With a view to counteracting evasion of tax, section 269SS provides modes of taking / accepting certain types of loan / deposit / specified sum. In case the person fails to comply with the said provisions of section 269SS, then he would be liable to pay the penalty as prescribed under section 271D of the Income Tax Act, 1961.

The present article covers the applicability of provisions of section 271D; authority imposing the penalty under section 271D; reasonable cause for the failure; and the amount of penalty payable under section 271D.

Applicability of provisions of section 271D of Income Tax Act

The penalty provision of section 271D applies in case the person contravenes provisions of section 269SS of the Income Tax Act.

Henceforth for understanding the penalty leviable under section 271D, it is important to understand the provisions of section 269SS, which are explained here under –

  • Under specified circumstances, section 269SS restricts the person from taking or accepting loan; deposit or any specified sum from any other person other than the following mode –
    • An account payee cheque; or
    • An account payee bank draft; or
    • Electronic clearing system through a bank account; or
    • Any other electronic mode, as specified.
  • The specified circumstances, as per provisions of section 269SS are summarized hereunder –
    • The amount of loan / deposit / specified sum is INR 20,000 or more.
    • The sum total of loan / deposit / specified sum is INR 20,000 or more.
    • In case the person has already taken a loan / deposit / specified sum from the depositor, and the amount of loan / deposit / specified sum is not paid back, and the unpaid amount is INR 20,000 or more.
  • Provisions of section 269SS shall not apply when loan / deposit / specified sum is taken or accepted from, or loan / deposit / specified sum is taken or accepted by any of the following entities –
    • The Government; or
    • Any banking company or a post office savings bank or a co-operative bank; or
    • Any corporation established by Central or State or a Provincial Act; or
    • Any Government Company; or
    • Any institution; association / body / class of institutions; association or bodies as notified in the official Gazette.
    • Both giver and taker are having only an agricultural income (both should not have any income chargeable to tax).

Authority imposing penalty under section 271D

As per section 271D (2), the penalty for contravening the provisions of section 269SS can be imposed only by the Joint Commissioner. In nut-shell, no other authority, other than Joint Commissioner, can impose a penalty under section 271D.

penalty

Reasonable cause for failure for penalty under section 271D

The penalty under section 271D is leviable in case the person contravenes provisions of section 269SS. However, in case of failure, if the person proves the reasonable cause for the said failure, then in such case, no penalty can be imposed (as per provisions of section 273B of the Income Tax Act).

Based on the judicial rulings, some of the reasonable cause are listed hereunder –

  • The amount paid by the partners to the firm or by the firm to the partners.
  • When the deposit amount is already accessed as income.
  • Genuine transactions made at the time of emergency.

Amount of penalty leviable under section 271D

In case the person fails to comply with the provisions of section 269SS, then, the defaulter would be liable to pay an amount equal to the amount of loan / deposit / specified sum so taken / accepted.

Read Also:-

S. No. Title
1 Section 272BB Penalty for failure to comply section 203A provisions
2 Section 272B Penalty for failure to comply with provisions of PAN
3 Section 272AA Penalty for failure in complying with provisions of section 133B
4 Section 272A Penalty for failure to answer questions or furnish information / returns/ statements or allow inspections etc
5 Section 271J Penalty on professionals for furnishing incorrect information in reports / certificates
6 Section 271I Penalty for failure in furnishing Form 15CA & Form 15CB
7 Section 271H Penalty for late filing/non-filing of TDS or TCS return
8 Penalty for failure in furnishing report or furnishing inaccurate report under section 286 – Section 271GB
9 Section 271GA Penalty for failure in furnishing the information / document in Form 49D as required under section 285A
10 Section 271G Penalty for failure to furnish information / document as per provisions of section 92D
11 Section 271FB Penalty for default in furnishing return of fringe benefits
12 Section 271FAB Penalty for failure to furnish statement / information / document by an eligible investment fund
13 Penalty for providing inaccurate statement of financial transaction or reportable account- Section 271FAA
14 Section 271FA Penalty for failure in furnishing statement of financial transactions or reportable account
15 Section 271E Penalty for contravening provisions of section 269T
16 Section 271DB | Penalty for contravening provisions of section 269SU
17 Section 271DA Penalty for contravening provisions of section 269ST
18 Section 271CA Penalty for failure to collect tax at source (TCS)
19 Section 271D Penalty for contravening provisions of section 269SS
20 Section 271C Penalty for failure / non-deduction / non-payment of TDS
21 TDS Rate Chart for AY 2020-21 and AY 2021-22
22 Section 271BA Penalty for failure to furnish section 92E report
23 Section 271B Penalty for failure to get accounts audited
24 Section 271AAC Penalty in respect of certain specified income
25 Section 271AA Penalty for failure to maintain Transfer Pricing documents
26 Section 271A Penalty for failure to keep / maintain or retain books of accounts, documents
27 Section 270A(1) Penalty for under-reporting & misreporting of income
28 Section 269SU Acceptance of payment through electronic modes
29 Section 234F Late fees for default in filing of income tax return
30 Section 234E Late Fee for default in filing of TDS / TCS returns
31 Section 158BFA(2) – Penalty on undisclosed income for block period
32 Section 140A(3) Penalty for non-payment of self-assessment tax

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