TMI Blog2011 (4) TMI 1409X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 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 ₹ 20,000/- or more in cash, for an aggregate amount of ₹ 32,46,761/- for allotment of Preference Shares in violation of the provisions of Sec.269-SS of the Act. 3. That, without prejudice, the Ld. CJ.T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /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 Act for accepting monies on account of preference shares/ debentures valuing 20,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d-7(1), Kolkata Vs. M/s. Avadh Rubber Ltd. (ITAT, Kolkata) in ITA No. 1853/Kol./2008 (AY 1999-2000) order dated 28.05.2010; (vi) CIT Vs. Speedways Rubber Pvt. Ltd. (2010) 326 ITR 31 (P H); (vii) ITO Vs. Cookme (Spice) Pvt. Ltd. in ITA No. 599/Kol./2009 42/Kol./2010 order dated 16.11.2010; (viii) Basil Express Ltd.Vs. DCIT in ITA Nos. 1912 to 1914/Kol./2009 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 ₹ 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 sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in fact wanted only loan or deposit but tried to show them as share application money and merely for the reason that for some of the applications monies were returned and in some of the applications the share allotments were not in full, it cannot be taken into account that this is no share application money. Hence, we are of the view, in view of the factual findings by the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d only in the absence of a reasonable cause. No doubt a reasonable cause has to be established by the assessee. The rationale behind the provisions of sections 269SS and 269T is to prevent tax evasion, i.e., the laundering of concealed income by parties in the guise of cash loans or deposits in or outside the accounts. The provision of sections 269SS and 269T therefore 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 cal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of certain deposits . Section 269T, as on the relevant period, reads as follows: 269T.(1) No company (including a banking company), co-operative society or firm shall repay to any person any deposit otherwise than by an account payee cheque or account payee bank draft where the amount of the deposit, or where the amount of the deposit 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 accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he is not subject to levy of penalty. The case of the assessee is that, the amount received by the assessee is only for the purpose of allotment of shares and it is not a deposit or loan. In this case, the reasonable cause is that the assessee was under the bona fide belief that the money received is only 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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