ITO, New Delhi V. M/s. Nandi Promoters Pvt. Ltd, New Delhi

ITA 3462/DEL/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2220 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-12-2009
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 23-02-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 06-08-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: MONA MOHANTY
• Section: 271D; 271E

Judgement Text

I.T.A. NO.3462/DEL./2009 (A.Y. : 2005-06) IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH `F : NEW DELHI) BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.3462/DEL./2009 (ASSESSMENT YEAR : 2002-03 ) ITO, WARD 13(1), VS. M/S NANDI PROMOTERS PVT. LTD ., NEW DELHI. C/O FORD SERVICE CENTRE, NH-8, NEAR SHIV MURTI, RANGPURI, NEW DELHI-110 037 (PAN/GIR NO.AAACN3816H) (APPELLANT) (RESPONDENT) APPELLANT BY : NONE RESPONDENT BY : MS MONA MOHANTY, DR ORDER PER A.K. GARODIA, AM THIS IS A REVENUE APPEAL DIRECTED AGAINST THE ORDER OF CIT(A)-XVI, NEW DELHI, DATED 11.05.2009 FOR AY 2005-06. THE ONLY ISSUE RA ISED BY THE REVENUE READS AS UNDER: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE CIT(A) HAS ERRED IN DELETING THE PENALTY OF RS.1,00,00,000/- L EVIED U/S 271D OF THE I.T. ACT WITHOUT PROPER APPRECIATION OF THE APPARENT FACTS O F THE CASE AS CLEARLY BROUGHT OUT IN THE PENALTY ORDER AS WELL AS IN THE RELEVANT ASS ESSMENT ORDER. 2. NONE APPEARED ON BEHALF OF THE ASSESSEE ON THE A PPOINTED DATE OF HEARING I.E. ON 10.12.2009. ONE ADJOURNMENT APPLICATION HAS BEEN P RESENTED BEFORE US WHICH IS SIGNED BY ONE SHRI B.L. GUPTA ON 8.12.209 AND THE SAME WAS PRESENTED BEFORE US BY ONE SHRI JAI KISHAN AGGARWAL,. WE FIND THAT NEITHER ANY POWER O F ATTORNEY IN FAVOUR OF SHRI B.L. GUPTA IS AVAILABLE BEFORE US NOR MR. JAI KISHAN AGG ARWAL COULD PRODUCE ANY POWER OF ATTORNEY IN HIS FAVOUR AND HENCE, WE DO NOT CONSIDE R THIS APPLICATION FOR ADJOURNMENT AND THE SAME WAS REJECTED FOR THE REASONS THAT THIS REQ UEST IS NEITHER BY AN 2 AUTHORIZED/COMPETENT PERSON NOR PRESENTED BEFORE US BY AN AUTHORIZED/COMPETENT PERSONS. SINCE, NONE APPEARED ON BEHALF OF THE AS SESSEE, WE HEARD THIS APPEAL EX-PARTE QUA-THE-ASSESEE. 3. BRIEF FACTS ARE THAT IN THE PENALTY ORDER PASSED BY THE AO U/S 271D OF THE I.T. ACT, IT HAS BEEN NOTED THAT DURING THIS YEAR, THE ASSESS EE COMPANY HAD SHOWN TO HAVE INCURRED A SUM OR RS.135.91 LAKH AS COST OF CONSTRUCTION OF A BUILDING AND THE SOURCE OF INVESTMENT IN THE SAID PROPERTY WAS CLAIMED TO BE S HARE APPLICATION MONEY AMOUNTING TO RS.134.75,980/- RECEIVED FROM SHRI GIAN GUPTA, ONE OF THE DIRECTOR OF THE ASSESSEE