M/s. Kunjika Construction Pvt. Ltd., Ujjain V. The ITO 2(1), Ujjain

ITA 440/IND/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5618 (ITAT-INDORE)
• Duration Of Justice: 3 year(s) 4 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 27-09-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 13-06-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MOHMD JAVED
• Assessee Lawyers: S S DESHPANDE
• Keywords: Search and seizure; Share purchase agreement; Additional evidence; Reasonable cause
• Section: 143(3); 27

Judgement Text

I.T.A. NO.440/IND/2013/A.Y:06-07/M/S. KUNJIKA CONST RUCTION PVT. LTD. PAGE 1 OF 25 , , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE .., .., % BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI O.P. MEENA, ACCOUNTANT MEMBER M/S. KUNJIKA CONSTRUCTION PVT. LTD. 16 LAXMIBAI MARG MALIPURA UJJAIN PAN:AACCK9345B VS. ADDL. CIT RANGE-2 UJJAIN / APPELLANT / RESPONDENT / APPELLANT BY SHRI S. S. DESHPANDE , CA / RESPONDENT BY SHRI MOHMD. JAVED, SR. (DR) / DATE OF HEARING 27.09.2016 / DATE OF PRONOUNCEMENT 26.10.2016 / O R D E R PER O. P. MEENA, ACCOUTANT MEMEBR. 1. THIS APPEAL IS FILED BY THE ASSESSEE IS DIRECTED AG AINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-I, INDO RE (HEREINAFTER REFERRED TO AS THE LD. CIT (A)) DATED 07.03.2013. T HIS APPEAL . . ./ I.T.A. NO. 440 /IND/2013 %' ' / ASSESSMENT YEAR: 2006-07 I.T.A. NO.440/IND/2013/A.Y:06-07/M/S. KUNJIKA CONST RUCTION PVT. LTD. PAGE 2 OF 25 PERTAINS TO ASSESSMENT YEAR 2006-07. THIS APPEAL AR ISES OUT OF PENALTY ORDER U/S. 271D OF INCOME TAX ACT, 1961 [HE REIN AFTER REFERRED TO AS 'THE ACT) PASSED BY THE ADDL. CIT R ANGE-2, UJJAIN [HEREINAFTER REFERRED TO AS THE AO]. 2. THE ASSESSEE HAS RAISED A SOLE GROUND OF APPEAL WHI CH IS AS UNDER: 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ER RED IN CONFIRMING THE PENALTY OF RS. 46,21,000/- U/S. 271D OF THE ACT. 3. SUCCINCTLY, FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PVT. LTD. COMPANY AND IS ENGAGED IN THE BUILDING CONSTRUCTION AND DEVELOPERS. THE E-RETURN OF INCOME WAS FILED ON 20 .12.2006 AND HARD COPY OF THE SAME WAS FILED ON 03.01.2007 DECLA RING TOTAL INCOME AT RS. NIL. THE ASSESSMENT WAS COMPLETED UND ER SECTION 143(3) AND INCOME WAS ASSESSED AT RS. 16,97,400/- V IDE ORDER DATED 29.12.2008. THE ASSESSEE WAS FOUND TO HAVE R ECEIVED DEPOSITS FROM ITS DIRECTORS IN CASH ON VARIOUS DATE S. THEREFORE, THE CASE WAS REFERRED TO ADDL. CIT RANGE FOR IMPOSI TION OF PENALTY U/S. 271D. DURING THE COURSE OF ASSESSMENT PROCEEDI NGS, IT WAS CLAIMED THAT CASH RECEIVED FROM DIRECTORS WAS ON AC COUNT OF I.T.A. NO.440/IND/2013/A.Y:06-07/M/S. KUNJIKA CONST RUCTION PVT. LTD. PAGE 3 OF 25 CONTRIBUTION TO SHARE APPLICATION MONEY, WHEREAS TH E AO TREATED THE SAME AS LOAN OR DEPOSIT AND INITIATED PENALTY P ROCEEDING U/S. 271D FOR CONTRAVENTION OF THE PROVISIONS OF SECTION 269SS. IN THE COURSE OF PENALTY PROCEEDING, IT WAS CLAIMED THAT A LL DEPOSITS WERE TAKEN FOR BUSINESS PURPOSE. THE RELIANCE WAS P LACED IN THE CASE OF CIT VS. IBHAYAM PUBLICATION LTD. (2007) 163 ITR 265(MAD) TO CONTEND THAT DEPOSIT AND WITHDRAWAL OF MONEY FROM CURRENT ACCOUNT COULD NOT BE CONSIDERED AS LOAN AND ADVANCES AND THAT THE REVENUE SHOULD ESTABLISH THAT WHAT WAS RECEIVED BY THE ASSESSEE COMPANY WAS LOAN OR DEPOSIT WITHIN THE MEANING OF SECTION 269SS OF THE INCOME TAX ACT. HOWEVER, THE LD. ADDL CIT OBSERVED THAT THE SAID CASE IS DISTINGUISHABLE AS M UCH AS IN THAT CASE AMOUNT OF SHARES OF RS. 35,000/- WERE ALLOTTED . ACCORDINGLY, THE ADDL. CIT HAS IMPOSED THE PENALTY BY HOLDING TH AT MONEY WAS GIVEN BY THE DIRECTORS FOR BUSINESS PURPOSE. THE AD DL. CIT RANGE IMPOSED A PENALTY OF RS. 46,21,000/- U/S. 271D OF T HE ACT VIDE ORDER DATED 19.07.2010. 