purchases made from the cash loans in question. The assessees had
all along relied on the oral assertions of urgent requirement of funds without
producing any material to establish such assertion. Order passed by the
Tribunal affirming the levy of penalty is held to be justified. (Related
Assessment year : 2008-09) – [Nitin Mohan
Wadikar v. ACIT (2019) 414 ITR 647 (Bom), Manisha Nitin Wadikar v .ACIT ( 2019)
414 ITR 647 (Bom.)]
Section 269SS not applicable to transactions
between relatives
The
learned counsel for the assessee, on the other hand, has contended that the
provisions of section 269SS are not strictly applicable to the transactions
between the relatives and the penalty imposed by the assessing officer under
section 271D and confirmed by the learned Commissioner(Appeals) is not
sustainable. In support of this contention, he has relied on the decision of
the Coordinate Bench of this Tribunal rendered in the case of Manisha
Prakash Amin v. JCIT vide its order dated 24.05.2011 passed
in ITA No. 1839/Kol/2010, wherein it was held that the transactions
between relatives involving receipt of loan in cash are not in the nature of
loans or deposits as envisaged in section 269SS of the Act and the penalty
imposed under section 271D was accordingly cancelled by the Tribunal. A similar
issue was again decided by the Tribunal in the case of Anant
Himatsingka v. Addl. CIT (ITA Nos. 331 & 332/Kol/2010) dated 25.11.2011) cited
by the ld. Counsel for the assessee, wherein it was held that the loan transaction between
son-in law and father-in-law for giving a support and help was not a loan or
deposit in stricter sense of section 269SS of the Act and the same having been
given only as a financial support, the relevant transaction did not
fall in the ambit of section 269SS of the Act. In our opinion, the ratio of
these decisions of the Coordinate Bench of this Tribunal is squarely applicable
in the present case, where the loans in question were received by the assessee
in cash from her daughter and son-in-law and applying the same, we hold that
the penalty imposed by the assessing officer under section 271D and confirmed
by the learned Commissioner(Appeals) is not sustainable. (Related Assessment Year : 2012-2013) – [Snehalata Sitani v. JCIT - Date
of Judgement : 24.04.2019 (ITAT
Kolkata)
Tax arrear-penalty levied
for contravention of Section 269SS and 269T is eligible to claim the benefit of
the Scheme
Single
Judge held that penalty levied for contravention of Section 269SS and 269T is
eligible to claim the benefit of the Scheme. On appeal by the revenue
dismissing the appeal the division bench held that when a specified sum was
provided as penalty, such specified sum was the minimum. penalty payable. This
did not, however, mean that the benefit of the Scheme could be claimed only by
those assessees who had been levied penalty under the provisions of the Act
providing for minimum. penalty and maximum penalty. Apart from the fact that
such a contention was not raised when the writ petitions were heard by the
single judge, on the merits also, such contention was rejected. According to
Section 271D a person who was liable to pay penalty thereunder was liable to
pay, by way of penalty, a sum equal to the amount of the loan or deposit or
specified sum so taken or accepted, in contravention of Section 269SS.
Similarly, under Section 271E also, the penalty provided was a sum equal to the
amount of loan or deposit or specified advance, if so repaid. The assessees
could not be denied the benefits of the Scheme. – [CIT v. Grihalakshmi Productions And Another (2018) 405 ITR 75 : 304
CTR 199 : 169 DTR 70 (Ker)]
No Penalty to be
levied under section 271D if there is reasonable cause
As per Section 273B of Income Tax Act no
penalty shall be levied if the failure to comply with the provisions of section
269SS is due to some reasonable cause.
It is not enough for the assessee to show
that the transaction of taking loan/ deposit by cash is genuine or bona fide.
It has also to be shown that there was reasonable cause under section 273B for
the assessee being unable to take the loan/deposit by account payee cheque or
account payee bank draft
There
is no dispute between the parties that bonafide nature of transactions alone
would not be sufficient to escape the clutches of section 271D of the Act. As
per the decision rendered by Hon’ble Supreme Court in the case of Kum. A.B.
Shanthi (supra), it is required to be established that there was some bonafide
reasons for the assessee for not taking or accepting loan or deposit by account
payee cheque or account payee bank draft, so that the provisions of section
273B of the Act will come to the help of the assessee. Only in such cases, the
Assessing Officer is precluded from levying penalty under section 271D of the
Act.
