I appreciate the answer given by Bhavin Bhadra, Articled Clerk which is based on his practical experience. Articled clerks should try to give answer. If something wrong is (t)here ; it would be rectified here.
Sec. 269SS : Acceptance of loans of Rs.20,000 or more otherwise than account payee cheque or draft.
Sec. 269T : Repayment of loans of Rs.20,000 or more otherwise than account payee cheque or draft.
These provisions are applicable to all without only restrictions to tax audit cases.
In Tax audits; these are specifically to be reported.
Once the amount of loan reaches or crosses Rs.20,000; no further loan should either be taken or repaid otherwise than by account payee cheque or bank draft.
For example; one can take loan of Rs.19,999/- in cash (Not Rs.20,000/-). The next amount he cannot take otherwise than the modes described above.
Similarly; if the amount of loan crosses Rs.19,999/- the repayment must be made only through account payee cheque or draft.
If one does not follow the provisions of these sections-
A PENALTY EQUAL TO THE AMOUNT OF THE LOAN IS LEVIABLE
by the Income-Tax Department.
If loan is repaid in cash to the Bank, Govt., Govt. Co., and SMCs. etc.; then these provisions are not applicable.