2015 (11) TMI 918 - AT - Income Tax

Penalty under section 271D - CIT(A) deleted the penalty - Held that - It is observed that although there are some case-law including the decision of Bhalotia Engineering Works P. Ltd. v. CIT 2004 (8) TMI 66 - JHARKHAND High Court which are in favour of the Revenue, taking a view that the share application money partakes the character of loan or deposit, there are various other case law as cited by the assessee before the learned Commissioner of Income-tax (Appeals), wherein a view in favour of the assessee has been taken, holding that the provisions of section 269SS are not applicable in the case of share application money being not in the nature of loan or deposit. In these circumstances, the learned Commissioner of Income-tax (Appeals) has rightly followed the decision of CIT v. Vegetable Products Ltd. 1973 (1) TMI 1 - SUPREME Court and accordingly cancelled the penalty imposed by the Assessing Officer under section 271D by following the view which is in favour of the assessee. Her impugned order cancelling the penalty imposed under section 271D is, therefore, upheld and this appeal filed by the Revenue is dismissed. - Decided in favour of assessee.

Summary

Issues:
Appeal against penalty cancellation under section 271D of the Income-tax Act, 1961.

Analysis:
1. The appeal was filed by the Revenue against the cancellation of a penalty of Rs. 35 lakhs imposed under section 271D of the Income-tax Act, 1961 by the Assessing Officer. The penalty was imposed due to the assessee-company receiving Rs. 35 lakhs in cash from its directors towards share application money, which was considered violative of section 269SS of the Act.

2. The Assessing Officer relied on the decision of the Jharkhand High Court and the Bombay High Court to impose the penalty, considering share application money as partaking the character of a deposit. The assessee contended that the share application money was not a loan or deposit, citing various judicial pronouncements in favor of the assessee.

3. The Commissioner of Income-tax (Appeals) canceled the penalty by following the decision of the Supreme Court in CIT v. Vegetable Products Ltd., which favored the assessee. The Commissioner noted conflicting case laws and upheld the cancellation of the penalty under section 271D, considering the views that were in favor of the assessee.

4. The Tribunal upheld the Commissioner's decision, stating that while some case laws favored the Revenue's view that share application money was akin to a loan or deposit, there were other judgments supporting the assessee's position. The Tribunal agreed with the Commissioner's application of the Supreme Court's decision in CIT v. Vegetable Products Ltd., leading to the dismissal of the Revenue's appeal.

5. The Tribunal dismissed the appeal filed by the Revenue, affirming the cancellation of the penalty under section 271D. The decision was based on the conflicting case laws and the application of the Supreme Court's ruling in favor of the assessee.

In conclusion, the Tribunal upheld the cancellation of the penalty imposed under section 271D, considering the conflicting judicial pronouncements and the application of the Supreme Court's decision in favor of the assessee.