M/s K.V.R. Industries Ltd., Visakhapatnam V. THE JCIT, RANGE - 3, Visakhapatnam

ITA 33/VIZ/2014

• Counselvise Citation: 3325314 RSA 2014
• Duration Of Justice: 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 31-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D MANOJ KUMAR
• Keywords: Bonafide belief; Reasonable cause
• Section: 27; 2

Judgement Text

ITA NO.33&34/VIZAG/2014 M/S. K.V.R. INDUSTRIES LTD., VSKP IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 33&34 /VIZAG/ 2014 ASSESSMENT YEARS : 2009-10 M/S. K.V.R. INDUSTRIES LTD VISAKHAPATNAM VS. JCIT RANGE-3 VISAKHAPATNAM (APPELLANT) (RESPONDENT) PAN NO.AACCK7954J ASSESSEE BY: SHRI G.V.N. HARI, ADVOCATE REVENUE BY: SHRI D. MANOJ KUMAR, ADDL. CIT DATE OF HEARING : 09.07.2014 DATE OF PRONOUNCEMENT : 09.07.2014 ORDER PER BENCH:- THESE TWO APPEALS OF THE ASSESSEE ARE AGAINST TWO S EPARATE ORDERS OF THE CIT(A) BOTH DATED 16.12.2013 CONFIRMING THE PEN ALTY IMPOSED U/S 271D AND 271E OF THE ACT PERTAINING TO THE ASSESSMENT YE AR 2009-10. ITA 33/VIZAG/2014: 2. THIS APPEAL IS AGAINST THE PENALTY IMPOSED U/S 2 71D OF THE ACT. 3. BRIEFLY THE FACTS ARE, THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING OF NEWS PRINTS. A SURVEY WAS CONDUCTED IN CASE OF THE ASSESSEE ON 28.1.2009. SUBSEQUENT TO THE SURVE Y, THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR O N 30.9.2009. DURING THE ASSESSMENT PROCEEDING, THE ASSESSING OFFICER NO TICED THAT THE ASSESSEE HAS MADE CERTAIN CASH TRANSACTIONS WHICH ARE IN VIO LATION OF PROVISIONS U/S 269SS OF THE INCOME-TAX ACT. HE THEREFORE REFERRED THE MATTER TO THE DCIT PROPOSING INITIATION OF PROCEEDING FOR IMPOSITION O F PENALTY U/S 271D OF THE ACT. ACCORDINGLY, A NOTICE WAS ISSUED TO THE ASSES SEE TO EXPLAIN WHY PENALTY U/S 271D OF THE ACT SHALL NOT BE IMPOSED. IN RESPON SE TO THE SHOW CAUSE NOTICE, IT WAS STATED BY THE ASSESSEE THAT THE AMOU NTS RECEIVED IN CASH FROM ITA NO.33&34/VIZAG/2014 M/S. K.V.R. INDUSTRIES LTD., VSKP 2 THREE PARTIES WERE TOWARDS SHARE APPLICATION MONEY WHICH WAS SUBSEQUENTLY RETURNED BACK AS SHARES COULD NOT BE ALLOTTED TO TH EM. IN SUPPORT OF SUCH CLAIM, THE ASSESSEE SUBMITTED AFFIDAVITS FROM THE C ONCERNED PARTIES CONFIRMING THE FACT THAT THE AMOUNTS ADVANCED BY TH EM TO THE ASSESSEE WERE TOWARDS SHARE APPLICATION MONEY AND THE SHARE APPLI CATION MONEY WAS