DCIT, Khanna V. M/s Kashmir Apiaries (P) Ltd., Doraha

ITA 26/CHANDI/2016

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8310 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 18-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: YOGESH MONGA
• Keywords: Share purchase agreement; Reasonable cause

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH,CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO. 26/CHD/2016 ASSESSMENT YEAR: 2009-10 THE DCIT, VS M/S KASHMIR APIARIES P.LTD. CIRCLE, G.T.ROAD, KHANNA. DORAHA. PAN: AABCK9673M (APPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI MANJIT SINGH RESPONDENT BY : SHRI YOGESH MONGA DATE OF HEARING : 23.03.2016 DATE OF PRONOUNCEMENT : 29.03.2016 O R D E R PER BHAVNESH SAINI,JM THIS APPEAL BY REVENUE HAS BEEN DIRECTED AGAINST THE ORDER OF LD. CIT(APPEALS)-II LUDHIANA DATED 06.11.2015 FOR ASSESSMENT YEAR 2009-10 CHALLENGING THE DELETION OF PENALTY UNDER SECTION 271-D OF THE INCO ME TAX ACT. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT ASSESSEE COMPANY RECEIVED RS. 50 LACS IN CASH AS SHARE APPLICATION MONEY FROM SHRI JAGJIT SINGH KAPOOR ON 29.09.2008 FOR ALLOTMENT OF ONE LAC SHARES @ RS. 5 0/- EACH. SINCE THIS CASH RECEIPT OF RS. 50 LACS BY TH E 2 ASSESSEE COMPANY WAS VIOLATION OF PROVISIONS OF SEC TION 269SS OF THE INCOME TAX ACT, THEREFORE, SHOW CAUSE NOTICE FOR LEVY OF THE PENALTY UNDER SECTION 271D W AS ISSUED AGAINST THE ASSESSEE. THE ASSESSEE CONTENDE D THAT SHARE APPLICATION MONEY FALLS SQUARELY OUTSIDE THE DEFINITION OF LOAN OR DEPOSIT AND THE TRANSACTI ON WAS DONE IN GOOD-FAITH AND WAS BONAFIDE TRANSACTION AND THAT IT WAS BELIEVED THAT THE SHARE APPLICATION MON EY WAS IN THE NATURE OF SHARE CAPITAL. THE ASSESSEE F URTHER CONTENDED THAT THE NEED OF THE HOUR WAS SUCH THAT T HERE WAS NO OTHER OPTION WITH THE ASSESSEE COMPANY THAN TO ACCEPT SHARE APPLICATION MONEY IN CASH. THE BANK O VER- DRAFT ACCOUNT OF THE ASSESSEE COMPANY WAS GROSSLY IRREGULAR. THERE WAS A CONSTANT PRESSURE FROM THE BANK TO MAKE IT REGULAR. THE AMOUNT WAS DEPOSITED TO TH E ASSESSEE COMPANY AND BY THE ASSESSEE COMPANY ON 29 TH SEPTEMBER AND 30 TH SEPTEMBER BEING A BANK HOLIDAY, THE ASSESSEE COMPANY WAS UNDER PRESSURE TO MADE IT REGU LAR ON THE SAME DAY BY DEPOSITING CASH ONLY AS IT WOULD HAVE TAKEN A LOT OF TIME FOR CLEARANCE ON CHEQUE. THE COPY OF THE CASH BOOK AND BANK STATEMENT OF THE ASSESSEE COMPANY WAS FILED. IT WAS ALSO EXPLAINED THAT SHRI JAGJIT SINGH KAPOOR WAS SUBSTANTIAL SHAREHOLDE R OF 200000 SHARES WHEN HE PAID RS. 50 LACS AS SHARE APPLICATION MONEY. IT CAN BE REASONABLY ASSUMED TH AT SHRI JAGJIT SINGH KAPOOR WAS RELATED TO THE ASSESSE E COMPANY, THEREFORE, NO PENALTY IS LEVIABLE. THE ASSESSING OFFICER, HOWEVER, DID NOT ACCEPT CONTENTI ON OF 3 THE ASSESSEE AND LEVIED THE PENALTY. THE ASSESSING OFFICER CONSIDERED THE JUDGEMENT OF HON'BLE JHARKHA ND HIGH COURT IN THE CASE OF BOLATIA ENGINEERING WORKS PVT. LTD. VS CIT 275 ITR 399 AND OTHERS IN SUPPORT OF HI S FINDINGS. 