Mode of taking or accepting certain loans, deposits and specified sum - Section 269SS & 271D - Income Tax - Ready Reckoner - Income Tax

Mode of taking or accepting certain loans, deposits and specified sum - Section 269SS 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, if - (a) the amount of such loan or deposit or specified sum or the aggregate amount of such loan, deposit and specified sum is Rs. 20,000 or more, (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 is Rs. 20,000 or more (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 Rs. 20,000 or more Exception the provisions of this section shall not apply to any loan or deposit or specified sum taken or accepted from, or any loan or deposit or specified sum taken or accepted by - Government Any banking company, post office saving bank or cooperative bank. Any corporation established by a Central, State or Provincial Act. Any Government company as defined in clause (45) of section 2 of the Companies Act, 2013 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 Official Gazette Note:- This section shall not apply where borrower and lender are having only agricultural income and neither of them has any income chargeable to tax under this Act. w.e.f. 01.04.2023 In the following case Limit of loans or deposit to be 2,00,000/- instead of 20,000/- where - (a) such deposit is paid by a primary agricultural credit society or a primary co-operative agricultural and rural development bank to its member; or (b) such loan is repaid to a primary agricultural credit society or a primary co-operative agricultural and rural development bank by its member. Meaning of co-operative bank , primary agricultural credit society and primary co-operative agricultural and rural development bank shall have the meanings respectively assigned to them in Explanation to section 80P(4) . Penalty for Failure to comply with the provisions of section 269SS:- Applicability - If a person takes any loan or deposit in contravention of this section, he shall be liable to pay, by way of penalty under section 271D , a sum equal to the amount of loan or deposit or specified sum so taken or accepted unless he can prove that there was reasonable cause for doing so. Quantum of Penalty - a sum equal to the amount of the loan or deposit or specified sum so taken or accepted. Authority to impose the penalty - From 01.04.2025 - any penalty under section 271D(1), on or after the 1st day of April, 2025, shall be imposed by the Assessing Officer. [Inserted vide Section 84 of the Finance Act, 2025 ] Upto 31.03.2025 - Any penalty imposable under section 271D(1) shall be imposed by the Joint Commissioner. Safeguard against section 271D - of the Section 273B provides that no penalty shall be imposable u/s 271D if the person proves that there was reasonable cause for the failure. This provision acts as a safeguard against automatic penalization in genuine cases, and its interpretation has been the subject of significant judicial scrutiny. Notes:- 269SS is not attracted where receipt was neither a deposit nor a loan, but merely an adjustment of amount which he owd to the company, the receipt did not fall within the meaning of loan or deposit u/s 269SS of the Act. [CIT v Indore Plastics Pvt. Ltd. 2002 (7) TMI 19 - Madhya Pradesh High Court ] Making book adjustment of of funds by the assessee firm with sister concern without making payment of cash, could not said to be violation of contravention of section 269SS and 269ST. [ Gururaj Mini Roller Flour v Addl CIT 2015 (2) TMI 362 - Andhra Pradesh High Court ]