INCOME TAX ACT, 1961

Section 271D

Penalty under section 271D - Contravention of provisions of section 269SS - Both creditor and borrower being agriculturist -

AO noticed that assessee took a loan in cash. As the assessee made contravention of provisions of section 269SS for accepting loan exceeding Rs. 20,000 otherwise than by an account payee cheque or bank draft, the AO levied penalty under section 271D, which was further confirmed by CIT(A). Assessee contended that as he and creditor both were agriculturist, therefore, the provisions of section 269SS were not attracted and hence, the penalty under section 271D would not be leviable in his case.Held: Second proviso to section 269SS lays down that the provisions of this section shall not apply to any loan or deposit or specified sum, where the person from whom the loan or deposit or specified sum is taken or accepted and the person by whom the loan or deposit or specified sum is taken or accepted, are both having agricultural income and neither of them has any income chargeable to tax. In instant case, the contention of the assessee that since the creditor had given the loan from his agricultural income and the borrower, i.e., the assessee was also engaged in agricultural activity, therefore, the provisions of section 269SS would not be attracted, had not been verified by AO as well as by CIT(A). Accordingly, the matter was remanded to the AO for proper adjudication.

REFERRED :

FAVOUR : Matter remanded.

A.Y. :

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