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In the present case, both, the Commissioner (Appeals) as well as the Tribunal have found that the transactions in question are neither in the nature of loans or deposits. Under the circumstances, the provisions of sections 269SS and 269T of the Act would not be applicable. Consequently, the question of contravention of such provisions attracting penalty under sections 271D and 271E of the Act would also not arise. Under the circumstances, no infirmity can be found in the impugned order of the Tribunal so as to give rise to a question of law, much less, a substantial question of law so as to warrant interference.
The Tribunal has not rested its decision on the only circumstance that it is the business of the assessee to collect deposits and, therefore, it was entitled to collect them in cash even if it involves violation of Section 269SS; that is not the substratum of the decision.
In the instant case, the AO did not dispute the genuineness of the transaction entered into between the assessee and Samajwadi Party and no addition had been made in this regard. Instead of cash, if the assessee had taken loan through cheque, it would have taken some time for process in clearing. Since the amount was deposited and withdrawn from bank on the same day for making cash payment to the Nazul Authority, there could be no reason to doubt the bona fide of the assessee.
The assessee must prove beyond the shadow of the doubt there existed a reasonable cause for not complying with the conditions contained in section 269SS of the Act. Circumstances under which the cash was accepted must be explained. Unfortunately no cogent material was produced in that direction.
The AO in the said case did not examine whether the share application money can be treated as loan or deposit within the meaning of provisions of sec. 269SS of the Act nor the Addl. CIT. The ld. CIT(A) found as a fact that the shares were subsequently allotted to the applicant-companies as shown by the form filed before the Registrar of Companies.
The assessee in the present case has also raised the plea of reasonable cause, that the person advancing the loan was agriculturist and had no bank account. Accordingly, we delete the penalty levied under sections 271D and 271E of the Act.
Addl. CIT Vs. J.A. Land & Housing Development India Limited (ITAT Kolkata) – 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.
CIT Vs. I.P. India Pvt. Ltd. (Delhi High Court) – Tt was held that a loan grants temporary use of money, or temporary accommodation, and that the essence of a deposit is that there must be a liability to return it to the party by whom or on whose behalf it has been made, on fulfilment of certain conditions. If these tests are applied to the facts of the case before us, it may be seen that the receipt of share application monies from the three private limited companies for allotment of shares in the assessee-company cannot be treated as receipt of loan or deposit.
DCIT Vs Rupen Das (ITAT Kolkata)- The assessee was engaged in providing security guards to various Government and non-Government organisations and regular payment to the employees was essential to provide better services.
In exercise of the powers conferred by clause (e) of proviso to section 269SS of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies Housing Development Finance Corporation Limited, Bombay, in respect of its Home Savings Plan Scheme, Loan Linked Deposit Scheme and Certificate of Deposit Scheme, including Cumulative Interest Scheme for the purpose of the said section.
