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Section 269 SS of the Income-tax Act, 1961 - Loans /deposits- Mode of accepting - Whether in view of safeguards provided in sections 278AA and 279, section 269SS is constitutionally valid - Held, yes FACTS Petitions were filed under article 226 challenging the legality of section 269SS on the ground that section 269SS imposed an arbitrary obligation in the sense that any person who had accepted a loan or deposit over the value of Rs. 10,000 otherwise than by an account payee cheque or account payee bank draft, he would be punishable under section 276DD, without providing him an opportunity to show a reasonable cause for such an acceptance of loan/deposit. HELD By a reading of sections 269SS and 276DD it is clear that failure to follow the procedure as stipulated in section 269SS would attract section 276DD. But there are other sections which require to be taken note of, namely, sections 278AA and 279. By a reading of these two sections it is clear that because of the use of non obstante clause under section 278AA which takes within it section 276SS as well, reasonable cause should be shown by the assessee before punishment for violation under section 269SS is imposed on him under section 276DD. In other words, the assessee will have to show that there was a reasonable cause for such failure. Only then the question of prosecution will arise. This is undoubtedly a sufficient safeguard. Yet another safeguard is from section 279 which provides that the prosecution is to be at the instance of the Chief Commissioner or the Commissioner. Where the highest functionary in the Income-tax Department is entrusted with the power, that itself lakes away the sting of arbitrariness. For these reasons, provision of section 269SS is valid. EDITOR'S NOTE Validity of section 44AB was upheld earlier in Writ Petition No. 3205 of 1985 by order dated 29-8 1989. K. Srinivasan, R. Janakiraman, K. Venkatasubbaraju, K. Balasubranianiam and P.P.S. Janarthana Raja for the Petitioner. Mrs. Nalini Chidambaram for the Respondent. ORDER Mohan, Offg. CJ. - In all these cases, the validity of section 269SS of the Income lax Act, 1961 ('the Act') as it stood prior to 1-4-1989 is questioned before…

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