[Deepak Sales & Properties (P) Ltd v. ACIT - Date of
Judgement : 13.06.2018 (ITAT Mumbai)(Special Bench)13.06.2018
Transfer of money between family
members to help and support – Penalty not justified
To support
and help the family members assesssee was transferring money from one family
member to another family, in law, is not a loan or deposit in stricter sense of
section 269SS and 269T and it is only a financial support. Hence, imposition of
penalty under sections 271D and 271E on said transfer of money between family
members was not justified.--During the course of assessment proceedings, AO
observed that the assessee had accepted loan in cash on an unspecified date his
son, in contravention of sections 269SS had repaid loans in cash to various
family members in contravention of section 269T. Therefore, AO initiated
penalty proceedings under sections 271D and 271E.Held: Assessee had accepted
the loan in cash from his son and repaid the same to his son, his wife and his
another son. All these transactions were between husband and wife, and between
father and son, being close relative of one family. It was also noted that
assessee was a salaried employee and not a businessman. Therefore, based on the
facts narrated above, these transactions do not fall within the ambit of
sections 269SS and 269T as the said transaction between son and father and wife
and husband, for giving a support and help, in law, was not a loan or deposit
in stricter sense of section 269SS and it was only a financial support. Hence,
penalty imposed by the Assessing Officer was not justified. – (Related
assessment year 2010-11 - [Nikhil Banik Mazumder v. JCIT (2018) TaxPub(DT) 635
(ITAT Kolkata)]
Takes or accepts any loan
or deposit-Acceptance of Loan in cash in excess of specified limits-Deletion of
penalty under section 271D based on entries alone-Matter remanded to Tribunal
for fresh consideration
It
was held that the Tribunal in its findings had primarily relied on entries in the
books of account that the two cash payments were imprest, and therefore neither
loan nor deposit. It had not considered and noticed specific aspects referred
to in the order of penalty under section 271D and the observations and findings
of the Commissioner (Appeals) holding that the contention and claim of imprest
was a sham and facile. Accordingly the penalty order was set aside and the
matter was remanded to the Tribunal. (Related Assessment year : 1999-2000) – [CIT v. Pawan Kumar Jain. (2018) 407 ITR 405
(Del)]
It
was held that the assessee failed to show that there was any urgent business
necessity due to which the assessee was constrained to take loans by way of
cash. As the the assessee has failed to show that there was a reasonable cause
for getting loans in violation of the provisions of Section 269SS of the Act.
CIT(A) was justified in confirming the penalty of Rs. 2.00 lakhs imposed by the
Assessing Officer. (Related Assessment year 2008-09) – [Deepak Sales & Properties (P) Ltd. v. ACIT (2018) 194 TTJ 690 :
172 ITD 33 : 168 DTR 65 (ITAT Mumbai)]
Accepts any loan or deposit
– loan received from father – same could be treated as gift and not loan – levy
of penalty under section 271D unjustified.
It
has been held by the Appellate Tribunal that merely because loan taken by
assessee from his father for purchasing the assets was shown as debt in his
father’s balance sheet, same need not be treated as violation of the provision
of Section 269SS and attracting levy of penalty under section 271D of the Act.
(Related Assessment year : 2009-10) – [Gokavarapu
Venkata Satya Durga Prasad v. Addl. CIT (2018) 194 TTJ 14 (ITAT Vishakha)(UO)]
Section
269SS of the Act were not applicable on the loan transaction between husband
and wife
It
was held that provisions of Section 269SS of the Act were not applicable on the
loan transaction between husband and wife. It relied on the judgment in case of
Tuhinara Begum Hoogly v. JCIT wherein it was held that the provisions of
Section 269SS were not applicable on the loan transaction between husband and
wife because there was no debtor-creditor relationship. The transaction between
the husband and wife are protected from the legislation as long as they are not
for commercial use. Thus, the question of levying of penalty under section 271D
of the Act does not arise. – [Nabil Javed
v. ITO [TS-701-ITAT-2018(DEL)]
Takes
or accepts any loan or deposit-Genuineness of the transaction was not in doubt
- Levy of penalty under section 271D was not justified
Dismissing the appeal of the revenue, the
Court held that the transaction was found to be genuine. The Assessing Officer
had not doubted the transaction. In that view of the matter, both the
Commissioner (Appeals) and the Tribunal had rightly deleted the penalty. (Related
Assessment year : 1994-95) – [CIT v.