3. THE ASSESSEE CHALLENGED THE LEVY OF PENALTY BEFO RE LD. CIT(APPEALS) AND SAME SUBMISSIONS WERE REITERAT ED BEFORE LD. CIT(APPEALS) AND SEVERAL DECISIONS OF VA RIOUS HIGH COURTS AND THE TRIBUNAL WERE RELIED UPON IN SUPPORT OF THE CONTENTION THAT NO PENALTY IS LEVIAB LE WHICH INCLUDES DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS I.P. INDIA (P) LTD. 343 ITR 353, DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF SPEEDWAYS RUBBER P. LTD. 326 ITR 31 AND ORD ER OF THE ITAT CHANDIGARH BENCH IN THE CASE OF IQBAL I NN & HOTELS LTD. VS JCIT DATED 30.01.2014 ( REPORTED IN 49 TAXMAN.COM 74 ). 4. THE LD. CIT(APPEALS) FOLLOWING THE DECISIONS REL IED UPON BY THE ASSESSEE AND IN THE LIGHT OF THE DECISI ON OF THE TRIBUNAL IN THE CASE OF IQBAL INN & HOTELS LTD. (SUPRA) HELD THAT PENALTY UNDER SECTION 271D SHALL NOT BE LE VIED IN CASE OF SHARE APPLICATION MONEY RECEI VED IN CASH. THE PENALTY WAS ACCORDINGLY, CANCELLED AND APPEAL OF THE ASSESSEE WAS ALLOWED. 5. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE LD . DR 4 RELIED UPON ORDER OF THE ASSESSING OFFICER AND RELI ED UPON DECISION OF JHARKHAND HIGH COURT IN THE CASE O F BOLATIA ENGINEERING WORKS PVT. LTD. VS CIT (SUPRA) AND DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CHARAN DASS ASHOK KUMAR VS CIT. ON THE OTH ER HAND, LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE AUTHORITIES BELOW. 6. ON CONSIDERATION OF THE RIVAL SUBMISSIONS AND IN THE LIGHT OF FINDINGS OF AUTHORITIES BELOW, WE ARE OF THE VIEW THAT APPEAL OF THE REVENUE HAS NO MERIT. IT I S ADMITTED FACT THAT ASSESSEE RECEIVED THE AMOUNT IN QUESTION AS SHARE APPLICATION MONEY FROM THE EXISTI NG SHAREHOLDER FOR ALLOTMENT OF THE SHARES. THE GENUINENESS OF THE TRANSACTION HAS NOT BEEN DISPUTE D BY THE AUTHORITIES BELOW. IT IS ALSO NOT IN DISPUTE T HAT THE ASSESSEE HAD TO DEPOSIT THE CASH AMOUNT IN THE BANK TO MAKE THE BANK OVER-DRAFT FACILITY AS REGULAR. THE ASSESSEE HAS FILED COPY OF FORM NO. 2 UNDER THE COMPANIES ACT OF ISSUE OF THE SHARES IN QUESTION. COPY OF SHARE CERTIFICATE IN FAVOUR OF SHRI JAGJIT SINGH KAPOOR HAS ALSO BEEN FILED TO SHOW THAT ASSESSEE INFACT IS SUED THE SHARES TO SHRI JAGJIT SINGH KAPOOR. THE LD. CIT(APPEALS) FOLLOWED THE DECISION OF ITAT CHANDIGA RH BENCH IN THE CASE OF IQBAL INN & HOTELS LTD.