TaxTMI 
TaxTMI 
2011 (4) TMI 1409
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....ty. The grounds as raised in ITA No. 1969/Kol./2009 for assessment year 2002-03 are being taken to decide this issue, which is common in all the appeals, for the sake of brevity, which read as under :- "1. That, the Ld. Commissioner of Income-Tax (Appeals) erred in appreciating and/or construing the primary facts of the case and the correct principles of law applicable to it, and on the basis of such misconceived notion of facts as well as of law, he further erred in confirming the penalty of Rs. 32,46,761/- levied by the Addl. Commissioner of Income-Tax u/s. 271-D read with Sec.269-SS of the Income-tax act. 2. That, the Ld. C.LT.(A) erred in inferring that ".... the act of placing money by the share applicants at the time of application with the assessee for allotment of shares tantamounts to depositing of money ...." (page -28 of the appellate order), and on the basis of such erroneous observation, he further erred in agreeing with the authority below that the assessee had received Share Application money, in the amount of Rs. 20,000/- or more in cash, for an aggregate amount of Rs. 32,46,761/- for allotment of Preference Shares in violation of the provisions of....
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....sis of such erroneous observation, he further erred in confirming the order u/s.271-E of the Act. 4. That, the conclusion drawn by the Ld. C.I.T.(A) in confirming the penalty u/s.271-E is based on irrelevant considerations and, therefore, the impugned order under appeal is bad in law and perverse". Accordingly all the seven appeals relate to the issue of acceptance and repayment of share application money by the assessee. The relevant assessment years involved in appeals are 2002-03, 2003-04, 2004-05 and 2007-08. The issue is common in these appeals hence, we will pass a consolidated order. 4. Brief facts are that the Revenue carried out a search and seizure operation under section 132 of the Act in Appelline Group of cases on 27.12.2006. Subsequently, assessment proceedings were started by issuing notices under section 153A of the Act. The assessee filed returns of income and Assessing Officer made assessment under section 153A of the Act on 14.07.2008 in all the years. During the course of assessment proceedings, the Assessing Officer initiated penalty proceedings under sections 271D and 271E of the Act for violation of provisions of section 269SS and 269T of the A....
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....order dated 21.01.2011. 7. On the other hand, the ld. CIT (D.R.) Shri V.A. Raju relied on the decision of the Hon'ble Jharkhand High Court in the case of Bhalotia Engineering Works (P) Ltd. (supra). 8. We have heard rival parties and gone through the facts and circumstances of the case. Admitted facts are that the assessee has accepted monies on account of preference shares/ debentures of Rs. 20,000/- or more and also repaid monies received on account of preference shares/ debentures from various persons otherwise than by account payee cheques or account payee Bank Drafts during the year under appeals. Now the question arises whether the amount received on account of share application money and the repayment of the same violates the provisions of section 269SS and 269T of the Act attracting penalty under section 271D and 271E of the Act. As the case law of the Hon'ble Jharkhand High Court in the case of Bhalotia Engineering Works Pvt. Ltd.(Supra) relied by ld. CIT (D.R.), wherein Hon'ble High Court held that the acceptance of share application money amounting to Rs. 20,000/- or more violates the provisions of section 269SS of the Act. On the other hand, the decision relied by....
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....lower authorities that the amount received by way of deposit or loan is only share application money. We further find that the Hon'ble Jharkhand High Court in the case of Bhalotia Engineering Works Pvt. Ltd. (supra) has decided the issue as under :- "If we take recourse to the Explanation in section 269T of the Act, deposit means a deposit of money which is repayable after notice or repayable after a period. Money paid to a company in support of an application for shares is a deposit of money in the company which is repayable by the company after the period for allotment of shares comes to an end, or a decision is taken regarding the allotment of shares. Thereafter, the amount is repayable to the person who paid the money, even without a demand in that behalf. In the case of refusal of shares the amount has to be returned in specie. In that context, it appears to us that there cannot be much difficulty in holding that the amount paid in support of an application for shares must be considered to be a deposit till the allotment of shares or refund of the money on rejection of the application. What will happen if shares are ultimately allotted to the applicant? What ....
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....refore have application only in a limited way in respect of deposits or loans. When it is neither deposit nor loan, the provisions of sections 269SS and 269T have no application at all. Even if there is repayment by cash it could not be said to attract the levy of penalty automatically, under section 271E of the Act. The advances of share application money or repayments of such advances have not flowed from any undisclosed income of the assessee or the concerned persons. It is also seen from the records that the assessee had not paid any interest at all on any of the advances repaid after quite some time. If the intention was to receive them as loans or deposits, then certainly the lenders would not have made the advances gratuitously. It is also a factual finding given by the authorities below that the assessee was not called upon to explain the default under section 269SS on receipt of the advances in earlier years, which would show that the assessee's case was not governed by the said provisions. Penalty under section 271E is not automatic, and a bona fide belief to the effect that the receipt of advances against allotment of shares would not be termed as loans or deposits, woul....
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....t is to be repaid together with any interest, the aggregate of the amount of the deposit and such interest, is ten thousand rupees or more : Provided that where the repayment is by a banking company or co-operative bank, such repayment may also be made by crediting the amount of such deposit to the account (if any) with such company or bank of the person to whom such deposit has to be repaid : Provided further that nothing in this sub-section shall apply to or in relation to the repayment of any deposit on or after the date on which the Income-tax (Second Amendment) Act, 1981, receives the assent of the President. (2) No branch of a banking company or a co-operative bank and no other company or co-operative society and no firm or other person shall repay any deposit made with it otherwise than by an account payee cheque or account payee bank draft drawn in the name of the person who has made the deposit if- (a) the amount of the deposit together with interest, if any, payable thereon, or (b) the aggregate amount of deposits held by such person with the branch of the banking company or co-operative bank or, as the case may be, the other c....
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....y for the purpose of allotment of shares. Also, there is no material or evidence or any compelling reason produced by the Revenue to prove that the money received is a deposit or loan. The first appellate authority as well as the Tribunal have come to a correct conclusion after accepting the explanation offered by the assessee. It is a question of fact and the order of the Tribunal is not a perverse one. The concurrent finding given by both the authorities below is based on valid materials and evidence. In the case of CIT v. P. Mohanakala [2007] 291 ITR 278, the Supreme Court held that whenever there is a concurrent finding by the authorities below, no interference should be called for by the High Court. Under these circumstances, we do not find any error or legal infirmity in the order of the Tribunal so as to warrant interference." 9. In view of the above two judgments of two Hon'ble High Courts, where conflicting views are taken, the view in favour of the assessee, interpreting the provisions should be adopted in view of the decision of the Hon'ble Supreme Court in the case of CIT Vs Vegetable Products (1973) 88 ITR 195 (SC), wherein Hon'ble Apex Court has held as under:- ....