COMPANY. IT IS ALSO NOTED THAT OUT OF THIS SHARE APPLICATION MONEY OF RS.134.75 LACS, AN AMOUNT OF RS. 1 CRORE WAS RECEIVED BY THE ASSESSEE COMPANY IN CASH. IT IS ALSO NOTED THAT THE ASSESSEE COMPANY HAD AUTHORIZED SHARE CAPI TAL OF RS.1 LACS WHICH WAS CONTINUING SINCE ITS INCORPORATION. IT IS ALSO NOTED THAT NO APPLICATION FOR INCREASE IN SAID AUTHORIZED CAPITAL WAS EVER FILED. IT IS THE CLAIM OF THE ASS ESSEE THAT AGAINST THE AUTHORIZED SHARE CAPITAL OF RS.1 LAKH ONLY, THE ASSESSEE HAS RECEIVE D SHARE APPLICATION MONEY TO THE TUNE OF RS.8.05 LAKH RECEIVED IN EARLIER YEARS. IT IS FURT HER NOTED THAT IN THE ASSESSMENT ORDER, IT IS OBSERVED BY THE AO THAT THE ASSESSEE COMPANY NEITHE R HAD STATUTORY CAPACITY NOR THE INTENTION TO RECEIVE THE MONEY AGAINST ALLOCATION O F SHARES. IT WAS HELD BY THE AO THAT MERELY GIVING IT THE NAME OF SHARE APPLICATION MONE Y WOULD NOT SUFFICE WHEN THE CIRCUMSTANCES AND THE FACTS OF THE CASE CLEARLY SHO W THAT IT COULD NOT BE SHARE APPLICATION MONEY. IT WAS HELD BY THE AO THAT THE MONEY RECEIV ED BY THE ASSESSEE IS NOTHING BUT LOAN DESPITE HAVING BEEN GIVEN NOMENCLATURE OF SHAR E APPLICATION IN ITS BOOKS OF ACCOUNT. IT IS FURTHER NOTED THAT THE ADDL.CIT WHO HAS PASSE D THE PENALTY ORDER THAT HE ASSESSEE COMPANY HAD NOT ADVANCED ANY REASON FOR NOT USING T HE BANKING CHANNEL, WHEN BOTH THE DIRECTORS OF THE ASSESSEE COMPANY AND THE ASSESSEE COMPANY WERE MAINTAINING BANK ACCOUNT. THE AO HAS RELIED UPON THE JUDGMENT OF HO NBLE JHARKHAND HIGH COURT, RENDERED IN THE CASE OF M/S BHALOTIA ENGINEERING WO RKS AS REPORTED IN 275 ITR 399 AND IMPOSED PENALTY U/S 271D FOR VIOLATION O F SECTION 269SS TO THE EXTENT OF RS.1 CRORE. 4. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THE CIT(A) HAS ALSO MENTIONED ABOUT THE JUDGMENT OF HON BLE JHARKHAND HIGH COURT, RENDERED IN THE CASE OF BHALOTIA ENGINEERING WORKS (SUPRA), BUT NO REASON HAS BEEN 3 GIVEN BY HIM FOR NOT FOLLOWING THIS JUDGMENT OF HON BLE JHARKHAND HIGH COURT. HE HAS REFERRED TO TWO JUDGMENTS OF HONBLE MADRAS HIGH CO URT IN THE CASE OF CIT VS. RUGHULMAN RAM RAGHAV SPINNERS (P) LTD., AS REPORTE D IN 220 CTR 520 (MAD.) AND IN THE CASE OF CIT VS. IDHAYAM PUBLICATIONS LTD. AS RE PORTED IN 285 ITR 221 (MAD.). HE HAS ALSO REFERRED TO SOME TRIBUNALS DECISION AND THERE AFTER DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING THAT PENALTY U/S 271D CANNOT BE IMPOSED FOR RECEIPT OF SHARE APPLICATION MONEY IN CASH. NOW, THE REVENUE IS IN FURTHER APPEAL BEFORE US. 5. IT IS SUBMITTED BY THE LD.DR OF THE REVENUE THAT FIRST OF ALL, THE CASE OF THE AO IS THAT THIS RECEIPT