RETURNED BACK TO THEM AT THEIR REQUEST. THE ASSESS ING OFFICER HOWEVER, DID NOT BELIEVE THE EXPLANATION OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE HAD RECEIVED THE ABOVE AMOUNTS IN CASH ONLY TO TIDE OVER THE FINANCIAL CRUNCH AND WERE THEREFORE IN THE NATURE OF LOANS. THUS, B ELIEVING THE AFFIDAVIT SUBMITTED BY THE CONCERNED PARTIES WHO HAVE ADVANCE D THE AMOUNT IN CASH, THE ASSESSING OFFICER TREATED THE AMOUNTS ADVANCED BY THEM AS LOANS WHICH IS IN VIOLATION OF SECTION 269SS OF THE ACT INVITING I MPOSITION OF PENALTY U/S 271D OF THE ACT. ACCORDINGLY, HE PASSED AN ORDER U/S 27 1D OF THE ACT IMPOSING PENALTY OF RS.2,13,74,604/-. THE ASSESSEE CHALLENG ED THE PENALTY ORDER IN AN APPEAL PREFERRED BEFORE THE CIT(A). 4. BEFORE THE CIT(A), IT WAS SUBMITTED BY THE ASSES SEE THAT THE ASSESSING OFFICER WAS NOT CORRECT IN IMPOSING PENALTY BY TREA TING THE SHARE APPLICATION MONEY AS LOAN AND DEPOSIT U/S 269SS OF THE ACT. IT WAS SUBMITTED BY THE ASSESSEE THAT IT IS NOT UNUSUAL OR UNCOMMON TO RECE IVE CASH FOR SHARE APPLICATION MONEY AS IT IS NOT PROHIBITED BY LAW. IT WAS SUBMITTED THAT THOUGH THE ASSESSEE HAD FILED AFFIDAVITS OF THE PAR TIES CONFIRMING THE FACT THAT THEY HAD ADVANCED THE AMOUNT TOWARDS SHARE APPLICAT ION MONEY BUT THE SAME HAS BEEN DISCARDED BY THE ASSESSING OFFICER WI THOUT ANY REASON. IT WAS SUBMITTED BY THE ASSESSEE THAT AT THE TIME OF ASSES SMENT PROCEEDING, THE ASSESSING OFFICER HAS NOT MADE ANY ALLEGATION WITH REGARD TO THE SHARE APPLICATION MONEY AND HAD ACCEPTED THE TRANSACTION AS GENUINE. THEREFORE, AT THE STAGE OF PENALTY, THE AUTHORITY CONCERNED CA NNOT DISPUTE THE SHARE APPLICATION MONEY. THE ASSESSEE PRODUCING DOCUMENT ARY EVIDENCE BEFORE THE CIT(A) SUBMITTED THAT SHARE TO THE EXTENT OF RS .1,65,74,604/- WERE ALLOTTED TO THE RESPECTIVE APPLICANTS AGAINST THE S HARE APPLICATION MONEY RECEIVED BY THE ASSESSEE. IN THIS CONTEXT, NECESSA RY EVIDENCES WERE ALSO FILED BEFORE THE CIT(A). THE CIT(A) AFTER CONSIDER ING THE SUBMISSIONS OF THE ASSESSEE FOUND THAT OUT OF THE TOTAL AMOUNT OF RS.5 ,89,28,000/- SHOWN TO HAVE BEEN RECEIVED AS SHARE APPLICATION MONEY BY TH E ASSESSEE, THE ITA NO.33&34/VIZAG/2014 M/S. K.V.R. INDUSTRIES LTD., VSKP 3 ASSESSING OFFICER HAS NOTED THAT SUMS AMOUNTING TO RS.2,13,74,604/- WAS RECEIVED IN CASH TOWARDS SHARE APPLICATION MONEY DU RING THE