Panchsheel Owners Associations (2017) 395 ITR 380 (Guj)]
Takes
or accepts any loan or deposit-cash received from son for urgent necessary,
penalty under section 271D cannot be levied
Allowing the appeal the Court held that,
penalty is not automatic under section 271D of the Income-tax Act, 1961 on mere
violation of the provisions of section 269SS of the Act. The assessee explained
that the amount received from his son was neither a loan nor a deposit within
the meaning of section 269SS of the Act and it was received in cash in view of
urgent necessity. A proper explanation had been rendered by the assessee for
the transaction. Hence, the imposition of penalty under section 271D was not
valid. – [Dr. Rajaram L. Akhani v. ITO (2017) 395 ITR 497 (Guj)]
The
Court reversed the Tribunal’s order and held that assessee-firm was liable to
penalty under Section 271D for contravention of section 269SS as it had
accepted deposits, otherwise than by account payee cheque / draft. It held that
a plain reading of Section 271D establishes that it was a mandatory provision
and since its language is crystal clear, the object or the purpose of the
enactment of said provision had no say in the matter. In the absence of
‘reasonable cause’ proved by assessee under section 273B no immunity from
penalty was available to the Assessee. – [CIT
v. M/s Sunil Sugar Co. TS-353-HC-2017 (All)]
Penalty
under section 271D cannot be imposed in absence of payment in cash
Section 269SS does not include in its ambit
where there is a transaction of loan or deposit by way of entries in the books
of account by crediting or debiting the account of the other person. In other
words, the provisions of section 269SS of the Act, according
to us, are not attracted when there is an acknowledgement of debt by passing
entry in the books of account and there is no transfer of money in cash from
one person to another person by way of loan or deposit. (Related Assessment
year : 2001-02) – [CIT v. Apex Finlease
Ltd. & Ors. Date of Judgement :
17.10.2016 (All)]
Takes or accepts any loan
or deposit- Limitation – Assessing Officer has the power to initiate penalty
proceedings under section 271D of the Act and upon referral to the Additional Commissioner,
the penalty order would by barred by limitation as the date of issue of notice
would be the date when the Assessing Officer issued notice
Dismissing
the appeal of the revenue, the Court held that; Section 271D(2) of the Act
provides that the jurisdiction of imposing penalty is vested in the Joint
Commissioner. The High Court held that though section 271D of the Act vests the
jurisdiction of imposing penalty solely in the Joint Commissioner, it is silent
as regards to who could initiate the proceedings. Relying on the ruling of the
Supreme Court in the case of D. M. Manasvi v. CIT (1972) 86 ITR 557, the High
Court held that in a case falling under section 271D the Assessing Officer is
not precluded from initiating the proceedings by issuing a notice. The High
Court had distinguished the ruling of the Kerala High Court in the case of
Grihalakshmi Vision (2015) 379 ITR 100, wherein it was held that if the AO has
come across a case of violation of law attracting penal provisions and has
thereafter a notice, it would tantamount to be an act without jurisdiction.
Thus, the High Court held that the order is hit by limitation as the
proceedings were initiated on 26.12.2006 when the notice was issued by the
Assessment year and hence the period of limitation expired on 30.06.2007,
whereas the order imposing penalty was passed on 21.09.2007. Thus, the appeal
was dismissed. (Related Assessment year 2004-05) – [CIT v. Narayani & Sons (P) Ltd. (2016) 289 CTR 301 : 141 DTR 315 :
73 taxmann.com 21 (Cal)]
Takes or accepts any loan
or deposit-Loan was taken to meet sudden business exigency – Levy of penalty
under section 271D was held to be not justified
Allowing
the appeal of the assesse , the Tribunal held that ;since cash transactions
were due to business exigency warranting immediate discharge of certain
liability, these transactions would be genuine and there was reasonable cause
as envisaged in under section 273B,therefore, no penalty could be imposed.
(Related Assessment year : 2008-09) – [Chawla
Chemtech (P) Ltd. v. JCIT (2016) 158 ITD 48 (ITAT Chandigarh)]
It
was held that where the assessee received a sum of Rs. 2 lakh in cash from his
son in view of urgent necessity, no penalty under section 271D of the Act could
be levied by the Assessing Officer on account of violation of the provisions of
Section 269SS, since there was a reasonable cause for such failure and there
was no evidence on record to indicate that the assessee had indulged in any tax
planning or tax evasion and there was no evidence on record to show that the
infraction of the provisions was with knowledge or in defiance of the
provisions. – [Dr Rajaram Lakhani v. ITO
(2016) 96 CCH 43 (Guj)]
Where
assessee had sufficiently proved that share application money was taken in cash
from a director to meet urgent and immediate requirement of business and there
was a reasonable cause to take 'loan' or deposit otherwise than by account
payee cheque or account payee bank draft, penalty under section 271D could not have been levied. – [Valley Extraction (P) Ltd. v. JCIT (2016)
68 taxmann.com 202 (ITAT Chandigarh)]
Penalty proceedings for contravention of Sections 269SS &
269T are not related to the assessment proceeding but are independent of it.
