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?
No. The Punjab and Haryana High Court held that section 273B opens with a non obstante clause and overrides sections 271D and 271E, so an assessee who proves reasonable cause escapes penalty even though section 269SS or 269T has been contravened. On these facts the Tribunal had found the cash loans were between family members and a sister concern, taken for business exigency, entered in cash books produced to the Revenue, with no tax avoidance or evasion and no prejudice to the Revenue. That is reasonable cause, and whether it exists is a finding of fact giving rise to no substantial question of law.
Decided by the High Court (High Court of Punjab and Haryana at Chandigarh - Hon'ble Mr Justice J.S. Khehar and Hon'ble Mr Justice Nawab Singh; oral judgment by J.S. Khehar, J) on 2009-03-03, reported as I.T.A. Nos. 777 and 778 of 2008 (Punjab and Haryana High Court). It bears on section 269SS, section 271D, section 273B, section 269T, section 271E of the Income Tax Act 1961, in Penalty and Cash Transaction Limits matters.
This is the case to cite when the officer says penalty under section 271D or 271E is automatic once cash crosses the threshold. The Court disposes of that in terms: section 273B is a non obstante provision and the penalty sections are read subject to it. It is also useful for the specific combination the Court accepted as reasonable cause - a transaction inside a family or with a sister concern, entered into out of business need, recorded in the accounts and disclosed, and with no tax effect. And because reasonable cause is a finding of fact, an assessee who wins on it before the Tribunal is well placed on further appeal, since the High Court will not entertain the question absent perversity.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
Read aloud by your device. Press again to stop.
The Deputy Commissioner of Income Tax, Rohtak Range, recorded by order of 11 October 1993 that the assessee had taken eight cash loans during financial year 1990-91, relevant to assessment year 1991-92, of Rs 25,000, Rs 30,000, Rs 10,000, Rs 10,000, Rs 20,000, Rs 15,000, Rs 20,000 and Rs 15,000. The Revenue treated this as a contravention of section 269SS and levied penalty under section 271D. The same loans were repaid in cash, which the Revenue treated as a contravention of section 269T attracting penalty under section 271E; that formed the subject of the companion appeal. The Commissioner (Appeals) dismissed the assessee's appeals on 23 December 1994. The Tribunal, Delhi Bench, allowed them on 19 January 2007, holding the default technical and venial, that the assessee had produced his cash books showing the loans, that no prejudice was caused to the Revenue because no tax was avoided or evaded, and that following the High Court's decision in CIT v Saini Medical Store the bona fides and genuineness of the transactions constituted reasonable cause. It was not in dispute that the transactions were with a sister concern, were between family, and arose from business exigency. The Revenue appealed.
Both appeals were dismissed. The Court held that section 273B carries a non obstante clause operating against sections 271D and 271E, so it is open to an assessee to establish reasonable cause for not complying with section 269SS or section 269T and, if he does, to be excused the penal consequence. The Tribunal was right to find that reasonable cause had been shown. The Court accepted the Revenue's premise that the onus of establishing bona fides rests on the assessee, but held the onus discharged on the material: the cash books were produced, the transactions were with a sister concern and within the family, they arose from business exigency, and there was no tax effect. Whether reasonable cause exists is a finding of fact based on appreciation of the material on record and gives rise to no question of law, much less a substantial question of law.
The Revenue's single argument was that sections 271D and 271E are mandatory, the penalty being a sum equal to the loan taken or repaid, leaving the Revenue no discretion. The Court answered it structurally. Section 273B says that notwithstanding the provisions listed in it - which include sections 271D and 271E - no penalty shall be imposable if the person proves there was reasonable cause for the failure. That is an exceptional situation in which the assessee may substantiate reasonable cause, and if he does the penal consequence does not follow. On the content of reasonable cause the Court followed its own decision in Saini Medical Store, where it had held that even if ignorance had led to an infraction the default was technical and venial, did not prejudice the interests of the Revenue because no tax avoidance or evasion was involved, and that a bona fide belief coupled with the genuineness of the transactions constituted reasonable cause under section 273B. Applying that here, the Court pointed to three things the Tribunal had relied on: the assessee had himself produced cash books showing the loans, no prejudice was caused to the Revenue because no tax liability was avoided, and the transactions were family transactions with a sister concern arising from business exigency and disclosed in the accounts. Saini Medical Store also supplied the second step, that such a conclusion is a finding of fact which does not give rise to a substantial question of law.
