ITO, New Delhi V. M/s. IPL India Pvt. Ltd., New Delhi

ITA 226/DEL/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 9994 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 21-03-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 14-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MONA MOHANTI
• Keywords: Bonafide belief

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCH C DELHI ] BEFORE SHRI C. L. SETHI, JM AND SHRI K. D. RANJAN, AM I. T. A. NO. 226 (DEL) OF 2011 ASSESSMENT YEAR : 2005-06. THE INCOME-TAX OFFICER, M /S. I P INDIA PVT. LTD., W A R D : 11 (4), A3/3A, GREE N APARTMENTS, N E W D E L H I. PASCHIM VIHAR, NEW DELHI100063. P A N / G I R NO. AAA CS 1792 C. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : SHRI K. SAMPATH, ADV.; DEPARTMENT BY : MS. MONA MOHANTI, SR. D.R.; O R D E R. PER K. D. RANJAN, AM : THIS APPEAL BY THE REVENUE FOR ASSESSMENT YEAR 200 5-06 ARISES OUT OF ORDER OF THE LD. CIT (APPEALS)XIII, NEW DELHI. 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE REPRODUCED AS UNDER :- ' 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ORDER OF LD. CIT (A) IS WRONG, PERVERSE, ILLEGAL AND AGAI NST THE PROVISIONS OF LAW WHICH IS LIABLE TO BE SET ASIDE; 2. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS ERRED IN DELETING THE PENALTY OF RS.18,00,000/- IMPOSED UNDER SECTION 271-D OF THE I. T. ACT, 1961 VIDE AOS ORDER DATED 31.12. 2007; 3. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS ERRED IN NOT TREATING THE SHARE APPLICATION MON EY RECEIVED IN CASH AS 2 I. T. A. NO. 226 (DEL) OF 2011 DEPOSIT AND IGNORING THE FINDINGS OF HONBLE HIGH COURT OF JHARKHAND IN CASE OF M/S. BHALOTIA ENGINEERING WORKS (P) LTD. VS. CIT RE PORTED IN 275 ITR 399. 3. THE ONLY ISSUE FOR CONSIDERATION RELATES TO LEVY OF PENALTY UNDER SECTION 271-D OF THE I. T. ACT, 1961. THE FACTS OF THE CASE STATED IN BRIEF A RE THAT THE ASSESSEE RECEIVED SHARE APPLICATION MONEY OF RS.4,75,35,000/- OUT OF WHICH A SUM OF RS. 18,00,000/- WAS ACCEPTED IN CASH FROM THREE PARTIES. THE ASSESSING OFFICER INITIATED PENALTY P ROCEEDINGS UNDER SECTION 271-D ON THE GROUND THAT ACCEPTANCE OF SHARE APPLICATION MONEY IN CASH AMOUNTING TO RS.20,000/- OR MORE VIOLATED THE PROVISIONS OF SECTION 269-SS OF THE ACT. IN TH E COURSE OF PENALTY PROCEEDINGS IT WAS SUBMITTED THAT THE ASSESSEE HAD NOT VIOLATED ANY PR OVISIONS OF SECTION 269-SS AS THIS SECTION RELATES TO SPECIFICALLY LOAN OR DEPOSIT TAKEN OR AC CEPTED. THIS CONTENTION OF THE ASSESSEE WAS NOT ACCEPTED BY THE AO IN VIEW OF DECISION OF HONBLE J HARKHANAD HIGH COURT IN THE CASE OF M/S. BHALOTIA ENGG. WORKS P. LTD. VS. CIT 275 ITR 3 99 WHEREIN ON SIMILAR FACTS IT WAS HELD THAT SHARE APPLICATION MONEY SHOULD BE TREATED AS L OAN OR DEPOSIT AS PROVIDED UNDER SECTION 269-SS OF THE ACT. IF A PERSON TAKES OR ACCEPTS AN Y LOAN OR DEPOSIT IN CONTRAVENTION OF PROVISIONS OF SECTION 269-SS HE SHALL BE