Section 271d of Income Tax Act

Section 271D of the Income Tax Act lays down the penalty to be imposed on a taxpayer for accepting or taking any loans, deposits or other specified amounts in contravention of Section 269SS. Under Section 269SS, all loans or deposits of over Rs.20,000 must be taken through banking channels. In this article, we look at the provisions of Section 271d of the

Income Tax Act in detail.

Section 271d of Income Tax

Section 271d of the Income Tax Act is reproduced below for reference:

271D. (1) 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.
(2) Any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner.

In the above lines, "specified sum" refers to any sum of money receivable, whether as advance or otherwise, in relation to the transfer of immovable property, whether or not the transfer takes place.

Section 269SS

Section 269SS specifies the rules pertaining to the acceptance of loans, deposits and specified sum. It states that an assessee is restricted from taking or accepting the specified transactions other than by means of an account payee cheque, account payee bank draft or electronic clearing system on the event of the following conditions:

The amount of loan, deposit or specified sum exceeds a sum of Rs.20,000.
Loans, deposits or specified sum availed or accepted earlier haven’t been settled.
The amount or its aggregate specified in the first clause together with the amount or its aggregate specified in the second clause constitutes a sum of Rs. 20,000 or more.

The provisions of this section would not be applicable to:

The Government
Any banking company, post office savings bank or co-operative bank
Establishments of a Central, State or Provincial Act.
Any Government entity.
Any notified institution, association or body or the class of institutions mentioned under the Act.

Further, this section is not valid if the persons involved in such transactions are receiving agricultural income and neither of them is taxable under the Act.

Amount of Penalty

For defaults under Section 271B, an assessee will be penalized with an amount which is equal to the loan or deposits are taken or accepted.

Limitation of Penalty Proceedings

The Supreme Court has updated that the provisions of section 271-D and 271-E of the Income Tax Act cannot be invoked after a specified limitation period. The period of limitation under this section would be the end of the financial year in which the proceedings for penalty under this section has drawn to a closure; or six months from the end of the month in which the procedures of penalty have been initiated, whichever period expires later. The limitation period will not be dependent on the status of appeal against the assessment or other orders specified in Section 275(1)(a) of the Act.

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Frequently Asked Questions

Common questions about Section 271D Income Tax Penalty for Non.

Section 271D of the Income Tax Act imposes a penalty on individuals who accept or take loans, deposits, or other specified amounts in contravention of Section 269SS. The penalty amount is equal to the loan, deposit, or specified sum taken or accepted.

Section 269SS aims to regulate the acceptance of loans, deposits, and specified sums. It requires that any such transactions exceeding Rs. 20,000 must be conducted through banking channels, such as account payee cheques, bank drafts, or electronic clearing systems.

A "specified sum" refers to any sum of money receivable, whether as an advance or otherwise, in relation to the transfer of immovable property, regardless of whether the transfer takes place or not.

The penalty imposable under Section 271D shall be imposed by the Joint Commissioner of Income Tax.

Yes, the provisions of Section 269SS are not applicable to the government, banking companies, post office savings banks, cooperative banks, establishments under Central, State or Provincial Acts, notified institutions, associations or bodies, and transactions involving agricultural income where neither party is taxable under the Income Tax Act.

Yes, the Supreme Court has clarified that penalty proceedings under Section 271D cannot be initiated after a specified limitation period, which is either the end of the financial year in which the penalty proceedings are concluded or six months from the end of the month in which the penalty proceedings were initiated, whichever is later.

No, the limitation period for penalty proceedings under Section 271D is not dependent on the status of appeals against assessments or other orders specified in Section 275(1)(a) of the Income Tax Act.

The requirement to conduct transactions above Rs. 20,000 through banking channels is likely aimed at promoting transparency, preventing tax evasion, and facilitating the tracking of high-value transactions.

Yes, the penalty under Section 271D can be imposed for each violation of accepting or taking loans, deposits, or specified sums in contravention of Section 269SS. The penalty amount is equal to the loan, deposit, or specified sum taken or accepted in each case.

The article does not mention any provisions for compounding or reducing the penalty under Section 271D. However, it is possible that the Income Tax Act or other relevant laws may provide guidelines or procedures for compounding or reducing penalties in certain circumstances.