A family transaction, between two independent assessees, based on an act of casualness ... in our view establishes "reasonable cause" under Section 273B of the Act.
Upload it and we will read it, work out your deadline and draft the reply. A CA reviews before anything is filed.
Handle my notice → Ask a CA on WhatsAppNo. The Punjab and Haryana High Court held that section 273B opens with a non obstante clause and overrides sections 271D and 271E, so an assessee who proves reasonable cause escapes penalty even though section 269SS or 269T has been contravened. On these facts the Tribunal had found the cash loans were between family members and a sister concern, taken for business exigency, entered in cash books produced to the Revenue, with no tax avoidance or evasion and no prejudice to the Revenue. That is reasonable cause, and whether it exists is a finding of fact giving rise to no substantial question of law. This was decided by the High Court (High Court of Punjab and Haryana at Chandigarh - Hon'ble Mr Justice J.S. Khehar and Hon'ble Mr Justice Nawab Singh; oral judgment by J.S. Khehar, J) and bears on section 269SS, section 271D, section 273B, section 269T, section 271E of the Income Tax Act 1961. It is reported as I.T.A. Nos. 777 and 778 of 2008 (Punjab and Haryana High Court). This is the case to cite when the officer says penalty under section 271D or 271E is automatic once cash crosses the threshold. The Court disposes of that in terms: section 273B is a non obstante provision and the penalty sections are read subject to it. It is also useful for the specific combination the Court accepted as reasonable cause - a transaction inside a family or with a sister concern, entered into out of business need, recorded in the accounts and disclosed, and with no tax effect. And because reasonable cause is a finding of fact, an assessee who wins on it before the Tribunal is well placed on further appeal, since the High Court will not entertain the question absent perversity. If it applies to you, the first step is this: Plead reasonable cause under section 273B expressly in the reply to the section 271D or 271E notice; the penalty sections are subject to it and the onus is on you.
The Deputy Commissioner of Income Tax, Rohtak Range, recorded by order of 11 October 1993 that the assessee had taken eight cash loans during financial year 1990-91, relevant to assessment year 1991-92, of Rs 25,000, Rs 30,000, Rs 10,000, Rs 10,000, Rs 20,000, Rs 15,000, Rs 20,000 and Rs 15,000. The Revenue treated this as a contravention of section 269SS and levied penalty under section 271D. The same loans were repaid in cash, which the Revenue treated as a contravention of section 269T attracting penalty under section 271E; that formed the subject of the companion appeal. The Commissioner (Appeals) dismissed the assessee's appeals on 23 December 1994. The Tribunal, Delhi Bench, allowed them on 19 January 2007, holding the default technical and venial, that the assessee had produced his cash books showing the loans, that no prejudice was caused to the Revenue because no tax was avoided or evaded, and that following the High Court's decision in CIT v Saini Medical Store the bona fides and genuineness of the transactions constituted reasonable cause. It was not in dispute that the transactions were with a sister concern, were between family, and arose from business exigency. The Revenue appealed. The matter was decided on 2009-03-03 by the High Court (High Court of Punjab and Haryana at Chandigarh - Hon'ble Mr Justice J.S. Khehar and Hon'ble Mr Justice Nawab Singh; oral judgment by J.S. Khehar, J). On those facts the High Court held as follows. Both appeals were dismissed. The Court held that section 273B carries a non obstante clause operating against sections 271D and 271E, so it is open to an assessee to establish reasonable cause for not complying with section 269SS or section 269T and, if he does, to be excused the penal consequence. The Tribunal was right to find that reasonable cause had been shown. The Court accepted the Revenue's premise that the onus of establishing bona fides rests on the assessee, but held the onus discharged on the material: the cash books were produced, the transactions were with a sister concern and within the family, they arose from business exigency, and there was no tax effect. Whether reasonable cause exists is a finding of fact based on appreciation of the material on record and gives rise to no question of law, much less a substantial question of law.
