ITO, New Delhi V. M/s. Nandlala Securities Pvt. Ltd., New Delhi

ITA 3043/DEL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86511 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 18-11-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 15-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Question of law; Reasonable cause

Judgement Text

DELHI BENCH E : NEW DELHI BEFORE SHRI S.V. MEHROTRA , ACCOUNTANT MEMBER AND SHRI A. T. VARKEY, JUDICIAL MEMBER ITA NO. 3043 /DEL/ 2013 (ASSESSMENT YEAR: 2008 - 09 ) INCOME TAX OFFICER, WARD13(1), ROOM NO.219, C.R.BUILDING, NEW DELHI VS. M/S. NANDLALA SECURITIES P LTD., FLAT NO.215, IJS PALACE, 320 - DELHI GATE BAZAR, ASAF ALI ROAD, NEW DELHI - 110002 PAN (APPELLANT) (RESPONDENT) O R D E R PER A. T. VARKEY, JUDICIAL MEMBER THIS IS AN APPEAL ARISING FROM AN ORDER OF THE LD CIT(A) - XVI, DELHI DATED 21.02.2013 FOR ASSESSMENT YEAR 2008 - 09. 2. ALL THE THREE GROUNDS RAISED BY THE REVENUE RELATE TO DELETION OF PENALTY LEVIED OF RS.7,80,000/ - U/S 2 71(D) OF THE INCOME TAX ACT , 1961 (HEREIN AFTER THE ACT) . 3. THE FACTS OF THE CASE ARE THAT THE APPELLANT COMPANY RECEIVED SHARE APPLICATION MONEY OF RS.7,80,000/ - IN CASH FROM 18 SHARE HOLDERS AT RS.40,000/ - PER PERSONS AND RS.30,000/ - EACH FROM 2 PERS ONS ON 10 TH AUGUST 2007. THE ADDL CIT HELD THAT THERE IS VIOLATION OF SECTION 269SS OF THE ACT, AS ASSESSEE HAS RECEIVED SHARE APPLICATION MONEY IN CASH AMOUNTING TO RS.20,000/ - OR MORE. THE LD CIT(A) HAS DELETED THE PENALTY FOLLOWING THE JUDGMENT OF JURIS DICTIONAL HIGH COURT IN THE CASE OF CIT VS. I.P. INDIA PVT. LTD. IN ITA NO.1192/2011. THE LD CIT(A) HAS HELD IN PARA 4.2 TO 4.5 AS UNDER: - APPELLANT BY : ARUN GUPTA, ADV RESPONDENT BY : JP CHANDRAKER, SR. DR PAGE 2 OF 4 4.2 ON IDENTICAL ISSUE HON'BLE JURISDICTIONAL DELHI HIGH IN THE CASE OF CIT VS. IP INDIA PVT. LTD. IN ITA NO. 1192/2011 IN ITS DECISION DT. 21 / 11/2011 AFTER CONSIDERING THE DECISION OF HONBLE JHARKHAND HIGH COURT IN BHALOTIA ENGG. WORKS PVT. LTD. (SUPRA) HAVE HELD THAT SECTION 269SS PROHIBITS ANY PERSON FROM ACCEPTING A LOAN OR DEPOSIT IN CASH EXCEEDING RS.20,000 / - IN THE A GGREGATE IN A YEAR FROM A THIRD PERSON. IF THERE IS ANY VIOLATION, THE PERSON RECEIVING THE LOAN OR DEPOSIT WILL BE LIABLE TO PENALTY U/S.271D IN AN AMOUNT EQUAL TO THE AMOUNT OF THE LOAN OR DEPOSIT. THE DISTINCTION BETWEEN A LOAN AND A DEPOSIT IS THAT IN THE CASE OF THE FORMER IT IS ORDINARILY THE DUTY OF THE DEBTOR TO SEEK OUT THE CREDITOR AND TO REPAY THE MONEY ACCORDING TO THE AGREEMENT WHILE IN THE CASE OF A DEPOSIT IT