The Dy. CIT, Vijayawada V. M/s. R.R. Chicken Pvt.Ltd., Vijayawada

ITA 466/VIZ/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8762 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 23-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P S MURTHY
• Section: 27

Judgement Text

ITA NO.466/VIZAG/2016 M/S. R.R. CHICKEN PVT. LTD., VIJAYAWADA 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . .. . . . . . ' , % BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ./I.T.A.NO.466/VIZAG/2016 ( / ASSESSMENT YEAR: 2012-13) DCIT, CIRCLE - 2(1), VIJAYAWADA M/S. R.R. CHICKEN PVT. LTD., VIJAYAWADA [PAN NO. AABCR7968Q ] ( ' / APPELLANT) ( ()' / RESPONDENT) / APPELLANT BY : SHRI P.S. MURTHY, DR / RESPONDENT BY : SHRI D.L. NARASIMHA RAO, AR / DATE OF HEARING : 19.02.2018 / DATE OF PRONOUNCEMENT : 2 1.02.2018 / O R D E R PER D.S. SUNDER SINGH, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) {CIT(A)}, VIJA YAWADA VIDE ITA NO.162/CIT(A)/VJA/2015-16 DATED 25.8.2016 FOR THE A SSESSMENT YEAR 2012-13. ITA NO.466/VIZAG/2016 M/S. R.R. CHICKEN PVT. LTD., VIJAYAWADA 2 2. ALL THE GROUNDS OF APPEAL ARE RELATED TO THE LEV Y OF PENALTY U/S 271D R.W.S. 269SS OF THE INCOME TAX ACT, 1961 (HERE INAFTER CALLED AS 'THE ACT'). IN THIS CASE, THE LD. ADDL. CIT OBSERV ED THAT THE ASSESSEE HAS RECEIVED A PAYMENT OF ` 50 LAKHS BY WAY OF CASH AS A LOAN. THEREFORE, THE LD. ADDL. CIT, RANGE-2, VIJAYAWADA HAS INITIATE D PENALTY U/S 271D R.W.S. 269SS OF THE ACT. AS PER THE DETAILS FURNIS HED BY THE LD. ADDL.CIT, THE ASSESSEE COMPANY HAS RECEIVED THE SHA RE APPLICATION MONEY FROM THE FOLLOWING DIRECTORS OF THE COMPANY. SRI PERAVALLI VENKATA RAMANA - ` 25,00,000/- SMT. PERAVALLI SABITHA - ` 25,00,000/- 3. THE ADDL. CIT HAS CALLED FOR THE EXPLANATION OF THE ASSESSEE AND THE ASSESSEES A.R. SUBMITTED THAT THE COMPANY HAS NOT RECEIVED ANY LOAN OR DEPOSIT BUT THE COMPANY HAS RECEIVED THE SH ARE APPLICATION MONEY FROM ITS DIRECTORS I.E. MR. P.V. RAMANA OF ` 25 LAKHS AND MRS. P. SABITHA OF ` 25 LAKHS. SINCE THE ASSESSEE HAS NEITHER RECEIVED THE LOAN OR DEPOSIT IN CASH THE LD. A.R. ARGUED THAT THE PRO VISIONS OF SECTION 269SS OF THE ACT ARE NOT APPLICABLE IN THE ASSESSEE S CASE, HENCE, REQUESTED TO DROP THE PENALTY PROCEEDINGS WHILE REL YING ON VARIOUS CASE LAWS AS UNDER: A) HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. IP I NDIA PVT. LTD. B) HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. RU GMINI RAM RAGAV SPINNERS PVT. LTD. C) HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE O F CIT VS. SPEED WAYS RUBBER PVT. LTD. ITA NO.466/VIZAG/2016 M/S. R.R. CHICKEN PVT. LTD., VIJAYAWADA 3 D) HONBLE ITAT CHANDIGARH IN THE CASE OF M/S. IQBAL IN N AND HOTELS LIMITED VS. THE JCIT. 4. THE LD. ADDL. CIT CONSIDERED THE SUBMISSIONS MAD E BY THE ASSESSEE AND RELIED ON THE ORDER OF HONBLE HIGH CO URT OF JHARKHAND IN THE CASE OF BHALOTIA ENGINEERING WORKS PVT. LTD. VS . CIT (275 ITR 399) AND HELD THAT THE SHARE APPLICATION MONEY PARTAKES THE CHARACTER OF DEPOSIT, HENCE, THE PROVISIONS OF SECTION 269SS OF THE ACT ARE APPLICABLE, ACCORDINGLY HELD THAT THE ASSESSEE HAD CONTRAVENED THE PROVISIONS OF SECTION 269SS OF THE ACT AND IMPOSED PENALTY OF ` 50 LAKHS U/S 271D OF THE ACT. 5. AGGRIEVED BY THE ORDER OF THE ADDL.CIT THE ASSES SEE WENT ON APPEAL BEFORE THE CIT(A) AND THE LD. CIT(A) OBSERVE D THAT IN THE ASSESSEES CASE, THE ASSESSEE HAS RECEIVED THE SHAR E APPLICATION MONEY AND SUBSEQUENTLY THE SHARES WERE ALLOTTED, HENCE TH E ASSESSEES CASE IS DISTINGUISHABLE