Section 269SS

Section 269SS — the law in short

What the courts have decided on section 269SS, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• CIT v Jai Laxmi Rice Mills Supreme CourtHelps taxpayer
  The assessment in which the s.271E satisfaction was recorded has been set aside. Can the penalty stand?
  No. The Supreme Court held that once the original assessment order was set aside, the satisfaction recorded in it for initiating penalty under s.271E did not survive, and a penalty imposed on the basis of that order could not be sustained.
• ADIT (Investigation) v Kum. A.B. Shanthi Supreme CourtHelps department
  You took a cash loan and now face penalty equal to the whole amount. Is there any relief?
  Yes, through s.273B. The Court upheld s.269SS as valid precisely because s.273B mitigates the hardship: no penalty is imposable if you prove reasonable cause for the failure.
• Pr. Commissioner of Income Tax v Shree Madhi Surali Vibhag Nagarik Sahakari Dhiran Mandli Ltd High CourtHelps taxpayer
  Our credit society takes and repays members' money in cash across the counter like a bank. The officer has levied penalty under sections 271D and 271E on the whole turnover. Can it stand?
  No, on these facts. The Gujarat High Court upheld the deletion of penalties of Rs 28,66,93,898 under section 271D and Rs 27,12,01,825 under section 271E. Section 273B says no penalty is imposable if the person proves reasonable cause, and that gives the authority a discretion to be exercised justly on the record. The Commissioner (Appeals) and the Tribunal found on the facts that the society, whose members' accounts work like savings accounts repayable on demand, acted on a bona fide belief that sections 269SS and 269T did not apply, that the deposits were accepted as genuine with no addition made, and that its auditor had never reported a contravention. The Court found no legal infirmity and dismissed the Revenue's appeal, holding that no substantial question of law arose.
• Grihalakshmi Vision v Addl CIT High CourtHelps departmentHigh Courts differ
  My assessment order says penalty under sections 271D and 271E is initiated. The Joint Commissioner issued his notice months later and passed the penalty order after that. Does time run from the assessment order or from his notice?
  From his notice, on this judgment. The Kerala High Court held that because a penalty under s.271D or s.271E may be imposed only by the Joint Commissioner, only the Joint Commissioner can initiate the proceedings; the assessing officer cannot. It follows that the sentence in the assessment order saying that proceedings under those sections are initiated is inconsequential, and that limitation under s.275(1)(c) is measured from the Joint Commissioner's notice. On the dates before the Court - assessment order 6 November 2007, notice by the Joint Commissioner 28 March 2008, penalty orders 29 July 2008 - the penalty orders were in time. The appeals were rejected and the questions answered in favour of the Revenue.
• CIT v Worldwide Township Projects Ltd High CourtHelps taxpayer
  The liability was created by a journal entry and no money moved. Does 269SS still apply?
  No. Passing a journal entry does not involve the acceptance of any loan or deposit of money, so s.269SS is not engaged. The Court also held that limitation for a s.271D penalty runs under s.275(1)(c), not s.275(1)(a)(ii).
• CIT v Sunil Kumar Goel High CourtHelps taxpayer
  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.
• CIT v Rugmini Ram Ragav Spinners P Ltd High CourtHelps taxpayer
  We refunded share application money in cash. Is that a repayment of a deposit under s.269T?
  No. The Madras High Court held that money received as advance towards allotment of shares, with no time frame for return and no interest, is neither a deposit nor a loan but share capital advance, and that ss.269SS and 269T apply only to deposits or loans — when it is neither, those sections have no application at all. Penalty under s.271E is not automatic and a bona fide belief that advances against allotment of shares are not loans or deposits is itself a reasonable cause under s.273B.
• CIT v Idhayam Publications Ltd High CourtHelps taxpayer
  Money moves both ways between me and my company on a current account. Is that a loan under 269SS?
  No. Deposits into and withdrawals from a running current account between a director and the company are not a loan or advance, so s.269SS does not reach them and penalty under s.271D on that footing cannot stand. The judgment says nothing about s.269T.
