My promoter paid a third party for me by account payee cheque and the amount was put through my books by journal entry. Is that a loan taken in cash?
No. The Delhi High Court declined to entertain the Revenue's appeal and upheld the deletion of penalty of Rs 4.85 crore under section 271D. The Tribunal had found that the transaction was by account payee cheque, that no payment was made in cash by the assessee or on its behalf, that no loan was accepted in cash, and that the amount paid on the assessee's behalf by its promoter was passed through the books by a journal entry crediting the promoter's account. Those are findings of fact, and on them section 269SS was not attracted. The order gave rise to no question of law, much less a substantial question of law.
Decided by the High Court (Delhi High Court - D.K. Jain and Madan B. Lokur, JJ) on 2003-01-28, reported as [2003] 262 ITR 260 (Delhi); (2003) 184 CTR (Del) 266. It bears on section 269SS, section 271D of the Income Tax Act 1961, in Cash Transaction Limits and Penalty matters.
This is the short and much-cited authority that section 269SS bites on cash and not on book entries. Where the money moves by account payee cheque - even a cheque drawn by somebody else in favour of a third party - and the liability is recorded in the assessee's books by journal entry, there is no acceptance of a loan or deposit otherwise than by account payee cheque and nothing for section 271D to penalise. The second point is procedural and just as useful: whether cash passed is a question of fact, so a Tribunal finding to that effect ends the matter on further appeal absent perversity. The same reasoning is applied to repayments under section 269T and section 271E, where the section again speaks of the mode of repayment.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The assessee was a special purpose vehicle promoted by Infrastructure Leasing and Finance Services Ltd, which held thirty per cent of its paid-up capital, to construct and operate a bridge over the Yamuna on a build, own, operate and transfer basis. For the project the assessee had to pay Rs 4.85 crore to the Government of Delhi in connection with the acquisition of land. That payment was in fact made by the promoter to the Delhi Government by account payee cheque, and the amount was debited to the assessee's account in the promoter's books and passed through the assessee's own books by a journal entry crediting the promoter. While completing the assessment for assessment year 1998-99 the Assessing Officer took the view that the assessee had accepted a loan otherwise than in the manner prescribed by section 269SS, and after a show cause notice levied penalty of Rs 4.85 crore under section 271D. The Commissioner (Appeals) upheld the penalty. The Tribunal deleted it by order dated 16 May 2002, and the Revenue appealed under section 260A.
The appeal was not entertained and was dismissed. The Court agreed completely with the Tribunal that section 269SS was not attracted on the facts. The Tribunal's findings - that the transaction was by account payee cheque, that no payment was made in cash by the assessee or on its behalf, that no loan was accepted in cash, and that the payment made through the promoter was routed by journal entry in the assessee's books crediting the promoter's account - are essentially findings of fact. Neither the assessee nor the promoter had made any payment in cash. The Tribunal's order gave rise to no question of law, much less a substantial question of law.
The Court took the section at its words. Section 269SS prohibits taking or accepting a loan or deposit otherwise than by account payee cheque or account payee bank draft, and section 271D penalises a contravention of that prohibition. What actually happened was that the promoter paid the Delhi Government by account payee cheque and the resulting liability of the assessee to the promoter was recorded by a journal entry. No cash moved at any stage, either from the assessee or on its behalf, and no loan was accepted in cash. Since the mischief the section addresses did not occur, the prohibition was not contravened and the penalty had no foundation. The Court then declined to go behind the Tribunal's conclusions, treating them as findings of fact, and applied the test under section 260A that an appeal lies only on a substantial question of law.
we are in complete agreement with the Tribunal that the provisions of Section 269SS were not attracted on the facts of the case.