YEAR, THOUGH THE AMOUNTS WERE RECORDED IN THE ASSESSEES BOOKS OF AC COUNTS UNDER SHARE APPLICATION MONEY ACCOUNT. HE FURTHER FOUND THAT O UT OF THE AMOUNT OF RS.2,13,74,604/- AN AMOUNT OF RS.48 LAKHS HAS BEEN RETURNED TO THE APPLICANTS FOR THE YEAR AND SHARES FOUND TO HAVE BE EN ALLOTTED TO THE SHARE APPLICANTS FOR THE BALANCE AMOUNT TOTALING TO RS.1, 65,74,604/-. THE DETAILS OF SHARES ALLOTTED WAS GIVEN BY THE ASSESSEE AS UNDER: SL. NO DATE NAME SRI/SMT/M/S. AMOUNT RECEIVED IN CASH IN RS. AMOUNT REPAID IN CASH IN RS. WHETHER SHARE APPLICATION MADE 1 11.05.2008 K. VENKATA RAO 2000000 NO 2. 18.05.2008 K. VENKATA RAO 2300000 NO 3. 01.06.2008 K. VENKATA RAO 750000 NO 4. 30.07.2008 K. VENKATA RAO 1775000 NO 5. 03.01.2009 K. VENKATA RAO 1000000 NO 6. 10.01.2009 K. VENKATA RAO 6300000 YES (ALLOTTED 7. 15.06.2008 RATNAM JUTE (P) LTD. 1500000 NO 8. 06.07.2008 RATNAM JUTE (P) LTD. 1500000 NO 9. 27.11.2008 RATNAM JUTE (P) LTD. 1500000 10. 07.12.2008 RATNAM JUTE (P) LTD. 1500000 11. 27.06.2008 SRI RAMACHANDRA TRADERS (PROP: K. YERUKU NAIDU) 800000 NO 12. 21.11.2008 SRI RAMACHANDRA TRADERS (PROP: K YERUKU NAIDU) 800000 13. 19.06.2008 SRI VAISHNAVI JUTE TRADERS (PROP: B TIRUPATHI NAIDU) 500000 NO 14. 23.06.2008 SRI VAISHNAVI JUTE TRADERS (PROP: B. TIRUPATHI NAIDU) 500000 NO ITA NO.33&34/VIZAG/2014 M/S. K.V.R. INDUSTRIES LTD., VSKP 4 SL. NO DATE NAME SRI/SMT/M/S. AMOUNT RECEIVED IN CASH IN RS. AMOUNT REPAID IN CASH IN RS. WHETHER SHARE APPLICATION MADE 15. 14.11.2008 SRI VAISHNAVI JUTE TRADERS (PROP: B TIRUPATHI NAIDU) 1000000 16. 07.12.2008 (SRI VAISHNAVI JUTE TRADERS (PROP: B TIRUPATHI NAIDU) 45000 YES (ALLOTTED) 17. 31.05.2008 K SWAPNA 350000 YES (ALLOTTED) 18. 31.01.2009 K SWAPNA 39600 YES, PART OF A SINGLE APPLICATION FOR RS.1,08,000/- (ALLOTTED) 19. 28.02.2009 K SWAPNA 38400 YES, PART OF A SINGLE APPLICATION FOR RS.1,08,000/- 20. 28.02.2009 K SRAVANTHI 388400 YES, PART OF A SINGLE APPLICATION FOR RS.17,00,000/- (ALLOTTED) 21 28.02.2009 K SRAVANTHI 338800 YES, PART OF A SINGLE APPLICATION FOR RS.17,00,000/ - 22 28.02.2009 K SRAVANTHI 339300 YES, PART OF A SINGLE APPLICATION FOR RS.17,00,000/- 23. 28.02.2009 K SRAVANTHI 339100 YES, PART OF A SINGLE APPLICATION FOR RS.17,00,000/- 24. 28.02.2009 K SRAVANTHI 294400 YES, PART OF A SINGLE APPLICATION FOR RS.17,00,000/- 25. 28. 0 2.2009 K RATNA KUMARI 162609 YES (ALLOTTED) 26. 