LIABLE TO PAY BY WAY OF PENALTY A SUM EQUAL TO THE AMOUNT OF LOAN OR DEPOSIT SO TAKEN OR ACCEPTED. THEREFORE, THE AO IMPOSED PENALTY OF RS.18 LAKHS UNDER SECTION 271-D OF THE ACT. 4. ON APPEAL BEFORE CIT(A) IT WAS SUBMITTED THAT TH E GENUINENESS OF THE AMOUNT RECEIVED AS SHARE APPLICATION MONEY WAS NOT IN DISPUTE AS IN AS SESSMENT THE AMOUNT HAD BEEN ACCEPTED WITHOUT ANY ADVERSE COMMENTS. THE ASSESSING OFFICE R HAD BLINDLY RELIED UPON THE DECISION OF HONBLE JHARKHAND HIGH COURT IN THE CASE OF BHALOTI A ENGG. WORKS P. LTD. VS. CIT (SUPRA). LD. AR OF THE ASSESSEE PLACED RELIANCE ON THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. RUGMINI RAM RAGHAV SPINNERS P. LTD. 304 ITR 417 (MAD.) WHEREIN IT HAS BEEN HELD THAT IN GENUINE CASES THERE IS NO QUESTION OF ANY P ENALTY. IT WAS ALSO SUBMITTED THAT SHARE APPLICATION MONEY WAS NOT IN THE NATURE OF LOAN OR DEPOSIT AND, THEREFORE, PROVISIONS OF SECTION 269-SS OF THE ACT WERE NOT APPLICABLE. HOW EVER, THE LD. CIT (APPEALS) RELYING ON THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE O F RUGMINI RAM RAGHAV SPINNERS (SUPRA) DELETED THE ADDITION. 3 I. T. A. NO. 226 (DEL) OF 2011 5. BEFORE US THE LD. SR. DR RELYING ON THE DECISION OF HONBLE JHARKHAND HIGH COURT IN THE CASE OF BHALOTIA ENGG. WORKS P. LTD. VS. CIT (SUPR A) SUBMITTED THAT THE PENALTY UNDER SECTION 271-D IS LEVIABLE WHEREAS THE LD. AR OF THE ASSESSE SE RELIED ON THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. RUGMINI RAM RAGHA V SPINNERS P. LTD (SUPRA) FOR THE PROPOSITION THAT WHERE TRANSACTIONS ARE GENUINE, PE NALTY UNDER SECTION 271-D OF THE ACT WAS NOT IMPOSABLE. HE FURTHER SUBMITTED THAT WHERE IN A CA SE TWO OPINIONS ARE POSSIBLE, THE VIEW IN FAVOUR OF THE ASSESSEE SHOULD BE TAKEN. HE PLACED RELIANCE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASES OF CIT VS. KULLU VALLEY TRANSPO RT CO. P. LTD. 77 ITR 518 (SC) 77 ITR 518; CIT V. VEGETABLE PRODUCTS LTD. 88 ITR 192; AND THE DECISION IN THE CASE OF MOTI LAL PADAMPAT SUGAR MILLS LTD. VS. STATE OF UTTAR PRADESH & OTHER S 118 ITR 326 (SC). 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. THE ASSESSEE RECEIVED SHARE APPLICATION MONEY IN CASH A T RS.18 LAKHS. THE TRANSACTION OF RECEIPT OF SHARE APPLICATION MONEY WAS ACCEPTED. THE AO HAD I MPOSED PENALTY UNDER SECTION 271-D RELYING ON THE DECISION OF HONBLE JHARKHAND HIGH C OURT IN THE CASE OF BHALITIA ENGG. WORKS P. LTD. VS. CIT (SUPRA), WHEREIN IT HAS BEEN HELD THA T EVEN IF SHARE APPLICATION MONEY CANNOT BE CONSIDERED TO BE A LOAN WITHIN THE MEANING OF SECTI ON 269-SS IT PARTAKES OF THE CHARACTER OF A DEPOSIT SINCE IT IS REPAYABLE IN SPECIE ON REFUSAL TO ALLOT SHARES AND IS REPAYABLE IF RECALLED BY THE APPLICANT BEFORE ALLOTMENT OF SHARES AND THE CONCLU SION OF THE CONTRACT. THEREFORE, SHARE APPLICATION MONEY RECEIVED IN CASH AMOUNTING TO RS. 20,000/- OR MORE VIOLATES THE PROVISIONS OF SECTION 269-SS. HONBLE