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Handle my notice → Ask a CA on WhatsAppNo. The Delhi High Court declined to entertain the Revenue's appeal and upheld the deletion of penalty of Rs 4.85 crore under section 271D. The Tribunal had found that the transaction was by account payee cheque, that no payment was made in cash by the assessee or on its behalf, that no loan was accepted in cash, and that the amount paid on the assessee's behalf by its promoter was passed through the books by a journal entry crediting the promoter's account. Those are findings of fact, and on them section 269SS was not attracted. The order gave rise to no question of law, much less a substantial question of law. This was decided by the High Court (Delhi High Court - D.K. Jain and Madan B. Lokur, JJ) and bears on section 269SS, section 271D of the Income Tax Act 1961. It is reported as [2003] 262 ITR 260 (Delhi); (2003) 184 CTR (Del) 266. This is the short and much-cited authority that section 269SS bites on cash and not on book entries. Where the money moves by account payee cheque - even a cheque drawn by somebody else in favour of a third party - and the liability is recorded in the assessee's books by journal entry, there is no acceptance of a loan or deposit otherwise than by account payee cheque and nothing for section 271D to penalise. The second point is procedural and just as useful: whether cash passed is a question of fact, so a Tribunal finding to that effect ends the matter on further appeal absent perversity. The same reasoning is applied to repayments under section 269T and section 271E, where the section again speaks of the mode of repayment. If it applies to you, the first step is this: Show the mode of payment: an account payee cheque or bank draft, even one issued by a group company on your behalf, takes the transaction outside section 269SS.
The assessee was a special purpose vehicle promoted by Infrastructure Leasing and Finance Services Ltd, which held thirty per cent of its paid-up capital, to construct and operate a bridge over the Yamuna on a build, own, operate and transfer basis. For the project the assessee had to pay Rs 4.85 crore to the Government of Delhi in connection with the acquisition of land. That payment was in fact made by the promoter to the Delhi Government by account payee cheque, and the amount was debited to the assessee's account in the promoter's books and passed through the assessee's own books by a journal entry crediting the promoter. While completing the assessment for assessment year 1998-99 the Assessing Officer took the view that the assessee had accepted a loan otherwise than in the manner prescribed by section 269SS, and after a show cause notice levied penalty of Rs 4.85 crore under section 271D. The Commissioner (Appeals) upheld the penalty. The Tribunal deleted it by order dated 16 May 2002, and the Revenue appealed under section 260A. The matter was decided on 2003-01-28 by the High Court (Delhi High Court - D.K. Jain and Madan B. Lokur, JJ). On those facts the High Court held as follows. The appeal was not entertained and was dismissed. The Court agreed completely with the Tribunal that section 269SS was not attracted on the facts. The Tribunal's findings - that the transaction was by account payee cheque, that no payment was made in cash by the assessee or on its behalf, that no loan was accepted in cash, and that the payment made through the promoter was routed by journal entry in the assessee's books crediting the promoter's account - are essentially findings of fact. Neither the assessee nor the promoter had made any payment in cash. The Tribunal's order gave rise to no question of law, much less a substantial question of law.
The Court took the section at its words. Section 269SS prohibits taking or accepting a loan or deposit otherwise than by account payee cheque or account payee bank draft, and section 271D penalises a contravention of that prohibition. What actually happened was that the promoter paid the Delhi Government by account payee cheque and the resulting liability of the assessee to the promoter was recorded by a journal entry. No cash moved at any stage, either from the assessee or on its behalf, and no loan was accepted in cash. Since the mischief the section addresses did not occur, the prohibition was not contravened and the penalty had no foundation. The Court then declined to go behind the Tribunal's conclusions, treating them as findings of fact, and applied the test under section 260A that an appeal lies only on a substantial question of law. In the words reproduced by the source cited on this page: "we are in complete agreement with the Tribunal that the provisions of Section 269SS were not attracted on the facts of the case."
It was decided by the High Court on 2003-01-28 and is reported as [2003] 262 ITR 260 (Delhi); (2003) 184 CTR (Del) 266. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 269SS, section 271D, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeal was not entertained and was dismissed. The Court agreed completely with the Tribunal that section 269SS was not attracted on the facts. The Tribunal's findings - that the transaction was by account payee cheque, that no payment was made in cash by the assessee or on its behalf, that no loan was accepted in cash, and that the payment made through the promoter was routed by journal entry in the assessee's books crediting the promoter's account - are essentially findings of fact. Neither the assessee nor the promoter had made any payment in cash. The Tribunal's order gave rise to no question of law, much less a substantial question of law. It arises in Cash Transaction Limits and Penalty matters, on section 269SS, section 271D of the Income Tax Act 1961, and was decided by Delhi High Court - D.K. Jain and Madan B. Lokur, JJ. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Keep the journal entry and the underlying instrument together in the file, so the book entry can be traced to a banking channel payment. Where the Tribunal has found as a fact that no cash passed, resist a further appeal on the ground that no substantial question of law arises. Do not treat this as covering an entry with no corresponding banking transaction at all; what saved this assessee was that the promoter had actually paid by cheque.
