2010 (11) TMI 702 - HC - Income Tax

Penalty u/s 271D - Revenue has submitted that the Tribunal has erred in law in dismissing the appeal without interpreting the provisions of section 269SS of the Act and while reducing the penalty u/s 271D of the Act from Rs. 13, 15, 540 to Rs. 67, 540 no finding was recorded as to whether or not the receipt of the amount of the company from its directors/promoters was in accordance with the requirement of section 271D of the Act - It is an admitted fact that the money was deposited by the directors in the bank account of the assessee therefore the transaction was genuine - The Tribunal was of the opinion that the default if any was unintentional and therefore it constitutes reasonable cause within the meaning of section 273B of the Income-tax Act - Provisions would show that section 269SS shall not apply to any loan or deposit taken or accepted from or any loan or deposit taken or accepted by any banking company post office savings bank or co-operative bank - In this case the transactions in question were through bank and were deposited by some of the directors/promoters of the assessee-company - Decided in favor of assessee.

Summary

Issues:
Income-tax appeal under section 260A against ITAT order reducing penalty under section 271D for assessment year 1993-94.

Analysis:
1. Facts of the Case:
- The assessee-company received loans/deposits amounting to Rs. 13,27,000 from directors/promoters.
- Penalty under section 271D imposed by Deputy CIT reduced by CIT (A) to Rs. 67,540.
- Tribunal upheld the reduction, leading to the appeal by Revenue and cross-objection by the assessee.

2. Interpretation of Law:
- Revenue contended Tribunal erred in dismissing appeal without interpreting section 269SS and not addressing compliance with section 271D.
- Tribunal found the transaction genuine as the money was deposited by directors, constituting reasonable cause under section 273B.

3. Legal Provisions:
- Section 269SS mandates loans/deposits to be through account payee cheque or bank draft.
- Exceptions include transactions with banking companies, post office savings banks, and co-operative banks.
- Rule 2(b)(ix) of Companies (Acceptance of Deposits) Rules exempts amounts received from directors/shareholders of private companies.

4. Conclusion:
- Transactions in question were through banks and deposited by directors/promoters, complying with legal provisions.
- Tribunal's decision upheld, no substantial question of law found, and the appeal was dismissed.

By analyzing the facts, legal interpretations, and provisions, the High Court upheld the Tribunal's decision, emphasizing compliance with the Income-tax Act's sections and rules governing loan/deposit transactions. The judgment clarified the legality of transactions involving directors/promoters and the exemption under relevant laws.