Section 269SS does not apply to bona fide business cash receipts lacking any loan or deposit character.

Cash receipts arising from an ongoing business relationship were not treated as a loan or deposit where the record showed they were made to support commercial commitments during financial difficulty. The amounts were received in instalments below the statutory threshold, were reflected in the accounts of both parties, and there was no evidence of borrowing or deposit-taking. On those facts, the mischief targeted by section 269SS was not attracted, so the penalty for alleged contravention was set aside in favour of the assessee.

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Issues: Whether cash amounts received by the assessee in excess of Rs. 20,000 in the course of business dealings constituted a loan or deposit so as to attract section 269SS of the Income-tax Act, 1961 and justify penalty.

Analysis: The parties had a continuing commercial relationship in which the assessee manufactured goods exclusively for its sister concern. The cash receipts were not shown to be a loan or deposit, were made in several instalments below the statutory threshold, and were supported by the accounts of both parties. The material showed that the payments were made to sustain the business and meet commitments during financial difficulty, rather than as borrowing or deposit-taking. In the absence of evidence indicating a loan or deposit, the statutory mischief aimed at by section 269SS was not attracted.

Conclusion: The cash receipts did not constitute a loan or deposit and section 269SS was not attracted. The penalty imposed for alleged contravention was rightly set aside, in favour of the assessee.

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