31.03.2009 K RATNA KUMARI 113995 YES (ALLOTTED) TOTAL 21374604 4800000 5. THE CIT(A) AFTER EXAMINING THE DETAILS FURNISHED BY THE ASSESSEE WAS OF THE VIEW THAT THE TRANSACTIONS REFERRED TO IN SE RIAL NO.1 TO 6 AND 16 TO 26 ITA NO.33&34/VIZAG/2014 M/S. K.V.R. INDUSTRIES LTD., VSKP 5 ARE OUT OF THE PURVIEW OF SECTION 269SS OF THE ACT AS THERE IS NO MATERIAL TO SHOW THAT THESE TRANSACTIONS REPRESENT LOAN OR DEPO SIT. 6. ACCORDINGLY, HE HELD THAT THE SAID AMOUNT OF RS. 1,65,74,604/- CANNOT BE TREATED AS LOAN OR DEPOSIT SO AS TO BRING IT WIT HIN THE PURVIEW OF SECTION 269SS OF THE ACT. SO FAR AS THE BALANCE AMOUNT OF RS.48 LAKHS IN RESPECT OF THREE PARTIES VIZ., M/S. RATNAM JUTE LTD. RS.30 LAK HS, SRI VAISHNAVI JUTE TRADERS RS.10 LAKHS AND SRI RAMACHANDRA TRADERS RS. 8 LAKHS, THE CIT(A) NOTICED THAT SO FAR AS M/S. RATNAM JUTE LTD. IS CONCERNED, IT IS A SISTER CONCERN OF THE ASSESSEE. APART FROM THE AMOUNT OF RS.30 LAKHS, THE COMPANY HAS ALSO GIVEN SHARE APPLICATION MONEY IN CHEQUE. THE SAID COMPANY WAS ALLOTTED SHARES TO THE TUNE OF RS.75 LAKHS WHICH AM OUNTS WERE RECEIVED IN CHEQUE AND THE AMOUNT OF RS.30 LAKHS WHICH WAS RECE IVED IN CASH WAS ALSO RETURNED BACK IN CASH. IN RESPECT OF SHRI RAMACHAND RA TRADERS, IT WAS NOTICED THAT OUT OF AN AMOUNT OF RS.180 LAKHS GIVEN TOWARDS SHARE APPLICATION MONEY, AN AMOUNT OF RS.8 LAKHS WAS IN C ASH. THE SAID CONCERN WAS ALSO ALLOTTED SHARES EXCEPT THE AMOUNT OF RS.8 LAKHS RECEIVED IN CASH WHICH WAS RETURNED BACK DURING THE YEAR. SIMILARLY IN CASE OF THE THIRD CONCERN OUT OF RS.186.70 LAKHS RECEIVED AS SHARE AP PLICATION MONEY, AN AMOUNT OF RS.10,45,000/- WAS RECEIVED IN CASH. THE SHARES WERE ALLOTTED FOR RS. 45,000/- AND RS.10 LAKHS WAS RETURNED BACK TO T HE APPLICANT DURING THE YEAR. THE CIT(A) THEREFORE HELD THAT AS THERE IS N O SATISFACTORY EXPLANATION OF THE ASSESSEE AS TO WHY SHARES WERE NOT ALLOTTED IN RESPECT OF THESE AMOUNTS GIVEN IN CASH AND WHICH WAS SUBSEQUENTLY RE TURNED BACK IN CASH TO THE APPLICANTS THEY ATTRACT THE IMPOSITION OF PENAL TY U/S 271D. ACCORDINGLY, HE CONFIRMED PENALTY FOR AN AMOUNT OF RS.48 LAKHS. THE OBSERVATION OF THE CIT(A) IN THIS RESPECT IS EXTRACTED HEREIN: I HAVE CONSIDERED THE SUBMISSIONS AND THE DETAILS F ILED. I FIND THAT THE ASSESSEE HAS NOT GIVEN ANY SATISFACTO RY EXPLANATION AS TO WHY SHARES