• CIT v Noida Toll Bridge Co Ltd High CourtHelps taxpayer
  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.
• Mohammed Shabbir Bhojani v ITO, Ward-9(1), Hyderabad ITATHelps taxpayerNo later treatment found
  I received the sale price of my land in cash across the table at the sub-registrar's office. Is that a 'specified sum' under s.269SS?
  The Hyderabad Bench held it is not. On its consistent view, cash received for the transfer of immovable property at the time of registration of the sale deed, where the receipt is recorded in the registered deed itself, does not fall within the mischief of s.269SS and does not attract s.271D. The Tribunal also set the penalty aside on the separate ground that no satisfaction had been recorded by the Assessing Officer in the assessment order.
• DCIT v Umiya Co-operative Credit Society Ltd ITATHelps taxpayerNo later treatment found
  Our credit society takes deposits and repays loans in cash to members. Can the department levy 271D and 271E on the whole amount?
  Not where the transactions are genuine dealings with members in the ordinary course. The Tribunal upheld the deletion of penalties under s.271D and s.271E on cash deposits and repayments of roughly Rs 28 crore and Rs 27 crore, treating a co-operative credit society's dealings with its own limited membership as attracting the reasonable cause protection in s.273B, particularly where no addition was made in the assessment and the genuineness of the transactions was not in dispute.
• DCIT, Central Circle-02, Jaipur v Ashwani Gupta ITATHelps taxpayerNo later treatment found
  The Joint Commissioner passed a penalty order months after the assessment was completed. From what date does the six-month limitation in section 275 actually run — the reference to him, or his own show-cause notice?
  For a penalty that is not integrally linked to the assessment — here section 271D — limitation is governed by clause (c) of section 275(1) and runs from the completion of the proceedings in the course of which the action for penalty was initiated, or six months from the end of the month in which that action was taken, whichever expires later; not from the date the competent officer issues his own notice. On that footing a penalty order passed on 28 December 2024, where the reference went to the Addl./Jt. CIT on 18 June 2023 and the assessment was completed on 23 March 2024, was out of time on either computation, and the Revenue's appeals were dismissed.
• DCIT v Jayapriya Company ITATHelps taxpayerNo later treatment found
  When does the s.275(1)(c) clock start for a s.271D penalty — the AO's satisfaction in the assessment order, or the Joint Commissioner's first notice?
  From the Assessing Officer's satisfaction. The Tribunal held that the imposition of a s.271D penalty is not a one-stroke process but a series of steps, that the recording of satisfaction by the Assessing Officer is a pre-requisite to the proceeding, and that the date of that satisfaction is the date on which action for imposition of penalty is initiated. Counting from an assessment order dated 30 December 2022, the two limbs of s.275(1)(c) expired on 31 March 2023 and 30 June 2023, the later being 30 June 2023, so the penalty order of 30 August 2023 was barred.
• MCM Developers v DCIT, Central Circle-1, Aurangabad ITATHelps taxpayerNo later treatment found
  The assessment order said s.269ST and s.271DA. The AO has now passed a s.154 order changing it to s.269SS and s.271D. Can he do that?
  No. The Tribunal held that mentioning s.269ST together with its own penalty section s.271DA is not a typographical error — it could only have been one if s.269ST had been typed alongside s.271D — so the original assessment order reflected a conscious application of mind. Substituting s.269SS and s.271D for them under s.154 was a change of opinion between two possible legal views, not the correction of a mistake apparent from the record, and the rectification order was quashed.
• Wahid Ali v JCIT ITATHelps taxpayerJudgment not reachable
  I received sale consideration for my property in cash. Is that a 269SS breach attracting 271D?
  On this decision, no. Section 269SS prohibits receipt of a sum by way of loan or deposit; sale consideration on a completed transfer of immovable property is neither, and since s.271D is entirely derivative of a s.269SS contravention, the penalty had no statutory foundation.
• DCIT, CC-7(3), Mumbai v Macrotech Developers Ltd ITATHelps taxpayer
  The group squares off inter-company balances by journal entry. The Department says every entry is a s.269SS or s.269T violation. What survives?
