TaxTMI 
TaxTMI 
2016 (8) TMI 65
X X X X Extracts X X X X
X X X X Extracts X X X X
....Aggarwal and Smt Kaveri Aggarwal. Out of the said share application money, amount of Rs. 10.70 Lakhs was received in cash on various dates as under: Sh. Pradee Kumar Aggarwal 28/04/05 Rs. 270000/- 14/11/05 Rs. 155000/- 16/11/05 Rs. 260000/- 22/11/05 Rs. 90000/- 22/11/05 Rs. 80000/- Smt. Kaveri Aggarwal 28/09/05 Rs. 215000/- 3. The Assessing Officer further observed that no shares were allotted against the said share application money either in the previous year or in the year in which the assessment proceeding were in progress. It was also observed that the authorised share capital of the assessee company was merely Rs. 1 lakh whereas the share application money stated to be received was more than Rs. 21 lakhs. The Assessing Officer referred the matter to the Additional Commissioner of Incometax for considering initiation of penalty under section 271D of the Act because of infringement of the provisions of section 269SS of the Act. The Additional Commissioner of Income tax, initiated the penalty through a show cause notice issued on 10/11/2008. Before the learned Additional Commissioner of Income T....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ied by the learned Additional Commissioner of Income Tax. Aggrieved, the assessee filed appeal before the Tribunal raising following grounds: i. On facts and circumstances of the case, the learned Commissioner of Income Tax (Appeals) has erred in law in upholding the Penalty of Rs. 10.70 lacs under section 271D of the Act. ii. On facts and circumstances of the case, the learned Commissioner of Income Tax (Appeals) has failed to appreciate the scope of section 269SS which is not applicable to case of the assessee. iii. On fact and circumstances of the case, the learned Commissioner of Income Tax (Appeals) has erred in law in not giving immunity from penalty under Section 273B of the Act as there were reasonable causes for not complying with the provision of the section 269SS. 4. The Tribunal in its order dated 29/10/2010 allowed the appeal of the assessee with following observations: "4. We have considered the facts of the case and submissions made before us. A coordinate bench of the Tribunal has already taken the decision in the matter that at the time of receipt, there is no liability on the assessee to return the money. Such a liability ari....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Commissioner of Income-tax (Appeals) in paras 2.1 to 2.4 of his order. The learned counsel also submitted that the fact recorded by the learned Commissioner of Income-tax (Appeals) that the money was taken as a loan to attend urgent business needs, was not committed by the assessee before the learned Commissioner of Income-tax (Appeals) and the findings of learned Commissioner of Income-tax (Appeals) in this respect was factually incorrect. On being enquired by the bench, whether the shares were allotted against the share application money, the learned counsel submitted that entire share application money was returned as on 31/03/2009 and no shares were allotted to the subscribers of share application money. This fact is also evident from the balance sheet of the assessee company as on 31/03/2009 available on page 29 of the assessee's paper book. 8. In reply to the submission of the learned counsel of the assessee, the learned Senior Departmental Representative submitted that the assessee could have rebutted the fact recorded by the learned Commissioner of Income Tax (Appeals) that the money was received as business need, by filing an affidavit before him under section 154 of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....plication monies can be treated as "loan" or "deposit" within the meaning of Section 269SS. 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 applicantcompanies 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 repay the money according to the agreement while in the case of a deposit it is generally the duty of the depositor to go to the banker or to the depositee, as the case may be, and make a demand for it. This judgment was approvingly cited by a Division Bench of this court in Director of Income Tax (Exemption) Vs. ACM....
X X X X Extracts X X X X
X X X X Extracts X X X X
....creasing the authorized share capital of the assessee. We also find from the balance sheet of the assessee company that this money was not kept separately for refund to the subscribers in case of nonallotment of the shares and the money was utilized for the purpose of business of the assessee. In such circumstances, it cannot be treated as share application money merely by making accounting entries in books of accounts. We agree with the findings of the learned Commissioner of Incometax( Appeals) that entries in the books of account are not determinative of the true character of the transactions and what was necessary to consider the true nature of the transaction as held by the Kedarnath Jute Manufacturing Company Limited Vs. Commissioner of Income Tax, (1971) 82 ITR 363 (SC). We may also like to refer to the decision of the Tribunal, Delhi bench in the case of ITO Vs. M/s. Nandi Promoters Private Limited in ITA No. 3462/Del/2009, where in, similar circumstances the money received was not held to be share application money. The relevant findings of the Tribunal are reproduced as under: "6. We have considered the submissions of the Ld. DR of the Revenue. We find that a cle....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n ground No. 3, the assessee has raised the issue of existence of reasonable cause for not complying with the provisions of section 269SS of the Act. 13.1 Before us, learned counsel of the assessee submitted that it was under bonafide belief that the provisions of section 269SS do not prohibit accepting the share application money in cash exceeding Rs. 20,000/- and that being a reasonable cause in terms of section 273B of the Act, no penalty should be levied under section 271D of the Act. 13.2 On the other hand, the learned Departmental Representative opposed the submission of the learned counsel and submitted that the assessee has failed to establish any emergency in accepting the money in cash despite both the subscriber and the company having bank accounts. 13.3 We have heard the rival submission and perused the material on record. We have already observed that the authorized share capital of the assessee company was already paid and nothing was left further against which the assessee could receive the share application money and, therefore, the argument of the assessee that the share application money exceeding Rs. 20,000/- was received in cash under bonafide belief th....