TMI Blog2012 (9) TMI 846X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. - ITA 1247/2011 - - - Dated:- 20-9-2012 - MR. S. RAVINDRA BHAT MR. R.V. EASWAR JJ. Appellant:- Sh. Kamal Sawhney, Sr. Standing Counsel. Respondent:- Dr. Rakesh Gupta with Ms. Rani Kiyala and Mr. Rishabh Jain, Advocates. MR. JUSTICE S.RAVINDRA BHAT 1. The Revenue is aggrieved by the impugned order of the Income Tax Appellate Tribunal (ITAT) dated 31.03.2011 in ITA No. 4577/Del/2009 by which the finding of the CIT (Appeals), directing the penalty imposed upon the assessee to be set-aside, was upheld. The question of law sought to be urged is: Is the impugned order of the ITAT deleting the penalty order of Rs. 3,51,47,523/- passed under Section 271B, (sic Section 271D) justified in law? 2. The assessee company was incorporated on 25.10.2002. It filed returns, showing loss of Rs. 1,63,68,608/- on 28.11.2006. The assessment order was framed under Section 143(3), on 26.12.2008 by which the total income determined was Rs. 2,06,78,913/-. The appellant was aggrieved by the addition of Rs. 1,48,82,000/- and Rs. 98,30,000/-. The latter amount received under Section 269SS of the Income Tax Act, 1961 (hereafter referred to as the Income Tax Act ) and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... money is received, are existing share holders of the appellant company. In fact three of them were promoter directors and other two are wives of two directors. In the affidavit filed, they have confirmed the share capital as well as share application money paid to the appellant company. The allotment of shares towards the amount paid by them could not be completed till the end of the year because of which this amount is reflected as share application money. In support of the transaction not only affidavit but acknowledgement of return, statement of income and balance sheet of the share applicants have been filed. It was submitted that all of them were separately assessed to tax and investments in the appellant company were duly reflected in their own balance sheet. These documents were filed before the AO but he neither called these persons for examination nor made any other enquiries. The AO simply stated that it was not believable that such persons would contribute huge amount towards share capital. However these observations of the AO were merely in the nature of surmise and conjecture which cannot be the basis of making addition. More over it was also contended that these amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pheld by the CIT(Appeals) was Rs. 3,51,47,523/-. The Revenue carried the matter in appeal both against the quantum assessment as well as the penalty order. The Tribunal upheld the CIT (Appeals) s order as regards the merits. The CIT (Appeal) s order imposing the penalty was consequently dismissed. 4. It was argued on behalf of the Revenue that the Tribunal ought to have seen that the inclusion of a huge amount of Rs.3,70,47,523/- automatically attracted Section 271D. It was also urged that this included the share application money of Rs. 98.3 lakhs. Learned counsel for the Revenue urged that the assessee did not show whether any share had ever been allotted during the period under consideration. Consequently, the assessee had clearly violated Section 269SS, exposing itself to penalty action under Section 271D of the Act. 5. The Tribunal noticed that during the assessment proceedings, it had been contended by the assessee that an amount of Rs. 53,18,200/- out of the unsecured loans in the last year had been converted into share capital. This was stated by way of letter dated 01.12.2008. The assessee had also furnished a list of persons who had made cash payments for the purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, 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 v. Vegetable Products 88 ITR 192 for the proposition that when two views are possible, the view which is in favour of the assessee should be adopted. 27. Respectfully, following the aforesaid Hon ble Apex Court decision, in our considered opinion, on the strength of Hon ble Madras High Court decision stated above, the assessee is liable to get relief from the levy of penalty in this regard. Hence, respectfully following the Hon ble Madras High Court decision cited above, we hold that the penalty on cash receipts of share application money is liable to be deleted. Hence, we set aside the order of the Ld. Commissioner of Income Tax (Appeals) and delete the levy of penalty in this case. Hence, assessee s appeal is allowed. 7. The question which this Court has to consider is whether the view of the Tribunal, following the Madras High Court judgment and setting-aside the penalty is justified. In Commissioner of Income-Tax v. Rugmini Ram Ragav Spinners P. Ltd. [2008] 304 ITR 417 (Mad), the Madras High Court w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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