East Africa Mobiles Ltd., Baroda V. The Dy.CIT.,Circle-1(2), Baroda

CO 309/AHD/2010

• Counselvise Citation: [2011] 122 COUNSELVISE.COM (IT) 6044 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 month(s) 28 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 17-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2004-2005
• Appeal Filed On: 20-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAKASH THAKKAR
• Assessee Lawyers: B L YADAV
• Keywords: Reasonable cause

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE S/SHRI M. K. SHRAWAT, JM AND D.C.AGRAWAL, AM DY. CIT, CIR.1(2), BARODA. VS. EAST AFRICA MOBILES LTD., OPP. GSFC, N.H.NO.8,DASHRATH, BARODA. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI B. L. YADAV, SR. DR RESPONDENT BY:- SHRI PRAKASH THAKKAR, AR O R D E R PER D.C. AGRAWAL, ACCOUNTANT MEMBER . THE APPEAL HAS BEEN FILED BY THE REVENUE RAISING F OLLOWING GROUND:- (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE PENALTY OF RS.9,80 ,000/- LEVIED U/S 271D OF THE ACT FOR VIOLATION OF PROVISIONS OF SECTION 269SS OF THE ACT BY RECEIVING DEPOSIT OF RS.10 LACS IN CA SH FROM ITS ASSOCIATE CONCERN M/S EAST AFRICA MOTORS LTD. THE APPEAL IS AGAINST DELETION OF PENALTY OF RS.9,8 0,000/- LEVIED U/S 271D BY THE AO. THE ASSESSEE HAS FILED THE CO IN SUPPORT OF THE RELIEF GIVEN BY THE LD. CIT(A). ITA NO.2732/AHD/2010 ALONG WITH CO NO.309/AHD/2010 ASST. YEAR 2004-05 ITA NO.2732/AHD/2010 ALONG WITH CO NO.309/AHD/2010 ASST. YEAR 2004-05 2 2. THE FACTS RELATING TO IMPOSITION OF PENALTY U/S 271D ARE THAT ASSESSEE IS DEALER IN TOYOTA MOTOR VEHICLES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO FOUND THAT THERE WAS A CREDIT ENTRY IN THE BOOKS OF THE ASSESSEE BY WAY OF DEPOSIT OF CASH OF RS.10 LAKHS FROM ITS SISTER CONCERN NAMELY M/S EAST AFRICA MOTORS LTD., BARODA. THIS CREDIT ENTRY BEING DEPOSIT IN CASH WAS IN RESPECT OF SHARE APPLICATION MONEY. SINCE IT WAS DEPOSITED IN CASH THE AO SUBMITTED A P ROPOSAL FOR LEVY OF PENALTY U/S 271D BEFORE LD. ADDL.CIT, RANGE-1, BARO DA, WHO ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE FOR ALLEGED CONTR AVENTION OF THE PROVISIONS OF SECTION 269SS. IN RESPONSE TO THE SHO W CAUSE NOTICE, THE ASSESSEE HAD SUBMITTED FOLLOWING REPLY TO THE ADDL. CIT:- 1. ON MERIT THE ASSESSEE STATED THAT WE HAD MEETIN G WITH OUR BANKER FROM WHOM WE WERE AVAILING WORKING CAPITAL AND TERM LOAN FACILITIES, WHO COMPELLED US TO INCREASE OUR SHARE CAPITAL TO I MPROVE OUR DEBT- EQUITY RATIO. THEY INSISTED THAT WE SHOULD INCREASE SHARE CAPITAL BY ABOUT 10.00 LACS IN THE FY 2003-04 ITSELF. BEING LAST DAY OF THE FINANCIAL YEAR, THE ONLY FEASIBLE WAY TO INCREASE SHARE CAPITAL WAS TO BRING IN THE SHARE CAPITAL IN THE FORM OF SHARE APPLICATION MONEY FROM OUR ASSOCIATE CONCERN M/S EAST AFRICA MOTORS LTD. IN CASH. AS REC EIPT OF SHARE APPLICATION MONEY THROUGH CHEQUE WOULD NOT HAVE SER VED OUR PURPOSE TO INCREASE THE SHARE APPLICATION MONEY IN THAT VERY S AME FY 2003-04 (AS THERE BEING BANK HOLIDAY ON 1 ST APRIL DUE TO FINANCIAL YEAR CLOSURE OF THE BANK). WE THEREFORE ACCEPTED SHARE APPLICATION MONE Y IN CASH FROM OUR M/S EAST AFRICA MOTORS LTD. ON LAST DAY OF FINANCIA L YEAR I.E. 31.03.2004. 