OF RS.1 CRORE IN CASH AND BALANCE AMOUNT OF RS.34.25 LAKH IN CHEQUE IS NOT ON ACCOUNT OF RECEIPT OF SHARE APPLICATION MONE Y, BUT IT IS IN FACT A LOAN ALTHOUGH IN THE BOOKS OF ACCOUNT, NOMENCLATURE GIVEN BY THE ASS ESSEE IS SHARE APPLICATION MONEY. IT IS POINTED OUT BY THE AO THAT THE ASSESSEE COMPANY WAS HAVING AUTHORIZED SHARE CAPITAL OF RS.1 LAKH ONLY AND EVEN AFTER RECEIPT OF RS.134. 75 IN THE PRESENT YEAR, THERE IS NO ACTION TAKEN BY THE ASSESSEE COMPANY TO INCREASE TH E AUTHORIZED SHARE CAPITAL. AGAINST THE AUTHORIZED SHARE CAPITAL OF RS.1 LAKH, THE COMP ANY HAD ALREADY RECEIVED RS.8.05 LAKH IN THE EARLIER YEAR TOWARDS SHARE APPLICATION MONEY AND HENCE, BEFORE DECIDING THIS ISSUE BY FOLLOWING VARIOUS TRIBUNALS DECISION AND TWO JU DGMENTS OF HONBLE MADRAS HIGH COURT, THE CIT(A) SHOULD HAVE DECIDED THE FACTUAL A SPECT AS TO WHETHER IN THE PRESENT CASE, THE AMOUNT RECEIVED BY THE ASSESSEE COMPANY W AS IN FACT ON ACCOUNT OF SHARE APPLICATION MONEY. IT WAS SUBMITTED THAT FOR THIS REASON ALONE, THE ORDER OF CIT(A) IS NOT SUSTAINABLE. IT IS ALSO SUBMITTED THAT THE JUDGMEN T OF HONBLE JHARKHAND HIGH COURT FOLLOWED BY THE AO HAS SQUARELY COVERED THIS ISSUE REGARDING RECEIPT OF SHARE APPLICATION MONEY IN VIOLATION OF THE PROVISIONS OF SECTION 269 SS WHEREAS THE TWO JUDGMENTS FOLLOWED BY THE CIT(A) ARE NOT ON THIS ISSUE. THE JUDGMENT OF HONBLE MADRAS HIGH COURT RENDERED IN THE CASE OF RUGHUMAN RAM RAGHAV S PINNERS (P) LTD. (SUPRA), IS REGARDING PENALTY IMPOSED BY THE AO U/S 271E IN THA T CASE AND NOT U/S 271D. REGARDING SECOND JUDGMENT OF HONBLE MADRAS HIGH COURT RENDER ED IN THE CASE OF IDHYAMA PUBLICATIONS LTD. (SUPRA), THE FACTS ARE DIFFERENT. IT IS POINTED OUT THAT IN THIS CASE, IT WAS FOUND BY THE TRIBUNAL THAT THERE WAS RUNNING ACCOUN T IN THE NAME OF THE DIRECTORS OF THE ASSESSEE COMPANY WITH THE ASSESSEE COMPANY AND UNDE R THESE FACTS, IT WAS HELD THAT THERE 4 WAS NO LOAN OR DEPOSIT. IT IS SUBMITTED THAT IN TH E PRESENT CASE, THE FACTS ARE DIFFERENT AND HENCE THIS JUDGMENT IS ALSO NOT APPLICABLE. THEREF ORE, THE JUDGMENT OF HONBLE JHARKHAND HIGH COURT IS APPLICABLE EVEN IF IT IS HE LD THAT THE AMOUNT RECEIVED BY THE ASSESSEE COMPANY IN THE PRESENT CASE IS SHARE APPLI CATION MONEY. 6. