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them have any taxable income.
(f) where the depositor and the acc eptor are both having agric ultural inc ome and neither of
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Section 271D of Inc ome Tax Ac t 1961 provides that if a loan or deposit is acc epted in contravention of the provisions of sec tion 269SS then a penalty equivalent to the amount of suc h loan or deposit may be levied by the Joint c ommissioner. Section 269T : Sec tion 269T of Inc ome Tax Act provides that any branch of a banking company or a cooperative soc iety, firm or other person shall not repay any loan or deposit otherwise than by an ac c ount payee cheque or ac c ount payee bank draft drawn in the name of the person, who has made the loan or deposit, if s . (1) The amount of the loan or deposit together with interest is R20000 or more, or (2) The aggregate amount of loans or deposits held by suc h person, either in his own name s . or jointly with other person on the date of such repayment together with interest, is R 20000 or more. . s For example if X is having loan of R30000 outstanding to Y. Then X cannot repay suc h loan in cash to Y. Exemptions from Section 269T: The Following persons are exempted from the purview of sec tion 269T: a) Government ; (b) any banking company, post offic e savings bank or co-operative bank ; (c ) any c orporation established by a Central, State or Provinc ial Act ; (d) any Government c ompany as defined in sec tion 617 of the Companies Act, 1956 (e) other notified insititutions Consequenses of contravention of section 269T: Section 271E of Inc ome Tax Act 1961 provides that if a loan or deposit is repaid in contravention of the provisions of sec tion 269T then a penalty equivalent to the amount of suc h loan or deposit repaid may be levied by the Joint commissioner. No Penalty to be levied u/s 271D or 271E if there is reasonable cause : As per Sec tion 273B of Inc ome Tax Ac t no penalty shall be levied if the failure to c omply with the provisions of sec tion 269SS or 269T is due to some reasonable cause. Now the question arises what can be a reasonable c ause to justify the violation of the provisions of sec tion 269SS and 269T. Some of the reasonable c auses based upon judicial dec isions are provided as follows: Repayment or receipt of amount to partners: If a partner introduc es capital in c ash in . s s . the firm or withdraws the same to the tune of R20000 or in exc ess of R20000, then Provisions of sec tion 269SS or 269T shall not be attracted as the introduction of c apital or withdrawl from firm c annot be called as loans or deposits. Amount paid by firm to partners or vic e versa- is payment to self and doesnot partake the charac ter of loan or deposits in general law. Provisions of sec tion 269SS are not applic able to suc h fac ts( CIT v. Lokhpat Film Exchange (Cinema) [2008] 304 ITR 172 (Raj.) Deposit assessed as income, No penality can be imposed u/s 271D in such case: It was held by Jodhpur tribunal in Bajrang Textiles v. Additional CIT [2009] 122 (JD.) 190 that where the A.O having treated the impugned amount of deposit as inc ome, he is precluded from treating the same amount as deposit or loan for the purpose of sec tion 269SS and levy penalty u/s 271D. The penalty ought to be c anc elled. Acceptance or repayment through Journal entry donot attract section 269SS or 269T: Ac ceptenc e or repayment through Journal Entry would not c ome 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. 262 ITR 260 (Del.)] A genuine transaction made in an emergency, doesnot attract penalty u/s 271D: held in Mrs Rupali R. Desai v. ACIT 88 ITD 76 (Mum.). In ITO v. Shree Mahaveer Industries 82 TTJ 549 (Jd.) it was held that cash paid to meet medical treatment expenditure in emergenc y, does not attract penalty u/s 271D. In ITO v. Prabhulal Sahu [2006] 99 TTJ (Jd.) 177 it was held that Assessee was not aware of provisions of sec tion 269SS or 269T. His counc el did not apprise him about the provisions. No penalty u/s 271D shall be attrac ted.
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Where Depositors residing in rural areas are not having ac c ess to banking fac ility 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 (AT) 377 (Visakha.)
Loan given by relatives on Sunday for safe custody and for use in business. No contravention of section 269SS takes place- ITO v. T.R. Rangarajan [2005] 279 ITR 587 (Mad.) Cash Transaction made on Sunday. No penalty c ould be imposed in suc h a c ase.- ITO v. Narsing Ram Ashok Kumar[1993] 47 ITD 38(Pat) . Transfer of money exceeding Rs20000 by way of bank voucher instead of a/c payee cheque or draft doesnot attract penalty u/s 271D as the transaction are through banking channels only held in Asst. CIT v. Jag Vijay Auto Finance (p) Ltd.[2000] 68 TTJ (Jp) 44 Loan in cash under compelling circumstances have been held to be reasonable c ause: Industrial Enterprises v. DCIT [2000] 68 TTJ (Hyd) 373 Where the Lenders did not have any bank account whic h c ompelled the assessee to ac c ept the loan in c ash. This has been c onsidered as reasonable cause in Balaji Traders v. DCIT [2001] 73 TTJ (Pune) 246
Although the provisions of sec tion 269SS and 269T have been enacted with a view to s . prevent the inc rease in black money and to stop the tax evasion. Still the amount of R20000 is very small in the present sc enario considering the rate of inflation resulting in dec rease in value of money and the rise in pric es of various goods, whic h in turn also has enhanced the working c apital needs of every businessman.Therefore the limits u/s 269SS and 269T also need to be raised similar to the increase in the audit limit u/s 44AB whic h has been done to benefit the small assessees in the current budget by the Finance minister. Author: Amit Bajaj Advocate Email: amitbajajadvocate@hotmail.com M +919815243335
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