Income Tax -Penalty for cash dealings in excess of Rs.20,000 - Limitation - CBDT Clarification
AS per Section 269SS of the Income Tax Act, "No person shall take or accept from any other person, 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, if the amount is twenty thousand rupees or more".
As per Section 271D, If a person takes or accepts any loan or deposit or specified sum in contravention of the provisions of section 269SS, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit or specified sum so taken or accepted.
As per Section 275(1), No order imposing a penalty under this Chapter shall be passed -
(a) in a case where the relevant assessment or other order is the subject-matter of an appeal to the Commissioner (Appeals) under section 246 or section 246A or an appeal to the Appellate Tribunal under section 253, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, or six months from the end of the month in which the order of the Commissioner (Appeals) or, as the case may be, the Appellate Tribunal is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, whichever period expires later :
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(c) in any other case, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, or six months from the end of the month in which action for imposition of penalty is initiated, whichever period expires later .
Now the question is in case where loan is accepted in cash in excess of Rs. 20,000/- whether the limitation to demand penalty is to be under Section 275(1)(a) or 275(1)(c).
The Delhi High Court in the case of Commissioner of Income Tax vs. Worldwide Township Projects Ltd - , considered the issue and observed that, "It is well settled that a penalty under this provision is independent of the assessment. The action inviting imposition of penalty is granting of loans above the prescribed limit otherwise than through banking channels and as such infringement of Section 269SS of the Act is not related to the income that may be assessed or finally adjudicated. In this view Section 275(1)(a) of the Act would not be applicable and the provisions of Section 275(1)(c) would be attracted.”
The CBDT has accepted this judgement. Therefore, CBDT communicates to the field that it is now a settled position that that the period of limitation of penalty proceedings under section 271D and 271E of the Act is governed by the provisions of section 275(1)(c) of the Act. Therefore, the limitation period for the imposition of penalty under these provisions would be the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, or six months from the end of the month in which action for imposition of penalty is initiated, whichever period expires later. The limitation period is not dependent on the pendency of appeal against the assessment or other order referred to in section 275(1)(a) of the Act. Accordingly, no appeals may henceforth be filed on this ground by the officers of the Department and appeals already filed, if any, on this issue before various Courts/Tribunals may not be pressed upon.
(Section 271E deals with penalty proceedings for repayment of loans by cash in excess of Rs.20,000/.)
CBDT Circular No. 10/2016, Dated: April 26, 2016