2009 (10) TMI 462 - HC - Income Tax

Penalty- Whether on the facts and in the circumstances of the case (having violated the provision of section 269SS of the Act) the Income-tax Appellate Tribunal was right in law in deleting the penalty imposed under section 271D of the Income-tax Act, 1961 ? held that- in view of the finding to the effect that the transaction was bona fide and the default was of technical nature the cancellation of penalty was justified.

Summary

Issues:
Violation of section 269SS of the Income-tax Act, 1961 - Penalty imposed under section 271D - Appeal against order of the Income-tax Appellate Tribunal.

Analysis:
1. The appeal was filed by the Revenue under section 260A of the Income-tax Act, 1961, challenging the order of the Income-tax Appellate Tribunal regarding the penalty imposed under section 271D for violating section 269SS of the Act. The main question raised was whether the Tribunal was correct in deleting the penalty.

2. The Assessing Officer initiated proceedings against the assessee for accepting share application money in cash, amounting to Rs. 20,000, which was considered a violation of section 269SS. Subsequently, a penalty was imposed. The Commissioner of Income-tax (Appeals) and the Tribunal both supported the assessee's stance that the amount received was not a loan or deposit, no interest was payable, and the transaction was genuine. They emphasized that the default was technical and the amount was received from the public, not directors or shareholders.

3. Various judgments were cited to support the view that the transaction was bona fide and the penalty was unjustified, including cases like Hindustan Steel Ltd. v. State of Orissa, CIT v. Kharaiti Lal and Co., CIT v. Maheshwari Nirman Udyog, and others. The judgment of the Jharkhand High Court in Bhalotia Engineering Works P. Ltd. v. CIT was deemed distinguishable.

4. During the hearing, the appellant's counsel contended that the amount should have been treated as a loan or deposit, referring to the Bhalotia Engineering Works case. However, the court found no merit in this argument. The court upheld the previous findings that the transaction was genuine, the default was technical, and there was no justification for imposing a penalty.

5. Ultimately, the court concluded that there was no substantial question of law arising from the case and dismissed the appeal filed by the Revenue under section 260A of the Income-tax Act, 1961.