Section 271D Of The Income Tax Act

Section 271D of the Income Tax Act specifies the penalty that will be imposed on a taxpayer who accepts or takes loans, deposits, or other specified amounts in violation of Section 269SS. All loans or deposits over Rs.20,000 must be made through banking channels, according to Section 269SS. In this post, we will go over Section 271D of the Income Tax Act in depth.

Section 271D:

(1) If a person takes or accepts any loan, deposit, or specified sum in violation of the provisions of section 269SS, he is responsible to pay a penalty equivalent to the amount of the loan, deposit, or specified sum so taken or accepted.

(2) The Joint Commissioner is the person who imposes any penalty imposed under subsection (1).

The term “specified sum” in the preceding lines refers to any sum of money receivable, whether as an advance or otherwise, regarding the transfer of immovable property, whether or not the transfer occurs.

Section 271D Of The Income Tax Act

Section 269SS:

Section 269SS lays out the procedures for accepting loans, deposits, and specified sums. It specifies that an assessee is prohibited from taking or accepting the stated transactions other than by account payee cheque, account payee bank draught, or electronic clearing system in the following circumstances:-

  • The loan, deposit, or stipulated amounts are greater than Rs.20,000.
  • Loans, deposits, or specified sums previously availed or received have not been settled.
  • The amount of aggregate specified in the first clause, combined with the amount of aggregate specified in the second clause, equals or exceeds Rs. 20,000.

This section’s provisions would not apply to: 

  • The Government
  • Any financial institution, post office savings bank, or co-operative bank
  • The creation of a Central, State, or Provincial Act.
  • Any government agency.
  • Any notified institution, association, entity, or institution class named in the Act.

Furthermore, this clause is inapplicable if the parties to the transaction are receiving agricultural income and neither is taxable under the Act.

Penalty Amount

In the event of a default under Section 271B, an assessee will be fined with an amount equal to the loan or deposits taken or accepted.

Penal Procedures Restrictions for Penalty

The Supreme Court has clarified that the provisions of Income Tax Act sections 271-D and 271-E cannot be applied after a stipulated limitation period. The term of limitation under this section would be the end of the fiscal year in which the penalty proceedings under this section were concluded, or 6 months from the end of the month in which the penalty procedures were commenced, whichever time expires later. The statute of limitations will not be extended based on the status of an appeal against an assessment or other order listed in Section 275(1)(a) of the Act.