Learner (XYZ) 13 December 2010

Regarding applicability of 269SS of Income Tax Act.

A party claims to have given Rs. 75,000/- loan, in cash, three years ago on a Monday, on Pronote and now have filed for suit of recovery on basis of the same.

The defendant is doing a govt. job on contract basis and the plaintiff is a big farmer, doing some side businesses too.

The defendant is denying any such loan.

Now, do the provisions of Sec. 269SS of tax act affect the plaintiff? As a pressure tactics, should a complaint be made to tax department? What would be the penalty?

Any other information regarding the applicability of sec 269SS in such cases?

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3 Replies

Anshul (Legal Associates) 13 December 2010

Dear XYZ,

According to the Income Tax Act 269SS "No person shall , after the 30th day of June ,1984, take or accept from any other person (hereafter in this section referred to as the depositor), any loan or deposit other wise than by an account payee cheque or account payee bank draft.

First In this matter providing loan cash more than 20,000 is invalid. and

Secondly in this matter the burden of proof is on plaintiff not on defendant.

Vineet (Director) 26 December 2010

The provisions of section 269SS apply to rceipient of cash loan. In this case receipient is denying any loan, so there is no chance of invoking this provision. No case is made out against plaintiff.

An income tax evasion case could be made out against plaintiff regarding source of cash which he claims to have advanced to defendant. However, the same is very week in your own admission, him being a big farmer who would easily link the same to exempt agricultural income.

Rajesh Thakker (Advocate) 01 January 2011

Your case is against the recovery of loan amount of Rs. 75000. The said amount was given against a promissiory note. Therefore, you have to prove the said promissory note. The sec 269SS is applicable only for Income tax matter and not for civil suite. The sec 269SS prohibit to accept the loan. Therefore, there is no ban to give the amount in cash for loan. If any person make the complaint to Income-tax department, the sec will not hit your client but hit to defendant.