The Income Tax Act,1962 has been drafted in a way so as to ensure that any activity undertaken with the intent to evade tax is curbed or unveiled, and consequently becomes subject to tax or penalty.
The provisions of Section 269SS are meant to serve the aforementioned purpose since it imposes restriction on accepting any loan or deposit exceeding the limit prescribed therein by any channel other than those prescribed. The section reads as –
“No person shall take or accept from any other person (herein 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 electronic clearing system through a bank account or through such other electronic mode as may be prescribed, if,-
(a) the amount of such loan or deposit or specified sum or the aggregate amount of such loan, deposit and specified sum; or
(b) on the date of taking or accepting such loan or deposit or specified sum, any loan or deposit or specified sum 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.“
In case the aforementioned Section is contravened penalty is attracted under Section 271D. However, the onus of proving that the provisions contained in Section 269SS have been violated rests with the A.O. The Assessing officer is liable to prove that the amount of loan or deposit was accepted by other than the means prescribed. Only then the penalty can be imposed.
In the Case of SHRI MOHAN LAL VERSUS J.C.I.T., RANGE-4, JAIPUR, the AO imposed the penalty u/s 271D merely on the basis of the order of magistrate under the Negotiable Instruments Act as per which the Magistrate had held the assessee to be guilty for dishonouring of cheque. In the given case a person had fraudulently made use of blank signed cheques of the assessee subsequent to refusal by the latter to grant loan, got it dishonoured and filed a complaint under Section 138 of the Negotiable Instruments Act.
Since the order of the Magistrate went against the assessee, the AO accordingly drew the conclusion that loan had been taken by the assessee in cash and at the time of repayment thereof the cheque got dishonoured. Accordingly, penalty was levied under Sectio 271D.
However, ITAT Jaipur has held that the responsibility is that of the A.O. to ascertain the violation of the provisions of Section 269SS. In the absence of the same, any penalty levied is invalid and arbitrary. Simply relying on the order of magistrate without conducting any independent enquiry in respect of whether any loan was taken in cash, thereby exceeding the prescribed limit is improper. Thus, the penalty was deleted
