CHAPTER - 15 Miscellaneous Provisions Section 2698S, 269ST, 269SU and 269T Question 1 Fearless General Finance & Investment Limited, a residuary non-banking company, accepts public deposits, issues deposit certificate and repays the same after some period of time along with interest, under different schemes run by it. Following transactions were noted from theirbooks of account: @ Gi) Mr. A, an individual, has deposited % 15,000 on 1* May, 2021 for 48 months by bearer cheque and another % 15,000 on 30" june, 2024 in cash to purchase a new certificate of 43 months tenure. Mr. has applied for premature withdrawal against both the certificates and the company has paid him Z 16,500, by a bearer cheque, against principal and interest on 23" March, 2025, due against his first certificate (purchased in 2021) and € 15,500 in cash on 25! March, 2025, against the second certificate. Discuss the violation of income tax provision, if any, and consequential penalty for each transaction. Will it make any difference ifthe certificates were held by Mr. A with his wife Mrs. A, jointly, while repaying back in cash or bearer cheque? Answer @ ‘There is no violation of section 2695S at the time of acceptance of the first deposit of T 15,000 by bearer cheque on 15.2021, since it is not in excess of the threshold limit of Z 20,000. However, violation under section 269SS is attracted at the time of acceptance of the second deposit in cash on 30" June, 2024, since as on that date, there is already an outstanding deposit of % 15,000 and another cash deposit of % 15,000 would take the aggregate to % 30,000, which exceeds the threshold limit of % 20,000. Therefore, penalty under section 271D of a sum equal to the amount of deposit taken from Mr. A is attracted for failure to comply with the provisions of section 2698S. In this case, there is a violation of the provisions of section 269T at the timo of first repayment by bearer cheque on 23" March, 2025, since on that date, the ageregate amount of deposits held by Mr. A with the non-banking company (together with interest payable on such deposits) is more than % 20,000. Therefore, penalty under section 271E equal to the amount of deposit so repaid will be attracted for failure to comply with the provisions of section 269T. However, the second repayment of € 15,500 on 25! March, 2025 in cash cannot be considered as a violation of section 269T, since neither the amount of deposit with interest thereon nor the aggregate amount of deposits held by Mr. A on that date together with interest exceeds the threshold limit of ¥ 20,000. ‘The provisions of section 269T will be attracted at the time of first repayment of bearer cheque even if the certificate is being held by Mr. A in jointname with his wife. BYCA ATUL AGARWAL (AIR-1) AIRICA Career Institute (ACI) Page 15.1‘Miscellaneous Provisions el Question 2 Mr. A an agriculturist has made an agreement to sell his 10 acres of agricultural land situated in a remote village at a price of € 1 lakh per acre to Mr. B, for constructing a farmhouse. Mr. A has received an advance of & 1 lakh by way of a crossed cheque. Later on, the agreement was rescinded as Mr. B could not pay the balance amount within the stipulated time as per the agreement. Mr. A returned the advance by a crossed cheque. The assessing officer has proposed to levy a penaky under section 27 1D on Mr. A. Examine the validity of the Assessing Officer's action. Answer Section 269SS prohibits acceptance of any advance of % 20,000 or more in relation to transfer of immovable property otherwise than by way of account payee cheque/bank draft or use of ECS through a bank account, whether or not the transfer has actually taken place. This provision will not be applicable in a case where both the payer and recipient have agricultural income and neither of them has any income chargeable to tax in India. In this case, Mr. A has accepted an advance of & 1 lakh by of a crossed cheque for transfer of immovable property, ie., agricultural land, which is in contravention of section 269SS. Further, the exemption from applicability of this provision would not be available even though Mr. A, recipient, has agricultural income because Mr. B, the payer of advance, is not having agricultural income. Accordingly, penalty under section 271D equal to the amount of such advance would be attracted. This is respective of Mr. A having returned the advance by a wossed cheque. However, such penalty can be imposed only by the Joint Commissi Accordingly, the proposed action for levy of penalty under section 271D by the Assessing Officer would be valid, only if the Assessing Officer is a Joint Commissioner. If he is not 2 Joint Commissioner, the proposed action for levy of penalty under section 27 1D would not be valid. Question 3 Mr. B proposes to purchase for his business, certain raw materials from Mr. S. In view of the scarcity of the products, $ insists on cash payments for the purchases, to