The limit of Rs. 20000 under sections 269SS and 269T is per person

Fact and issue of the case

Both these appeals filed by the assessee are directed against two different orders of the ld. CIT(A) 22-07-2022 National Faceless Appeal Centre, Delhi [ hereinafter referred to as (NFAC) ] for the assessment year 2013-14 in the matter of Section 271E and 271D of the Act, 1961.

The assessee has taken solitary ground in ITA No. 308/JP/2022 and 309/JP/2022 for the assessment year 2013-14 u/s 271E and 271D of the Act as under:-

‘’ The ld. CIT(A) has erred on facts and in confirming the levy of penalty of Rs.10,07,500/- u/s 271E of the Act, 1961. He has further erred in not appreciating that repayment of loan made to each person is less than Rs.20,000/- and thus, there is no violation of Section 269T of I.T. Act.”

‘’ The ld. CIT(A) has erred on facts and in confirming the levy of penalty of Rs.9,77,500/- u/s 271D of the I.T. Act, 1061. He has further erred in not appreciating that amount of loan taken from each person is less than Rs.20,000/- and thus, there is no violation of Section 269SS of I.T. Act.”

Brief facts of the case are that the assessee in response to notice issued u/s 148 of the Act filed the return of income declaring total income at Rs.4,33,400/-. The AO framed the assessment u/s 143(3) read with Section 148 of the Act on 20-01-2016 at an income of Rs.4,90,610/-. During the course of audit, it was observed by the audit party that the assessee had received cash of Rs.9,77,500/-from various parties which according to the Revenue is violation of Section 269SS and thus attracts penalty u/s 271D of the Income Tax Act, 1961. It was also noticed that the assesse had paid cash of Rs.10,07,500/- to various parties which according to the Revenue is violation of Section 269T of the Act and thus attracts the penalty u/s 271E of the Act. Accordingly, the JCIT, issued show cause notice and after providing the opportunity of hearing to the assessee, imposed penalty of Rs.9,77,500/- u/s 271D and penalty of Rs.10,07,500/- u/s. 271E of the Act.

Aggrieved by the imposition of penalty, the assessee preferred appeal before the ld. CIT(A) who after considering the case of both the parties, dismissed both the appeals (supra) filed by the assessee.

Now aggrieved by the order of the ld. CIT(A) in both the cases, the assessee preferred appeals before us in the case of Section 271E and 271D respectively.

Observation of the court

The ld. AR in order to support the ground taken by him before us submitted that Section 269SS read with Section 271D is attracted when the amount of loan taken from each person exceeds Rs.20,000/-. Similarly, Section 269T read with Section 271E is attracted when the repayment of loan made to each person exceeds Rs.20,000/-. In this regard, the ld. AR has drawn Bench attention to the cash book and pointed out that the amount received from various parties / amount paid to various parties for unsecured loan did not exceed the limit of Rs.20,000/- and thus no provisions of Section 271D and 271E are attracted. Further, in order to support his contention, the ld. AR filed the affidavit of the parties from whom loan was taken / repaid.

During the course of hearing, the ld. DR supported the orders of the ld. CIT(A).

After having meticulously gone through the facts of the present and documents relied upon by the assesee, the Bench found that the assessee had taken / paid loans or deposits and the aggregate of which is more than Rs. 20,000/-. Thus the same is in contravention of Section 269SS and 269T of the Act and ld. CIT(A) confirmed the penalty levied u/s 271D and 271E of the Act respectively.

In order to solve the controversy in question, it is necessary to evaluate the provisions of Section 269SS and also the provision of Section 269T of the Act which reads as under:-

The provision of Section 269SS reads as under: 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. The provision of section 269 reads as under: No branch of a banking company or a co-operative bank and no other company or co operative society and no firm or other person shall repay any loan or deposit made with it or any specified advance received by it otherwise than by an account payee cheque or account payee bank draft drawn in the name of the person who has made the loan or deposit or paid the specified advance, or by use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed if – (a) the amount of the loan or deposit or specified advance together with the interest, if any, payable thereon, or (b) the aggregate amount of the loans or deposits held by such person with the branch of the banking company or co-operative bank or, as the case may be, the other company or co-operative society or the firm, or other person either in his own name or jointly with any other person on the date of such repayment together with the interest, if any, payable on such loans or deposits, or (c) the aggregate amount of the specified advances received by such person either in his own name or jointly with any other person on the date of such repayment together with the interest, if any, payable on such specified advances, is twenty thousand rupees or more.”

After having gone through the legal proposition as enumerated above, the Bench found that the plain reading of both the Sections denotes that Section 269SS is attracted when the amount of loan taken from individual person exceeds Rs,20,000/- and Section 269T is attracted when the repayment of loan made to individual person exceeds Rs.20,000/-. The Bench has also gone through the cash book placed on record at Paper Book Pages 3 to 28 and statement of loan taken and loan repaid in cash drawn from the cash book placed at Paper Book Pages 29 to 30, it can be noted that the amount of loan taken from each person and amount of loan repaid to each person does not exceed Rs.20,000/-. However, the Revenue Authorities levied and confirmed the penalty by holding that Aggregate of loan/deposits taken/paid by the assessee is more than Rs.20,000/- by not appreciating the provisions of these Sections. In my view, after evaluating the provisions of law, aggregate of loan is to be seen personwise and not aggregate loan taken from all the persons in the whole year. Therefore, in my view and under these present facts and circumstances of the case, the penalty is not attracted in the present case and thus both the penalties confirmed by the ld. CIT(A) (supra) are directed to be deleted.

In the result, both the appeals filed by the assessee are allowed.

Order pronounced in the open court on 18/10/2022