Therefore, the completion of appellate proceedings arising out of the
assessment proceedings has no relevance. Consequently, the limitation
prescribed by section 275(1)(a) does not apply. The limitation period
prescribed in section 275(1)(c) applies to such penalty proceedings
In CIT v. Hissaria Bros 291 ITR 244 Raj, the Rajasthan High
Court held that penalty proceedings for default in not having transactions
through the bank as required under Sections 269SS and 269T are not related to
the assessment proceeding but are independent of it, therefore, the completion
of appellate proceedings arising out of the assessment proceedings or the other
proceedings during which the penalty proceedings under Sections 271D and 271E
may have been initiated has no relevance for sustaining or not sustaining the
penalty proceedings. It was held that clause (a) of sub-section (1) of Section
275 was not attracted to such proceedings. It was held that if that were not
so, clause (c) of Section 275(1) would be redundant because otherwise as a
matter of fact every penalty proceeding is usually initiated when during some
proceedings such default is noticed, though the final fact finding in this
proceeding may not have any bearing on the issues relating to establishing
default e.g. penalty for not deducting tax at source while making payment to
employees, or contractor, or for that matter not making payment through cheque
or demand draft where it is so required to be made. On appeal by the department
to the Supreme Court HELD dismissing the appeal:
On perusing the judgment of the
High Court, it is found that penalty imposed on the respondent herein was also
set aside on the ground that the provisions of Section 271-D and 271-E of the
Income Tax Act were invoked after six months of limitation and, therefore, such
penalty could not have been imposed. Since the outcome of the judgment of the
High Court can be sustained on this aspect alone, it is not even necessary to
go into other aspects. Leaving the other questions of law open, the appeal is
dismissed. There shall be no order as to costs. – [CIT v. Hissaria Brothers –– TS-471-SC-2016 – Date of Judgement :
22.08.2016 (SC)]
Loans and
deposits are to be taken different and distinct
“The two
expressions loans and deposits are to be taken different and the distinction can
be summed up by stating that in
the case of loan, the needy person approaches the lender for obtaining the loan
therefrom. The loan is clearly lent at the terms stated by the
lender. In the case of deposit,
however, the depositor goes to the depositee for investing his money primarily
with the intention of earning interest.” - [Housing & Urban Development
Corporation Ltd. v. JCIT (2006)
102 TTJ 936 (Del)(SB)]
Assessees were members of HUF of M. Subramaniam. The assessing
officer noticed that during the assessment year 2009-10 both the assessees who
were husband and wife had received and repaid cash loans exceeding Rs. 20,000
from/to M. Subramaniam (HUF) thereby contravening the provisions of sections
269SS and 269T of the Act. Thus, the assessing officer levied penalty under
sections 271D and 271E of the Act. The assessee contended before the assessing
officer that he has not received any loan or deposit but it was only an
accommodation transaction there was no revenue leakage or evasion of tax from
accepting and repaying the amounts from HUF, therefore pleaded that no penalty
to be levied. – [S. Vasundara Devi v.