which B agrees. On 27.3.2025, the purchases are offected through a cash invoice for & 3,20,000. In respect of the above transactions, will there be any detrimental effect in the hands of B and $ under the provisions of the Income-tax Adt, 1961? Explain briefly. Will your answer be different, ifthe cash purchases are effected by the buyer B on two different dates for different raw materials for 1,80,000 and % 140,000 respectively? Answer (1) Where purchases are effected through cash invoice of 7 3,20,000 @__ Inthehandsof Mr. B Since Mr. B is making cash payment of € 3,20,000 for purchase of raw materials from Mr. 8 for his business, disallowance under section 40A(3) would be attracted, since the payment otherwise than by way of account payee cheque or bank draft or use of ECS BYCA ATUL AGARWAL (AIR-1) AIRICA Career Institute (ACI) Page 15.2Miscellaneous Provisions el through abank account to aperson ina day exceeds % 10,000. Accordingly, % 3,20,000 would notbe allowable as deduction while computing his business income. (i) Inthehandsof Mr. Section 269ST prohibits, inter alia, receipt of an amount of % 2 lakh or more in aggregate from a person in a day otherwise than by way of account payee cheque or account payee bank draft or use of ECS through a bank account. If any person receives any sitm in contravention ofthe provisions of section 269ST, he shall be liable to pay penalty under section 271DA of a sum equal to the amount of such receipt. In this case, since S has received % 3,20,000 by way of cash from Mr. Bon 27.3.2025, he has violated the provisions of section 269ST, and hence, is liable to pay penalty of T 3,20,000 under section 271DA. (@) Where cash purchases of ¥ 1,80,000 and % 1,40,000 are effected in respect of different raw materials on two different dates ©) InthebandsofMn i Even if cash payment of ¢ 1,80,000 and Z 1,40,000 are made by Mr. B on two different dates for different raw materials, disallowance under section 40A(3) would be attracted, since the paymentin cash in a day to Mr.S exceeds 10,000. Gi) Inthehandsof Mrs If $ receives cash of % 1,80,000 and % 1,40,000 on two different dates, for purchase of different raw materials, there would be no violation of section 269ST since receipt on. a day is less than % 2 lakh and the receipts are not in respect of the same transaction but for purchase of different raw materials. Hence, provision of section 271DA shall not be attracted. Question 4 Rose Ltd,, an Indian Company engaged in trading of electronic appliances through retail stores al aqvoss India, reported a total tumnover of £75 cores during the previous year 2023-24 and % 49 crores during the previous year 202425. The customers who purchase appliance from its stores can pay only through cash, cheque, credit card or debit card. Discuss the relevant provisions of the Act with resp ect to relevant compliances that should have been ensured by Rose Lti. and in the absence of such compliances, what will be the amount of penalty, if any, that can be levied on Rose Ltd. Answer As per section 2698 U, Rose Ltd. is required to provide facility for accepting payment through the prescribed electronic modes, in addition to the facility for other eledronic modes of payment of debit card or credit card provided by Rose Lti., since its total turnover in business during the immediately preceding previous year. ie,, P.Y. 2023-24 ist 75 crores, which exceeds the prescribed threshold of 850 crores. Prescribed electro (1) _ Debit Card powered by RuPay; (2) _ Unified Payments Interface (UPI) (BHIM-UPN; and BYCA ATUL AGARWAL (AIR-1) AIRICA Career Institute (ACI) modes are Page 15.3Miscellaneous Provisions ey G) Unified Payments Interface Quick Resp onse Code (UPI QR Code) (BHIM-UPI QR Code). ‘The failure to provide facility for electronic modes of payment prescribed under section 269SU by Rose Ltd. would attract a penalty under section 271DB of a sum of 5,000, for every day during which such failure continues. However, penalty shall not be imposed, if Rose Ltd. proves that there were good and sufficient reasons for such failure. Further, any such penalty shall be imposed by the Joint Commissioner. Provisional Attachment to Protect the Interest of Revenue (Section 2815) Question 5 Explain the circumstances under which the Assessing Officer can resort to provisional attachment of the property of the assessee. Also, state the period of time for which such attachment can take place. ‘When can the Assessing Officer revoke provisional assessment of property? Answer As per the provisions of section 2818, there can be provisional attachment to protect the interest of Revenue in certain cases, @ The proceeding for the assessment of any income or for the assessment or reassessment of any income which has escaped assessment or for imposition of penalty under section 271AAD (Penalty for false entry ote. in books of accounts) where the amount or aggregate of amounts of penalty likely to be