IS GENERALLY THE DUTY OF THE DEPOSITOR TO GO TO THE BANKER OR TO THE DEPO SITEE, AS THE CASE MAY BE, AND MAKE A DEMAND FOR IT. SHARE APPLICATION MONIES FOR ALLOTMENT OF SHARES CANNOT BE TREATED AS RECEIPT OF LOAN OR DEPOSIT. IN THE ABOVE DECISION HON'BLE HIGH COURT HAVE HELD: '7. SECTION 269SS PROHIBITS ANY PERSON FROM ACCEPTIN G A LOAN OR DEPOSIT IN CASH EXCEEDING RS.20,000/ - IN THE AGGREGATE IN A YEAR FROM A THIRD PERSON. IF THERE IS ANY VIOLATION, THE PERSON RECEIVING THE LOAN OR DEPOSIT WILL BE LIABLE TO PENALTY U/S.271D IN AN AMOUNT EQUAL TO THE AMOUNT OF THE LOAN OR DEPOSIT . A LOAN OR DEPOSIT IS DEFINED IN THE EXPLANATION BELOW SEC.269SS AS A 'LOAN OR DEPOSIT OF MONEY'. THE ASSESSEE'S CONTENTION, ACCEPTED BOTH BY THE CIT(A) AND THE TRIBUNAL, IS THAT SHARE APPLICATION MONIES RECEIVED BY A COMPANY, PENDING ALLOTMENT OF SHARES, DO NOT AMOUNT TO LOAN OR DEPOSIT. 8. ON A CAREFUL CONSIDERATION OF THE MATTER, WE FIND THAT THE AO HAS RELIED ON THE JUDGMENT OF THE JHARKHAND HIGH COURT (SUPRA) AND REFERRED THE ISSUE OF LEVYING PENALTY TO THE ADDITIONAL CIT. HE DID NOT EXAMINE WHETHER THE SHARE APPLICATION MONIES CAN BE TREATED AS '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 APPLICANT - COMPANIES 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 TH E JHARKHAND HIGH COURT (SUPRA). THE RELIANCE ON THIS JUDGMENT APPEARS TO US TO BE PAGE 3 OF 4 MISPLACED. IN BAIDYA NATH PLASTIC INDUSTRIES (P) LTD. AND ORS VS K.L. ANAND (1998) 230 ITR 522, A LEARNED SINGLE JUDGE OF THIS COURT POINTED OUT THAT THE DISTINCTION BETWEEN A LOAN AND A DEPOSIT IS THAT IN THE CASE OF THE FORMER IT IS ORDINARILY THE DUTY OF THE DEBTOR TO SEEK OUT THE CREDITOR AND TO REPAY THE MONEY ACCORDING TO THE AGREEMENT WHILE IN THE CASE OF A DEPOSIT IT IS GENERALLY THE DUTY OF THE DEPOSITOR TO GO TO THE BANKER 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 FULFILMENT OF CERTAIN CONDITIONS. IF THESE TESTS ARE APPLIED TO THE FACTS OF THE CASE BEFORE US, IT MAY BE SEEN THAT THE RECEIPT OF SHARE APPLICATION MONIES FROM THE THREE PRIVATE LIMITED COMPANIES FOR ALLOTMENT OF SHARES IN THE ASSESSEE - COMPANY CANNOT BE TREATED AS RECEIPT OF LOAN OR DEP OSIT. IN ANY CASE, THE TRIBUNAL HAS RIGHTLY NOTICED THE CLEAVAGE OF JUDICIAL OPINION ON THE POINT AND HELD THAT IN THAT SITUATION THERE WAS REASONABLE CAUSE U/S.273B, APPLYING THE JUDGMENT OF THE SUPREME COURT IN VEGETABLE PRODUCTS (SUPRA). 