JCIT (2015) 66 (II) ITCL 578 (ITAT Chennai)]
No Penalty is Imposable under
section 271D for Contravention of Section 269SS if Cash Loan Transaction is
Genuine
It was held
that where genuineness of the loan transaction in cash is not disputed and it
was deposited and routed through banking channels subsequently, penalty under
sections 271D for violation of section 269SS is not imposable in view of
section 273B. The court has categorically stated that the contention of the ITD
that since there was no urgency, the assessee could have taken the loan through
cheque and should have processed the matter through regular banking channels
was immaterial, inasmuch as the genuineness of the transaction has not been
disputed by the Assessing Officer. (Related Assessment year 2006-07) - [CIT-II, Agra (Appellant) v. Smt. Dimpal
Yadav (Respondent) - Date of Judgment: 21.08.2015 (All)]
Acceptance of loan or
deposit otherwise than by crossed cheque--Book adjustment of funds by assessee
to its sister concern – Not a loan or deposit - No identification of loanee or
depositor- Penalty under section 271D could not be imposed
Held,
allowing the appeal, that except making reference to the relevant provisions of
the Act and the allegation contained in the show-cause notices, the Assessing
Officer did not indicate the method of payment. It was simply mentioned that
everything was done in cash. The very fact that from the same agencies, amounts
were said to have been received and repaid, as reflected in the books,
disclosed that it was nothing but book adjustment. Making book adjustment of
the funds by a firm vis-a-vis its sister concern, could not be said to be
violation or contravention of section 269SS and section 269T. Levy of penalty
was deleted. (Related Assessment years : 1992-93, 1993-94) – [Gururaj Mini
Roller Flour Mills v. Addl. CIT (2015) 370 ITR 50 : 277 CTR 53 : 118 DTR 218 (T
& AP)]
Where
even though assessee had taken a loan in cash, since loan was routed through
bank account of assessee for payment to Government for converting land into
free hold property, no penalty could be imposed under section 271D. – [CIT v. Smt. Dimpal Yadav (2015) 61
taxmann.com 219 (Allahabad)]
If assessee's plea about compulsion to pay/ receive loans in cash is not
disputed, the violation of section 269SS/269T is deemed to be bonafide and does
not attract penalty. - [Chemfert
Traders (Bombay) Pvt. Ltd v. ACIT - Date
of Judgement : 18.02.2015 (ITAT Mumbai)
Cash transaction between assessee and
its HUF being genuine--No penalty under section 271D leviable
Assessee
accepted loan amount of more than Rs. 20,000 in cash from her father-in-law for
purchase of property and the High Court held that the Tribunal has rightly
found that transaction between the daughter-in-law and father-in-law is a
reasonable transaction and genuine one owing to urgent necessity and money to
be paid to the seller and this would amount to reasonable cause shown by the
assessee to avoid penalty under section 271D of the Act. (Related Assessment
year 2005-06)- [M. Yesodha (2013) 351 ITR
265 (Mad)]
Absence of adequate
banking facility amounts to reasonable cause
Existence of
inadequate banking facilities and reluctance of customers to utilize banking
facilities due to illiteracy and non-cooperation in bank constituted a
reasonable cause so as to delete penalty imposed by Assessing Officer under
section 271D. – [CIT v. Sahara India Financial Corpn. Ltd. (2012) 26 taxmann.com 269
(Delhi)
Where assessee could prove genuineness of accepting cash loan beyond
exempted limit and no involvement of unaccounted or black money was traceable,
penalty under section 271D could not be levied for violation of section 269SS.
– [DCIT v. Akhilesh Kumar Yadav (2012) 26 taxmann.com 264 (ITAT Agra)]
The
assessee in the present case has also raised the plea of reasonable cause, that
the person advancing the loan was agriculturist and had no bank account.
Accordingly, we delete the penalty levied under sections 271D and 271E of the
Act. (Related
Assessment Year : 2005-06) - [Baldev Singh v. Addl.
CIT - Date
of Judgement : 28.02.2012 (ITAT Chandigarh)
Capital contribution in cash of a partner in
the partnership firm does not attract provisions of Section 269SS even if the
amount is returned on non-approval of Government for constitution of
partnership firm. – [Bhikhabhai
Dhanjibhai Patel v. ACIT (2010) 127 TTJ 479 (ITAT Ahmedabad)]
Penalty can be
initiated even after completion of assessment proceedings
The penalty
proceedings under sections 271D and 271E could be initiated even after
completion of regular assessment proceedings. - [CIT v. Emeskay Financial
Services Ltd. (2010) 124 ITD 435 (ITAT Vishakhapatnam)]
Deposit assessed as income - No penality can
be imposed under section 271D in such case
It was held that
where the A.O having treated the impugned amount of deposit as income, he is
precluded from treating the same amount as deposit or loan for the purpose of
section 269SS and levy penalty under section 271D. The penalty ought to be
cancelled. – [Bajrang Textiles v. Additional CIT (2009) 122 (JD.) 190 [ITAT
Jodhpur]
No penalty under section 271D for
receipt of share application money in cash
The
Assessing officer initiated proceedings for alleged violation of section 269SS
of the Act in as much as the assessee accepted share application money being
Rs. 20,000/- in cash. Thereafter, penalty was imposed. On appeal, CIT(A) upheld
the stand of the assessee that the amount received was not loan or deposit and
no interest was payable. It was further held that transaction was bonafide and
default was of technical nature and in any case, the amount was received from
public and not from directors or share holders. High Court upheld the view of
CIT(A). – [CIT v. M/s Speedways Rubber (P) Limited - Date of Judgement : 22.10.2009 (P&H)]
Provisions of section 269SS were not applicable to amount advanced for
future supply of goods. – [CIT v. Kailash Chandra Deepak Kumar (2009)
317 ITR 351 (All)]
Amount paid by firm to partners or vice versa- is payment to
self and does not partake the character of loan or deposits in general law.
