TaxTMI 
TaxTMI 
2012 (10) TMI 318
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....g to Rs. 13,12,526/- from one of its director Manish Agarwal as under: July 15,2006 Rs. 1,00,000/- September 26, 2006 Rs. 10,00,000/- October 30,2006 Rs. 2,12,526/- 2.1. The assessee company allotted equity shares to the said director Shhri Manish Agarwal as under: 4-6-2007 Rs. 1,87,500/- 27-2-2010 Rs. 7,12,500/- Total: Rs. 9,00,000/ 2.2. According to Assessing Officer, the assessee had accepted cash deposits from director Shri Manish Agarwal and initiated penalty proceedings u/s 271D of the I.T. Act, 1961. 2.3. In response thereto, the assessee replied that the amounts were paid by the Director towards share application money and assessee was under bona fide belief that the s....
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....s, the exact nature of share application money being a deposit in terms of sec. 269-SS or not was a debatable issue. The assessee was under bona fide belief that the amount received from a director as share application money can be received in cash. Hon'ble Jharkhand High Court in the case of M/s Bhalotia Engineering Works (P) Ltd. (supra) has also held that it partakes the character of deposit. Thus, there existed a debate about the nature of share application money being deposit or not. It is only after various judicial pronouncements that this issue has evolved to this extent now. Since the assessee was under a bona fide belief, the penalty should not be imposed. As the transactions in question have been held to be genuine, the def....
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.... endorsed the view of the AO in passing the penalty order. The CIT(A) has found as a fact that he 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 credi....
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.... Income tax (Appeals) has relied upon the decision of the Hon'ble High Court of Jharkhand in the case of Bhalotia Engineering Works (P) Ltd. Vs. CIT (supra). 26. In this connection, ld. counsel of the assessee has placed reliance upon the decision of the Hon'ble Madras High Court in the case of CIT Vs. Rugmini Ram Raghav Spinners Pvt. Ltd. 304 ITR 417 wherein it has been held that the share application money was not deposit or loan under the provisions of section 269T and therefore, the penalty u/s 271E was liable to be deleted. On the strength of this ruling, ld. counsel of the assessee referred the decision of the Hon'ble Apex Court in the case of CIT Vs. Vegetable Products 88 ITR 192 for the proposition that when two views are possibl....
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....r and above the authorized share capital cannot be treated as share application money. Assessee has explained that it was under bona fide belief that the amount received from the director was towards share application money, which were to be subsequently allotted. These amounts were incurred for the company by the director with understanding that it will be appropriated towards allotment of shares in future. 5.2. The issue for our consideration is whether the assessee was under bona fide belief or not. In the case of M/s Nandi Promoters Pvt. Ltd. (supra), the appeal before ITAT was at the instance of revenue, which indicates that the CIT(A) in that case had accepted the amounts to be share application money, which was subsequen....