Still good law. The ratio is applied across Tribunal benches to this day. In Gopal S. Pandith v JCIT (Bangalore Tribunal, 21 October 2020) the Bench set out at paragraph 7 that 'The Hon'ble Delhi High Court in the case of CIT v. Noida Toll Bridge Co. Ltd. had held that passing of journal entry without actual receipt of cash would not attract provisions of section 269SS of the I.T.Act', and made that the operative rule of its own decision: 'In view of the dictum laid down by the Hon'ble Delhi High Court in the case of CIT v. Noida Toll Bridge Co. Ltd., if the assessee had passed only a journal entry, the provisions of section 269SS would not be attracted and penalty u/s 271D of the I.T.Act cannot be imposed', restoring the matter for verification on that footing. It is applied on the same basis in ACIT v Satvinder Singh Washawan (Delhi, 21 June 2019), DCIT v Macrotech Construction P Ltd (Mumbai, 8 April 2021) and DCIT v Kiran Fine Jewellers Pvt Ltd (Jaipur, 26 June 2025), and treated as covering the issue directly in Rajkot Buildwell (P) Ltd (Delhi, 3 March 2011). Nothing overruling, doubting or confining it has been found. One thing a practitioner must check before relying on it. The Bombay High Court's decision on journal entries and section 269SS in the Triumph International line has itself been the subject of Supreme Court proceedings, and at least one Tribunal decision (BSC C&C Kurali Toll Road Ltd, Delhi, 18 May 2021) refers to a Bombay High Court decision having been altered by the Supreme Court. That development is not established in this entry and nothing here should be read as stating its outcome; check it directly before a journal-entry defence is run, particularly where the entry passes between related concerns rather than recording a payment actually made to a third party by account payee cheque. The distinction that carried this case was that no cash moved at any stage, and a journal entry that merely squares off inter-company balances may not attract the same answer. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The batch line lists sections 269T and 271E, which deal with repayment. The judgment concerns acceptance of a loan or deposit and is decided under sections 269SS and 271D, and those are given instead; the reasoning is commonly applied to the repayment provisions as well, but that extension is not in this judgment. The judgment is very brief. It does not set out the terms on which the promoter paid, whether the amount was a loan at all, or how the Assessing Officer characterised it, and it does not consider section 273B or reasonable cause because it holds the prohibition itself inapplicable. The text prints 'assessee' as 'assessed' throughout, apparently an artefact of the source. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was not entertained and was dismissed. The Court agreed completely with the Tribunal that section 269SS was not attracted on the facts. The Tribunal's findings - that the transaction was by account payee cheque, that no payment was made in cash by the assessee or on its behalf, that no loan was accepted in cash, and that the payment made through the promoter was routed by journal entry in the assessee's books crediting the promoter's account - are essentially findings of fact. Neither the assessee nor the promoter had made any payment in cash. The Tribunal's order gave rise to no question of law, much less a substantial question of law.
TaxSphere, “CIT v Noida Toll Bridge Co Ltd”, https://taxnotice.vittsphere.com/caselaw/case/cit-v-noida-toll-bridge-co-ltd/ (validity last checked 2026-08-29)
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You took a cash loan and now face penalty equal to the whole amount. Is there any relief?
The assessment in which the s.271E satisfaction was recorded has been set aside. Can the penalty stand?
Money moves both ways between me and my company on a current account. Is that a loan under 269SS?
I took and repaid small cash loans from my family's sister concern, all recorded in the books. Must penalty follow automatically under sections 271D and 271E?