WERE NOT BEEN ALLOTTED IN RESPECT OF ONLY THESE AMOUNTS GIVEN IN CASH, AND ON LY THESE AMOUNTS WERE RETURNED BACK IN CASH TO THESE APPLICA NTS THOUGH THEY HAVE BEEN ALLOTTED SHARES IN RESPECT OF OTHER AMOUNTS GIVEN BY THEM TO THE ASSESSEE. THUS THERE IS EVERY INDICATION TO TAKE A VIEW THAT THESE AMOUNTS WERE N OT GIVEN AS SHARE APPLICATION MONEY AND THAT THE ADVANCEMENT OF THESE AMOUNTS WERE IN THE NATURE OF LOANS AS THEY H AVE UTILIZED TO MEET FINANCIAL CRUNCH OF THE ASSESSEE A ND THEY HAVE ALSO BEEN RETURNED BACK, AND SHARES WERE NOT A LLOTTED. ITA NO.33&34/VIZAG/2014 M/S. K.V.R. INDUSTRIES LTD., VSKP 6 HENCE I AM OF THE VIEW THAT PENALTY U/S 271D IS EXI GIBLE IN RESPECT OF THESE TRANSACTIONS AMOUNTING TO RS.48,00 ,000/-. ACCORDINGLY, THE IMPUGNED PENALTY TO THE TUNE OF RS.48,00,000/- IS CONFIRMED AND PENALTY AMOUNTING T O RS.1,65,74,604/- IS CANCELLED. 7. THE LD. A.R. SUBMITTED BEFORE US THAT THE TRANSA CTION IN RESPECT OF THE 3 PARTIES ON WHICH PENALTY WAS CONFIRMED BY THE CI T(A) WERE RECORDED NOT ONLY IN THE BOOKS OF THE ASSESSEE BUT ALSO IN THE B OOKS OF THE RESPECTIVE PARTIES. THE GENUINENESS OF THE TRANSACTIONS HAS N EVER BEEN DOUBLED BY THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDING. THEREFORE, ONCE A TRANSACTION IS RECORDED IN THE BOOKS OF ACCOUNTS AN D WHEN GENUINENESS OF SUCH TRANSACTION IS NOT DOUBTED BY REVENUE, THERE W OULD BE NO JUSTIFICATION FOR LEVY OF PENALTY U/S 271D OR 271E OF THE ACT. I N SUPPORT OF SUCH CONTENTION, THE ASSESSEE RELIED UPON A NUMBER OF DE CISIONS WHICH ARE AS UNDER: A) OMEC ENGINEERS VS. CIT (2007) 294 ITR 599 B) BHAGWATI PRASAD BAJORIA (HUF) VS. CIT (2003) 263 IT R 487 (GAU) C) CIT VS. SUNIL KUMAR GOEL (2009) 315 ITR 163 (DEL) D) LAKSHMI TRUST CO. VS. CIT (2008) 303 ITR 99 (MAD) E) CHOUDHARY CO. BHUJIAWALA VS. ITO (2004) 89 TTJ (JD) 357 F) DILLU CINE ENTERPRISES (P) LTD. VS. ADDL. CIT (2002 ) 80 ITD 484 (HYD) 8. FURTHER, IT WAS CONTENDED BY THE ASSESSEE THAT M /S. RATNAM JUTE LTD. IS A SISTER CONCERN OF THE ASSESSEE. THEREFORE, TH E AMOUNT RECEIVED FROM THE SISTER CONCERN IS OUTSIDE THE SCOPE OF SECTION 271D OF THE ACT. IN SUPPORT OF SUCH CONTENTION, HE RELIED ON THE FOLLOWING DECISIO NS: A) CIT VS. AMBICA FLOUR MILLS (2008) 6 DTR (GUJ) 169 B) CIT VS. SUNIL KUMAR GOEL (2009) 315 ITR 163 (DEL) C) DILLU CINE ENTERPRISES (P) LTD. VS. ADDL. CIT (2002 ) 80ITD 484 (HYD) 9. THE LD. A.R. CONTENDED THAT WHEN A TRANSACTION I S CARRIED OUT WITH A BONAFIDE BELIEF THAT THE SAME IS OUTSIDE THE SCOPE OF SECTION 269 SS OF THE ACT OR SECTION 269T OF THE ACT, THEN LEVY OF PENALT Y U/S 271D OR 271E IS NOT JUSTIFIED. IT WAS SUBMITTED THAT WHEREVER POSSIBLE, THE ASSESSEE TOOK THE AMOUNTS BY ACCOUNT PAYEE CHEQUES. THEREFORE, MEREL Y BECAUSE THE REVENUE DID NOT AGREE WITH THE NATURE OF THE TRANSACTION IN A FEW CASES, IT CANNOT BE A GOOD REASON TO JUSTIFY LEVY OF PENALTY. IN THIS CO NTEXT, HE RELIED ON THE FOLLOWING DECISIONS: ITA NO.33&34/VIZAG/2014 M/S. K.V.R. INDUSTRIES LTD., VSKP 7 A) CIT VS. RUGMINI RAM RAGAV SPINNERS (P) LIMITED 304 ITR 417 (MAD) B) CHOUDHARY CO. BHUJIAWALA VS. ITO (2004) 89 TTJ (JD) 357 C) CHANDRA CEMENT LIMITED VS. DCIT (2000) 68 TTJ (JP) 35 D) SALAGAON SANMITRA SAHAKARI PATHPEDI LTD. VS. ADDL. CIT (2012) 51 SOT 53 (MUM) (URO) 10. FINALLY, THE LD. A.R. SUBMITTED THAT ONCE A CAS H TRANSACTION CARRIED OUT IS ACCEPTED TO BE DUE TO FINANCIAL URGENCY AND COMM ERCIAL EXPEDIENCY, THEN THAT WOULD CONSTITUTE A REASONABLE CAUSE BY ITSELF NOT TO LEVY PENALTY U/S 271D OF THE ACT. IT WAS SUBMITTED THAT THE ASSESSIN G OFFICER WHILE REJECTING ASSESSEES CLAIM OF SHARE APPLICATION HAS OBSERVED THAT THE AMOUNT WAS RECEIVED TO TIDE OVER THE FINANCIAL CRUNCH OF THE A SSESSEE. IN THIS CONTEXT, IT WAS SUBMITTED THAT IN A SITUATION OF FINANCIAL CRUN CH AN ASSESSEE IS SOMETIMES COMPELLED TO ACCEPT/REPAY LOANS IN CASH AS COMMERCI AL EXPEDIENCY DEMAND. THEREFORE, PENALTY SHOULD NOT HAVE BEEN IMPOSED FOR THAT REASON ALSO. IN SUPPORT OF SUCH CONTENTION, HE RELIED ON THE FOLLOW ING DECISIONS: A) BUILTEC ENGINEERS AND BUILDERS VS. DCIT (2013) 256 CTR (MAD) 205 B) SHREENATH BUILDERS VS. DCIT (2000) 66 TTJ (AHD) 113 C) JITU BUILDERS (P) LIMITED VS. ADDL. CIT (2010) 124 ITD 134 (AHD) (TM) 11. SO FAR AS THE AMOUNTS RECEIVED FROM SRI VAISHNA VI JUTE LTD. IS CONCERNED, THE LD. A.R. SUBMITTED THAT OUT OF THE T OTAL AMOUNT RECEIVED IN CASH OF RS.10,45,000/- THE ASSESSEE HAS ALREADY ALL OTTED SHARE OF RS.45,000/- AND WHICH WAS ALSO ACCEPTED BY THE ASSESSING OFFICE R BY NOT LEVYING PENALTY. THEREFORE, WHEN THE ASSESSING OFFICER IS ACCEPTING A PART OF THE AMOUNT RECEIVED, THERE IS NO REASON WHY HE SHOULD NOT HAVE ACCEPTED THE OTHER PART WHEN THE EXPLANATION OF