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2016 (8) TMI 65 - ITAT DELHI

2016 (8) TMI 65 - ITAT DELHI - TMI - Penalty under section 271D - violation of the provisions of section 269SS - share application money exceeding ₹ 20,000/- was received in cash - Held 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 ₹ 20,000/- was received in cash under b .....

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with the provisions of section 269SS of the Act. Accordingly, we are not inclined to grant any immunity from levy of penalty under section 271D of the Act on the ground of existence of reasonable cause for failure to comply with the provisions of section 269SS of the Act. - Decided in favour of revenue - ITA No. 1713/Del/2010 - Dated:- 27-7-2016 - Smt. Diva Singh, Judicial Member And Sh. O. P. Kant, Accountant Member Appellant by Sh. Sanjay Gupta, CA Respondent by Sh. V.R. Sonbhadra, Sr. DR ORD .....

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ssment proceedings, the Assessing Officer observed that the assessee company was engaged in the business of providing financial services. He further observed from the records that the assessee company received share application money of ₹ 21,97,500/- from Sh. Pradeep Aggarwal and Smt Kaveri Aggarwal. Out of the said share application money, amount of ₹ 10.70 Lakhs was received in cash on various dates as under: Sh. Pradee Kumar Aggarwal 28/04/05 ₹ 270000/- 14/11/05 ₹ 1550 .....

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as more than ₹ 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 Tax, it was contended by the assessee that the money received was neither lo .....

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73B of the Act, on the ground that the assessee company was under bonafide belief that the provision of section 269SS did not prohibit accepting the share application money in cash exceeding ₹ 20,000/-, was also not accepted by the learned Additional Commissioner of Income Tax, as according to him there was no reasonable cause for the assessee to accept share application money in cash. The Ld. Additional Commissioner of Income Tax following the judgment of the Hon ble Jharkhand High Court .....

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e of the true character of the transaction and what was necessary to be considered is the true nature of the transaction as held in the case of Kadarnath Jute Manufacturing Company Limited Vs. CIT (1971) 82 ITR 363 (SC). The learned Commissioner of Income-tax (Appeals) also held that the reliance placed by the assessee on the decisions of the Tribunal in the case of Sharad Holding Leasing Private Limited, (2005) 95 ITD 336 (Pune) and in the case of Jagvijay Auto Finance Private Limited Vs. ACIT .....

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nces of the case, the learned Commissioner of Income Tax (Appeals) has erred in law in upholding the Penalty of ₹ 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 penalt .....

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only in case shares are not allotted to the depositor. Thus, it has been held that penalty is not leviable in such circumstances. Relying on this order, the penalty confirmed by the learned CIT(A) is deleted. 5. Against the said decision of the Tribunal, the Revenue preferred appeal under section 260A of the Act before the Hon ble High Court of Delhi, wherein following substantial question of law was framed: Whether the Income Tax Appellate Tribunal was justified and right in allowing the appea .....

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cer and the Commissioner of Income Tax(Appeals). In these circumstances, we answer the aforesaid question of law in favour of the appellant and against the respondent-assessee. However, an order of remit is passed to the tribunal to decide the appeal afresh after recording factual findings and thereafter apply the decision of this Court in ITA No. 1192/2011. This order will not be construed as an order which decides the factual issue/question whichever arises for consideration on merits. 7. In c .....

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the sum of ₹ 10,70,000/- received in cash. He further submitted that said amount of share application money was neither loan nor deposits, therefore, the transaction would not come within the scope of section 269SS of the Act. The learned counsel reiterated its submission made before the learned Commissioner of Income-tax (Appeals), which are summarized by the learned Commissioner of Income-tax (Appeals) in paras 2.1 to 2.4 of his order. The learned counsel also submitted that the fact rec .....

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ed 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 a .....

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ee company as on 31.03.2006, and there was no increase in the authorized share capital, thereafter, till 31/03/2009. He further submitted that the assessee was not authorized to receive the share application money as the authorized share capital was already fully paid and allotted. According to the learned Departmental Representative , the amount received was actually in the nature of the loan rather than share application money. He also submitted that facts of the instant case are different fro .....

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the rival submissions and perused the material on record. In the case of I.P. India Private Limited (supra) also the assessee received share application money in cash from three private limited companies and shares in fact were subsequently allotted to those companies, who advanced the money to the assessee. The Hon ble High Court observed that this aspect of allotment of shares was not examined either by the Assessing Officer or by the Additional Commissioner of Income Tax. The Hon ble High Cou .....

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ot;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 Cou .....

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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. ACME Educational Society (2010) 326 ITR 146 (Del). In this decision, it was held that a loan grants temporary use of money, or temporary accommodation, and that the essence of a deposit is that there must be a liability to return it to the party by whom or on whose behalf it has been made, on fulfillment of certain cond .....

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a). 11. Thus, the Hon ble High Court has laid down the test that if the amount is given for temporary use then it is in the nature of loan and it is in the nature of deposit, if there s liability to return it to the party by whom or on whose behalf the amount was made. When we apply this test to the facts of the instant case, we find that the authorized share capital of the assessee was only ₹ 1 lakh as on 31/03/2006, which is evident from the Schedule-I of balance sheet of the assessee av .....

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lication money to a company. Further, from the balance sheet dated 31/03/2009, it is manifest that entire amount of ₹ 21,97,500/-, which was appearing as a share application money in the balance sheet dated 31/03/2006, has been returned back to the subscribers. In the case of I.P. India (P) Ltd. (supra), the shares were allotted to the subscribers & hence the Hon ble High Court held the amount received in cash as share application money, whereas in the case in hand, no shares have been .....

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ooks 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 Pr .....

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ication money although it is the nomenclature given by the assessee in its books of account. The reason and basis of this has also been pointed out by showing that the assessee company was having authorized share capital of ₹ 1 lakh only which was continuing since its incorporation and there is no application made by the assessee company for increase in the authorized share capital. It is also noted that an amount of ₹ 8.05 lakh was also received by the assessee company in earlier ye .....

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ble Apex Court in the case of Kedar Nath Jute Manufacturing Co. vs. CIT as reported in 82 ITR 363. In view of these facts, we are of the considered opinion that this claim of the assessee cannot be accepted that the amount received by the assessee company in the present year of ₹ 134.75 lakhs from Shri Gian Gupta, Director of the assessee company was on account of share application money. Once, we hold that, the order of the CIT(A) cannot be sustained because there is no finding given by t .....

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ments followed by AO or by CIT(A) is applicable and the penalty is leviable u/s 271D for default u/s 269SS. We, therefore, reverse the order of the CIT(A) and restore the penalty order. 13. In 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 .....

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