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TMI Blog2011 (4) TMI 841X X X X Extracts X X X X X X X X Extracts X X X X ..... ed:- 21-4-2011 - G.E. VEERABHADRAPPA, RAJPAL YADAV, JJ. Piyush Sonkar for the Appellant. B.L. Gupta for the Respondent. ORDER Rajpal Yadav, Judicial Member. The revenue is in appeal before us, against the order of ld. CIT(A) dated 11-5-2009, passed for assessment year 2005-06. The solitary grievance of the revenue is that ld. CIT(A) has erred in deleting the penalty of Rs. 1 crore, levied under section 271D of the Income-tax Act, 1961, without appreciating the facts and circumstances properly. 2. The brief facts of the case are that assessee company was incorporated on 24-4-1995. It is engaged in the business of real estate. Shri Gian Gupta and Smt. Usha Gupta are two directors of the assessee company, who are also the shareholders of 11 per cent 89 per cent respectively. The total share capital is of Rs. 1 lakh. The company has filed its return of income for assessment year 2005-06 on 30-10-2005 declaring loss of Rs. 29,708. The return was processed under section 143(1) of the Act, however, the case of the assessee was selected for scrutiny assessment and a notice under section 143(2) of the Act was issued on 26-10-2006, which was served upon the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ld. Additional Commissioner after going through the assessment order and other material, formed an opinion that assessee deserves to be visited with penalty under section 271D of the Act. He issued a show-cause notice dated 1-2-2008 whereby assessee was directed to explain as to why penalty under section 271D should not be imposed. According to the ld. Additional Commissioner, assessee filed a written submission vide letter dated 12-2-2008 in response to the show-cause notice issued to it. Ld. Addl. Commissioner took into consideration the submissions filed by the assessee as well as section 271D and section 269SS of the Income-tax Act. He imposed a penalty of Rs. 1 crore upon the assessee under section 271D of the Act. 5. Dissatisfied with the action of ld. Addl. Commissioner, assessee carried the matter in appeal before ld. CIT(A). It filed written submissions which has dully been noted by ld. First Appellate Authority. The assessee has put reliance upon various decisions which have also been taken into consideration at page 9 by the ld. First Appellate Authority. The ld. First Appellate Authority has deleted the penalty by referring to the decision of Hon ble Madras High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ld. CIT(A). He took us through his written submissions submitted before the ld. CIT(A) whose copy is available on pages 1 to 19 of the paper book. He also made a reference to the decisions relied upon before the ld. CIT(A) which are placed in the paper book. The main thrust of the arguments advanced by ld. Counsel for the assessee is how to appreciate and construe section 269SS. In this connection, he made a reference to a large number of decisions. On the strength of Hon ble Supreme Court s decision in the case of Asstt. DIT v. Kum. A.B. Shanthi [2002] 122 Taxman 574, he submitted that intention of the Legislature for introducing section 269SS is to curb introduction of black money. He further contended that even if an assessee has taken loan or deposit in cash but everything is declared then there cannot be any penalty under section 271D of the Act. For butteracing this preposition he relied upon the decision of Hon ble Gauahati High Court rendered in the case of CIT v. Bhagwati Prasad Bhajoria (HUF) [2003] 133 Taxman 426. Ld. Counsel for the assessee further apprised us the intention of Legislature which has been explained by the board and the Tribunal has construed the circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eaning of companies (acceptance of deposits, Rule 1975). He also pointed out that assessee has sent Form No. 23AC to the Registrar of Companies showing the receipt of share application money in this year and also in the earlier years as per annual required by the Companies Act. He prayed that ld. CIT(A) has rightly deleted the penalty and no interference is called for in the order of ld. CIT(A). 8. We have duly considered the rival contention and gone through the record carefully. Sections 271D and 269SS have a direct bearing on the controversy. Therefore, it is salutary upon us to take cognigence of both these clauses . They read as under : "271D. (1) If a person takes or accepts any loan or deposit in contravention of the provisions of section 269SS, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit so taken or accepted. (2) Any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner." Section 269SS of the Act to the extent it is relevant for the purpose reads: "No person shall, after the 30th day of June, 1984, take or accept from any other person (hereafter in this section referred to as 'the dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on money of Rs. 8,05,000 in earlier year. In our understanding, if it was to receive share capital then it ought to have applied for increase in the authorised share capital. How long assessee can receive the alleged share application money without there being authorised share capital. In the earlier year it has already received Rs. 8,05,000. Apart from this, there is one more factor. Out of the total share capital alleged to have been received by it, a sum of Rs. 34,75,986 was through bank account. This amount was directly paid to the parties from whom construction material was purchased. This factor indicates that assessee had took the money from the directors, according to its requirement for the construction of the building when at the end of the year it was caught on the wrong side of law that it has not received the money in accordance with the provision of the Act, then it brand it as share application money. The simple reason is that parties who had emphasised for payment through banking channel for the material supplied to the assessee, the payment was made through banking channel. Assessee was required to make more payment or incur more expenses through banking channel, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are credit entry as well as debit entry in that account. This account was not considered as loan or deposit account. The next argument was raised on the strength of Hon ble Gujrat High Court decision in the case of New Sorathia Engg. Co. (supra). This case was in connection with penalty imposable under section 271(1)(c). The Hon ble High Court was of the view that Assessing Officer was unable to confront the assessee with the specific charge whether any inaccurate particulars of income had been furnished or assessee has concealed the particulars of income. Ld. Counsel tried to draw parity with loan or deposit. According to him, Assessing Officer failed to establish whether it was a loan or deposit. According to us he cannot draw any benefit from this decision because there is no ambiguity with regard to the charge and assessee has not given explanation with the angle that these were loan or deposit. The next judgment relied upon by the assessee was in respect of Karnataka Ginning Pressing Factory's case (supra). In this case, Tribunal found reasonable cause for the assessee to act in contravention of section 269SS. During the course of hearing, ld. Counsel has raised an argument ..... X X X X Extracts X X X X X X X X Extracts X X X X
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