2. ON THE LEGAL GROUND THE ASSESSEE HAS SUBMITTED A S UNDER :- A. VIDE CIRCULAR 345CBDT HAS CLARIFIED THAT THE PURPOSE OF INTRODUCING SECTION 269SS IS TO COUNTER ATTEMPTS TO CIRCULATE BLOCK MONEY BY ACCEPTING DEPOSIT AMOUNTS THROUGH CASH AS BENAMI TRANSACTIONS. IN OUR CASE THE INVESTMENT IS MADE BY OUR ASSOCIATE ITA NO.2732/AHD/2010 ALONG WITH CO NO.309/AHD/2010 ASST. YEAR 2004-05 3 CONCERN ONLY IS ALSO ASSESSEE FILING RETURN IN YOUR CIRCLE ONLY. IT HAS ALSO BEEN ASSESSED U/S 143(3 ) FOR AY 2004-05 B Y SAME LEARNED ACIT CIRCLE 1(2). THE SHARES ARE IMMEDIATELY ISSUED IN THE NEXT FINANCIAL YEAR. THE IDENTITY OF THE INVESTOR IS EST ABLISHED AND THERE IS NO INTENTION TO CIRCULATE BLACK MONEY. B. AS REGARDS PROVISIONS CONTAINED IN SECTION 26 9SS R.W.S. 271D WAS COVERING ONLY LOANS AND DEPOSITS, WHICH IN OUR OPINION WAS NOT APPLICABLE TO SHARE APPLICATION MONEY. WE THERE FORE BONA FIDE ACCEPT SHARE APPLICATION MONEY IN CASH OR 31-03-200 4 DUE TO EXIGENCIES EXPLAINED IN PARA 1. THE. CASE LAW CITE D BY YOU OF JHARKAND HIGH COURT IN THE CASE OF BHALOTIA ENGINEE RING WORKS (P) LTD. VS. C1T 2005 (2196) CTR 275 (ITR) 399, IS ALSO OF YEAR 2005 AND THEREFORE SUCH JUDICIAL INTERPRETATION WAS NOT WHEN WE BONA FIDE ACCEPT SHARE APPLICATION MONEY IN CASH ' THE LD. ADDL. COMMISSIONER, HOWEVER, DID NOT ACCEPT THE ABOVE EXPLANATION THAT ON THE FACTS OF THE CASE OF ASSESS EE, PROVISIONS OF SECTION 269SS OR OF SECTION 271D WOULD NOT BE APPLICABLE. H E ACCORDINGLY IMPOSED A PENALTY OF RS.9,80,000/- ON THE ASSESSEE FOR ALLEGED VIOLATION OF PROVISIONS OF SECTION 269SS. 3. THE LD. CIT(A) CANCELLED THE PENALTY FOR THE REA SONS THAT - (1) ASSESSEE WAS UNDER PRESSURE FROM THE BANK TO SQ UARE UP ITS NEGATIVE BANK BALANCES. THE SISTER CONCERN DID NOT HAVE BALANCE IN ITS BANK ACCOUNT THEREFORE, IT DEPOSITED CASH WITH THE ASSESSEE COMPANY AS SHARE APPLICATION MONEY. (2) IT WAS ALSO CLAIMED THAT ASSESSEE HAS RECEIVED A LEGAL ADVICE TO THE EFFECT THAT ACCEPTANCE OF SHARE APPLICATION MONEY D ID NOT AMOUNT OF ACCEPTANCE OF LOAN OR DEPOSIT. THE MEANING OF TH E WORDS LOAN OR DEPOSIT AS USED IN SECTION 269SS DID NOT INCLU DE THE RECEIPT OF MONEY AS SHARE APPLICATION MONEY AND HENCE PROVISIO NS OF SECTION 269SS COULD NOT BE APPLICABLE. FOLLOWING JUDGMENTS WERE AVAILABLE AT THE RELEVANT TIME IN SUPPORT OF THIS V IEW. THE AO HAD RELIED ON THE JUDGMENT OF HON. JHARKHAND HIGH COURT IN BHALOTIA ITA NO.2732/AHD/2010 ALONG WITH CO NO.309/AHD/2010 ASST. YEAR 2004-05 4 ENGINEERING WORKS (P) LTD. VS. CIT 275 ITR 399 WHER EIN A DIFFERENT VIEW WAS TAKEN. THE LD. CIT(A), HOWEVER, HELD THAT IF ASSESSEE HAS TAKEN A STAND ON THE BASIS OF VIEW AVAILABLE AT THAT TIME AND SUBSEQUENT LY CONTRARY VIEW WAS EXPRESSED THEN, ASSESSEE CANNOT BE PENALIZED FOR TA KING A VIEW WHICH IS SUPPORTED BY AUTHORITIES AVAILABLE AT THE RELEVANT TIME, THOUGH CONTRARY VIEW WAS PRONOUNCED SUBSEQUENTLY. SINCE AT THE TIME WHEN SHARE