TaxTMI 
TaxTMI 
2016 (4) TMI 902
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....Income-tax Act have been violated and consequently penalty proceedings u/s 271D of the Act were initiated against the assessee company. The Assessing officer issued a show cause notice to the assessee stating that as to why penalty u/s 271D of the Act should not be imposed. In response to the above notice, the assessee submitted a detailed reply on 26.6.2009 but the Assessing officer did not accept the contention of the assessee and imposed a penalty of Rs. 30,26,000/- equal to the deposit i.e Rs. 30,26,000/-. 3. On appeal, the CIT(A) confirmed the penalty for the reasons stated in para 4 of the impugned order and, hence, the assessee is in appeal before the Tribunal. 4. Shri Parikshit Aggarwal, Ld. Counsel for the assessee vehemently argued that while passing the impugned order, the Jt. CIT, Shimla treated the cash receipts in the nature of cash deposits or loans, which is not correct. According to Ld. Counsel for the assessee, the cash was contributed by Shri Tejinder Singh, one of the directors of the assessee company towards the share application money as per the Board's resolution. It is stated that the source of such money was completely from explained sources, the ....
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.... Rs. 14,350/- As discussed in para 5 above Rs. 2,962/- Rs. 2,17,312/- Rs. 2,17,312/- Total income assessed for the year Rs. 10,06,820/- Loss assessed u/s 143(3) Rs. 12,91,952/- For the assessment year 2005-06 Less: B/F losses of Rs. 10,06,820/- of AY 2005-06 Set off against the profit Loss to be carried forward Rs. 2,85,137/- Book profit declared u/s 115JB Rs. 10,31,982/- Assessed as above, Issue requisite documents. Issue penalty notice u/s 271D of the I.T. Act, 1961." 8. On a perusal of the above, it is clear that the Assessing officer treated the amount of Rs. 30,26,000/- received by the assessee company as share application money from Sh. Tejinder Singh, one of the directors of the company. It is observed that while levying the penalty u/s 271D of the Act, the Jt.CIT, Shimla Range, Shimla held that the amount of Rs. 30,26,000/- has been received by the company in cash in share application account and not in the current account. He therefore, relying on the judgm....
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....a finding that the cash was not contributed by Shri Tejinder Singh towards the share application money as per paras 4.1 to 4.5 of the impugned order. According to Ld. CIT(A), the assessee failed to produce any documentary evidence to support its claim that during the year under consideration, it was decided by the company to increase the share capital of the company and that the said Resolution of Board was communicated to the Registrar of the Companies. The CIT(A) further observed that there is no mention of any such Board's Resolution made by the assessee company, in the balance sheet prepared as per Schedule VI of the Companies Act. The assessee failed to furnish any documentary evidence i.e Board Resolution confirming the acceptance of share application money from Shri Tejinder Singh. The CIT(A) noted that for all practical purposes, Shri Tejinder Singh himself was managing the business affairs of the assessee company. As per the CIT(A), the authorized and subscribed share capital of the company was shown at 12,50,000 shares @ Rs. 10 each, out of which 12,49,990 shares were subscribed by Shri Tejinder Singh amounting to Rs. 12,49,900/-. The other share holders was one Shri ....
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....2005) 271 ITR 399, wherein it has been held by the Hon'ble High Court that the share application money partakes the character of deposits. There are contrary decisions of other High Courts, wherein it has been held that the amount received in cash for allotment of shares did not amount to either loan or deposit within the meaning of section 269SS, hence, no penalty can be levied u/s 271D of the Act. These decisions are as under:- CIT v I.P. India (P) Ltd (2012) 343 ITR 353 (Delhi ) CIT v Rugmini Ram Ragav Spinners P. Ltd. (2008) 304 ITR 417 (Mad. ) CIT v M/s Iqbal Inn & Hotels Ltd in ITA No. 256 of 2014 judgment dated 21.9.2015 (P&H) 11. In the case of Iqbal Inn & Hotels Ltd. (supra), the Hon'ble High Court did not agree with the view taken by the Hon'ble Jharkhand High Court in the case of Bhalotia Engineering Works (P) Ltd v CIT (supra) and held that the amounts received by the assessee towards share application money would not fall under loan or deposit as provided u/s 269SS of the Act. Accordingly, the Hon'ble High Court held that penalty u/s 271D was not leviable. In our view, the issue as to whether the share application money rec....
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....nt remaining unpaid; or (c) the amount or the aggregate amount referred to in clause (a) together with amount or the aggregate amount referred to in clause (b) is Rs. 20,000/- or more w.e.f. 1.4.1989. For failure to comply with the provisions of section 269SS, the penalty is leviable u/s 271D of the Act which empowers the Jt. CIT to impose penalty to any person who takes or accept any loan or deposit in contravention of the provisions of section 269SS of the Act. The penalty under this section is leviable in a sum equal to the amount or loan or deposit so taken or accepted. The Hon'ble Supreme Court in the case of Asst. Director of Inspection (Investigation) Vs. Kum. A.B. Shanthi (2002) 255 ITR 258 (SC) has observed the object of introducing of section 269SS of the Act, which reads as under:- "The object of introducing section 269SS is to ensure that a taxpayer is not allowed to give false explanation for his unaccounted money, or if he makes some false entries, he shall not escape by giving false explanation for the same. During search and seizures, unaccounted money is unearthed and the taxpayer would usually give the explanation that he had borrowed or received depo....
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....sog in Himachal Pradesh. The Revenue has not doubted the source of deposits made by Shri Tejinder Singh one of the directors of the company. This amount has not been treated as cash credits u/s 68 of the Act. The amount invested by Shri Tejinder Singh stands duly verified and explained. Furthermore, Shri Tejinder Singh is one of the directors of the assessee company has introduced money in an almost 99.9% of company owned by him. There is no material on record to doubt the explanation offered by the assessee. From the facts of the present case, it is clear that the transactions made between the company and its directors cannot be doubted by any stretch of imagination. In other words, the transactions are genuine. In the case of CIT Vs. Sunil Kumar Goel (2009) 315 ITR 163 (P&H), it was held that cash transactions with sister concern which had no tax effect, established 'reasonable cause u/s 273B of the Act. Therefore, no penalty u/s 271D and 271E is leviable. The relevant observations made by the Hon'ble Punjab & Haryana High Court in the above case are as under:- "Furthermore, there is no dispute about the fact that the instant cash transactions of the respondent a....
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....in the interiors of Karsog Tehsil in Himachal Pradesh. The Revenue has not doubted the source of deposits. It is an admitted fact that Sh. Tejinder Singh had made the deposits, though in cash. In view of the decisions referred to above, in our considered view, there is no violation of the provisions of sec. 269SS of the Act, in as much as the transactions have duly been recorded in the accounts of the company. There is no dispute that since the company was in urgent need of money, considering the urgency, Sh Tejinder Singh, one of the directors of the company introduced the money with the assessee company. As we have already observed herein above that the object of introducing sec. 269SS is to ensure that a tax payer is not allowed to give false explanation for his unaccounted money, or if he makes any false entry, he shall have no escape by giving false explanation to the same. In the instant case, it is clear that the cash transactions of the assessee were with the director of the company, and due to business expediency. Nobody has doubted the genuineness of the transactions. It is an admitted fact that the money was deposited by Shri Tejinder Singh, one of the directors of the c....