Share Application Money received in cash by Company does not attract Provisions of S. 269SS of Income Tax Act: ITAT deletes Penalty [Read Order]

The Delhi Income Tax Appellate Tribunal (ITAT) recently, while deleting the penalty imposed by the assessing officer, held that share application money received in cash by the company did not attract provisions of Section 269SS of Income Tax Act, 1961.

Section 269SS of Income Tax Act, 1961 states that any person should not accept any loan, deposit, any specific amount from anyone other than any account payee bank draft, account payee cheque or through any electronic clearing system. This section applicable to every person who receives money above Rs. 20,000 /-

Assessee Layog Properties Pvt. Ltd after filing  return of income, the Assessing Officer while completing the assessment made addition in respect of share application money received by the assessee in cash of Rs.22,00,000/- and RS.14,00,000/-from  Arvind Mittal and Awdesh Mittal respectively . Assessing Officer initiated penalty proceedings under section 271D of the Act and imposed penalty of Rs.36, 00,000/- for contravention of the provisions of Section 269SS of the Income Tax Act, 1961. Against this order assesee filed an appeal before the ITAT.

The written submission submitted by the assessee contended that share application money received by the assessee company in cash for allotment of shares would not amount either to a loan or deposit within the meaning of Section 269SS of the Income Tax Act, 1961.

Jeetendra Chand counsel for the revenue supported the orders of the authorities below and pointed out that share application money received in cash attracts the provisions of Section 269SS of the Income Tax Act, 1961.

After considering the contentions of the both parties the division bench of the Shamim Yahya, (Accountant Member) and Challa Nagendra Prasad, (Judicial Member)  allowed the appeal filed by the assessee and further observed that  receipt of share application monies from the three private limited companies for allotment of shares in the assessee-company could not be treated as receipt of loan or deposit.

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