THE ASSESSEE REMAINS THE SA ME. 12. THE LD. D.R. ON THE OTHER HAND SUBMITTED THAT S O FAR AS THE AMOUNTS RECEIVED IN CASH IS CONCERNED EXCEPT ALLOTTING THE PENALTY AMOUNT OF SHARES OF RS.45,000/-, THE REST OF THE AMOUNTS ARE RETURNED B ACK TO THE PERSONS CONCERNED WITHOUT ALLOTMENT OF SHARES. THEREFORE, THE ASSESSING OFFICER WAS CORRECT IN IMPOSING PENALTY U/S 271D OF THE ACT. T HE LD. D.R. SUBMITTED THAT ONCE LOAN IS RECEIVED IN CASH, THE PROVISIONS OF SE CTION 269SS OF THE ACT AUTOMATICALLY COMES INTO PLAY. HENCE, PENALTY U/S 271D OF THE ACT HAS TO BE LEVIED. IT WAS SUBMITTED THAT FOR VIOLATION OF SECT ION 269SS OF THE ACT, ITA NO.33&34/VIZAG/2014 M/S. K.V.R. INDUSTRIES LTD., VSKP 8 GENUINENESS IS NOT A CRITERIA. IN SUPPORT OF HIS C ONTENTION, THE LD. D.R. RELIED ON THE FOLLOWING DECISIONS: 94 ITD 281 ITO VS. SUNIL M. KASLIWAL (2005) (PUNE) (TM) 96 ITD 210 THENAMAL CHHAJJER VS. JCIT (2005)(CHENN AI) 13. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES AND PERUSED THE MATERIALS ON RECORD AS WELL AS ORDERS OF THE REVENU E AUTHORITY. WE HAVE ALSO CAREFULLY APPLIED OUR MIND TO THE DECISIONS RELIED UPON BY THE PARTIES. AS CAN BE SEEN, OUT OF THE PENALTY IMPOSED OF RS.2,13,74,6 04/- REPRESENTING CASH TRANSACTION, WHICH WAS TREATED BY THE ASSESSING OFF ICER AS LOANS OR DEPOSIT, THE CIT(A) HAS ACCEPTED ASSESSEES CLAIM OF SHARE A PPLICATION MONEY TO THE EXTENT OF RS.1,65,74,604/-. THE CIT(A) HAS NOT ACC EPTED CASH TRANSACTIONS IN RESPECT OF THREE PARTIES BY SIMPLY OBSERVING THAT T HE ASSESSEE HAS FAILED TO SUBSTANTIATE ITS CLAIM THAT IT IS SHARE APPLICATION MONEY. HOWEVER, FACT REMAINS THAT NOT ONLY THE AFORESAID AMOUNTS HAVE BE EN RECORDED IN THE BOOKS OF ACCOUNTS AS SHARE APPLICATION MONEY BY THE ASSES SEE BUT THE CONCERNED PARTIES HAVE ALSO SHOWN IT AS SHARE APPLICATION MON EY IN THEIR BOOKS. IN FACT, THE SAID PARTIES HAVE ALSO CONFIRMED BEFORE THE ASS ESSING OFFICER BY SUBMITTING AFFIDAVITS THAT THE AMOUNTS ADVANCED BY THEM IN CASH REPRESENTED SHARE APPLICATION MONEY. WHEN THE ADVANCE HAS BEEN RECORDED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE AS WELL AS THE PARTIES WHO HAVE ADVANCED THEM AS SHARE APPLICATION MONEY AND WHEN THOSE PARTIES H AVE CONFIRMED IT TO BE SHARE APPLICATION MONEY BY FURNISHING AFFIDAVIT, TH E ASSESSING OFFICER WAS NOT JUSTIFIED IN TREATING THEM AS