Cash loan treated as income? Breach of loan-acceptance rules attracts penalty, not automatic conversion into taxable income.

A receipt accepted on the Revenue's own premise as a cash loan cannot simultaneously be treated as taxable income merely because the loan was received in contravention of Section 269SS of the Income-tax Act, 1961. The statutory scheme addresses such non-compliant acceptance through the specific penalty provision under Section 271D. The legal point is that violation of the prescribed mode of accepting a loan does not change the receipt's character into assessable income. The notes state that, on this reasoning, the disputed addition was considered unsustainable and removed in favour of the assessee.

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Issues: Whether an amount treated by the Revenue itself as a cash loan received by the assessee could nevertheless be added as taxable income in the reassessment.

Analysis: The assessment proceeded on the basis that the assessee had received a cash loan of Rs. 10,00,000/-. Once the character of the receipt was accepted as a loan transaction, its consequence under the statutory scheme was confined to the penal provision governing acceptance of cash loans in violation of Section 269SS of the Income-tax Act, 1961, for which Section 271D provides the specific remedy. The same receipt could not, on that accepted factual premise, be simultaneously treated as taxable income. Mere violation of the mode of acceptance of a loan does not by itself convert the loan amount into assessable income.

Conclusion: The addition of Rs. 10,00,000/- was unsustainable in law and was deleted; this issue was decided in favour of the assessee.

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