4. BEING, AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFO RE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). THE ASSESSEE HAS FILED SOME ADDITIONAL EVIDENCES ON WHICH REMAND REPORT WA S OBTAINED BY THE LD. CIT (A) UNDER RULE 46A OF INCOME TAX RUL ES, 1962. THE I.T.A. NO.440/IND/2013/A.Y:06-07/M/S. KUNJIKA CONST RUCTION PVT. LTD. PAGE 4 OF 25 ASSESSEE HAS ALSO PLACED RELIANCE IN THE CASE OF CI T VS. RUGMINI RAM RAGAV SPINNERS (P)LTD. IN WHICH HON'BLE HIGH CO URT HAS TAKEN A VIEW THAT PENALTY U/S. 271E IS NOT AUTOMAT IC AND TO BE LEVIED ONLY IN THE ABSENCE OF REASONABLE CAUSE. NO DOUBT, A REASONABLE CAUSE HAS TO BE ESTABLISHED BY THE ASSES SEE. THE RATIONALE BEHIND THE PROVISIONS OF SECTION 269SS AN D SECTION 269T TO PREVENT TAX EVASION, I.E. THE LAUNDERING CO NCEALED INCOME BY THE PARTIES IN THE GUISE OF CASH LOANS OR DEPOSI TS IN OR OUTSIDE THE ACCOUNTS. THE PROVISIONS OF SECTION 269SS & SEC TION 269T, THEREFORE, HAD APPLICATION ONLY IN A LIMITED WAY IN RESPECT OF DEPOSITS OR LOANS. THE ASSESSEE HAS ALSO RELIED U PON THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. SPEEDWAYS RUBBER PVT. LTD. AND HON'BLE DELH I HIGH COURT IN THE CASE OF CIT VS. I P INDIA PVT. LTD. & HONBL E TRIBUNAL OF CALCUTTA IN THE CASE OF I T O VS. AVADH RUBBER LTD. TO CONTEND THAT CONTRIBUTION TOWARDS SHARE APPLICATION MONEY D OES NOT COME WITHIN THE SCOPE AND AMBIT OF EXPRESSION DEPOSIT APPEARING IN THE PROVISIONS OF SECTION 269SS IN ORDER TO JUSTIFY THE LEVY OF PENALTY. 5. THE LD. CIT (A) OBSERVED THAT THE ASSESSEE COMPANY CAME IN TO EXISTENCE ON 21.11.2005. AS PER MEMORANDUM OF ASSOC IATION, I.T.A. NO.440/IND/2013/A.Y:06-07/M/S. KUNJIKA CONST RUCTION PVT. LTD. PAGE 5 OF 25 AUTHORISED SHARE CAPITAL WAS RS. 5 LAKH ONLY AND NO APPLICATION WAS MADE BY THE ASSESSEE TO ROC TO INCREASE SHARE C APITAL. THE ASSESSEE COMPANY ALLOTTED SHARES TO SHRI VIJAY JAIN ON 15.11.2010 AND SHRI AJAY SINGH KUSHWAHA ON 01.02.20 12. NO SHARES WERE ALLOTTED TO SHRI MUKESH SONI AND TO WHO M THE AMOUNT WAS REFUNDED WITH INTEREST. THE ASSESSEE FIL ED FORM NO. 5 TO INCREASE AUTHORISED SHARE CAPITAL OF THE COMPA NY FROM EXISTING RS. 5 LAKH TO RS. 25 LAKHS ON 09.11.2010 W HEREAS PENALTY ORDER U/S. 271D WAS PASSED ON 19.07.2010. N O ACTION WAS TAKEN TO INCREASE AUTHORISED SHARE CAPITAL AND FOR ALLOTMENT OF SHARES BY THE APPELLANT UNTIL DATE OF PENALTY OR DER 09.11.2010. THE APPELLANT HAS TRIED TO JUSTIFY CASH LOANS TAKEN FROM THE DIRECTORS BY GIVING IT COLOUR OF SHARE APPLICATION MONEY AFTER THE PENALTY U/S. 271D WAS IMPOSED. THE ASSESSEE COMPANY HAS ALSO FAILED TO FURNISH ANY EVIDENCE IN SUPPORT OF SHARE APPLICATION MONEY DURING THE STATEMENT OF DIRECTORS, RECORDED I N THE COURSE OF ASSESSMENT PROCEEDINGS BY THE AO. SHRI VIJAY JAI N; HAS CATEGORICALLY ACCEPTED IN HIS STATEMENT THAT APPLIC ATION FOR SHARE ALLOTMENT IS NOT AVAILABLE. HE COULD NOT GIVE DETAI LS ABOUT AMOUNT OF RS. 43,93,000/- IS PENDING FOR ALLOTMENT OF SHAR ES WITH THE DATE OF MONEY DEPOSITED WITH THE COMPANY. IT WAS AD MITTED BY I.T.A. NO.440/IND/2013/A.Y:06-07/M/S. KUNJIKA CONST RUCTION PVT. LTD. PAGE 6 OF 25 HIM THAT SHARE CERTIFICATE HAS NOT BEEN ISSUED EVEN FOR SHARES ISSUED, SUBSCRIBED AND PAID UP WAS SHOWN AT RS. 1 L AKH. SHARES APPLICATION FORMS ARE FILLED UP AND NOT AVAILABLE. HE ALSO ACCEPTED THAT MONEY WAS ADVANCED TO THE COMPANY, WH ETHER IT WAS LOAN OR SHARE APPLICATION MONEY HE DID NOT REME MBER. SOME PAYMENTS WERE MADE TO SHRI NAVIN SODANI FOR PURCHAS E OF STAMP AND REGISTRATION CHARGES DIRECTLY FROM THE ACCOUNT OF SHRI VIJAY JAIN THROUGH BEARER CHEQUES. SIMILARLY, SHRI MUKESH SONI HAS ALSO ADMITTED IN HIS STATEMENT THAT HE FILED NO APP LICATION FOR SHARE APPLICATION MONEY. SIMILARLY, SHRI AJAY SINGH KUSHWAHA AND SHRI MUKESH SONI MADE PAYMENTS TO THE APPELLANT AS PER ITS BUSINESS REQUIREMENT. THUS, THE NATURE OF CREDITS I N THE ACCOUNT OF DIRECTORS ARE LOANS RECEIVED BY THE APPELLANT FR OM THEM. THE LD. CIT (A) ALSO RELIED IN THE CASE OF ITO VS. NANDI PR OMOTERS PVT. LTD. (2011) 13 TAXMANN.COM 213 (SB) (DEL) WHEREIN IT WAS HELD THAT ADMITTEDLY, THE AUTHORISED SHARE CAPITAL OF THE AS SESSEE WAS RS. 1 LAKH. ITS DIRECTORS HAD NOT INTENDED TO I NCREASE THE AUTHORISED SHARE CAPITAL. THE ASSESSEE HAS ALLEGED THAT IT HAS RECEIVED SHARE APPLICATION MONEY OF RS. 8.05 LA KHS IN EARLIER YEAR, IF THE ASSESSEE WAS TO RECEIVE THE AL LEGED SHARE APPLICATION MONEY WITHOUT THERE BEING AUTHORISED SH ARE CAPITAL. IN THE EARLIER YEAR, IT HAD ALREADY RECEI VED RS. 8.05 LAKHS. APART FROM THAT, THERE WAS ONE MORE FACTOR. OUT OF THE I.T.A. NO.440/IND/2013/A.Y:06-07/M/S. KUNJIKA CONST RUCTION PVT. LTD. PAGE 7 OF 25 TOTAL SHARE CAPITAL ALLEGED TO HAVE BEEN RECEIVED B Y IT, A