Penalty cannot be levied u/s 271D for receiving cash from borrower by a lender in violation of section 269SS
SUMMARY OF THE CASE LAWS
Section 269SS and 271D are not applicable where the assessee received back the money in cash and not advanced money or accepted the loan in cash.
CASE LAWS DETAILSI
DECIDED BY: ITAT, HYDERABAD BENCH `B’, HYDERABAD, IN THE CASE OF: DCIT Ankush Rao Ingle, APPEAL NO: ITA Nos. 8 to 10/ Hyd/2010, DECIDED ON March 19, 2010
5. We have heard and perused the material available on records.
Section 269SS was inserted by the Finance Act, 1984, w.e.f April 1, 1984 which lays down the mode of taking and accepting certain loans and deposits. Section 269SS reads as under:
“269SS Mode of taking or accepting certain loans and deposits:
No per shall after the 30th day of June, 1984 take or accept from any other person (hereinafter in this section referred to as the depositor), any loan or deposit otherwise than by an account payee cheque or a/c payee bank draft if:
a) The amount of such loan or deposit or the aggregate amount of such loan and deposits; 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)
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 ruppes 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:
b) Any banking company, post office savings bank or cooperative bank
c) Any corporation established by a Central, state or provincial act
d) Any Govt. Company as defined in section 617 of the Companies Act 1956 (1 of 1956)
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 office gazettee.
Provided further that the provisions of this section shall not apply to any loan or deposit where the person from whom the loan or deposit 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 referee to in section 51 of that Act.
ii) ‘Cooperative bank’ shall have the meaning assigned to In it Part V of the Banking Regulation Act, 1949 (10 of 1949)
iii) `Loan or deposit’ means loan or deposit of money’.
From the above reading of the aforesaid provision, It is manifestly clearly that after the Insertion of the aforesaid said; no person should take or accept from any other person from any loan or deposit otherwise than by an account payee cheque or account payee bank draft If the amount is Rs.20,000 c-r more.
Section 291D lays down the provisions of imposition of penalty for failure to comply with the provisions of sec.269SS.
Section 291D reads as under:
271D: Penalty for failure to comply with the previsions of section 269SS (1)
1. If a person takes or accepts any loan or deposits in contravention of the provisions of sec.269SS he shall be liable to pay by way of penalty, a sum equal to the amount of the loan or deposit so taken or accepted,
2. Any penalty imposable under sub section (1) shall be imposed by the Joint Commissioner” ,
Section 269T reads as follows:
Mode of repayment of certain loans or deposits;
No Branch of a banking company or a cooperative bank and no other company of cooperative society and no firm or other person shall repay any loan or deposit made with It otherwise than by an account payee cheque or account payee bank draft in the name of the person who has made the loan or deposit if:
a) the amount of the loan or deposit together with the Interest, If any payable thereon or
b) the aggregate amount of the loans or deposits held by such person with the branch of the banking company or cooperative bank or as the case may be the other company or cooperative society or the firm, or other person either In his own name or jointly with any other person on the date of such repayment together with the Interest If any payable on such loans or posits
c) is twenty thousand rupees or more
Provided that where the repayment is by a branch ef a banking company or cooperative bank such repayment may also be made by crediting the amount of such loan or deposit to the savings bank account or the current account If any with such branch of the person to whom such loan or deposit has to be repaid.
Provided further that nothing contained in this section shall apply to repayment of any loan or deposit taken or accepted from:
II) any banking company, post office savings bank or cooperative bank
iii) any government company as defined in sec.617 of the companies Act 1956 (1 of 1956)
iv) any corporate established by a central state or provincial Act.
v) Such other institution, association or body or class of institutions associations or bodies which the central govt, may for reasons to be recorded in writing notify In the behalf In the official gazette.
Explanation – For the purpose of this section:
I) banking company shall have the meaning assigned to It in clause (I) of the Explanation to section 269SS
ii) ‘Cooperative bank’ shall have the meaning assigned to it in Part V of the Banking Regulation Act/1949 (10 of 1949)
iii) Moan or deposit’ means apply loan or deposit of money which is repayable after notice or repayable after a period and, in the case of a person other than a company, includes loan or deposit of any nature.
Thus, Sec.269T provides that no company (including banking company) cooperative society or partnership firm shall repay to any person, any deposit made by him with such entity otherwise than by cheque or an a/c payee bank draft in case where the amount of the deposit, or the aggregate amount and the interest thereon equals or exceeds the stipulated amount. In case of repayment by a bank , the repayment may be made by crediting the amount to the account, of the concerned creditor, if any, with such bank vide the first proviso Sec.269T (1) of the IT Act. The section would apply in relation to the repayment of any deposit made before 19th Sept. 1991. further, provides that no branch of a banu. and no other company, cooperative society, or a firm shall repay any deposit otherwise than through an a/c payee cheque or a/c payee bank draft, if amount of deposit or aggregate of deposit and interest thereon equals or exceeds the stipulated amount. W.e.f. 1.4.1989, the Direct Tax Laws (Amendment) Act, 1987 made provision 269T applicable tp all other persons such as individuals, HUFs, and AOPs. The word ‘deposit’ also amended so that in case of all persons other than companies ‘deposit, for the purpose of sec.269T means deposit of any nature. In view of the extended definition in case of persons other than companies, deposits for the purpose of S.269T include deposit payable on demands also.
Section 271E of the Act reads as follows:
If a person repays any (loan or; deposit referred to In section -269T-’ otherwise than in accordance with the provisions of that section, he shall be liable to pay, by way of penalty, a sum equal to the amount of the (loan or) deposit so repaid.
Any penalty imposable under subjection (1) shall be imposed by the Joint Commissioner.
Section 273B which was inserted by the Taxation Laws (Amendments and Miscellaneous Provisions) Act/ 1986, however provides that no penalty shall be imposed if the assessee proves that there was reasonable cause for the said failure.
Section 273B reads as under:
Sec. 273B Penalty not be imposed in certain cases:
Not withstanding anything contained In the provisions of clause (b) of sub section (1) of sec.271, seci23^A, sec.271.AA, sec.271B, sec.271.BS, sec.271BB, sec.271C, sec.271CA, Sec.271D, sec.271E, sec.27F, sec.271FA, sec.271FB, sec.271G, clause (c ) or clause (d) of sub section (1) or sub section (2) of sec.272A, sub sec.(l) of sec.272AA, or sec,272B, or sub section (1) or sub section (1A) of sec.272BB or sub section (b) or clause ( c) or sub section (2) of sec.273 no penalty shall 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 reasonable cause for the said failure.
6. In our opinion, the Section 269SS and 271D are not applicable to the fact of the case since the assessee in this case received back the money in cash and not advanced money or accepted the loan in cash. The penalty In this case cannot be levied u/s 271D of the Act. for receiving the cash from the borrower, by the assessee.
7. In view of this, in our opinion, CIT (A) is justified in deleting the penalty levied u/s 271D.