Section 271E Penalty for contravening provisions of section 269T

The person who breaches the provisions of section 269T of the Income Tax Act is liable to pay the penalty under section 271E of the Income Tax Act.

The basic understanding of section 269T states that the person cannot repay any loans / deposits / specified advances in cash if the amount of payment is INR 20,000 or more. While repaying such loans / deposits / specified advances, if the person doesn’t satisfy the restriction imposed under section 269T, then such a person would be liable to pay the penalty under section 271E.

The present article meticulously explains the provisions of section 271E of the Income Tax Act. It also covers the explanation of connecting provisions of section 269T along with the amount of penalty payable under section 271E.

Explanation of Provisions of section 271E of the Income Tax Act 

Provisions of section 271E states as under –

• The penalty provisions are applicable only in case the person repays loans / deposit / specified advances referred to in section 269T.
• The penalty under section 271E gets attracted when the person repays the above referred amount in the manner other than the mode specified under section 269T.
• The penalty under section 271E can be levied only by the Joint Commissioner.
• In case of default, the defaulter would be liable to pay the penalty equal to the loans / deposits / specified advances so repaid.

Explanation of Provisions of section 269T of the Income Tax Act

The provisions of section 269T restrict the person from repaying the loans / deposits / specified advances in the following cases –

• The amount of loans / deposit / specified advances, along with interest, is INR 20,000 or more.
• The total amount of loans / deposits, along with interest, held by the person in his own name or jointly with any other person is INR 20,000 or more.
• The total amount of specified advances received by the person in his own name or jointly with any other person is INR 20,000 or more.

In case the transaction is covered within any of the above mentioned situations, then, the repayment of the loans / deposits / specified advances is to be done in any of the following mode –

• An account payee cheque; or
• An account payee draft (drawn in the name of the person who has made the loans / deposits / paid the specified advances); or
• By means of electronic clearing system through a bank account; or
• By means of such other prescribed electronic mode.

Exceptions to the Provisions of section 269T of the Income Tax Act

The above restriction imposed under provisions of section 269T is not applicable in case of repayment of loans / deposits / specified advances taken or accepted from any of the following categories of person –

• The Government; or
• Any banking company or post office savings or co-operative bank; or
• Any corporation; or
• Any Government Company; or
• Notified institutions; association / body / class of institutions; associations / bodies.

Penalty under section 271E of the Income Tax Act, 1961

The penalty under section 271E is payable in case the person contravenes provisions of section 269T of the Income Tax Act. In such a case, the defaulter is liable to pay the penalty amounting to the sum equal to the loans / deposits / specified advances so repaid.

It is important to mention here that in case the defaulter proves the reasonable cause for the failure so committed, then, as per provisions of section 273B, no penalty can be imposed under section 271E.

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