The Revenue's single argument was that sections 271D and 271E are mandatory, the penalty being a sum equal to the loan taken or repaid, leaving the Revenue no discretion. The Court answered it structurally. Section 273B says that notwithstanding the provisions listed in it - which include sections 271D and 271E - no penalty shall be imposable if the person proves there was reasonable cause for the failure. That is an exceptional situation in which the assessee may substantiate reasonable cause, and if he does the penal consequence does not follow. On the content of reasonable cause the Court followed its own decision in Saini Medical Store, where it had held that even if ignorance had led to an infraction the default was technical and venial, did not prejudice the interests of the Revenue because no tax avoidance or evasion was involved, and that a bona fide belief coupled with the genuineness of the transactions constituted reasonable cause under section 273B. Applying that here, the Court pointed to three things the Tribunal had relied on: the assessee had himself produced cash books showing the loans, no prejudice was caused to the Revenue because no tax liability was avoided, and the transactions were family transactions with a sister concern arising from business exigency and disclosed in the accounts. Saini Medical Store also supplied the second step, that such a conclusion is a finding of fact which does not give rise to a substantial question of law. In the words reproduced by the source cited on this page: "A family transaction, between two independent assessees, based on an act of casualness ... in our view establishes "reasonable cause" under Section 273B of the Act."
It was decided by the High Court on 2009-03-03 and is reported as I.T.A. Nos. 777 and 778 of 2008 (Punjab and Haryana High Court). 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, section 273B, section 269T, section 271E, 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. Both appeals were dismissed. The Court held that section 273B carries a non obstante clause operating against sections 271D and 271E, so it is open to an assessee to establish reasonable cause for not complying with section 269SS or section 269T and, if he does, to be excused the penal consequence. The Tribunal was right to find that reasonable cause had been shown. The Court accepted the Revenue's premise that the onus of establishing bona fides rests on the assessee, but held the onus discharged on the material: the cash books were produced, the transactions were with a sister concern and within the family, they arose from business exigency, and there was no tax effect. Whether reasonable cause exists is a finding of fact based on appreciation of the material on record and gives rise to no question of law, much less a substantial question of law. It arises in Penalty and Cash Transaction Limits matters, on section 269SS, section 271D, section 273B, section 269T, section 271E of the Income Tax Act 1961, and was decided by High Court of Punjab and Haryana at Chandigarh - Hon'ble Mr Justice J.S. Khehar and Hon'ble Mr Justice Nawab Singh; oral judgment by J.S. Khehar, J. 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. Put the cash book and the accounts on record to show the transaction was disclosed, and show the business need that made cash necessary. Demonstrate that there was no tax avoidance or evasion and no prejudice to the Revenue - the Tribunal's findings on both were what carried the day here. Where the Tribunal has already found reasonable cause on the facts, resist a further appeal on the ground that this is a finding of fact and raises no substantial question of law.
Validity check could not be completed. No later history was checked. The decision follows the same Court's earlier ruling in Saini Medical Store and rests substantially on a finding of fact, but nothing subsequent has been established from the material read. 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 names the case as Sunil Kumar Goel v CIT; the judgment is the Revenue's appeal, CIT v Sunil Kumar Goel, the assessee being the respondent, and the slug preserves the batch form. The batch line lists only sections 269SS, 271D and 273B, but the judgment disposes of the companion appeal on sections 269T and 271E as well, and those are added. The batch line carried no reporter citations, so the case numbers from the judgment's first page are used. The judgment does not state the amount of penalty imposed under either section, nor who the lenders were beyond describing them as family and a sister concern. One passage in the judgment says loans in excess of Rs 10,000 were taken in cash while the section it extracts sets the threshold at Rs 20,000; the individual amounts listed range from Rs 10,000 to Rs 30,000 and the aggregate plainly crossed the threshold. 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.
Both appeals were dismissed. The Court held that section 273B carries a non obstante clause operating against sections 271D and 271E, so it is open to an assessee to establish reasonable cause for not complying with section 269SS or section 269T and, if he does, to be excused the penal consequence. The Tribunal was right to find that reasonable cause had been shown. The Court accepted the Revenue's premise that the onus of establishing bona fides rests on the assessee, but held the onus discharged on the material: the cash books were produced, the transactions were with a sister concern and within the family, they arose from business exigency, and there was no tax effect. Whether reasonable cause exists is a finding of fact based on appreciation of the material on record and gives rise to no question of law, much less a substantial question of law.
Every entry in this library links to where it was found, so you can check it yourself rather than take our word for it.
You took a cash loan and now face penalty equal to the whole amount. Is there any relief?
Must penalty be imposed just because the law permits it?
Money moves both ways between me and my company on a current account. Is that a loan under 269SS?
The liability was created by a journal entry and no money moved. Does 269SS still apply?