MADRAS HIGH COURT IN THE C ASE OF RUGMINI RAM RAGHAV SPINNERS LTD. (SUPRA) HAS HELD THAT PENALTY UNDER SECTION 271-E W AS NOT AUTOMATIC AND A BONAFIDE BELIEF TO THE EFFECT THAT RECEIPT OF ADVANCE AGAINST ALLOTMENT OF SHARES WOULD NOT BE TERMED AS LOANS OR DEPOSITS, WOULD BE SUFFICIENT TO DROP THE PENALTY L EVIABLE UNLESS AND UNTIL THE MATERIAL ON RECORD POSITIVELY SHOWED THAT MONEY RECEIVED WAS ONLY A DE POSIT OR A LOAN. THEREFORE, FROM THE DECISIONS OF HONBLE MADRAS HIGH COURT AS WELL AS J HARKHAND HIGH COURT, ONE MAY FIND THAT THERE IS CLEAVAGE OF JUDICIAL OPINION ON THE ISSUE. HENCE, THE ASSESSEES CASE IS COVERED BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CI T VS. VEGETABLE PRODUCTS LTD. (SUPRA) WHEREIN IT HAS BEEN HELD THAT IN A CASE IF THE COUR T FINDS THAT THE LANGUAGE OF A TAXING PROVISION IS 4 I. T. A. NO. 226 (DEL) OF 2011 AMBIGUOUS OR CAPABLE OF MORE THAN ONE MEANING THEN THE COURT HAS TO ADOPT THAT INTERPRETATION, WHICH FAVOURS THE ASSESSEE, MORE PARTICULARLY SO WH ERE THE PROVISION RELATES TO IMPOSITION OF A PENALTY. DURING THE COURSE OF HEARING, THE LD. COU NSEL FOR THE ASSESSEE SUBMITTED THAT THERE IS NO PRESUMPTION THAT EVERY PERSON KNOWS THE LAW. HE PL ACED RELIANCE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF MOTI LAL PADAM PAT SUGAR MILLS LTD. VS. STATE OF UTTAR PRADESH & OTHERS (SUPRA). FURTHER, HONBLE SU PREME COURT IN THE CASE OF CIT VS. KULLU VALLEY TRANSPORT CO. P. LTD. 77 ITR 518 (SC) HAS HE LD THAT EVEN IF TWO VIEWS ARE POSSIBLE THE VIEW WHICH IS FAVOURABLE TO THE ASSESSEE MUST BE AC CEPTED WHILE CONSTRUING THE PROVISIONS OF A TAXING STATUTE. 7. IF THE FACTS OF THE CASE BEFORE US ARE EXAMINED IN THE LIGHT OF JUDICIAL PRONOUNCEMENTS, IT IS CLEAR THAT IN ORDER TO ATTRACT PROVISIONS OF SECTION 269-SS, THE AMOUNT RECEIVED BY THE ASSESSEE MUST BE IN THE NATURE OF DEPOSIT OR LOAN. ON THIS ISSUE THERE IS CLEAVAGE OF JUDICIAL OPINIONS. THEREFORE, THE ASSESSEES CASE IS COVERE D BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF VEGETABLE PRODUCTS LTD. (SUPRA) WHER EIN IT HAS BEEN HELD THAT WHERE TWO OPINIONS ARE POSSIBLE, THE VIEW IN FAVOUR OF THE ASSESSEE SH OULD BE TAKEN. RESPECTFULLY FOLLOWING THE JUDICIAL PRONOUNCEMENTS, IT IS HELD THAT PENALTY UN DER SECTION 271-D OF THE ACT IS NOT IMPOSABLE IN THE CASE OF THE ASSESSEE. NO MATERIAL HAS BEEN BROUGHT ON RECORD TO PROVE THAT MONEY WAS RECEIVED ONLY A DEPOSIT OR LOAN. THEREFORE, IN OUR CONSIDERED OPINION, THE LD. CIT (A) WAS JUSTIFIED IN DELETING THE PENALTY. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON : 31 ST MARCH, 2011. SD/- SD/- [ C. L. SETHI ] [ K. D. RANJAN ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 31 ST MARCH, 2011. *MEHTA * 5 I. T. A. NO. 226 (DEL) OF 2011 COPY OF THE ORDER FORWARDED TO : - 1. APPELLANT. 2. RESPONDENT. 3. CIT, 4. CIT (APPEALS), 5. DR, ITAT, NEW DELHI. TRUE COPY. BY ORDER. ASSISTANT REGISTRAR, ITAT.