Provisions of section 269SS are not applicable to such facts. – [CIT v. Lokhpat Film Exchange
(Cinema) (2008) 304 ITR 172 (Raj)]
The Hon ble Madras High Court in the case of CIT v.
Lakshmi Trust Co. upheld the orders of Commissioner (Appeals) and the Tribunal
who found on facts that transactions were genuine and identity of the lender
was established, there was no intention on the part of the assessee to evade
tax, the cancellation of penalty under section 271D was justified. - [CIT v. Lakshmi Trust Co. (2008) 303 ITR 99
(Mad)]
Deposits
and loans in cash in excess of prescribed limit – Finding that
amounts were mere book entries and
transactions on behalf of family members ‐
No violation of sections 269SS and 269T – Penalty could not be
imposed. – [Natvarlal Purshottamdas
Parekh v. CIT (2008) 303 ITR 5 : 219 CTR 509 :
205 Taxation 237 : 4 DTR 37 (Guj)]
It is necessary to show the motive to evade tax in order to
justify the levy of penalty under section 271D and section 271E
Deposits in cash in excess of specified
limit – Effect of section 273B – Reasonable explanation for such deposits –
Penalty cannot be imposed ‐ Purchase of
goods – Balance due adjusted by book entries ‐ No
intention to evade tax – Penalty could not be imposed‐ Income
Tax Act, 1961. – [Bombay Conductors
and Electricals Ltd. v. CIT (2008) 301 ITR 328 : 205
Taxation 259
173 Taxman 434 (Guj)
Transactions
between sister concerns ‐ Tribunal
having deleted penalty under ss. 271D and 271E observing that
transactions between sister concerns are not covered by either
provisions of section 269SS or section 269T and that the default if
any was of venial nature, no interference is called for. [Shree
Ambica Flour Mills Corpn. v. CIT (2008) 6 DTR 169
(Guj)]
Penalty under
section 271D can not be levied on mere surmises or incomplete evidences
Penalties being strict in nature they cannot
be automatic. Unless the fact of breach of provision is proved beyond doubt and
the act or omission falls within four corners of the provision of law, penalty
should not be levied.
In
the absence of any definite material to establish that the assessee had
received loan/deposit in contravention of the provisions of section 269SS,
except for the photocopies of statement of loan submitted by the alleged
creditor which was contradicted by the assessee and which has been shown to be
incomplete and had been rejected by the CIT(A). Penalty under section 271D could
not be levied. (Related Assessment years :
1995-96, 1996-97) - [Navin Kumar v.
JCIT (2006) 99 TTJ 267 : 98 ITD 242 (TM)(ITAT Amritsar)]
Hon’ble Pune ITAT in the case of DCIT v. M/s. Sneh
Builders held that “The action of the Assessing Officer in imposing the penalty
under section 271D on the presumption that against the security of these
cheques of Rs. 95,50,000/- the assessee must have taken equivalent amount of
cash is not borne from the records. There is no concrete evidence to fact that
such amount was in fact received in cash by the assessee except the statement
of Shri B.H. Shah. General statement of third person cannot be valid basis for
taking action against the assessee. As the penalty has been imposed only on the
basis that against the security of cheques equivalent amount of cash might have
been taken cash loans is not justified. Under the facts and circumstances
penalty of Rs. 95,50,000/- was rightly deleted by the CIT(A). We uphold the
same.’ (para no. 7 of the order)” - (Related Assessment year : 2004-05) - [DCIT Central Circle v. M/s. Sneh Builders
[I.T.A. No. 520/PN/2008 : ITAT Pune)]
There
being no finding of Assessing Officer, CIT (A) or tribunal that the
transactions in violations of section 269SS were not genuine, assessee’s return
of having been accepted under section 143(3) after scrutiny, there being also
no finding that transactions were malafides aimed at disclosing concealed
money, imposition of penalty under 271D merely for technical mistake could not
be sustained. - [Omec Engineers v. CIT (2008) 217 CTR 144
(Jharkhand)]
Transactions between sister
concerns ‐ Tribunal
having deleted penalty
Tribunal
having deleted penalty under sections 271D and 271E observing that
transactions between sister concerns are not covered by either provisions
of section 269SS or section 269T and that the default if
any was of venial nature, no interference is called for. High Court
held:
"..... The
transaction of loan has found place in the books of account of the assessee as
well as the lender of the loan. None of the authorities have reached the
conclusion that the transaction of the loan was not genuine and it was a sham
transaction to cover up the unaccounted money. It appears to us that the
assessee felt need of money and thus he approached the money-lender for
advancement of the money, the transaction is reflected in the promissory notes
executed by the assessee in favour of the lender. When there is an immediate
need of money the person cannot get such money from the nationalised bank to
satisfy the immediate requirement. ....." - [Shree Ambica
Flour Mills Corpn. v. CIT v. (2008) 6 DTR 169(Guj)]
Where Depositors residing in rural areas are not
having access to banking facility and are ignorant of relevant provisions of
law, it would constitute bonafide reasons for payment in cash. – [ACIT v. Vinman Finance & Leasing Ltd.