SUM OF RS. 34.75 LAKHS WAS THROUGH BANK ACCOUNT. THAT A MOUNT WAS DIRECTLY PAID TO THE PARTIES FROM WHOM CONSTRUC TION MATERIAL WAS PURCHASED. THAT FACTOR INDICATED THAT ASSESSEE HAD TOOK THE MONEY FROM DIRECTORS, ACCORDING TO ITS REQUIREMENT, FOR THE CONSTRUCTION OF THE BUILDING, AND, WHEN AT THE END OF THE YEAR IT WAS CAUGHT ON WRONG SIDE OF LAW, THAT IT HAD NOT RECEIVED THE MONEY IN ACCORDANCE WITH THE P ROVISIONS OF THE ACT; THEN IT BRANDED THE SAME AS SHARE APPLI CATION MONEY. THE SIMPLE REASON WAS THAT THE PARTIES HAD EMPHASIZED THAT FOR PAYMENT THROUGH BANKING CHANNEL FOR THE MATERIAL SUPPLIED TO THE ASSESSEE, THEREFORE, T HE PAYMENT WAS MADE THROUGH BANKING CHANNEL. THE ASSESSEE WAS REQUIRED TO MAKE MORE PAYMENT OR INCUR MORE EXPENSE S THROUGH BANKING CHANNEL, AND IT WOULD HAVE MADE THE PAYMENT THROUGH THE BANKING CHANNEL OUT OF THE ALLE GED SHARE APPLICATION MONEY. CONDUCTING OF THE BUSINESS IN THAT WAY SIMPLY SUGGESTED THAT IT CONTINUED TO INCUR EXP ENSES OUT OF AMOUNTS WHICH WERE PROCURED FROM THE DIRECTORS A ND THEN TRIED TO GIVE IT A COLOUR OF SHARE CAPITAL; OTHER T HAN THAT THERE WAS NO MATERIAL ON RECORD WHICH COULD GIVE INFERENC E THAT ASSESSEE HAD INVITED SHARE CAPITAL [PARA9]. 6. ACCORDINGLY, LD. CIT (A) HAD THOSE FACTS OF THE SA ID CASE ARE SQUARELY APPLICABLE TO THIS CASE. I.T.A. NO.440/IND/2013/A.Y:06-07/M/S. KUNJIKA CONST RUCTION PVT. LTD. PAGE 8 OF 25 7. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ADDL. CIT HAS MENTIONED THAT THE ASSESSEE HAS RECEIVED DE POSITS IN CASH FROM THE DIRECTORS AS FOLLOWS: 1. RS. 10,50,000/- ON VARIOUS DATES FROM SHRI VIJAY J AIN 2. RS. 14, 63,000/- FROM VIJAY JAIN BEING THE AMOUNT P AID TO STAMP VENDOR FOR PURCHASE OF STAMP. 3. RS. 8,02,000/- RECEIVED ON VARIOUS DATES FROM SHRI VIJAY JAIN 4. RS. 6,50,000/- RECEIVED ON TWO DATES FROM SHRI AJAY SINGH KUSHWAH 5. RS. 6,56,000/- FROM SHRI MUKESH SONI TOTAL RS. 46,21,000/- 8. IT WAS SUBMITTED BEFORE THE AO AND THE LEARNED ADDL . CIT THAT THE AMOUNT HAVE BEEN RECEIVED ON ACCOUNT OF SHARE A PPLICATION MONEY FROM VARIOUS PERSONS. THE LD. ADDL. CIT DID N OT ACCEPT THE ASSESSEE`S CONTENTION AND HAS LEVIED THE PENALTY U/ S. 271D. BEFORE THE LD. CIT (A), IT WAS CONTENDED THE AMOUNT WERE RECEIVED BY WAY OF SHARE APPLICATION AND NO INTEREST WAS PAI D ON THE SAID SHARE APPLICATION MONEY. IT WAS FURTHER SUBMITTED T HAT THE SHARES WERE ALLOTTED TO ALL THE PERSONS AND FORM NO . 2 WAS SUBMITTED TO ROC GWALIOR WITH A COPY OF BOARD`S RES OLUTION. A I.T.A. NO.440/IND/2013/A.Y:06-07/M/S. KUNJIKA CONST RUCTION PVT. LTD. PAGE 9 OF 25 REMAND REPORT WAS CALLED. IN THE REMAND REPORT, WHI CH IS AT PAGE NO 9 OF THE PAPER BOOK SAYS THAT THE COPY OF FORM N O. 2 IS SUBMITTED TO THE REGISTRAR OF COMPANIES, THE COPY O F THE BOARD RESOLUTION IS ALSO SUBMITTED. ON THE NEXT PAGE, THE LD. ADDL. CIT OBSERVED THAT THE ASSESSEE`S CONTENTION IS CORRECT THAT IN THE ASSESSMENT ORDER OF SHRI VIJAY JAIN FOR THE A.Y. 20 06-07, THE LD. A.O. HIMSELF TREATED THE ABOVE AMOUNT AS SHARE APPL ICATION MONEY. HE FURTHER OBSERVES THAT THE ASSESSEE`S CONT ENTION IS CORRECT THAT IN THE AUDITED BALANCE SHEET AS ON 31/ 03/2006 DTD. 30/09/2006, THE ABOVE AMOUNTS HAVE BEEN SHOWN AS SH ARE APPLICATION MONEY IN SCHEDULE 9. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER SUBMIT TED THAT THE AMOUNTS RECEIVED WERE BY WAY OF SHARE APPLICATION M ONEY WHICH IS ALSO SHOWN IN THE BALANCE SHEET AS SHARE APPLICA TION MONEY (REFER TO PAGE 18 OF PAPER BOOK). THE LD. ADDL. CIT HAS IN THE REMAND REPORT ACCEPTED THIS POSITION, (PLACED AT PA GE 10 OF PAPER BOOK). THE SHARES HAVE BEEN ISSUED TO THE RESPECTI VE PERSONS WHICH HAVE BEEN DULY INFORMED TO THE REGISTRAR OF C OMPANIES (REFER PAGE 37 AND 45 OF PAPER BOOK) . THE BOARD RE SOLUTION HAS ALSO BEEN PASSED FOR ISSUE OF SHARES. IT WAS THUS C ONTENDED THAT SHARES HAVE BEEN ISSUED IS NOT DENIED BY THE DEPART MENT, I.T.A. NO.440/IND/2013/A.Y:06-07/M/S. KUNJIKA CONST RUCTION PVT. LTD. PAGE 10 OF 25 THOUGH, THE SAME WERE ALLOTTED SUBSEQUENTLY. UNDER THESE CIRCUMSTANCES, THE FACTS THAT THE AMOUNT WAS RECEIV ED AS SHARE APPLICATION MONEY AND THAT THE SHARES WERE ISSUED T O THE RESPECTIVE PERSON STANDS PROVED. WHEN THE SHARE APP LICATION MONEY IS