2012 (3) TMI 174 - HC - Income Tax

Penalty u/s 271D loans and deposits received in contavention to Section 269SS penalty waived by Tribunal accepting contention of assessee that the same is share application money Held that - First and the foremost aspect, which has to be considered and examined is whether the amount received was loan or deposit. This aspect has not been considered and examined by the tribunal in spite of the specific findings recorded by the A.O. and the CIT (Appeals). Therefore, an order of remit is passed to the Tribunal to decide the appeal afresh after recording factual finding Decided in favor of Revenue.

Summary

Issues involved:
Whether the Income Tax Appellate Tribunal was justified in deleting the penalty under Section 271D of the Income Tax Act, 1961 for the respondent-assessee.

Analysis:

1. Imposition of Penalty by Assessing Officer:
- The Assessing Officer imposed a penalty of Rs.10,70,000 under Section 271D of the Income Tax Act, 1961 on the respondent-assessee for receiving Rs.21,97,500 in cash.
- The nature of the deposit/transaction was discussed, and it was noted that the company's authorized share capital was only Rs.1,00,000.

2. Decision of CIT (Appeals):
- The CIT (Appeals) confirmed the penalty and observed that the amount received was a loan to meet urgent business needs.
- The entries in the books of account were considered inconclusive in determining the true character of the transaction.

3. Tribunal's Decision:
- The tribunal deleted the penalty without discussing the factual matrix or the findings of the Assessing Officer/CIT (Appeals).
- It relied on a previous decision and stated that no liability to return the money arises at the time of receipt if shares are not allotted to the depositor.

4. High Court's Analysis:
- The High Court found the tribunal's finding to be insufficient as it did not address the specific findings of the Assessing Officer and CIT (Appeals).
- The court emphasized the need to determine whether the amount received was a loan or a deposit before imposing a penalty under Section 271D.

5. Legal Precedents Considered:
- The High Court referred to various legal precedents, including decisions by other High Courts, in analyzing the issue of loans and deposits under Section 271D.
- It highlighted the importance of examining the nature of the amount received before deciding on the applicability of the penalty.

6. Court's Decision and Order:
- The High Court ruled in favor of the appellant and directed the tribunal to reconsider the appeal, record factual findings, and apply the court's previous decision.
- The order was not a final decision on the factual issues but a directive for the tribunal to reevaluate the case based on the established legal principles.

7. Conclusion:
- The appeal was disposed of without costs, emphasizing the importance of determining whether the amount received was a loan or a deposit before imposing penalties under the Income Tax Act, 1961.