APPLICATION MONEY WAS TAKEN , THE DECISION OF HON. JHARKHAND HIGH COURT IN THE CASE OF BHALOTIA ENGG. WORKS (P) LTD. (SUPRA ) WAS NOT AVAILABLE THE ASSESSEE HAD A REASONABLE CAUSE IN ACCEPTING THE SH ARE APPLICATION MONEY IN CASH. 4. WE HAVE HEARD THE PARTIES AND CAREFULLY PERUSED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW THERE IS NO CASE FOR INTERFERENCE IN THE ORDER OF LD. CIT(A). THE REASONS ARE THAT WHILE LEV YING THE PENALTY U/S 271D THE AO HAS NOWHERE GIVEN A FINDING THAT IT WAS IN FACT A LOAN OR DEPOSIT IN THE GARB OF SHARE APPLICATION MONEY AND NECESSARY FORMALITIES FOR ISSUING SHARES WERE NOT COMPLETED. NO EVIDENCE IN SUPPORT OF THE NON-GENUINENESS OF THE SHARE APPLICATION MONEY WAS BROUGHT ON RECORD. THE PENALTY HAS BEEN LEVIED MERELY BY RELYING ON TH E DECISION OF HON. JHARKHAND HIGH COURT IN THE CASE OF BHALOTIA ENGG. WORKS (P) LTD. (SUPRA). ONCE GENUINENESS OF ACCEPTANCE OF SHARE AP PLICATION MONEY IS NOT DOUBTED THEN THE DECISION OF LD. CIT(A) WILL HO LD GOOD. INASMUCH AS ITA NO.2732/AHD/2010 ALONG WITH CO NO.309/AHD/2010 ASST. YEAR 2004-05 5 THE LAW WHICH IS PRONOUNCED BY THE AUTHORITIES AVAI LABLE AT THE TIME WHEN ACCEPTING SHARE APPLICATION MONEY IN CASH WOULD BE APPLICABLE AND THE LAW PRONOUNCED BY HON. JHARKHAND HIGH COURT IN THE CASE OF BHALOTIA ENGG. WORKS (P) LTD. (SUPRA) WOULD NOT BE APPLICABL E. THAT JUDGMENT WAS NOT AVAILABLE AT THE TIME WHEN RELEVANT TRANSAC TION TOOK PLACE. AT LEAST THIS WILL CONSTITUTE A REASONABLE CAUSE. VIDE CIRCULAR NO.345 ISSUED BY CBDT HAD CLARIFIED THAT PURPOSE OF INTRODUCING S ECTION 269SS IS TO COUNTER ATTEMPT TO CIRCULATE BLACK MONEY BY ACCEPTI NG DEPOSIT THROUGH CASH AS BENAMI TRANSACTION. HOWEVER, IN THE PRESENT CASE THERE IS NO EVIDENCE THAT ASSESSEE HAD RECEIVED MONEY FROM SOME BENAMI AS IT WAS RECEIVED FROM A SISTER CONCERN AND PROPER ENTRIES A RE FOUND IN THE BOOKS OF ACCOUNT. THUS IN THE ABSENCE OF ANY EVIDENCE TO THE EFFECT THAT SHARE APPLICATION MONEY WAS A DISGUISE FOR IMMEDIATELY CR EDITING MONEY TO AVOID ACTION FROM THE BANK, AND AO HAVING ACCEPTED THAT WHAT WAS RECEIVED WAS SHARE APPLICATION MONEY THEN BELIEF OF THE ASSESSEE THAT THERE WILL NOT BE ANY VIOLATION OF PROVISIONS OF SE CTION 269SS ON RECEIPT OF SHARE APPLICATION MONEY WHICH IS FOUNDED ON AVAI LABLE AUTHORITIES ON THE ISSUE AT THAT TIME WOULD BE BONA FIDE AND THERE FORE, NO PENALTY CAN BE LEVIED. AS A RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED AND THE CROSS OBJECTION FILED BY THE ASSESSEE IS ALLOWED. ITA NO.2732/AHD/2010 ALONG WITH CO NO.309/AHD/2010 ASST. YEAR 2004-05 6 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED AND THE CO FILED BY THE ASSESSEE IS ALLOWED. ORDER WAS PRONOUNCED IN OPEN COURT ON 17.06.2011. SD/- SD/- (M. K. SHRAWAT) (D.C. AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMB ER AHMEDABAD, DATED : 17.06.2011 MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD 1.DATE OF DICTATION 6/6/2011 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 8/6/2011 OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..