imposed under the said section exceeds % 2 crores should be pending. Gi) Such attachment should be necessary for the purpose of protecting the interest of Revenue in the opinion of the Assessing Officer. Gi) The previous approval of the Principal Chief Commissioner or Chief Commissioner, Principal Commissioner or Commissioner, Prindpal Director General or Director General or Principal Director or Director hasbeen obtained by the Assessing Officer. (iv) The Assessing Officer, may, by an order in writing attach provisionally any property belonging to the assessee in the manner provided in the Second Schedule. (¥) Such provisional attachment shall cease to have effect after the expiry of a period of six months from the date of order made under section 281B(1). However, the period can bo extended bythe Principal Chief Commissioner or Chief Commissioner, Principal Commissioner or Commissioner, Principal Director General or Director General or Principal Director or Director, as the case may be, for the reasons to be recorded in writing for a further period or periods as he thinks fit. The total period of extension in any case cannot exceed 2 years or 60 days after the date of order ofassessment or reassessment, whichever is later. ‘The Assessing Officer shall, by order in writing, revoke provisional attachment of a property made under section 281B(1) in a case where the assessee furnishes a guarantee from a scheduled bank, for an amount not less than the fair market value of such provisionally attached property or for an amount which is sufficient to protect the interests of the revenue. BYCA ATUL AGARWAL (AIR-1) AIRICA Career Institute (ACI) Page 15.4‘Miscellaneous Provisions el Question 6 ‘The regular assessment of Ms. Swati for the A.Y. 2023-24 was completed u/s 143(3) on 31.12.2024. On 18.03.2025, she received a notice issued u/s 148 for income escaping assessment for the same AY. 2023-24, Further, during the pendency of such proceeding for income escaping assessment, the A.O.attaches the house property of Ms. Swati. Now, aggrieved Swati seeks your opinion (being a Chartered Accountant) as to: @ The circumstances under which A.O. can make provisional attachment of property of assessee. (i) The period of time for which such attachment can take place. Gi) Can such attachment berevoked bythe A.O. and if yes, how? Discuss the relevant provisions of lawto satisfy the aggrieved assessee, Ms. Swati. Answer (As per section 2818(1), the Assessing Officer is empowered to provisionally attach any property of Ms. Swati, by an order in writing, during the pendency of assessment or reassessment proceedings, with the prior approval of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner or Principal Director General or Director General or Principal Director or Director, if he is of the opinion that it is necessary to do so for the purpose of protecting the interests of the revenue. (ii) As per section 2818(2), the provisional attachment shalll be valid for a period of 6 months from the date ofthe order issued for provisional attachment. However, the income-tax authority may extend the period of provisional attachment, for reasons tobe recorded in writing, by a further period as hethinks fit. However, the total period of extension shall not exceed two years or sixty days after the date of assessment or reassessment, whichever is later. (iii) Section 281B() empowers the Assessing Officer to revoke, by an order in writing, provisional attachment of property if Ms. Swati furnishes a guarantee from a scheduled bank, for an amount not less than the fair market value of such provisionally attached property or for an amount which is sufficient to protect the interests of the revenue. Question 7 As per Income Tax Act, the Assessing Officer is empowered to provisionally attach any property of the assessee if he is of the opinion that it is necessary to do so for the purpose of protecting the interests of the revenue. Can the Assessing Officer revoke Provisional attachment of property if the assessee furnishes a bank guarantee. If yes, from whom and to what extent of value of the Bank guarantee needs to befurnished as per law. Is the Assessing Officer empowered ta invoke such Bank guarantee under any circumstances? Answer Yes, as per section 281B(3), the Assessing Officer can, by order in writing, revoke provisional attachment of a property made u/s 281Bin a case where the assessee furnishes a guarantee. BYCA ATUL AGARWAL (AIR-1) AIRICA Career Institute (ACI) Page 15.5‘Miscellaneous Provisions el Such bank guarantee should be froma scheduled bank and for an amount not less than the fair market value of such provisionally attached property or for an amount which is suffident to protect the interests of the Revenue. ‘The Assessing Officer is empowered to invoke bank guarantee in the following circumstances - @_— Where a notice of demand specifying a sum payable is served upon the assessee and the assessee