(2008) 306 ITR 377 (ITAT Visakha)]
It was held that Assessee
was not aware of provisions of section 269SS or 269T. His councel did not
apprise him about the provisions. No penalty under section 271D shall be
attracted. - [ITO v. Prabhulal Sahu (2006) 99 TTJ 177 (ITAT Jodhpur)]
Loan given by relatives on Sunday for safe
custody and for use in business. No contravention of section 269SS takes place
No penalty can be levied where the loan had been
received by the assessee in a case exceeding the prescribed limit from the
family member on a Sunday, to be kept in safe custody and use in business. - [CIT v. T. R. Renagrajan (2005) 279 ITR 587
(Mad)]
When the credit entry made in books of account of
assessee are by way of transfer entry, there had been no deposit as per mode of
section 269SS. [CIT v. Lala Murari Lal and Sons (2004) 2 SOT 543 (ITAT Lucknow)]
A genuine transaction made in an emergency, does not attract penalty
under section 271D
It was held that cash paid to meet medical treatment expenditure in
emergency, does not attract penalty under section 271D. - [Mrs Rupali R. Desai v. ACIT (2005) 273 ITR 109 : (2004) 88 ITD 76 : 82 TTJ 190 {ITAT Mumbai), ITO v. Shree Mahaveer Industries (2004) 82 TTJ
549 (ITAT Jodhpur)]
It
is held that once it was found that payment made by promoter of
assessee-company to assessee was not by way of deposit or loan, but towards
adjustment of amount drawn by him from assessee’s account, no penalty to be
levied. The dispute is regarding payments made
to the assessee in instalments, by one Shri R. C. Khosla, in the relevant
assessment year, amounting to Rs. 2,31,390. Apparently, Shri Khosla was the
promoter and managing director of the respondent-company. According to the
assessing authority as also the Commissioner of Income-tax (Appeals), the said
payment was in contravention of Section 269SS of the Income-tax Act
and the assessee was, therefore, liable to pay penalty. The penalty so imposed
was, however, vacated in second appeal by the Tribunal on the finding that the
said payment was not by way of deposit or loan, but towards adjustments of the
amount drawn by Shri Khosla, from the company's account. We find ourselves in
full agreement with the Tribunal that the aforesaid finding is a finding of
fact, and, therefore, does not give rise to any question of law to be answered
by this court. - [CIT v. Indore
Plastics (P) Ltd. (2003)
262 ITR 163 (MP)]
Repayment or receipt of amount to partners
– cannot be called as loans or deposits
If a partner
introduces capital in cash in the firm or withdraws the same to the tune of Rs
20000 or in excess of Rs 20,000, then Provisions of section 269SS or 269T shall
not be attracted as the introduction of capital or withdrawl from firm cannot
be called as loans or deposits.
Acceptance or repayment through Journal entry donot
attract section 269SS or 269T: Acceptence or repayment through Journal Entry
would not come within the ambit of the words ‘loans or deposits’-section 269SS
applies only where money passes from one person to another by way of ‘loan or
deposit’- [CIT v. Noida Toll Bridge Co.
