Cash advance-Deemed Dividend-269SS

[deepak gulati]

A major shareholder in a Pvt Ltd Company has received Advance in CASH from company and same is treated as Deemed Dividend in his Assessment, Can penalty under 271D ( regarding 269SS) be imposeed on this, particulary when in Assessment, it has been treated as Deemed Dividend and not loan.

[MOHAN S]

Mr.Gulati,

Pl see  Section 269SS and you will find that he deals with Acceptance of "Deposit" by any mode otherwise than "account payee" cash. So primafacie, to attract there must be a "Deposit" In th epresent case stated by you, what the major share holder received from the company (in Cash) has already been assessed as Deemed dividend by the Assessing Officer invoking Sec 2(22) (e) of IT Act. Thus there is no deposit in the hands of the Shareholder. Incoem and Deposit are utually exclusive. What is received by him is Deemed Dividend and no question of "Deposit" arise. So ther can be no question of levy of any penalty u/s 271D.

AI Summary

Deemed dividend classification prevents deposit-acceptance penalty under section 269SS and section 271D. The deposit-rule penalises acceptance of a 'deposit' otherwise than by account-payee cheque or transfer; it applies only if the receipt is a deposit. Where the assessing officer has characterised and assessed a cash receipt to a shareholder as a deemed dividend, that receipt is not a deposit, and the penalty for acceptance of deposits does not apply.