Sec 269SS and Sec 269T of the Act which attract penalty under sec 271 is not violated by share application money and repayment thereof

Last updated: 09 January 2012

Court :
INCOME TAX APPELLATE TRIBUNAL

Brief :
Assessing Officer levied penalty under section 271D for the assessment year 2004-05 in respect of M/s. J.A. Land & Housing Dev. India Limited and also in assessment years 2005-06 & 2006-07, as well as under section 271E of the Income Tax Act for the assessment year 2007-08 in the case of M/s. J.A.M. Chemical Works Limited. Assessing Officer was of the view that violation of Section 269SS which defines ‘loan or deposit’ & Section 269T defines ‘loan or deposit’ and the common word “loan” means lending a sum of money by one party to another upon agreement to repay. Hence, Assessing Officer was of the view that though in the Companies Act “deposit” does not include share application money which is given to a Company by an applicant for allotment of shares. The fact that under the given set of facts, according to Assessing Officer, the amount so deposited with the assessee-company in the name of share application money attracts Sections 269SS & 269T. In other words, these financial transactions should be through banking channels by abiding cash transactions. Therefore, Assessing Officer was of the view that assessee has violated Section 269SS in ITA Nos. 1116 to 1118/Kol/2011 and there is violation of Section 269T in respect of ITA No.1140/Kol/2011. He, therefore, levied penalty. On appeal to the Ld. CIT(A), Ld. CIT(A) found that I.T.A.T., Kolkata Benches, “C” Bench in ITA Nos. 141 & 142/Kol/2011 have decided the issue vide order dated 19.04.2011 by following the decision of Hon’ble Madras High Court in the case of CIT vs. Rugmini Ram Raghav Spinners (P) Ltd. [2008] 304 ITR 417 (Mad.) that the share application money and repayment thereof will not violate Sections 269SS & 269T of the Act which attracts levy of penalty under section 271D & 271E of the Act.

Citation :
Addl. C.I.T., R-V(C) Kolkata [Appellant]-vs.-M/s. J.A. Land & Housing Development India Limited Kolkata [PAN: AABCJ 3753 D] [Respondent]