fails to pay such sum within the time specified in the notice of demand, the Assessing Officer may invoke the bank guarantee, wholly or partly, to recover the said amount, Gi) In a case where the assessee fails to renew the bank guarantee or fails to furnish a new guarantee from a scheduled bank for an equal amount, fifteen days before the expiry of such guarantee, the Assessing Officer shall, in the interests of revenue, invoke the bank guarantee. Question 8 During the pendency of reassessment proceedings, the Assessing Officer has provisionally attached the property of the assessee, Mr. Malhothra in accordance with powers vested under section 281B of the Income-tax Act, 1961. The fair market value of the said property is ¥ 90 lakhs. Mr. Malhothra proposes to furnish bank guarantee to the tune of € 90 lakhs in liew of provisional attachment of property and approached the AO to revoke the attachment, AO refused such proposal. Answer the following issues in the context of relevant provisions of the Act: @ Whether AO can refuse to accept bank guarantee, if not, is it mandatory on his part to pass revocation order forthe provisional attachment of property? Gi) Specify drcumstan cos under which the AO is empowered to invoke the bank guarantee. Answer (@ Since Mr. Malhotra proposes to furnish a bank guarantee froma scheduled bank for an amount equal to the fair value of the property, the Assessing Officer has to revoke provisional attachment of property. In such situation, as per section 2818, the Assessing Officer cannot refuse to accept bank guarantee, and has to mandatorily pass an order in writing revoking the provisional attachment of property. (ii) The Assessing Oificer can invoke the bank guarantee in the following two circumstances - (2) Eailum to pay - Where a notice of demand specifying a sum payable is served upon Mr. Malhotra, and he fails to pay such sum within the time specified in the notice of demand: @) Eailure to renew - Where Mr. Malhotra fails to renew the bank guarantee or fails to furnish a new guarantee from a scheduled bank for an equal amount 15 days before the expiry of such guarantee. Question 9 Mr. Biswas, a stock broker, has defaulted with regard tohis income-tax payments and the Assessing Officer has attached his membership card of Stock Exchange under section 281B of the Income-tax Act, 1961. Mr. Biswas contends that the membership card is not transferable and is not his personal asset. Discuss the validity of attachment of card by Assessing Officer in the context of Section 281B. BY CA ATUL AGARWAL (AIR-1) AIRICA Career Institute (ACI) Page 15.6Miscellaneous Provisions ey Answer ‘The right of membership is not a private asset and it is merely a personal privilege granted to the member. It is non transferable and incapable of alienation by the member or his legal representative except to the limited extent provided in the rules and regulations of the stock exchange and subject to the fulfillment of conditions prescribed by the stods exchange. The nomination, even if permitted, is subject to the rules and is not automatic. The right of nomination is vested in the stock exchange absolutely in the case of death of or default of a member. Thus, the membership card is not the property of the assessee and therefore cannot be attached under section 281B. It has been so held by the Apex Court in the case of Stock Exchange Ahmedabad vs. ACIT (2001) 248 ITR 209. Statement of Finan 1 Transaction or Reportable Account (Section 285BA) Question 10 Comment whether the following transactions, undertaken during the financial year 2024-25, are required to be reported under the Statement of Financial Transaction or Reportable Account as required u/s 285BA of the Income-tax Act, 1961. Please give your answer alongwith suitable reasons and Category of Reporting Person @)_ Mr.A purchased five bank drafts of € 3 lakh each from his current A/ewith State Bank of India, Jaipur, ©) Ms. Qmade twotime deposits with Canara Bank, Jaipur - (a) a time deposit of 7 lakhs made on 7.8.2024 and (b) Renewal of Time deposit of Z 5 lakhs originally made on 1.1.2024 and renewed on 1.1.2025; (© Ms.Cmade following payments in respect of credit card payments- * Forthe months of April to July, 2024 | - | 19,500 for each month, in cash * Forthe months of Aug. to Dec, 2024 | - %59,500 for each month, through bank A/c + Forthe months of Jan to Mar, 2025 | - 13,300 for each month, in cash (@_ Mr. Zpurchased garments of € 2 lakhs in cash from M/s Arora Designers on the occasion of his marriage. M/s Arora Designers is liable for audit u/s 44AB of the Income-tax Act, 1961. Answer @) __ State Bank of India, Jaipur, is not required to report value of bank drafts purchased by Mr. A, oven though aggregate value of such bank drafts io, % 15 lakhs, exceed = 10 lakhs in the FY.2024-25, since such bank drafts are purchased from his current A/c and not in cash. ©) Canara Bank, Jaipur is not required to report