  The Tribunal dismissed the Revenue's appeals and confirmed the deletion of penalties under ss.271D and 271E. Its route was not that journal entries fall outside the sections — on the jurisdictional High Court's decision they are hit — but that the reasons for using them were commercial and therefore reasonable cause under s.273B. The reasons accepted were raising funds, assignment of receivables, squaring up transactions, operational efficiency and MIS, consolidation of family member debts, correction of errors, and loans taken in cash, and there was no finding that the transactions involved unaccounted money or were not genuine.
• Smt. Meera Devi Kumawat v JCIT, Range-4, Jaipur ITATHelps taxpayer
  My client's husband gave her the money to buy a plot registered in her name, partly in cash. Is that a s.269SS violation?
  The Jaipur Bench deleted the s.271D penalty. It held that registering property in a wife's name is guided by family and societal factors and by the Government's own incentive of reduced stamp duty for female purchasers, that pooling family funds in that situation calls for a flexible approach to the reasonableness of the explanation, and that where the whole transaction is documented in the registered sale deed and the cash portion came from the husband's known sources, the assessee had shown reasonable cause and did not deserve to be penalised.
• Thane Zilla Madhyamik Shikshak Sangh Sahakari Parpedhi Maryadit v ACIT ITATHelps taxpayerNo later treatment found
  My society's chartered accountant told the penalty officer it was a co-operative bank. Can the department use that admission to deny section 80P?
  No. The Mumbai Bench held that no addition and no denial of a deduction can be made merely on the admission of a person, still less the assessee's authorised representative, without going into the actual charter documents, and that there is no estoppel against the statute. The society's chartered accountant had argued before the Commissioner (Appeals) in a section 271D penalty matter that it was a co-operative bank, and the penalty was deleted on that basis; he later filed an affidavit saying it had been a genuine misinterpretation. On the bye-laws and objects the society took deposits only from members and lent only to members, and it held no licence from the Reserve Bank of India, so it was a co-operative credit society and not a co-operative bank. Section 80P(4) did not shut it out and the deduction under section 80P(2)(a)(i) was allowed for each of the years in appeal.
• Dr. Sanjiv Keshav Karande v ITO, Ward-11(1), Pune ITATHelps departmentNo later treatment found
  The penalty under s.271D came more than six months after it was initiated. Is it automatically time-barred?
  No. Section 275(1)(c) gives the Department the later of two periods, and where the proceedings in the course of which the penalty was initiated were completed in a financial year that ends after the six-month period, the financial-year limb governs. Here the penalty was initiated in April 2016, six months would have run out at the end of October 2016, but the relevant financial year was 2016-17, so a penalty order passed on 29 November 2016 was in time. The Tribunal also dismissed the reasonable-cause plea on the facts.
• Sanmathi Ambanna v Jt CIT ITATHelps taxpayerNo later treatment found
  I took a cash loan from my father-in-law. Can they levy 271D on a genuine family transaction?
  No, on these facts - but on one ground only. The Tribunal deleted the penalty by following a coordinate bench decision, holding that cash loans from close relatives do not fall within the mischief of s.269SS because near or close relatives cannot be said to be 'other persons' within that section. It made no finding of reasonable cause under s.273B: that section appears in the grounds of appeal and inside the decisions the order extracts, but not in the Tribunal's own reasoning.
• CBDT Instruction No. 03/2017 — the demonetisation cash verification SOP CBDT Circulars & InstructionsCuts both ways
  Is there a departmental instruction telling the officer how to verify my demonetisation cash deposits, and what comparisons is he supposed to make?
  Yes. The Board issued a Standard Operating Procedure on 21 February 2017 for the online verification of cash deposits made in the demonetisation window. It fixes deposit levels at which no further verification is to be made — up to 2.5 lakh for an individual without business income, and Rs. 5.0 lakh for a person above 70 — and it lists the comparisons an officer is to run before treating recorded cash sales as back-dated, the first of which is an abnormal jump in cash sales for November and December 2016 against the assessee's own earlier history.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.