TMI Blog2012 (2) TMI 355X X X X Extracts X X X X X X X X Extracts X X X X ..... lty is set aside – Decided in favor of revenue. - ITA No.313/2006 - - - Dated:- 23-2-2012 - MR JUSTICE BADAR DURREZ AHMED, MR JUSTICE V.K. JAIN, JJ. For the Appellant : Mr Kiran Babu For the Respondent : Mr Anoop Sharma JUDGMENT BADAR DURREZ AHMED, J 1. The substantial question of law which we have to answer in this appeal is:- Whether on the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in law in concluding that no penalty was leviable on the assessee under the provisions of section 271D of the Income Tax Act, 1961? 2. This appeal arises out of the order dated 29.07.2005 passed by the Income Tax Appellate Tribunal, Delhi Bench E , New Delhi (hereinafter referred to as the Tribunal ) in ITA No.1066/Del/2005 relating to the assessment year 2001-02. 3. In the course of assessment proceedings for the relevant assessment year ( 2001-02), the Assessing Officer noticed that a sum of ₹ 66.50 lakhs was shown to have been received by the assessee from three persons (Mr Rajinder Diwan, Mr Puneet Diwan Mrs Urmil Diwan promoter directors) by way of unsecured loans. What is significant is that, out of the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grieved by the penalty order, the assessee company preferred an appeal before the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A) ]. Before the CIT(A), it was submitted that the amounts received from the directors/ shareholders were strictly not in the nature of loans and the source of the said amounts having allegedly been explained in the hands of the concerned creditors, imposition of penalty under section 271D was not justified keeping in view the legislative intent behind enacting the said provisions. It was reiterated that the said amounts were contributed by the director / shareholders as their share application money and the same having allegedly been finally adjusted against the shares allotted to the said creditors, the amounts in questions could not be treated as loans in the strict sense so as to attract the provisions of Section 269SS. It was also submitted that there was a reasonable cause for having taken the said amounts from its directors/ shareholders in cash / bearer cheques and it was therefore not a fit case for imposition of penalty under section 271D. The submissions made on behalf of the assessee company, however, did not find fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny was also based on the interpretation of the words any other person appearing in section 269SS. The Tribunal noted that the Hyderabad Bench of ITAT in Dillu Cine Enterprises (P) Ltd v. ACIT: 80 ITD 484 had taken the view that the words any other person did not include a director of the very company which accepted the loan or deposit. Though the Tribunal also noted that a contrary view had been taken by other benches of the ITAT, it was of the view that the Hyderabad Bench decision was sufficient to lead the assessee company to believe that its shareholders/ directors were not covered within the expression any other person and consequently the acceptance of the amounts in question were not in violation of section 269SS of the said Act. 9. The Tribunal concluded as under:- 10. As such, considering all the facts of the case and keeping in view the legal position emanating from the aforesaid judicial pronouncement we are of the view that the assessee company had entertained bona fide belief that the loans accepted by it from its shareholders/ directors were not covered by the provisions of section 269SS and this bona fide belief coupled with the fact that the said loans we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id (whether repayment has fallen due or not), the amount or the aggregate amount remaining unpaid ; or (c) the amount or the aggregate amount referred to in clause (a) together with the amount or the aggregate amount referred to in clause (b), is twenty thousand rupees or more: Provided that the provisions of this section shall not apply to any loan or deposit taken or accepted from, or any loan or deposit taken or accepted by,-- (a) Government ; (b) any banking company, post office savings bank or cooperative bank ; (c) any corporation established by a Central, State or Provincial Act ; (d) any Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956) ; (e) such other institution, association or body or class of institutions, associations or bodies which the Central Government may, for reasons to be recorded in writing, notify in this behalf in the Official Gazette. Provided further that the provisions of this section shall not apply to any loan or deposit where the person from whom the loan or deposit is taken or accepted and that person by whom the loan or deposit is taken or accepted are both having agricultural income and neither of them h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the expression any other person does not exclude the directors or members of the assessee company which has received or accepted the loans or deposits. 13. The view taken by the Tribunal that the assessee company had entertained a bona fide belief that the loans accepted by it from its directors/ shareholders were not covered by the provisions of section 269SS, we are afraid, is not borne out by the record. When the assessee company was asked to furnish its answer in the penalty proceedings, the assessee company did not take the plea that the receipts in question were loans but, because they were from directors/shareholders, the loans were not covered under section 269SS. On the contrary, the specific plea of the assessee company was that the amounts in question represented share application money and were not loans or deposits at all! When the clear stand of the assessee was that the amounts in question were not loans or deposits how can it said that the assessee company had entertained a bona fide belief that the loans accepted by it from its directors/ shareholders were not covered by the provisions of section 269SS? It is another matter that the story of share application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of CIT, Delhi-IV v. I.P. India (P) Ltd: (2012) 204 Taxman 368. But, that decision would also be of no help to the assessee inasmuch as in that case, the receipts by the assessee company were in the form of share application monies. The Division Bench held that such receipts cannot be treated as receipts of loans or deposits. However, in the present case, the receipts are not in the nature of share application money. Therefore, the decision in I.P. India (P) Ltd (supra) is clearly distinguishable and would not be of any help to the assessee in the case at hand. 18. Let us now consider section 271D. The meaning is clear. If a person takes or accepts any loan or deposit in contravention of the provisions of section 269SS, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit so taken or accepted. Once it is established that there is a violation of section 269SS, the penalty is mandatory and so is the amount of penalty. 19. In such an eventuality where section 271D is attracted, it is only section 273B of the said Act which can save a person from penalty. Section 273B provides that, notwithstanding anything contained in the provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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