RECEIVED, NO PENALTY CAN BE LEVIED U/S. 27 1D ON THE GROUND THAT THE DEPOSITS ARE ACCEPTED IN CASH. IN S UPPORT OF THIS VIEW THE LD. A. R. HAS PLACED RELIANCE ON THE FOLLO WING CASE LAWS: CIT VS. RUGMINI RAM RAGAV SPINNER PVT. LTD. 304 ITR 417( MAD), CIT VS. I. P. INDIA PVT. LTD. 343 ITR 353 (DE L), INCOME TAX OFFICER VS. AVADH RUBBER 136 TTJ 457 (KOL), 10. IN VIEW OF ABOVE JUDGEMENTS, IT WAS SUBMITTED THAT PENALTY UNDER SECTION 271D IS NOT ATTRACTED SINCE THERE IS NO INF RINGEMENT OF SECTION 269SS OF THE ACT. 11. THE LEARNED COUNSEL FOR THE ASSESSEE, FURTHER WIT HOUT PREJUDICE TO THE ABOVE CONTENTION, SUBMITTED THAT AS INDICATE D IN THE ORDER A SUM OF RS. 14,63,000/- IS PAID FOR PURCHASE OF TH E STAMP BY THE DIRECTOR OF THE COMPANY AND THIS AMOUNT IS ADJU STED BY WAY OF TRANSFER ENTRY AS COULD BE SEEN FROM PAGE 39 OF PAPER BOOK. IN CASE OF TRANSFER ENTRIES BY JOURNAL, THE PROVISIONS OF SECTION 269SS ARE NOT ATTRACTED, SINCE THERE IS NO CASH REC EIPT OF ANY MONEY. IN SUPPORT OF THE PROPOSITION, THE LD. A. R. HAS PLACED I.T.A. NO.440/IND/2013/A.Y:06-07/M/S. KUNJIKA CONST RUCTION PVT. LTD. PAGE 11 OF 25 RELIANCE IN THE CASE OF ACIT VS. VARDAAN FASHION 16 8 TTJ 561 (DEL- TRIBUNAL) 12. PER CONTRA, THE LD. SENIOR (DR) , SUBMITTED THAT TH E AO HAS BROUGHT ON RECORD THAT THE COMPANY HAS RECEIVED CAS H DEPOSITS FROM 3 DIRECTORS I.E. SHRI VIJAY JAIN AND SHRI AJAY SINGH KUSHWAHA AND SHRI MUKESH SONI IN CASH. THE AO HAS A LSO DISTINGUISHED THE CASE LAW OF CIT VS. IDHAYAM PUBLI CATIONS LTD. (2007) 163 TAXMAN 265 (MAD). THE LD. CIT (A) HAS AL SO OBSERVED THAT THE COMPANY CAME IN TO EXISTENCE ON 21.11.2005 WHEN THE AUTHORISED SHARE CAPITAL WAS ONLY RS. 5 LAKHS. THE 3 PERSON NAMELY SHRI MUKESH SONI, SHRI VIJAY AND SHRI AJAY S INGH KUSHWAHA HAD AGREED TO TAKE 3500 SHARES EACH AND TH E COMPANY HAS SHOWN THE AMOUNT RECEIVED FROM THREE PE RSON AT RS. 57,34,000/- (SCHEDULE 1 OF BALANCE SHEET PARA 3 .5.). HOWEVER, THE ASSESSEE HAS FAILED TO PRODUCE THE ORIGINAL SHA RE APPLICATION FORM, COPY OF RESOLUTION PASSED, FORM NO. 2 SUBMITT ED TO ROC AND DETAILS OF CORRESPONDENCE REGARDING INCREASING THE AUTHORISED SHARE CAPITAL. EVEN DURING THE COURSE OF ASSESSMENT PROCEEDINGS, WHEN STATEMENT OF DIRECTOR WAS RECORDE D, THEY HAVE FAILED TO PRODUCE THE SAME. THE LD. CIT (A) RELIED IN THE CASE OF I T O VS. NANDI PROMOTERS PVT. LTD. (2011) 13 TAXMANN .COM 213 I.T.A. NO.440/IND/2013/A.Y:06-07/M/S. KUNJIKA CONST RUCTION PVT. LTD. PAGE 12 OF 25 (DEL) AND OBSERVED THAT THE AUTHORISED SHARE CAPITA L OF THE ASSESSEE COMPANY WAS ONLY RS. 5 LAKH AND THE SHARE APPLICATION MONEY RECEIVED WAS AT RS. 56,34,000/- WHICH IS GREA TER THAN 10 TIMES. THE LD. DEPARTMENTAL REPRESENTATIVE FURTHER SUBMITTED THAT THE ASSESSEE TOOK NO ACTION UNTIL IMPOSITION O F PENALTY; THE REQUEST FOR INCREASING AUTHORISED SHARE CAPITAL TO ROC WAS MADE BY THE ASSESSEE ON 09.11.2010 WHEREAS THE PENALTY O RDER WAS PASSED ON 19.07.2010. THUS IT IS CLEAR THAT SHARES WERE NOT ALLOTTED TILL THE DATE OF ADDL. CIT`S ORDER. THE AS SESSEE COMPANY TAKEN CASH LOAN OR DEPOSIT IN THE YEAR 2006-07 WHER EAS THE FORM NO. 5 TO ROC WAS FILED IN THE YEAR 2010-11 AFTER 5 YEARS OF ACCEPTING SHARE APPLICATION MONEY. THEREFORE, IT WA S CONTENDED THAT CASH RECEIVED BY THE ASSESSEE COMPANY WOULD NO T FALL IN THE CHARACTER OF SHARE APPLICATION MONEY. 13. THE LD. SENIOR (DR) FURTHER RELIED IN THE CASE OF B HALOTIA ENGINEERING WORKS (P) LTD. VS. CIT (2005) 275 ITR 399 (JHARKHAND) WHEREIN IT WAS HELD THAT SHARE APPLICAT ION MONEY RECEIVED IN CASH PARTAKES THE CHARACTER OF DEPOSIT WITHIN THE MEANING OF SECTION 269SS, HENCE ACCEPTANCE OF SHAR E APPLICATION MONEY IN CASH ABOVE RS. 20,000/- ATTRAC TS PENALTY I.T.A. NO.440/IND/2013/A.Y:06-07/M/S. KUNJIKA CONST RUCTION PVT. LTD. PAGE 13 OF 25 UNDER SECTION 271D. THE LD. SENIOR (DR) SUBMITTED T HAT THIS CASE IS SQUARELY APPLICABLE TO PRESENT CASE. 14. THE LD. SENIOR (DR) FURTHER SUBMITTED THAT IN THE R ECENT CASE THE HONBLE DELHI ITAT IN THE CASE OF M/S. NUMERO UNO F INANCIAL SERVICES PVT. LTD. VS. ADDL. CIT 13 NEW DELHI IN I. T. A. NO. 1713/DEL/2010 HELD THAT PENALTY U/S. 271D LEVIABLE WITH RESPECT TO SHARE APPLICATION MONEY RECEIVED IN CASH. 15. THE LD. SENIOR (DR) FURTHER SUBMITTED THAT IN THE C ASE OF CIT VS. SAMORA HOTELS PVT. LTD. IN I. T. A. NO. 313/DEL/200 6 HAD THAT THERE IS NOTHING ON RECORD TO SHOW THAT THERE WERE BONA FIDE REASON FOR NOT ACCEPTING THE SAID AMOUNT THROUGH AC COUNT PAYEE CHEQUES OR ACCOUNT BY BANK DRAFT. THEREFORE, THE LD . SENIOR (DR) STRONGLY SUBMITTED THAT THE APPEAL OF THE ASSESSEE SHOULD BE DISMISSED. 16. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GONE T HROUGH THE ORDERS OF THE LOWER AUTHORITIES, AND PERUSED THE MA TERIAL AVAILABLE ON RECORD. IT IS SEEN THAT THE ASSESSEE C OMPANY HAS RECEIVED A SUM OF RS. 46, 21,000/- BY WAY OF CASH R ECEIPTS FROM THREE PERSONS BEING DIRECTOR OF THE ASSESSEE COMPAN Y. THE AMOUNT OF RS. 33,15,000/- WAS RECEIVED FROM SHRI VI JAY JAIN WHICH INCLUDED CASH RECEIPTS OF RS. 10,50,000/- ON VARIOUS I.T.A. NO.440/IND/2013/A.Y:06-07/M/S. KUNJIKA CONST RUCTION PVT. LTD. PAGE 14 OF 25 DATES, RS. 14,63,000/- AMOUNT BEING GIVEN TO VENDO R FOR PURCHASE OF STAMP PAPER AND RS.8,02,000/- AS CASH D EPOSITS. THESE CASH RECEIPTS ARE CLAIMED TO BE SHARE APPLIC ATION MONEY. THE AMOUNT OF RS. 6,50,000/- WAS RECEIVED FROM SHRI AJAY SINGH KUSHWAHA BY THE ASSESSEE COMPANY ON TWO DATES IN CA SH AND CLAIMED TO BE SHARE APPLICATION MONEY AND RS. 6,56, 000/- FROM SHRI MUKESH SONI IN CASH CLAIMED TO BE SHARE APPLI CATION MONEY BUT TO WHOM NO SHARES WERE ALLOTTED AND MONEY WAS R EFUNDED SUBSEQUENTLY WITH INTEREST. WE FIND THAT THE ASSESS EE COMPANY CAME IN TO EXISTENCE ON 21.11.2005. AS PER MEMORAND UM OF ASSOCIATION, AUTHORISED SHARE CAPITAL WAS RS. 5 LAK H ONLY AND NO APPLICATION WAS MADE BY THE ASSESSEE TO ROC TO INCR EASE SHARE CAPITAL. THE ASSESSEE COMPANY ALLOTTED SHARES TO SH RI VIJAY JAIN ON 15.11.2010 AND SHRI AJAY SINGH KUSHWAHA ON 01.02 .2012. WE ALSO NOTE THAT NO SHARES WERE ALLOTTED TO SHRI M UKESH SONI AND TO WHOM THE AMOUNT WAS REFUNDED WITH INTEREST. THEREFORE, THIS AMOUNT CANNOT BE TREATED AS SHARE APPLICATION MONEY. HENCE, PENALTY ON THIS AMOUNT IS PENALTY U/S. 271D IS CONFIRMED. THEREFORE, THIS ACTION OF THE A.O. IS UP HELD. THE ASSESSEE FILED FORM NO. 5 TO INCREASE AUTHORISED SH ARE CAPITAL OF THE COMPANY FROM EXISTING RS. 5 LAKH TO RS. 25 LAKH S ON I.T.A. NO.440/IND/2013/A.Y:06-07/M/S. KUNJIKA CONST RUCTION PVT. LTD. PAGE 15 OF 25 09.11.2010 WHEREAS PENALTY ORDER U/S. 271D WAS PASS ED ON 19.07.2010. NO ACTION WAS TAKEN TO INCREASE AUTHORI SED SHARE CAPITAL AND FOR ALLOTMENT OF SHARES BY THE APPELLAN T UNTIL THE DATE OF PENALTY ORDER 09.11.2010. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE HAS TRIED TO JUSTIFY THE CAS H LOANS/DEPOSITS TAKEN FROM THE DIRECTORS BY GIVING IT COLOUR OF SHA RE APPLICATION MONEY AFTER THE PENALTY U/S. 271D WAS IMPOSED. WE ALSO NOTICED THAT THE ASSESSEE COMPANY HAS ALSO FAILED TO FURNIS H ANY EVIDENCE IN SUPPORT OF SHARE APPLICATION MONEY IN H IS STATEMENT RECORDED DURING THE COURSE OF ASSESSMENT BY THE AO. SHRI VIJAY JAIN HAS CATEGORICALLY ACCEPTED IN HIS STATEMENT TH AT APPLICATION FOR SHARE ALLOTMENT WAS NOT AVAILABLE. HE COULD NOT GIVE DETAILS ABOUT AMOUNT OF RS.43,93,000/- CLAIMED TO BE PENDIN G FOR ALLOTMENT OF SHARES WITH THE DATE OF MONEY DEPOSITE D WITH THE COMPANY. WE ALSO FIND THAT SHARE CERTIFICATE HAS NO T BEEN ISSUED EVEN FOR SHARES ISSUED, SUBSCRIBED AND PAID UP SHOW N AT RS.1 LAKH. SHARES APPLICATION FORMS ARE NOT FILLED UP NO R MADE AVAILABLE FOR VERIFICATION OF THE A.O. THE COPY OF RESOLUTION DTD. 21.11.2005 WAS ALSO NOT PRODUCED BEFORE THE AO AND IT WAS ALSO NOT ADMITTED BY THE LD. CIT (A) BY HOLDING THAT IT IS SELF-SERVING EVIDENCE COULD BE CREATED LATER AND AS SAME WAS NOT PRODUCED I.T.A. NO.440/IND/2013/A.Y:06-07/M/S. KUNJIKA CONST RUCTION PVT. LTD. PAGE 16 OF 25 DURING ASSESSMENT PROCEEDINGS. WE ALSO SUBSCRIBE T HE VIEW OF LD. CIT (A) ON HIS OBSERVATION. SHRI VIJAY JAIN HA S STATED THAT MONEY WAS ADVANCED TO THE COMPANY, WHETHER IT WAS L OAN OR SHARE APPLICATION MONEY HE DID NOT REMEMBER. SOME P AYMENTS WERE MADE TO SHRI NAVIN SODANI FOR PURCHASE OF STAM P AND REGISTRATION CHARGES DIRECTLY FROM THE ACCOUNT OF S HRI VIJAY JAIN THROUGH BEARER CHEQUES. THESE WERE ALSO CREDITED IN NAME OF SHRI VIJAY JAIN IN BOOKS OF ACCOUNTS OF THE COMPANY. SIM ILARLY, SHRI MUKESH SONI HAS ALSO ADMITTED IN HIS STATEMENT THAT HE FILED NO SHARE APPLICATION. SIMILARLY, SHRI AJAY SINGH KUSHW AHA AND SHRI MUKESH SONI MADE PAYMENTS TO THE APPELLANT AS PER I TS BUSINESS REQUIREMENT. THUS, THE NATURE OF CREDITS IN THE ACC OUNT OF DIRECTORS ARE LOANS/DEPOSITS RECEIVED BY THE ASSESS EE FROM THEM. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, WE ARE OF THE CONSIDERED OPINION THAT THE AMOUNT RECEIVED IN CASH WAS NOT INTENDED TO BE SHARE APPLICATION MONEY DURING THE F INANCIAL YEAR UNDER CONSIDERATION. WE FIND THAT THE LD. CIT (A) H AS RELIED IN THE CASE OF I TO WARD 13(1) NEW DELHI VS. NANDI PROM OTERS PVT. LTD. (2011) 13 TAXMANN.COM 213 (SB) (DEL) WHEREIN I T WAS HELD AS UNDER: I.T.A. NO.440/IND/2013/A.Y:06-07/M/S. KUNJIKA CONST RUCTION PVT. LTD. PAGE 17 OF 25 ADMITTEDLY, THE AUTHORISED SHARE CAPITAL OF THE AS SESSEE WAS RS. 1 LAKH. ITS DIRECTORS HAD NOT INTENDED TO INCREASE THE AUTHORISED SHARE CAPITAL. THE ASSESSEE HAS ALLEGED THAT IT HAS RECEIVED SHARE APPLICATION MONEY OF RS. 8.05 LAKHS IN EARLIER YEAR , IF THE ASSESSEE WAS TO RECEIVE THE ALLEGED SHARE APPLICATION MONEY WITHOUT THERE BEING AUTHORISED SHARE CAPITAL. IN THE EARLIER YEA R, IT HAD ALREADY RECEIVED RS. 8.05 LAKHS. APART FROM THAT, THERE WAS ONE MORE FACTOR. OUT OF THE TOTAL SHARE CAPITAL ALLEGED TO H AVE BEEN RECEIVED BY IT, A SUM OF RS. 34.75 LAKHS WAS THROUGH BANK AC COUNT. THAT AMOUNT WAS DIRECTLY PAID TO THE PARTIES FROM WHOM C ONSTRUCTION MATERIAL WAS PURCHASED. THAT FACTOR INDICATED THAT ASSESSEE HAD TOOK THE MONEY FROM DIRECTORS, ACCORDING TO ITS RE QUIREMENT, FOR THE CONSTRUCTION OF THE BUILDING, AND, WHEN AT THE END OF THE YEAR IT WAS CAUGHT ON WRONG SIDE OF LAW, THAT IT HAD NOT RE CEIVED THE MONEY IN ACCORDANCE WITH THE PROVISIONS OF THE ACT; THEN IT BRANDED THE SAME AS SHARE APPLICATION MONEY. THE SI MPLE REASON WAS THAT THE PARTIES HAD EMPHASIZED THAT FOR PAYMEN T THROUGH BANKING CHANNEL FOR THE MATERIAL SUPPLIED TO THE AS SESSEE, THEREFORE, THE PAYMENT WAS MADE THROUGH BANKING CHA NNEL. THE ASSESSEE WAS REQUIRED TO MAKE MORE PAYMENT OR INCUR MORE EXPENSES THROUGH BANKING CHANNEL, AND IT WOULD HAVE MADE THE PAYMENT THROUGH THE BANKING CHANNEL OUT OF THE ALLE GED SHARE APPLICATION MONEY. CONDUCTING OF THE BUSINESS IN TH AT WAY SIMPLY SUGGESTED THAT IT CONTINUED TO INCUR EXPENSES OUT O F AMOUNTS WHICH WERE PROCURED FROM THE DIRECTORS AND THEN TRI ED TO GIVE IT A COLOUR OF SHARE CAPITAL; OTHER THAN THAT THERE WAS NO MATERIAL ON RECORD WHICH COULD GIVE INFERENCE THAT ASSESSEE HAD INVITED SHARE CAPITAL [PARA9]. I.T.A. NO.440/IND/2013/A.Y:06-07/M/S. KUNJIKA CONST RUCTION PVT. LTD. PAGE 18 OF 25 17. THUS, THE FACTS OF THE ABOVE CASE ARE IDENTICAL TO THE CASE OF THE ASSESSEE. THE ASSESSEE HAS ALSO RECEIVED ALLEGED SH ARE APPLICATION MONEY WITHOUT THERE BEING INCREASE IN A UTHORISED SHARE CAPITAL. THE ASSESSEE COMPANY HAS RECEIVED AM OUNT OF RS. 46,21,000/- AMOUNT IN CASH WHEREAS AUTHORISED SHAR E CAPITAL OF THE ASSESSEE COMPANY WAS AT RS. 5 LAKHS ONLY AND IS SUED CAPITAL WAS ONLY OF RS. 1 LAKH. WE ALSO FIND THAT THIS AMOU NT WAS INVESTED TOWARDS PURCHASE OF LAND FOR THE BUSINESS OF THE COMPANY. THE ASSESSEE HAS NEITHER INVITED SHARE APP LICATION FROM INVESTOR/ DIRECTORS. THE ASSESSEE HAS NOT EVEN APPLIED TO ROC FOR INCREASE OF SHARE CAPITAL. IT IS ONLY WHEN PENALTY ORDER U/S. 271D WAS PASSED ON 19.07.2010, THE ASSESSEE HA S MADE AN APPLICATION IN FORM NO.5 TO ROC ON 09.11.2010, AFTE R FIVE YEARS OF ACCEPTING ALLEGED SHARE APPLICATION MONEY. THES E FACTS ESTABLISH THAT DIRECTORS WERE NOT INTENDED TO INCRE ASE AUTHORISED SHARE CAPITAL BUT THE AMOUNT IN CASH WAS TAKEN FOR CONDUCTING BUSINESS OF THE ASSESSEE AND TO INCUR EXPENSES, WHI CH WERE PROCURED FROM THE DIRECTORS BY WAY OF LOAN/DEPOSIT THROUGH BANKING CHANNEL. THUS, SUBSEQUENT EVENT FOR MAKING APPLICATION WITH ROC IS AFTER THOUGHT. I.T.A. NO.440/IND/2013/A.Y:06-07/M/S. KUNJIKA CONST RUCTION PVT. LTD. PAGE 19 OF 25 18. WE FURTHER QUOTE FROM THE DECISION OF HONBLE COORD INATE BENCH IN THE CASE OF ITO VS. M/S. NANDI PROMOTERS PRIVATE LIMITED IN ITA NO. 3462/DEL/2009, WHERE IN, SIMILAR CIRCUMSTAN CES THE MONEY RECEIVED WAS NOT HELD TO BE SHARE APPLICATION MONEY. THE RELEVANT FINDINGS OF THE TRIBUNAL ARE REPRODUCED AS UNDER: 6. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. D R OF THE REVENUE. WE FIND THAT A CLEAR FINDING IS GIVEN BY T HE ADD.CIT, WHO HAS IMPOSED THE PENALTY IN THE PRESENT CASE U/S 271D THAT AS PER THE AO, THE RECEIPT OF THIS AMOUNT BY T HE ASSESSEE COMPANY OF RS.134.75 LAKH WAS NOT ACCOUNT OF SHARE APPLICATION MONEY ALTHOUGH IT IS THE NOMENCLATURE G IVEN BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT. THE REASON AN D BASIS OF THIS HAS ALSO BEEN POINTED OUT BY SHOWING THAT THE ASSESSEE COMPANY WAS HAVING AUTHORIZED SHARE CAPITAL OF RS.1 LAKH ONLY WHICH WAS CONTINUING SINCE ITS INCORPORATION A ND 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 C OMPANY IN EARLIER YEARS TOWARDS SHARE APPLICATION MONEY. H ENCE, 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 THE LIGHT OF THESE FACTS, IT CANNOT BE HELD THAT THE AMOUNT IN QUESTIO N RECEIVED BY THE ASSESSEE COMPANY WAS IN FACT SHARE APPLICATI ON MONEY. IT IS SETTLED POSITION BY NOW THAT THE NOMEN CLATURE GIVEN BY THE ASSESSEE COMPANY IN ITS BOOKS OF ACCOU NT IS NOT I.T.A. NO.440/IND/2013/A.Y:06-07/M/S. KUNJIKA CONST RUCTION PVT. LTD. PAGE 20 OF 25 FINAL AND DECISIVE AS HELD BY THE HON'BLE APEX COUR T IN THE CASE OF KEDAR NATH JUTE MANUFACTURING CO. VS. CIT A S REPORTED IN 82 ITR 363. IN VIEW OF THESE FACTS, WE ARE OF THE CONSIDERED OPINION THAT THIS CLAIM OF THE ASSESSEE CANNOT BE ACCEPTED THAT THE AMOUNT RECEIVED BY THE ASSESSEE C OMPANY IN THE PRESENT YEAR OF RS.134.75 LAKHS FROM SHRI GI AN GUPTA, DIRECTOR OF THE ASSESSEE COMPANY WAS BECAUSE OF SHA RE APPLICATION MONEY. ONCE, WE HOLD THAT, THE ORDER OF THE CIT(A) CANNOT BE SUSTAINED BECAUSE THERE IS NO FINDING GIV EN BY THE CIT(A) AS TO HOW THE RECEIPT IN THE PRESENT CASE, I T IS RECEIPT OF SHARE APPLICATION MONEY AND NOT OF LOAN AS HELD BY THE AO. WE, THEREFORE, HOLD THAT IN THE FACTS OF THE PRESEN T 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 RECEIP T AND EVEN AFTER RECEIPT OF THIS AMOUNT, AUTHORIZED SHARE CAPI TAL WAS NOT INCREASED TILL THE END OF THIS YEAR. 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, THEREFORE, REVERSE THE ORDER OF THE CIT(A) AND RESTORE THE PENALTY ORDER. 19. THE FACTS OF ABOVE CASE ARE SQUARELY APPLICABLE TO THE PRESENT CASE OF THE ASSESSEE. THE NOMENCLATURE OF SHARE APP LICATION MONEY GIVEN, IN BOOKS OF ACCOUNTS IS NOT DECISIVE A S HELD BY HON'BLE SUPREME COURT IN THE CASE OF KEDAR NATH JUTE I.T.A. NO.440/IND/2013/A.Y:06-07/M/S. KUNJIKA CONST RUCTION PVT. LTD. PAGE 21 OF 25 MANUFACTURING CO. VS. C I T 82 ITR 363(SC) WHEREIN IT WAS HELD THAT IT IS SETTLED POSITION BY NOW THAT THE NOMENCL ATURE GIVEN BY THE ASSESSEE COMPANY IN ITS BOOKS OF ACCOUNT IS NOT FINAL AND DECISIVE. 20. WE ALSO RELY ON THE DECISION IN THE CASE OF BHALOTIA ENGINEERING WORKS (P) LTD. VS. CIT (2005) 275 ITR 399 (JHARKHAN D) WHEREIN IT WAS HELD THAT EVEN IF SHARE APPLICATION MONEY CANNO T BE CONSIDERED AS A LOAN WITHIN THE MEANING OF SECTION 269SS OF THE ACT, WE ARE OF THE VIEW THAT IT PARTAKES THE CHARAC TER OF DEPOSIT; SINCE IT IS REPAYABLE IN SPECIE ON REFUSAL TO ALLOT SHARES AND IS REPAYABLE IF RECALLED BY THE APPLICANT, BEFORE ALLO TMENT OF SHARES AND THE CONCLUSION OF THE CONTRACT WITHIN THE MEAN ING OF SECTION 269SS, HENCE ACCEPTANCE OF SHARE APPLICATION MONEY IN CASH ABOVE RS. 20,000/- ATTRACTS PENALTY UNDER SECTION 2 71D. IN THE INSTANT, WE FIND THAT THE ASSESSEE HAS NOT TAKEN TH E AMOUNT IN CASH ON ACCOUNT OF SHARE APPLICATION MONEY BUT AS L OANS/ DEPOSITS. EVEN IN CASE OF ALLEGED SHARE APPLICATION MONEY, THE HONBLE HIGH COURT HELD THAT SUCH CASH RECEIPTS PAR TAKES THE CHARACTER OF DEPOSIT. THUS, THIS DECISION IS ALSO A PPLICABLE TO THE CASE OF THE ASSESSEE. I.T.A. NO.440/IND/2013/A.Y:06-07/M/S. KUNJIKA CONST RUCTION PVT. LTD. PAGE 22 OF 25 21. OUR VIEW IS FURTHER FORTIFIED BUT DECISION IN THE C ASE OF CIT VS. M/S. SAMORA HOTELS P LTD. ITAN313/2006 DTD. 23.02.2 012(DELHI) HELD AS UNDER 13. THE VIEW TAKEN BY THE TRIBUNAL THAT THE ASSESS EE COMPANY HAD ENTERTAINED A BONA FIDE BELIEF THAT THE LOANS ACCEPTED BY IT FROM ITS DIRECTORS/ SHAREHOLDERS WER E NOT COVERED BY THE PROVISIONS OF SECTION 269SS, WE ARE AFRAID, IS NOT BORNE OUT BY THE RECORD. WHEN THE ASSESSEE COMP ANY