time deposits made by Ms. Q, since the value of time deposits other than time deposit renewed on 1.1.2025 is only % 7 lakhs, and hence, does not aggregate to f 10 lakhs or more in the FY.202425. (© The bank or institution issuing credit card is required to report cash payment made by Ms. C in respect of credit card, since aggregate cash payments of % 1,17,900 (& 19,500 x 4+ 13,300 x3) exceeds € 4 lakh in the FY202425. However, payment of € 59,500 for each month from August 2024 to December 2024 need BYCA ATUL AGARWAL (AIR-1) AIRICA Career Institute (ACI) Page 15.7Miscellaneous Provisions ey not be reported by such bank or company or institution since, aggregate value of such transactions, being ¥ 2,97,500, is less than 10 lakhs. (@ _ Payment of 2 lakhs by Mr. Z is not required to be reported by M/s Arora Designers, since receipt of cash payment against sale of garments from Mr. Z does not exceed € 2 lakhs. Other Miscellaneous Question 11 “Proceedings cannot be initiated under the Act, unless a proper notice to this effect has been served upon." In this context answer: (@_ What are the prescribed modes of service of such notice? (i) On whom should the notice be addressed and served upon in the cases where the assessee Isa dissolved firm, a deceased person and a partitioned HUF, Answer (@ As per section 282(1), the service of notice or summon or requisition or order or any other communication under this Act may be made by delivering or transmitting a copy thereof to the person named therein - ()__ bypost or such courier services as approved bythe CBDT; or (@)_ imsuch manner as provided in the Code of Civil Procedure, 1908 for the purposes of service of summons; or (@)_ im the form of any electronic record as provided in Chapter IV of the Information Technology Act, 2000; or (@_ byanyother means of trans the CBDT in this behalf. ‘The CBDT is empowered to make rules providing for the addresses (including the address for electronic mail or electronic mail message) to which such communication may be delivered or transmitted to the person named therein. mn of documents as may be provided by rules made by ‘The service of notice in the given cases should be on the persons mentioned hereunder: Person Notice to be addressed and served on A dissolved firm | Any person who was a partner (not being a minor) immediately before dissolution. ‘A deceased person | The legal heirs of the deceased. ‘A partitioned HUF | Last Manager of the HUF, or, if he is dead, then, all adult members of the erstwhile HUF. Question 12 ‘The proceedings before the Income-tax Authorities either can be attended by the assessee in person or through an authorized representative. Who can be treated as an authorized representative of the BYCA ATUL AGARWAL (AIR-1) AIRICA Career Institute (ACI) Page 15.8Miscellaneous Provisions ey assessee? Mention any five persons who can be treated as an authorized representative of assessee. Answer As per section 268, the proceedings before the in come-tax authorities can be attended by an assessee in person or through an authorised representative, ie, a person authorized by the assestee in writing to appear on his behalf, being - @__aperson who isa relative or a regular employee of the assessee; or Gi) any officer of a Scheduled Bank in which the assessee maintains a current account or has other regular dealings; or Gi) a legal practitioner who is entitled to practisein any dvil court in India; or (iv) a chartered accountant within the meaning of the Chartered Accountants Ad, 1949 who hold avalid certificate of practice; or (¥) any person who has passed any accountancy examination recognized in this behalf by the CBDT for this purpose. Question 13 An order for A.Y. 2025-26 was passed by the Assessing Officer as per section 143(3), but the typist wrongly typed in the order, the assessment year as A.Y2024-25 and the relevant previous year as ending on 31,3.2024. The assessee daimed in appeal that the same is aninvalid order which was not accepted by the CIT (Appeals) on the ground of the error being of derical nature. Discuss the correctness of the order of the CIT(Appeals). Answer Section 292B provides that no return of income, assessment, notice or summons furnished or made or issued or taken in pursuance of any of the provisions of the Income-tax Act, 1961 shall be invalid or deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment or notice etc, if such return of income, assessment, notice, summons etc is in substano» and effoct in conformity with or according to the intent and purpose of the Ad. Therefore, a clerical mistake cannot invalidate an otherwise valid assessment. Thus, the typographical error in the assessment order as to assessment year and previous year does not make the same invalid unless established otherwise. Accordingly, the action of the CIT(Appeals) in not accepting the claim of the assessee is valid. BYCA ATUL AGARWAL (AIR-1) AIRICA Career Institute (ACI) Page 15.9