9. WE ARE ACC ORDINGLY OF THE VIEW THAT NO SUBSTANTIAL QUESTION OF LAW ARISES FROM THE ORDER OF THE TRIBUNAL. WE DECLINE TO ADMIT THE APPEAL. THE SAME IS DISMISSED WITH NO ORDER AS TO COSTS'. THE ABOVE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IS SQUARELY APPLICABL E IN THE INSTANT APPEAL. THERE IS NO DISPUTE THAT THE ABOVE MONEYS OF RS.7,80,000/ - WERE RECEIVED AS SHARE APPLICATION MONEYS FROM THE 20 PERSONS AND SHARES WERE ALSO SUBSEQUENTLY ALLOTTED TO THEM ON 31/08/07 AND 31 / 07 / 08 WHICH WAS ALSO RECORDED BY THE ADD L. CIT IN PARA 5.3 OF HER ORDER. 4.3 REGARDING THE ISSUE OF SHARE APPLICATIONS DT.10/08/07 AND DT. 10/01/2008, THERE IS NO DISPUTE THAT OUT OF THE ABOVE SUM OF RS.7,80,000/ - AMOUNT OF RS.4,80,000/ - WERE RECEIVED AS SHARE APPLICATION MONEYS ON 10/08/07 AS PER THE SHARE APPLICATION FORMS DT. 10/08/07 FROM THE 12(TWELVE) SHARE APPLICANTS. THE SHARE WERE ALSO ALLOTTED TO THEM ON 31/08/07. 4.4 REGARDING THE AMOUNT OF RS.3,00,000/ - RECEIVED ON 10/08/2007 FROM THE 8 PERSONS, THEIR SHARE APPLICATIONS WERE DT. 1 0/01/2008. ON THE BASIS THEIR SHARE APPLICATION DT. 10/01/2008 THE MONEYS GIVEN ON 10/08/07 WERE TREATED AS SHARE APPLICATION MONEYS AND SHARES WERE ALSO SUBSEQUENTLY ALLOTTED TO THEM ON 31 / 07/2008. UNDER SEC 269SS AGGREGATE AMOUNT OF LOAN OR DEPOSIT IS CO NSIDERED. BY VIRTUE OF SHARE APPLICATION DT. 10/01/08 THE SUMS GIVEN ON 10/08/07 BEING TREATED AS SHARE APPLICATION MONEYS, THEREFORE, THE AGGREGATE AMOUNT OF LOAN OR PAGE 4 OF 4 DEPOSIT WOULD BE NIL, AS THE ENTIRE SUM OF RS. 3,00,000/ - IS APPLIED AS SHARE APPLICATION MONEY. 4.5 IN VIEW OF THE ABOVE THE SUM OF RS.7,80,000/ - RECEIVED AS THE SHARE APPLICATION MONEY FROM THE 20 SHARE APPLICANTS CANNOT BE TREATED AS RECEIPT OF LOAN OR DEPOSIT AS PROVIDED IN SEC 269SS. SHARE APPLICATION MONEYS BEING OUTSIDE THE PREVIEW OF SEC 269SS, THEREFORE, PENALTY U/S 271D CANNOT BE IMPOSED ON THE AMOUNT OF RS.7,80,000/ - RECEIVED AS SHARE APPLICATION MONEY ON 10/08/07. IN THE RESULT THE APPEAL IS ALLOWED. 4. HAVING GONE THROUGH THE MATERIAL ON RECORD AND SUBMISSION BY BOTH SIDES WE FIND THE ISSUE IS SQUARELY COVERED BY THE JUDGEMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF IP INDIA (SUPRA) WHEREIN IT WAS HELD THAT RECEIPT OF SHARE APPLICATION MONEY IN CASH I S BEYOND THE SCOPE OF PROVISION CONTAINED IN SECTION 269S S READ WITH SECTI ON 271D OF THE ACT. WE THEREFORE CONFIRM THE ORDER OF THE LD CIT(A) AND DISMISS THE GROUND RAISED BY THE REVENUE. 5. IN THE RESULT THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 07 .01.2015 . - S D / - - S D / - ( S.V. MEHROTRA ) (A. T. VARK EY) A CCOUNTANT MEMBER JUDICIAL MEMBER DATED : 07 / 01 / 2015 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI