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2023 (2) TMI 414 - AT - Income TaxPenalty u/s 271D - additions were confirmed towards share application money as a colorable device - AO considered the same as deemed deposits and considered it as violation of section 269SS - HELD THAT - Assessee has accepted the share application money and not any loan or deposit. The share capital money is an irreversible entry. It is not to be repaid by the assessee. Similarly the first part is relating to expenditure incurred by the Group. For intra-group services this is also not loan or deposit. AO has presumably failed to construe the transaction as well as meaning of section 269SS read with section 271D. The more surprising factor is that ld. Principal CIT (Admin.) who has given permission to file the appeal failed to appreciate the order of the ld. CIT(Appeals) before authorizing the revenue to file the appeal before the Tribunal. It is unnecessarily wastage of resources. Appeal of the Revenue is dismissed.
Issues:
1. Appeal against order of CIT(A) for A.Y. 2010-11. 2. Alleged violation of provisions of Companies Act and Income Tax Act. 3. Imposition of penalty under section 271D for deemed deposits. 4. Dispute over share application money treated as loan or deposit. 5. Examination of penalty proceedings under section 271D. Issue 1: Appeal against order of CIT(A) for A.Y. 2010-11 The Revenue appealed against the order of the ld. Commissioner of Income Tax (Appeals)-4, Kolkata for the assessment year 2010-11. The grounds of appeal raised concerns about the allowance of the appeal of the assessee by the CIT(A) and alleged errors in ignoring findings of the Assessing Officer (AO) regarding statutory requirements under the Companies Act not being fulfilled by the Assessee Company. Issue 2: Alleged violation of provisions of Companies Act and Income Tax Act The Revenue contended that the share application money was a colorable device and deemed deposits, leading to the imposition of penalties under sections 269SS and 271D of the Income Tax Act. The AO treated the receipt of share application money as deemed deposits, alleging violations of statutory provisions. The company's explanations regarding cash receipts from group companies were also scrutinized for violations of Sections 269SS and 269T. Issue 3: Imposition of penalty under section 271D for deemed deposits The Revenue imposed penalties under section 271D for alleged violations of section 269SS regarding deemed deposits. The company raised various grounds challenging the penalty proceedings, including insufficient opportunity to be heard and contentions against the imposition of penalties. The CIT(A) examined the facts and found no cogent reason to treat share application money as loans or deposits, ultimately deleting the penalties levied by the AO under section 271D. Issue 4: Dispute over share application money treated as loan or deposit The CIT(A) analyzed the nature of the share application money received by the appellant company and concluded that it was not a loan or deposit but legitimate share application money. The findings were supported by various facts, including disclosures in the balance sheet, filings with the ROC, and statements from shareholders confirming their share subscriptions. The CIT(A) cited relevant legal precedents, such as the decision of the Hon'ble Madras High Court, to support the conclusion that share application money does not fall under the purview of section 269T, leading to the deletion of penalties under section 271D. Issue 5: Examination of penalty proceedings under section 271D The Tribunal examined the imposition of penalties under section 271D and concurred with the CIT(A)'s findings that the share application money did not constitute loans or deposits. The Tribunal noted the requirements under section 269SS and emphasized that penalties under section 271D apply specifically to loans or deposits accepted in cash, which was not the case with the share application money in question. The Tribunal dismissed the Revenue's appeal, highlighting the failure to appreciate the CIT(A)'s order and deeming the appeal as an unnecessary waste of resources. This detailed analysis of the judgment highlights the issues raised, the contentions of the parties involved, and the legal reasoning behind the decisions made by the authorities and the Tribunal.
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