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD.DR OF THE REVENUE. WE FIND THAT A CLEAR FINDING IS GIVEN BY THE ADD.CIT, WHO HAS IMPO SED THE PENALTY IN THE PRESENT CASE U/S 271D THAT AS PER THE AO, THE RECEIPT OF THIS AM OUNT BY THE ASSESSEE COMPANY OF RS.134.75 LAKH WAS NOT ACCOUNT OF SHARE APPLICATION MONEY ALTHOUGH IT IS THE NOMENCLATURE GIVEN BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT. THE REASON AND BASIS OF THIS HAS ALSO BEEN POINTED OUT BY SHOWING THAT THE ASSES SEE COMPANY WAS HAVING AUTHORIZED SHARE CAPITAL OF RS.1 LAKH ONLY WHICH WAS CONTINUIN G SINCE ITS INCORPORATION AND THERE IS NO APPLICATION MADE BY THE ASSESSEE COMPANY FOR INC REASE IN THE AUTHORIZED SHARE CAPITAL. IT IS ALSO NOTED THAT AN AMOUNT OF RS.8.05 LAKH WAS ALSO RECEIVED BY THE ASSESSEE COMPANY IN EARLIER YEARS TOWARDS SHARE APPLICATION MONEY. HENCE, THERE WAS NO AMOUNT LEFT IN AUTHORIZED SHARE APICAL AGAINST WHICH THE ASSESSEE COMPANY COULD HAVE RECEIVED ANY SHARE APPLICATION MONEY IN THE PRESENT YEAR. IN TH E LIGHT OF THESE FACTS, IT CANNOT BE HELD THAT THE AMOUNT IN QUESTION RECEIVED BY THE ASSESSE E COMPANY WAS IN FACT SHARE APPLICATION MONEY. IT IS SETTLED POSITION BY NOW T HAT THE NOMENCLATURE GIVEN BY THE ASSESSEE COMPANY IN ITS BOOKS OF ACCOUNT IS NOT FIN AL AND DECISIVE AS HELD BY THE HONBLE APEX COURT IN THE CASE OF KEDAR NATH JUTE MANUFACTU RING CO. VS. CIT AS REPORTED IN 82 ITR 363. IN VIEW OF THESE FACTS, WE ARE OF THE CON SIDERED OPINION THAT THIS CLAIM OF THE ASSESSEE CANNOT BE ACCEPTED THAT THE AMOUNT RECEIVE D BY THE ASSESSEE COMPANY IN THE PRESENT YEAR OF RS.134.75 LAKHS FROM SHRI GIAN GUPT A, DIRECTOR OF THE ASSESSEE COMPANY WAS ON ACCOUNT OF SHARE APPLICATION MONEY. ONCE, W E HOLD THAT, THE ORDER OF THE CIT(A) CAN NOT BE SUSTAINED BECAUSE THERE IS NO FINDING GI VEN BY THE CIT(A) AS TO HOW THE RECEIPT IN THE PRESENT CASE, IT IS RECEIPT OF SHARE APPLICATION MONEY AND NOT OF LOAN AS HELD BY THE AO. WE, THEREFORE, HOLD THAT IN THE FACTS O F THE PRESENT CASE, THE CASH OF RS.1 CRORE RECEIVED BY THE ASSESSEE COMPANY WAS NOT ON ACCOUNT OF SHARE APPLICATION MONEY BECAUSE THERE IS NO AUTHORIZED SHARE CAPITAL AT THE TIME OF SUCH RECEIPT AND EVEN AFTER RECEIPT OF THIS AMOUNT, AUTHORIZED SHARE CAPITAL WA S NOT INCREASED TILL THE END OF THIS YEAR. 5 HENCE, NONE OF THE JUDGMENTS FOLLOWED BY AO OR BY C IT(A) IS APPLICABLE AND THE PENALTY IS LEVIABLE U/S 271D FOR DEFAULT U/S 269SS. WE, T HEREFORE, REVERSE THE ORDER OF THE CIT(A) AND RESTORE THE PENALTY ORDER. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLO WED. 8. ORDER PRONOUNCED IN OPEN COURT ON 10.12.209 ON T HE DATE OF HEARING ITSELF. SD/- SD/- (C.L. SETHI) (A.K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: DEC. 10, 2009. *SKB* COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-XVI, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. TRUE COPY. BY ORDER DY. REGISTRA R, INCOME -TAX APPELLATE TRIBUNAL NEW DELHI.