LOAN OR DEPOSIT ON ME RE PRESUMPTION AND SURMISES. THE FACT THAT IT HAS BEEN RECORDED AS SH ARE APPLICATION MONEY BY BOTH THE ASSESSEE AND PERSONS WHO ADVANCED THEM HAS NOT BEEN CONTROVERTED BY THE DEPARTMENT. IT IS ALSO A FACT F OUND BY THE CIT(A) THAT SHARES IN FACT HAS BEEN ALLOTTED TO THE VERY SAME P ARTIES BY THE ASSESSEE, HOWEVER, HE HAS SUSTAINED PENALTY BY OBSERVING THAT SHARES WERE ALLOTTED AGAINST CHEQUE PAYMENTS AND NOT CASH PAYMENTS. THI S, IN OUR VIEW IS NOT JUSTIFIED. WHEN BOTH THE ASSESSEE AND THE PARTIES WHO HAVE ADVANCED ARE ADMITTING IT TO BE SHARE APPLICATION MONEY, THERE I S NO REASON TO DISBELIEVE THEM IN ABSENCE OF ANY OTHER MATERIAL TO PROVE THE FACT THAT IT IS LOAN OR DEPOSIT. IN THE AFORESAID FACTS AND CIRCUMSTANCES, IN OUR VIEW, THE REVENUE ITA NO.33&34/VIZAG/2014 M/S. K.V.R. INDUSTRIES LTD., VSKP 9 AUTHORITIES WERE NOT CORRECT IN IMPOSING PENALTY U/ S 271D OF THE ACT BY TREATING THE SHARE APPLICATION MONEY AS LOAN OR DEP OSIT. SINCE, WE HAVE HELD THAT CASH RECEIVED ARE SHARE APPLICATION MONEY AND AS SUCH OUTSIDE THE PURVIEW OF SECTION 269SS, THERE IS NO NEED TO DEAL WITH THE ALTERNATIVE CONTENTIONS OF THE LD. A.R. 14. IN VIEW OF THE AFORESAID, WE HOLD THAT PENALTY U /S 271D OF THE ACT IN THE PRESENT CASE WILL NOT BE ATTRACTED. ACCORDINGL Y, WE DIRECT THE AO TO DELETE THE SAME. ITA NO.34/VIZAG/2014: 15. IN THIS CASE PENALTY HAS BEEN IMPOSED FOR REPAYM ENT OF THE AMOUNT OF RS.48 LAKHS IN CASH IN PURPORTED VIOLATION OF SECTI ON 269T OF THE ACT. SINCE WHILE CONSIDERING ASSESSEES APPEAL IN ITA NO.32 IN CASE OF IMPOSITION OF PENALTY U/S 271D OF THE ACT, WE HELD THAT THE MONEY ADVANCED WAS TOWARDS SHARE APPLICATION, THE SAME WILL ALSO APPLY TO THE ISSUE IN DISPUTE IN THE PRESENT APPEAL. THEREFORE, THE PENALTY IMPOSED U/S 271E OF THE ACT WILL ALSO NOT SURVIVE. ACCORDINGLY, WE DIRECT DELETION OF TH E PENALTY IMPOSED. 16. IN THE RESULT, BOTH THE APPEALS ARE ALLOWED . PRONOUNCED IN THE OPEN COURT ON 9 TH JULY14 SD/- SD/- (J. SUDHAKAR REDDY) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM, DATED 9 TH JULY, 2014 COPY TO 1 M/S. K.V.R. INDUSTRIES LIMITED, D.NO.47-11-13, PL OT NO.2, 5 TH FLOOR, ESWARA HOME, DWARAKA NAGAR, VISAKHAPATNAM 2 JCIT RANGE-3, VISAKHAPATNAM` 3 THE CIT, VISAKHAPATNAM 4 THE CIT (A) , VISAKHAPATNAM 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM