TMI Blog2013 (1) TMI 779X X X X Extracts X X X X X X X X Extracts X X X X ..... .I.T. by observing that the AO has not recorded satisfaction for initiation of penalty proceedings u/s 271D of the I. T. Act, 1961. 2. Ld. Commissioner of Income Tax (Appeal) erred, in law and on the facts and circumstances of the case, in deleting the penalty u/s 271D of ₹ 7,00,000/- imposed by the Addl. C.I.T. by observing that the acceptance of money in cash for Share Capital by the assessee was only a technical mistake. 3. The appellant craves to add, alter, amend, modify, add or forego any ground of appeal at any time before or during the hearing of this appeal. 2. During the year, the assessee company has received share application money of ₹ 7 lacs in cash from 26 persons. The Assessing Officer initiated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case may be, for any failure referred to in the said provisions, if he proves that there was reasonable cause for the said failure. The words 'reasonable cause' have not been defined under the Act but they could receive the same interpretation which is given to the expression 'sufficient cause'. Therefore, in the context of the penalty provisions, the words 'reasonable cause' would mean a cause which is beyond the control of the assessee. 'Reasonable cause' obviously means a cause which prevents a reasonable man of ordinary prudence acting under normal circumstances, without negligence or inaction or want of bonafides. Before imposition of penalty under section 271D , the Assessing Officer must be satisfi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atter, we find that the AO has relied on the judgment of the Jharkhand High Court (supra) and referred the issue of levying penalty to the Additional CIT. He did not examine whether the share application monies can be treated as loan or deposit within the meaning of Section 269S8. The Additional CIT has merely endorsed the view of the AO in passing the penalty order. The CIT(A) has 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. Neither the AO nor the Additional CIT has taken the trouble to examine this aspect while imposing the penalty. They have merely relied on the judgment of the Jharkhand High Court (supra). The reliance on this judgment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entire gamut of facts and circumstances of the case, I am of the considered view that the appellant had a reasonable cause for its failure to accept the impugned amounts in a manner other than those prescribed under section 269SS of the Act thereby rendering it outside the purview of the penal provisions of section 271D. Therefore~ it is held that A.O. was not justified in imposing penalty u/s 271D amounting to ₹ 7,00,000/-. Accordingly, the same is cancelled. 3. We have heard both the sides on the issue. While pleading on behalf of the revenue the ld. DR relied on the order of Assessing Officer and the ld. AR relied on the order of the CIT (A) and also submitted that this issue is covered by the decision of Hon'ble jurisdict ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e view of the AO in passing the penalty order. The CIT(A) has 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. Neither the AO nor the Additional CIT has taken the trouble to examine this aspect while imposing the penalty. They have merely relied on the judgment of the Jharkhand High Court (supra). The reliance on this judgment appears to us to be misplaced. In Baidya Nath Plastic Industries (P) Ltd. and Ors vs K.L. Anand (1998) 230 ITR 522, a learned Single Judge of this court pointed out that the distinction between a loan and a deposit is that in the case of the former it is ordinarily the duty of the debtor to seek out the creditor and to r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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