2011 (11) TMI 252

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....substantial questions of law have been raised in the appeal : "2.1 Whether learned ITAT/CIT(A) erred in deleting the penalty of Rs.18,00,000/- imposed by the Assessing officer under Section 271D of the Income Tax Act, 1961? 2.2 Whether ITAT was correct in law in holding that the share application money received in cash is not violation of section 269SS attracting penalty under section 271D of the Income Tax Act, 1961? 2.3 Whether the decision of the Hon'ble Jharkhand High Court in the case of M/s Bhalotia Engineering Works Pvt. Ltd. reported at 275 ITR 399 is not applicable in the present case? 2. The respondent assessee is a private limited company. While completing the assessment under Section 143(3) of the Act, the Assessing ....

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....plication monies in cash did not amount to acceptance of loan or deposit by the company. These submissions were, however, rejected by the Additional Commissioner of Income Tax, who by a brief order dated 28th August, 2008 imposed the penalty of Rs.18,00,000/- under Section 271D.   4. The assessee filed an appeal before the CIT(A) repeating the arguments advanced before the Additional Commissioner of Income Tax. In addition, the assessee relied on the judgment of the Madras High Court in Commissioner of Income Tax Vs. Rugmini Ram Ragav Spinners (P) Ltd. (2008) 304 ITR 417 where it was held that the money in cash by a company towards allotment of shares, was neither a loan nor a deposit. The CIT(Appeals) considered the submissions of ....

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....ction 269SS to monies received as share application monies, the CIT(Appeals) had rightly cancelled the penalty. The appeal filed by the Revenue was thus dismissed. 6. The revenue has raised the questions of law extracted above. The facts are not in dispute. On these facts, the question is whether any substantial question of law arises from the order of the Tribunal cancelling the penalty. 7. Section 269SS prohibits any person from accepting a loan or deposit in cash exceeding Rs.20,000 in the aggregate in a year from a third person. If there is any violation, the person receiving the loan or deposit will be liable to penalty u/S.271D in an amount equal to the amount of the loan or deposit. A loan or deposit is defined in the Explanati....