Latest Expert Exchange Queries

GST Demo Service software link:
Username: demouser Password: demopass
Get your inventory and invoicing software GST Ready from Binarysoft
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
Popular Search: ACCOUNTING STANDARDS :: articles on VAT and GST in India :: list of goods taxed at 4% :: form 3cd :: TDS :: Central Excise rule to resale the machines to a new company :: ARTICLES ON INPUT TAX CREDIT IN VAT :: due date for vat payment :: cpt :: ACCOUNTING STANDARD :: empanelment :: TAX RATES - GOODS TAXABLE @ 4% :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: VAT Audit :: VAT RATES
News Headlines »
 Tax-saving for young earners simplified
 How to save income tax? Here are 6 investments with tax free income
 10 Top salary deductions that can save tax for you
 What are the tax saving options beyond Section 80C?
 The penalties for not paying tax on time
 How to make your salary tax efficient
 I-T Department may go into overdrive this quarter
 Ways to reduce the TDS deduction from your salary
 4 Tips for choosing who prepares your 2017 Tax Returns
 Processing of income-tax returns under section 143(1) of the Income-tax Act which were filed in Forms ITR-1 to 6 & applicability of section 143(1)(a)(vi)
 Price Waterhouse gets 2-year ban in Satyam case

Penalty issue in repayment of loans by cash
September, 23rd 2006
The same amount cannot represent both a loan and undisclosed income -------------------------------------------------------------------------------- The ITO should decide before hand whether the amount represented a loan or undisclosed income. If it is a loan, it is easier to levy penalty. -------------------------------------------------------------------------------- The tax law prohibits taking loans or deposits in cash if the amount exceeds Rs 20,000. Section 269SS and Sections 271 D and 271E were introduced in the Income-Tax Act, 1961 to curb the circulation of black money. Such payments or repayments of loans and deposits had to be by an account-payee cheque or account-payee bank draft drawn in the name of the person who made the loan or deposits. The courts had earlier held that there was a distinction between a loan and a deposit and the section did not apply to the repayment of a loan, but covered only the repayment of a deposit. The lacuna in the law was made good by the Finance Act 2003, which amended the Section to make it applicable to both loan and deposit. Earlier, failure to repay a deposit in the manner required by the law was punishable under Section 276E. From April 1, 1989, onwards, such contravention attracted penalty under Section 271E read with Section 273B. The provision for prosecution was done away with. Section 273B gives the income-tax officer (ITO) the discretion not to levy a penalty if he is satisfied that there was a reasonable cause for not complying with the legal provision. In most cases, the judiciary has inferred the reasonable cause in favour of the taxpayer and penalties levied for such violations have been few and far between. The constitutional validity of the provision was upheld by Supreme Court in a number of cases. Treatment of cash receipt Is it open to the I-T Department to treat the receipt of cash as undisclosed income and still go on with proceedings under Section 269SS read with Section 271D for the levy of penalty? The Delhi High Court examined this question in CIT vs Standard Brands Ltd (285 ITR 195). The company, Standard Brands Ltd, had received Rs 3 lakh in cash from D. S. Imports. According to the assessing officer (AO), the amount represented undisclosed income in the hands of the assessee, but the assessee contended it was a deposit made by D. S. Imports. Despite the Revenue taking the view that the amount was undisclosed income, penalty proceedings were initiated against the assessee for violation of Section 269SS, which provides that loans or deposits in excess of Rs 20,000 should not be received in cash. On appeal, it was held by the Income-Tax Appellate Tribunal (ITAT) that the addition of Rs 3 lakh as undisclosed income cannot be sustained under Chapter XIVB of the Act. It was open to the Department to take action for reopening the assessments under Section 147 of the Act. Penalty proceedings under Section 271D were pending. The Revenue took up the matter in appeal to the High Court. Dismissing the appeal, the Delhi High Court pointed out that the Revenue could not, on the one hand, contend that the Rs 3 lakh is undisclosed income in the hands of the assessee and, at the same time, seek to initiate proceedings against the assessee for violation of Section 269SS which deals with cash deposits or loans in excess of Rs 20,000. Having taken the stand that the income was undisclosed income in the hands of the assessee, the Revenue cannot resort to proceedings under Section 269SS read with Section 271D. Since the block assessment was not sustained, penal action under Section 271D may be permissible (if at all) only after regular assessments are made. Similar views It is strange that the Revenue chose to blow hot and cold on the same facts. The ITO should decide before hand whether the amount represented a loan or undisclosed income. If it is a loan, it is easier to levy penalty. The same amount cannot represent both a loan and undisclosed income. Several Benches of the ITAT have taken the same view. This is basic common sense. There is this case of a Chennai-based film star who claimed that she had taken a loan from a political bigwig running into lakhs of rupees. The Supreme Court ruling went against the film star (ADIT vs Shanthi 255 ITR 258 SC). It pointed out that the undue hardship of Section 271D providing for a penalty is substantially mitigated by the inclusion of Section 273B providing that if there was a genuine and bona fide transaction and the taxpayer could not get a loan or deposit by account-payee cheque or demand draft for some bona fide reason, the authority vested with the power to impose penalty has a discretionary power not to levy the penalty. T. C. A. Ramanujam (The author is a former Chief Commissioner of Income-Tax.)
Home | About Us | Terms and Conditions | Contact Us
Copyright 2018 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - Careers

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions