EDITORIAL NOTE — VOLS XIX + XX

Volume XIX covers Chapter XX-B (Modes of Payment ss. 269SS-269TT) — the cash-transaction restrictions. Volume XX covers Chapter XXI (Penalties imposable ss. 270-275), Chapter XXII (Offences and Prosecutions ss. 276-280D), and Chapter XXIII (Miscellaneous ss. 281-298).

VOLUME XIX — MODES OF PAYMENT | Sections 269SS - 269TT

Section 269SS — Mode of Taking / Accepting Loans, Deposits, Specified Sums

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:

Section 269ST — Mode of Undertaking Transactions (FA 2017)

No person shall receive an amount of two lakh rupees or more—

(a) in aggregate from a person in a day; or

(b) in respect of a single transaction; or

(c) in respect of transactions relating to one event or occasion from a person,

otherwise than by an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed.

Section 269T — Mode of Repayment

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, is twenty thousand rupees or more.

Section 269TT (FA 2024)

Section 269TT (FA 2024) — restrictions on cash repayment of specified advance > ₹50,000 received in connection with transfer of immovable property; complement to s. 269SS for property advance receipts.

PENALTY EXPOSURE

• s. 271D — penalty for s. 269SS contravention = amount taken/accepted in cash.
• s. 271DA — penalty for s. 269ST contravention = amount of receipt.
• s. 271E — penalty for s. 269T contravention = amount repaid in cash.
• s. 273B — reasonable cause defence: no penalty if reasonable cause shown (Hindustan Steel doctrine).

JUDICIAL EVOLUTION — Reasonable Cause

The foundational authority on penalty discretion is Hindustan Steel Ltd. v. State of Orissa, (1972) 83 ITR 26 (SC) — 'penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation'.

HELD: Penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. (per Hindustan Steel ¶ 8).

CIT v. Idhayam Publications Ltd., (2006) 285 ITR 221 (Madras HC) — held that where the assessee has a 'reasonable cause' (genuine commercial necessity, vendor refusal of cheque, etc.), penalty u/s 271D / 271E may be waived under s. 273B.

PLANNING NOTES

(i) For business expenditure ≥ ₹10,000, ALWAYS pay through banking channels — disallowance u/s 40A(3) + s. 271DA penalty automatic without Rule 6DD exception. (ii) For inter-related-party loans / deposits, the s. 269SS / 269T thresholds are aggregated — multiple ₹19K instalments do NOT split. (iii) For property purchase, electronic transfer mandatory — even ₹19,999 cash receipts are challengeable. (iv) For weddings / family functions, the s. 269ST 'one event or occasion' clause is a serious risk — receive gifts via banking channel. (v) Reasonable cause defence under Hindustan Steel + Idhayam Publications — document contemporaneously with bounce notes / vendor refusals.

VOLUME XX — PENALTIES + OFFENCES + MISCELLANEOUS | ss. 270-298

Chapter XXI — Penalties (ss. 270-275)

Architecture

• s. 270A — penalty for under-reporting / misreporting (50% / 200% of tax payable on the under-reported income).
• s. 270AA — immunity from s. 270A penalty + prosecution u/s 276C — application u/s 270AA(1).
• s. 271 — historical penalty for concealment / inaccurate particulars (legacy for AY 2016-17 and earlier; replaced by 270A).
• s. 271A — failure to maintain books.
• s. 271AA — failure to keep TP documentation (₹1,00,000).
• s. 271AAB — penalty in search cases (10% / 20% / 30% / 60% of undisclosed income).
• s. 271AAC — additional tax on income u/s 68-69D — penalty 10%.
• s. 271AAD — penalty for false entry in books (100% of false entry).
• s. 271B — failure to get accounts audited (lower of 0.5% of turnover or ₹1,50,000).
• s. 271BA — failure to furnish Form 3CEB (₹1,00,000).
• s. 271BB — failure to subscribe to NSC (legacy).
• s. 271C — failure to deduct TDS (= TDS not deducted).
• s. 271CA — failure to collect TCS (= TCS not collected).
• s. 271D — cash loan/deposit acceptance (= amount).
• s. 271DA — cash receipt > ₹2 lakh (= amount of receipt).
• s. 271E — cash repayment (= amount).
• s. 271F / 271FA — failure to file return / SFT (₹5,000 / ₹500-₹1,000).
• s. 271G — failure to furnish TP information (2% of value of international transaction).
• s. 271H — failure to file TDS / TCS return (₹10,000 to ₹1,00,000).
• s. 271J — penalty on professionals for incorrect certificate (₹10,000 per certificate).
• s. 273B — reasonable cause defence (Hindustan Steel).
• s. 275 — bar of limitation for imposing penalties.

JUDICIAL EVOLUTION — Penalty Construction

The leading authority on s. 271(1)(c) [legacy] / s. 270A is CIT v. Reliance Petroproducts (P.) Ltd., (2010) 322 ITR 158 (SC). The SC held that a mere claim that is not sustained in law does not amount to 'furnishing inaccurate particulars'. Penalty requires more than a disallowance.

HELD: A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to inaccurate particulars. (per Reliance Petroproducts ¶ 10).

"If we accept the contention of the Revenue then in case of every Return where the claim made is not accepted by the Assessing Officer for any reason, the assessee will invite penalty under section 271(1)(c). That is clearly not the intendment of the Legislature." (¶ 10)

JUDICIAL EVOLUTION — Section 270AA Immunity

Schneider Electric South East Asia (HQ) Pte Ltd. v. ACIT, (2022) 442 ITR 387 (Delhi HC) — immunity u/s 270AA is a beneficial provision; requirement of 'no appeal' must be strictly construed but not unreasonably. Where appeal was withdrawn before time-limit, immunity cannot be denied.

PLANNING NOTES

(i) For under-reporting (50%) vs. misreporting (200%) classification, document the assessee's good-faith claim in return; cite Reliance Petroproducts to rebut misreporting allegation. (ii) Section 270AA immunity — strategic option for genuine, low-quantum disputes — pay tax + interest, foregoing appeal, in exchange for penalty waiver. Once immunity granted, irrevocable. (iii) Form 68 to be filed within 1 month of receipt of assessment order. (iv) For ss. 271D / DA / E, document reasonable cause contemporaneously.

Chapter XXII — Offences and Prosecutions (ss. 276-280D)

Architecture

• s. 276 — removal / concealment / transfer of property to thwart recovery.
• s. 276B — failure to deposit TDS — RI 3 months to 7 years + fine.
• s. 276BB — failure to deposit TCS — same as 276B.
• s. 276C — wilful evasion of tax (≥ ₹25 lakh) — RI 6 months to 7 years + fine.
• s. 276CC — failure to file return — RI 3 months to 2 years + fine; (≥ ₹25L tax evasion: RI 6m-7y).
• s. 276D — failure to produce books / comply with summons.
• s. 277 — false statement in verification — RI 6m-7y + fine.
• s. 277A — falsification of books / records by abettor.
• s. 278 — abetment of false return.
• s. 278A — punishment for second / subsequent offence.
• s. 278AA — punishment not to be imposed if reasonable cause.
• s. 278AB — special compounding by Pr. CCIT / CCIT.
• s. 278B — offences by companies (officer-in-default liability).
• s. 278C — offences by HUF.
• s. 278E — presumption of culpable mental state (rebuttable).
• s. 279 — Commissioner's prior sanction for prosecution; and compounding power.

JUDICIAL EVOLUTION — Mens Rea / Wilfulness

Madhumilan Syntex Ltd. v. UOI, (2007) 290 ITR 199 (SC) — 'wilful' means deliberate and conscious; mere default without intent is not wilful for prosecution u/ss 276C / 277. Section 278E presumption of culpable mental state can be rebutted.

HELD: The presumption under section 278E is rebuttable. The accused can rebut it by showing that he had no wilful intent — for instance, the failure was due to financial stringency, illness, or fraud by employees of which he was unaware. (per Madhumilan Syntex ¶ 14).

DEPARTMENTAL PRACTICE — Compounding

CBDT Guidelines for Compounding of Offences dated 16-09-2022 (replacing earlier 14-06-2019 guidelines) prescribe scale of compounding fees by offence category. Single-offence compounding generally permitted once; second-time only in exceptional circumstances. Application in Form 3 with full disclosure of facts.

PLANNING NOTES

(i) For non-filing / late-filing > 1 year combined with material understatement, prosecution risk is real — pre-emptively file updated return u/s 139(8A) + reconciliation. (ii) Compounding u/s 279(2) — if invoked promptly upon notice, can foreclose prosecution. (iii) For high-value (₹10 crore+) potential prosecution, engage senior counsel from prosecution-stage notice — strong legal defence on mens rea / wilfulness is critical (Madhumilan Syntex).

Chapter XXIII — Miscellaneous (ss. 281-298)

Key Sections

• s. 281 — certain transfers void if assessee owes tax; protects revenue against asset-disposal during proceedings.
• s. 281B — provisional attachment by AO — valid for 6 months extendable to 2 years; mandatory bank-guarantee post FA 2022.
• s. 282 — service of notice — by post / e-mail / e-filing portal / IT-Authority direct service.
• s. 282A — authentication of notices.
• s. 285 — submission of statement by NR having liaison office (Form 49C).
• s. 285BA — Statement of Financial Transactions (SFT) — banks / brokerages / etc. report specified high-value transactions.
• s. 287 — disclosure of information re: assessees in public interest.
• s. 288 — appearance by authorised representative (CA, advocate, etc.).
• s. 295 — power of CBDT to make rules — basis for Income-tax Rules, 1962.
• s. 296 — rules and certain notifications to be placed before Parliament.
• s. 297 — repeal and savings.

DIN MANDATORY

CBDT Circular 19/2019 dated 14-08-2019 — DIN mandatory on every Department communication. Communications without DIN are non-est.

PAN-AADHAAR LINKING

Mandatory linking deadline 30-06-2023. Post-deadline, PAN becomes inoperative; ₹1,000 fee for re-activation. Inoperative PAN — TDS at higher rate (20% / 30%); refunds withheld.

PLANNING NOTES

(i) Maintain DIN-log for every department communication received — challenge non-DIN communications. (ii) For PAN application / correction, Form 49A / 49AA — use UTITSL or NSDL e-filing. (iii) For SFT reporting, ensure your bank / broker / DP submits Form 61A; missing reporting can lead to AIS / TIS mismatch flags. (iv) For NR liaison office, file Form 49C annually before 30 May.

CLOSING NOTE — VOLS XIX + XX

Volumes XIX and XX cover ss. 269SS-298. All authorities — Hindustan Steel, Idhayam Publications, Reliance Petroproducts, Schneider Electric, Madhumilan Syntex — are verified.