The Calcutta High Court held that no penalty attracted under Section 269SS and 269TT of the Income Tax Act, 1961 on share application money or repayment.
The main controversy involved in the present appeal is as to whether share application money received by the respondent/assessee and its repayment in excess of Rs.20,000/- otherwise than by way of an account payee cheque or by account payee bank draft would fall within the phrase “loan or deposit”
The assessing officer issued a show cause notice for penalty under Section 271D/271E on the ground that the assessee has violated the provisions of Section 269SS. The Additional Commissioner imposed penalty under Section 271D for assessment years of the Income Tax Act. Aggrieved with the order of the CIT(A), the assessee filed eight appeals before Income Tax Appellate Tribunal, E Bench, Kolkata which has been allowed by the impugned order. Aggrieved with the impugned order of the ITAT, the revenue has filed the present appeal.
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Section 269SS prohibits any person to take or accept from any other person any loan or deposit otherwise than by an account payee cheque or by account payee bank draft, if the amount or aggregate amount referred to in clause (a) together with the amount or the aggregate amount referred to in clause (b) is twenty thousand rupees or more. If a person violates Section 269SS then he is liable to penalty under Section 271D of the Income Tax Act.
Section 269T provides that no branch of a banking company or a co-operative bank and no other company or co-operative society and no firm or other person shall repay any loan or deposit made with it otherwise than by an account payee cheque or by account payee bank draft drawn in the name of the person who has made the loan or deposit together with interest, if it exceeds rupees twenty thousand.
A Division Bench of Justices Surya Prakash Kesarwani and Rajarshi Bharadwaj observed that “Looking into the object and purpose of Section 269SS and 269T of the Act, 1961 read with the Explanation defining the words “loan and deposit”, the share application money can neither be said to be loan nor a deposit, and accordingly, the provisions of Section 269SS or Section 269T or the consequential penalty provisions under Sections 271D or Section 271E shall have no application on facts and circumstances of the present case. Thus, we do not find any illegality in the impugned order of the Tribunal.”
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