(SUPRA) FOR THE PURPOSE OF CANCELING THE PENALTY IN WHICH IT WA S HELD THAT WHEN MONEY IS ACCEPTED AS SHARE APPLICATI ON MONEY, THE SAME CANNOT BE CONSTRUED AS LOAN OR 5 DEPOSIT FOR THE PURPOSE OF SECTION 269SS OF THE I NCOME TAX ACT. IN THIS CASE, SEVERAL DECISIONS OF DIFFER ENT HIGH COURTS HAVE BEEN REFERRED TO ON THE SAME PROPOSITIO N THAT PENALTY IN SUCH CIRCUMSTANCES IS NOT LEVIABLE. THE TRIBUNAL ALSO CONSIDERED THE REASONABLE CAUSE IN FA VOUR OF THE ASSESSEE BECAUSE ASSESSEE WAS OF THE BONAFID E OPINION THAT SHARE APPLICATION MONEY RECEIVED AS CA PITAL RECEIPT AND COULD NOT BE CONSTRUED AS LOAN OR DE POSIT SO AS TO ATTRACT THE PENALTY. THE ABOVE ORDER OF T HE ITAT CHANDIGARH BENCH IN THE CASE OF IQBAL INN & HO TELS LTD. ( SUPRA) HAVE BEEN CONFIRMED BY HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V IQBAL INN & HOTELS LTD. (2015) 12 TMI( 1070 IN WHICH IT WAS HE LD AS UNDER : PENALTIES UNDER SECTION 271D VIOLATION OF SECTIONS 269SS ITAT DELETED PENALTY HELD THAT:- THE AMOUNT RECEIVED BY THE ASSESSEE TOWARDS SHARE APPLICATION MONEY WOULD NOT FALL UNDER LOAN OR DEPOSIT UNDER SECTION 269SS OF THE ACT. CONSEQUENTLY, THE PENALTY UNDER SECTION 271D OF THE ACT WAS NOT LEVIABLE. THE TRIBUNAL WAS RIGHT IN DELETING THE PENALTY. DECIDED IN FAVOUR OF ASSESSEE. 7. HON'BLE PUNJAB & HARYANA HIGH COURT ALSO IN THE CASE OF CIT V SPEEDWAYS RUBBERS P.LTD. 326 ITR 31 A LSO CONSIDERED THE SIMILAR ISSUE THAT PENALTY IS NOT LE VIABLE WHEN ASSESSEE ACCEPTED SHARE APPLICATION MONEY IN CASH. HON'BLE PUNJAB & HARYANA HIGH COURT ALSO CONSIDERED THE DECISION OF THE JHARKHAND HIGH COURT IN THE CASE OF BOLATIA ENGINEERING WORKS PVT. LTD. VS CIT 6 (SUPRA) AND CONSIDERED IT TO BE DISTINGUISHABLE ON FACTS. THEREFORE, ISSUE IS COVERED IN FAVOUR OF THE ASSESS EE BY THE ABOVE JUDGEMENTS OF THE HON'BLE JURISDICTIONAL PUNJAB & HARYANA HIGH COURT. THE LD. DR ALSO RELIE D UPON DECISION OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CHARAN DASS ASHOK KUMAR (SUPRA ) IN WHICH ASSESSEE FAILED TO ESTABLISH THAT THERE EX IST REASONABLE CAUSE IN TAKING OR ACCEPTING LOAN OR DEP OSIT OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE OR ACCOUN T PAYEE BANK DRAFT. THIS DECISION WOULD NOT SUPPORT THE CASE OF THE REVENUE. 8. CONSIDERING THE TOTALITY OF FACTS AND CIRCUMSTANCES, WE DO NOT FIND ANY MERIT IN THE APPE AL OF THE REVENUE. THE SAME IS ACCORDINGLY, DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (RANO JAIN) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 29 TH MARCH, 2016. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR, ITAT/CHD