THE CIT has passed order u/s. 271D of the Act on 27th March, 2017 and levied penalty of Rs. 4 lacs on the assessee u/s. 271D on loan amount obtained in cash in violation of provision of section 269SS of the act. During the course of assessment, the Assessing Officer noticed that assessee had accepted certain loan amounting to Rs. 2,30,000/- in cash from Anish Nagpal and Rs. 1,70,000/- from Amit Purswani which was found to be in violation of provisions of section 269SS of the act. After drawing satisfaction the additional CIT issued SCN which was returned un-served. Thereafter, the AO has referred provision of section 269SS indicating that the assessee should not have accepted the loans or deposits, otherwise than by a account payee cheque or by account payee bank draft drawn in the name of the assessee, if the aggregate amount of such loan or deposit amount to Rs. 20,000/- or more therefore levied penalty u/s. 271D of the act of Rs. 4 lacs for accepting the loan amount in cash.

On appeal, the Tribunal held that,

Whether penalty imposed u/s 271D is rightly upheld where assessee is unable to establish that provisions of Section 269SS were not contravened – YES: ITAT

Penalty imposed u/s 271D is right if assessee is unable to establish that provisions of Section 269SS were not contravened

Section 269SS bars the loans acceptance in cash for an amount exceeding Rs. 20,000/-. Violation attracts the penalty U/s 271D. However, if there is a reasonable cause then immunity can be given by virtue of section 273B.

Here is one case before Ahmedabad ITAT on the scope of section 269SS vis a vis Section 271D. The case details is as under:

Bookmywish E-Commerce Pvt Ltd

Vs

Addl.CIT

ITA No. 1705/Ahd/2018

Let us have a short overview of the case before ITAT Ahemdabad.

In this case, the CIT has passed order u/s. 271D of the Act on 27th March, 2017 and levied penalty of Rs. 4 lacs on the assessee u/s. 271D on loan amount obtained in cash in violation of provision of section 269SS of the Act.

During the course of assessment, the Assessing Officer noticed that assessee had accepted certain loan amounting to Rs. 2,30,000/- in cash from Anish Nagpal and Rs. 1,70,000/- from Amit Purswani which was found to be in violation of provisions of section 269SS of the act.

After drawing satisfaction the additional CIT issued SCN which was returned un-served.

Thereafter, the AO has referred provision of section 269SS indicating that the assessee should not have accepted the loans or deposits, otherwise than by a account payee cheque or by account payee bank draft drawn in the name of the assessee, if the aggregate amount of such loan or deposit amount to Rs. 20,000/- or more therefore levied penalty u/s. 271D of the act of Rs. 4 lacs for accepting the loan amount in cash.

On appeal, the issue before Tribunal was whether penalty imposed u/s 271D is rightly upheld where assessee is unable to establish that provisions of Section 269SS were not contravened?

ITAT observed as under:

1.    We have considered the fact and material on record and noticed from the copy of ledger account submitted by the assessee that on the different dates assessee has obtained cash from the two directors and there was no repayment made by the assessee during the year.

2.    The accounts cannot be said of the nature of current account as claimed by the assessee.

3.    Further, the assessee has not brought any material to substantiate that assessee has not committed any violation of section 269SS of the act.

4.    We do not find any infirmity in the decision of CIT(A) in sustaining the penalty levied u/s. 271D of the act, therefore, this ground of appeal of the assessee is dismissed.

In short, Assessee has to demonstrate either the reasonable ground for acceptance or for non violation of section 269SS.

++ We have considered the fact and material on record and noticed from the copy of ledger account submitted by the assessee that on the different dates assessee has obtained cash from the two directors and there was no repayment made by the assessee during the year, the accounts cannot be said of the nature of current account as claimed by the assessee. Further, the assessee has not brought any material to substantiate that assessee has not committed any violation of section 269SS of the act, we do not find any infirmity in the decision of CIT(A) in sustaining the penalty levied u/s. 271D of the act, therefore, this ground of appeal of the assessee is dismissed.

ITA No. 1705/Ahd/2018