Law:

Section:

Section 269SS, read with section 271D, of the Income-tax Act, 1961 - Deposits or Loans, mode of taking or accepting - Assessment year 2005-06 - Assessee-company received share application monies amounting to Rs. 18 lakhs in cash from three private limited companies for allotment of shares - Additional Commissioner relying on of Jharkhand High Court rendered in case of Bhalotia Engg. Works (P.) Ltd. v. CIT [2005] 275 ITR 399 levied penalty under section 271D upon assessee - He rejected submission of assessee that there was no violation of provisions of section 269SS on its part - Appellate authorities cancelled penalty levied upon assessee holding that share application monies received by assessee in cash for allotment of shares would not amount either to a loan or a deposit within meaning of section 269SS - Whether, appellate authorities were justified in their view - Held, yes [In favour of assessee] FACTS During the year, the assessee-company received share application monies amounting to Rs. 18 lakhs in cash from three private limited companies for allotment of shares. The Assessing Officer relying on the Judgment of the Jharkhand High Court rendered in the case of Bhalotia Engg. Works (P.) Ltd. v. CIT [2005] 275 ITR 399 , where it was held that receipt of share application monies in cash, in violation of section 269SS should be treated as 'deposit' with the consequence that the assessee would be liable for penalty under section 271D, referred the matter to the Additional Commissioner to levy the penalty under section 271D upon the assessee. Before the Additional Commissioner, the assessee submitted that there was no violation of the provisions of section 269SS, as it had not accepted any loan or deposit in cash, and that the receipt of share application monies in cash did not amount to acceptance of loan or deposit by the company. The Additional Commissioner rejected the submissions of the assessee and levied the penalty under section 271D upon it. On appeal, the Commissioner (Appeals) held that there was no violation of provisions of section 269SS by the assessee, since the share application monies received by the assessee in cash would not amount either…

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