Ltd. (2003) 262 ITR 260 (Del)]
In case the assessee had accepted deposit or taken
loan from agriculturalist who had no bank account default was mainly technical
in nature and penalty was not attracted - [ITO
v. Tarlochan Singh (2003) 128 Taxman 20 (Mag)]
It was held that the
penalty under section 271D was not leviable for the reason that transaction of
loan finds place in the books of accounts of the assessee.- [Bhagwati
Prasad Bajoriya (2003) 183 CTR 484 (Gau)]
It was
held that the introduction of section 269 SS and 269 T in the statute was to
prevent proliferation of black/unaccounted money deposited with banks and other
persons by introducing the system of repayment through A/c payee cheques and
drafts and thus to ensure that the identity of payee is established. When the identity is known and genuineness of loan transaction was
not in doubt, if any could be set to be a technical default for which no
penalty would be leviable. – [Addl. CIT v. Smt. Prahati Baruah (2003) 113 Taxman
74 (Gau)(Mag)]
Ignorance
of law is no excuse for violation of provisions of sections 269SS and 269TT
[Udaichand Santoshkumar Jain v ITO (2003) 79 TTJ 88 (ITAT Indore)]
Where the
transaction of loan has found place in the books of account of the assessee as
well as the lender of the loan – Penalty not justified
The
Supreme Court considered the provision of Section 271D and 273B of
the Act and held:--
"It is
important to note that another provision, namely section 273B was
also incorporated which provides that notwithstanding anything contained in the
provisions of section 271D, no penalty shall be imposable on the person or
the assessee, as the case may be, for any failure referred to in the said
provision is he proves that there was reasonable cause for such failure and if
the assessee proves that there was reasonable cause for failure to take a loan
otherwise than by account-payee cheque or account-payee demand draft, then the
penalty may not be levied. Therefore, undue hardship is very much mitigated by
the inclusion of section 273B in the Act. If there was a genuine and
bona fide transaction and if for any reason the taxpayer.. [Chamundi Granites
(P) Ltd. v. CIT (2002) 255 ITR 258 (SC)]
Takes or accepts any loan
or deposit-Representative of the assessee consented to the proposition that
apart from the bona fides of the transaction, assessee is also required to
prove the existence of reasonable cause to come within the immunity provided in
S. 273B of the Act, Accordingly the Tribunal has not dealt with the
reservations expressed by the Division Bench in the reference note. Accordingly
on facts the assessee has failed to show that there was a reasonable cause for getting
loans in violation of the provisions of Section 269SS of the Act. Levy of
penalty under section 271D is held to be justified
It
was held that since the Learned representative for the assessee consented to
the proposition that apart from the bona fides of the transaction, assessee is
also required to prove the existence of reasonable cause to come within the
immunity provided in Section 273B of the Act, there was no reason to dwell upon
any further on the reservations expressed by the Division Bench . – [ADIT (Inv) v. Kum. A.B. Shanthi (2002) 255
ITR 258 (SC)]
It was
held that when the genuineness of the borrowings were not doubted by Assessing
Officer and Assessing Officer was satisfied with the assessee’s explanation
regarding the nature & source of the amount, the transactions of deposits
does not fall within the mischief of section 269SS. – [Karnataka
Ginning And pressing factory v. JCIT (2001) 77 ITD 478 (ITAT Mumbai)]
Where
the assessee obtains certain loans from his wife in case for construction of
house which was naturally a joint venture for prosperity of family and the
transaction did not involve any interest limit and there was no promise to
return amount with or w/o interest , it could be said that there was reasonable
causes for non complying with section 269SS.- [Dr. B.G. Panda v. CIT (2000) 111 Taxman 86 (Cal)]
Cash Transaction made on Sunday. No penalty could
be imposed in such a case.- [ITO v.
Narsing Ram Ashok Kumar (1993) 47 ITD 38 (Pat)]
Penalty
is not leviable on loan taken in cash by partners from firm
It was held that partnership is only a
collective of separate persons and not a legal person in itself. Thus, there
cannot be a contract of service in strict law between a firm and one of its
partners. – [CIT v. R.M. Chidambaram
Pillai (1977) 106 ITR 292 (SC)]
It was
held that, an order imposing penalty for
failure to carry out a statutory obligation is the result of a quasi-criminal
proceedings, and penalty will not ordinarily be imposed unless the party
obliged either acted deliberately in defiance of law or was guilty of conduct
contumacious or dishonest, or acted in conscious disregard of it is obligation. The
penalty will not also be imposed merely because of it is lawful to do so.
Whether penalty should be imposed for failure to perform a statutory obligation
is a matter of discretion of authority to be exercised judicially and on a
consideration of all relevant circumstances. Even if a minimum penalty is
prescribed the authority competent to impose penalty will be justified in
refusing to impose penalty, when there is a technical or venial breach of the
provisions of the Act or when there is breach flows from the bona fide belief
that the offender is not liable to act in the manner prescribed by the statute.
– [Hindustan
Steel Ltd v. State of Orisa (1972) 83 ITR 26 (SC)]