WAS ASKED TO FURNISH ITS ANSWER IN THE PENALTY PROC EEDINGS, THE ASSESSEE COMPANY DID NOT TAKE THE PLEA THAT THE RECEIPTS IN QUESTION WERE LOANS BUT, BECAUSE THEY WERE FROM DIRECTORS/SHAREHOLDERS, THE LOANS WERE NOT COVERED UNDER SECTION 269SS. ON THE CONTRARY, THE SPECIFIC PLEA OF THE ASSESSEE COMPANY WAS THAT THE AMOUNTS IN QUESTION REPRESENTED SHARE APPLICATION MONEY AND WERE NOT LO ANS OR DEPOSITS AT ALL! WHEN THE CLEAR STAND OF THE ASSESS EE WAS THAT THE AMOUNTS IN QUESTION WERE NOT LOANS OR DEPO SITS HOW CAN IT SAID THAT THE ASSESSEE COMPANY HAD ENTERTAIN ED A BONA FIDE BELIEF THAT THE LOANS ACCEPTED BY IT FROM ITS DIRECTORS/ SHAREHOLDERS WERE NOT COVERED BY THE PRO VISIONS OF SECTION 269SS? IT IS ANOTHER MATTER THAT THE STO RY OF SHARE APPLICATION MONEY WAS ITSELF AN AFTER THOUGHT AND W AS RIGHTLY REJECTED BY ALL THE AUTHORITIES BELOW. AT THE SAME TIME, THERE WAS NO BELIEF WHAT TO SPEAK OF 'BONA FIDE BELIEF' T HAT THE LOANS TAKEN FROM DIRECTORS/ SHAREHOLDERS WERE NOT W ITHIN THE AMBIT OF SECTION 269SS. I.T.A. NO.440/IND/2013/A.Y:06-07/M/S. KUNJIKA CONST RUCTION PVT. LTD. PAGE 23 OF 25 22. THE FACTS OF THE ABOVE CASE ALSO APPLICABLE TO PRES ENT CASE AS THE ASSESSEE HAS MADE UP A STORY OF RECEIPTS OF CASH DE POSITS AS SHARE APPLICATION MONEY AFTER PENALTY ORDER WHICH IS AN AFTER THOUGHT. AS THE APPLICATION TO INCREASE AUTHORISED SHARE CAPITAL TO ROC WAS FILED AFTER ORDER OF PENALTY WAS PASSED BY THE AO. 23. THE CASE LAW RELIED BY THE ASSESSEE IN THE CASE OF CIT VS. RUGMINI RAM RAGAV SPINNERS PVT. LTD.(SUPRA) IS NOT APPLICABLE AS IN SAID AMOUNT IN CASH DEPOSIT ON ACCOUNT OF SHA RE APPLICATION MONEY AND WHEN AFTER SURPLUS WAS REFUN DED THE PENALTY U/S.271E WAS LEVIED. IN SUCH SITUATION THE HONBLE HIGH COURT HELD THAT PENALTY U/S. 271E IS NOT AUTOMATIC AND TO BE LEVIED ONLY IN THE ABSENCE OF REASONABLE CAUSE. WH EREAS IN THE PRESENT CASE NO REASONABLE CAUSE HAS BEEN ESTABLISH ED BY THE ASSESSEE AS TO WHY CASH DEPOSIT OR LOAN OR SHARE AP PLICATION MONEY ACCEPTED IN CASH. 24. THE LD. AR RELIED IN THE CASE OF CIT VS. I. P. INDI A (P) LTD. (2012) 204 TAXMAN 368(DELHI) BUT THAT DECISION WOULD ALSO BE NO HELP THAT THE ASSESSEE INASMUCH AS IN THAT CASE, THE REC EIPTS BY THE ASSESSEE COMPANY WERE IN THE FORM OF SHARE APPLICAT ION MONIES. THE HONBLE HIGH COURT HELD THAT SUCH RECEIPTS AND BE TREATED AS RECEIPTS OF LOANS OF DEPOSITS. HOWEVER, IN PRESENT CASE, THE I.T.A. NO.440/IND/2013/A.Y:06-07/M/S. KUNJIKA CONST RUCTION PVT. LTD. PAGE 24 OF 25 RECEIPTS ARE NOT IN THE NATURE OF SHARE APPLICATION MONEY. THEREFORE, THE DECISION IN I.P. INDIA (P) LTD. (SUP RA) IS CLEARLY DISTINGUISHABLE AND WOULD NOT BE ANY HELP THAT THE ASSESSEE IN THE CASE IN HAND. SIMILARLY OTHER CASE LAWS RELIED CIT VS. SPEEDWAYS RUBBER PVT. LTD., CIT VS. M/S. IQBAL INN HOTELS LIMITED I. T. A. NO. 256 OF 2014 DTD. 21.09.2015 (P &H), AND AVADH RUBBER LTD. ARE DISTINGUISHABLE ON FACTS AS I N THOSE CASES THE ASSESSEE COMPANY HAVE RECEIVED SHARE APPLICATIO N MONEY BUT IN THE PRESENT CASE IT IS FOUND THAT THE HAS NOT RE CEIVED SHARE APPLICATION MONEY. SHARES ARE ALLOTTED AFTER 5 YEAR S; APPLICATION TO ROC MADE AFTER 5 YEARS AND AFTER PENALTY WAS IMP OSED. 25. THE ALTERNATE PLEA OF THE LD. A. R. THAT THE SUM OF RS. 14.63 LAKHS PAID TO VENDOR FOR PURCHASE OF STAMP, BY SHRI VIJAY JAIN IS ADJUSTED BY WAY GENERAL ENTRY IS ALSO NOT ACCEPTABL E AS SAID AMOUNT HAS BEEN CREDITED IN THE NAME OF DIRECTOR AS PART OF CASH DEPOSIT OR LOAN OF SHARE APPLICATION MONEY IN THE B OOKS OF ACCOUNTS OF THE ASSESSEE COMPANY. FURTHER, THE AMOU NT HAS BEEN PAID IN CASH BY THE DIRECTOR ON BEHALF OF THE ASSES SEE COMPANY FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. I.T.A. NO.440/IND/2013/A.Y:06-07/M/S. KUNJIKA CONST RUCTION PVT. LTD. PAGE 25 OF 25 26. IN THE LIGHT OF ABOVE FACTS AND CIRCUMSTANCES AND J UDICIAL PRONOUNCEMENT, WE ARE INCLINED TO AGREE WITH FINDIN G OF LOWER AUTHORITIES. ACCORDINGLY, THIS GROUNDS OF APPEAL IS DISMISSED 27. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED. 28. THE ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH OCTOBER, 2016. SD/- ( . . ) (D.T.GARASIA) JUDICIAL MEMBER SD/- ( . . ) (O.P.MEENA) ACCOUNTANT MEMBER & / DATED : 26 TH OCTOBER, 2016.OPM