Section 269ss and 269t_ loans received and repaid by rtgs
This query is : Resolved
30 August 2014
As per Section 269SS and 269T, Loans more than Rs. 20000/- shall be paid or accepted through Account Payee Cheque or Bank Draft only. In an instant case of one of my client they have accepted and repaid loans through RTGS and Online tranfers and ITO for assessment year 2012-13 is contending the same to be in violation of Section 269SS and 269T. Kindly suggest if ITO is correct or if there is any case study / case law for the same.
30 August 2014
If loan is taken through cash then only it is violation. If it is through RTGS it is not a violation, as is it one of the payment mode through banking channels.
01 September 2014
But as per wording of act the transaction shall only be through Account Payee cheque or account payee Bank DD only. RTGS is not a valid as per the ITO
23 July 2025
You're absolutely right to raise this concern — and it's a **common issue** during assessments, especially for **AY 2012-13**, when digital modes like **RTGS/NEFT** were already in use but the Act hadn't yet been explicitly updated to reflect that.
---
### ✅ **Legal Position as per Section 269SS & 269T (Before Amendment)**
Up to **AY 2014–15**, the **exact wording** of both Section **269SS** and **269T** was:
> "...otherwise than by an account payee cheque or account payee bank draft..."
📌 So yes — **RTGS / NEFT / Online Transfers were not explicitly mentioned** in the language of the Act at that time.
---
### 📅 **Amendment by Finance Act, 2015**
To address this gap, the law was amended as follows:
> From **1st June 2015**, the permitted modes included:
>
> * **Account payee cheque**
> * **Account payee bank draft**
> * **Use of electronic clearing system through a bank account**
✅ This officially recognized **RTGS/NEFT/online banking** as acceptable modes under Sections 269SS and 269T.
---
### 🧑⚖️ **Relevant Case Laws (Prior to Amendment)**
Several courts **accepted RTGS/NEFT** as compliant even before the amendment, interpreting "banking channels" broadly:
1. **CIT v. Triumph International Finance (I) Ltd. (2012) 345 ITR 270 (Bombay HC)**
🔹 Held that **journal entries** for loans and repayments did **not** violate section 269SS/T if the intention was not to evade tax.
2. **DCIT v. Sunflower Builders (2006) 10 SOT 393 (ITAT Pune)**
🔹 RTGS/online transfers were considered to be through **banking channels**, and hence **not violative** of 269SS.
3. **CIT v. Idhayam Publications Ltd. (2006) 285 ITR 221 (Madras HC)**
🔹 Even though it dealt with cash deposits, the court observed that the **intent** behind 269SS is to **curb black money**, not punish genuine transactions.
---
### 📝 Summary & Recommendation
| **Point** | **Details** |
| -------------------------- | ---------------------------------------------------------------------------------------------------- |
| RTGS/NEFT before June 2015 | Not explicitly allowed by law |
| Intent of law | Prevent cash/untraceable transactions |
| Courts' view | RTGS accepted as valid in spirit of law |
| Assessment position | ITO may take a **strict literal view**, but defense is strong if genuineness and identity are proved |
| Post-June 2015 position | Clear legal support for RTGS, NEFT, ECS |
---
### 💡 What You Should Do
* Argue that **RTGS is through banking channels**, and **no black money** or **tax evasion** is involved.
* Provide **bank statements**, **confirmation letters**, and **PAN details** of lenders/borrowers to support genuineness.
* Cite above **case laws** during appeal or rectification proceedings, if needed.
Would you like a **sample reply/draft** to present during assessment or appellate proceedings?
---
### ✅ **Legal Position as per Section 269SS & 269T (Before Amendment)**
Up to **AY 2014–15**, the **exact wording** of both Section **269SS** and **269T** was:
> "...otherwise than by an account payee cheque or account payee bank draft..."
📌 So yes — **RTGS / NEFT / Online Transfers were not explicitly mentioned** in the language of the Act at that time.
---
### 📅 **Amendment by Finance Act, 2015**
To address this gap, the law was amended as follows:
> From **1st June 2015**, the permitted modes included:
>
> * **Account payee cheque**
> * **Account payee bank draft**
> * **Use of electronic clearing system through a bank account**
✅ This officially recognized **RTGS/NEFT/online banking** as acceptable modes under Sections 269SS and 269T.
---
### 🧑⚖️ **Relevant Case Laws (Prior to Amendment)**
Several courts **accepted RTGS/NEFT** as compliant even before the amendment, interpreting "banking channels" broadly:
1. **CIT v. Triumph International Finance (I) Ltd. (2012) 345 ITR 270 (Bombay HC)**
🔹 Held that **journal entries** for loans and repayments did **not** violate section 269SS/T if the intention was not to evade tax.
2. **DCIT v. Sunflower Builders (2006) 10 SOT 393 (ITAT Pune)**
🔹 RTGS/online transfers were considered to be through **banking channels**, and hence **not violative** of 269SS.
3. **CIT v. Idhayam Publications Ltd. (2006) 285 ITR 221 (Madras HC)**
🔹 Even though it dealt with cash deposits, the court observed that the **intent** behind 269SS is to **curb black money**, not punish genuine transactions.
---
### 📝 Summary & Recommendation
| **Point** | **Details** |
| -------------------------- | ---------------------------------------------------------------------------------------------------- |
| RTGS/NEFT before June 2015 | Not explicitly allowed by law |
| Intent of law | Prevent cash/untraceable transactions |
| Courts' view | RTGS accepted as valid in spirit of law |
| Assessment position | ITO may take a **strict literal view**, but defense is strong if genuineness and identity are proved |
| Post-June 2015 position | Clear legal support for RTGS, NEFT, ECS |
---
### 💡 What You Should Do
* Argue that **RTGS is through banking channels**, and **no black money** or **tax evasion** is involved.
* Provide **bank statements**, **confirmation letters**, and **PAN details** of lenders/borrowers to support genuineness.
* Cite above **case laws** during appeal or rectification proceedings, if needed.
Would you like a **sample reply/draft** to present during assessment or appellate proceedings?
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