IN RESPECT OF THE CASE LAW RELIED U PON BY THE LD. ADDL. CIT IN THE CASE OF BHALOTIA ENGINEERING WORKS PVT. L TD. (SUPRA) AND FOLLOWING DECISIONS OF (I)CIT V. SRI SIDHDATA ISPAT (P) LTD. [2012 - TIOL 786 HC (DEL.)], (II)CIT V. IP INDIA (P) LTD. (2 012)70 DTR (DEL.) 452, 2011-TIOL-811-HC (DEL.) (III) CIT V. LDHAYAM PUBLIC ATIONS LTD. (2006) 285 ITR 221 (MAD.) ALLOWED THE APPEAL OF THE ASSESSEE. FOR READY REFERENCE AND FOR THE SAKE OF CLARITY, W E EXTRACT RELEVANT PARAGRAPH OF THE CIT(A)S ORDER AS UNDER: ITA NO.466/VIZAG/2016 M/S. R.R. CHICKEN PVT. LTD., VIJAYAWADA 4 5. I HAVE PERUSED THE SUBMISSIONS OF APPELLANT AND THE CASE LAWS RELIED ON BY ASSESSING OFFICER AND APPELLANT. 5.1. ADMITTEDLY, IN APPELLANT'S CASE, 2.5 LAKH (EAC H) SHARES WERE ALLOTTED IN NOVEMBER, 2014 TO BOTH DIRECTORS OF THE COMPANY, VIZ. (1) SRI P.VENKATA RAMANA AND (2) SMT P.SABITHA . CAPITAL STRUCTURE OF THE COMPANY AFTER TAKING INTO CONSIDER ATION THE ABOVE ALLOTMENT IS AS FOLLOWS: AUTHORIZED CAPITAL - ` 2.50 CRORES ISSUED CAPITAL - ` 2.00 CRORES SUBSCRIBED CAPITAL - ` 2.00 CRORES PAID UP CAPITAL - ` 2.00 CRORES THIS IS EVIDENCED BY FORM NO.PAS-3 AND THE INTIMAT ION GIVEN TO THE MINISTRY OF CORPORATE AFFAIRS ON 19.08 .2015 AS PER RECEIPT GAR-7/SRN S39047378. HENCE, APPELLANT'S CAS E IS DISTINGUISHABLE ON FACTS FROM THAT OF THE CASE MENT IONED BY ADDL. CIT IN HIS PENALTY ORDER VIZ. BHALOTIA ENGG. WORKS PVT. LTD. VS. CIT (275 ITR 399) (JHARKHAND HIGH COURT), AS THERE WAS NO OCCASION FOR REFUND OF SHARE APPLICATION MONEY TO T HESE DIRECTORS IN APPELLANT'S CASE. 5.2. HON'BLE HYDERABAD TRIBUNAL DELETED THE PENALTY IMPOSED U/S.271D HOLDING THAT THE PROVISIONS OF SECTION 269 SS ARE NOT APPLICABLE IN THE CASE OF SHARE APPLICATION MONEY, BEING NOT IN THE NATURE OF LOAN OR DEPOSIT IN THE CASE OF ITO VS . SUNDER SYNTHETICS (P) LTD. (ASST. YEAR 2008-09) - ITA NO.3 14/HYD/2015 ORDER DATED 01.07.2015 - (2015) 041 ITR (TRIB.) 061 8, (2015) TAX PUB (DT) 3229 (HYD. TRIB.). 5.3 IN ANY EVENT, SHARES WERE ALLOTTED BY THE COMPA NY TO THE DIRECTORS FOR THE AMOUNTS CONTRIBUTED TOWARDS SHARE APPLICATION MONEY. IN SUCH A SITUATION, SECTION 269SS WILL NO T APPLY WHERE THE CONTRIBUTIONS RECEIVED HAVE BEEN CONVERTED INTO SHARE CAPITAL BY WAY OF ALLOTMENT OF SHARES, WAS HELD BY COURTS I N THE FOLLOWING CASES I. CIT V. SRI SIDHDATA ISPAT (P) LTD. [2012 - TIOL 7 86 HC (DEL.)] II. CIT V. IP INDIA (P) LTD. (2012)70 DTR (DEL.) 452, 2 011-TIOL- 811-HC (DEL.) III. CIT V. LDHAYAM PUBLICATIONS LTD. (2006) 285 ITR 221 (MAD.) 5.4 IN VIEW OF THE ABOVE, I HOLD THAT PENALTY U/S 27 1D IS NOT LEVIABLE IN THIS CASE. I, THEREFORE, CANCEL THE PENALTY LEVIED. ITA NO.466/VIZAG/2016 M/S. R.R. CHICKEN PVT. LTD., VIJAYAWADA 5 6. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. IN THIS CASE, BOTH THE DIRECTORS HAVE CONTRIBUTED THE SHARE APPLICATION MONEY TO THE ASSESSEE COMPANY IN THE YEAR 2011 AND SUBSEQ UENTLY, THE SHARES WERE ALLOTTED TO THE SHARE APPLICANTS. THIS IS EVI DENT FROM THE BALANCE SHEET OF THE ASSESSEE, WHICH WAS PLACED BEFORE US A ND ALSO BEFORE THE LD.CIT(A). THE LD. CIT(A) HAS GIVEN A CATEGORICAL FINDING THAT THE SHARES WERE ALLOTTED TO THE APPLICANTS AND THE CASE LAW RELIED UPON BY THE ASSESSEE HAS NO APPLICATION SINCE THE FACTS ARE DISTINGUISHABLE. THE LD. CIT(A), FOLLOWING THE COORDINATE BENCH DECISION IN THE CASE OF ITO VS. SUNDER SYNTHETICS (P) LTD. IN ITA NO.314/HYD/20 15 DATED 1.7.2015 OF ITAT HYDERABAD AND OTHER DECISIONS (SUPRA)ALLOW ED THE APPEAL OF THE ASSESSEE. LD. D.R. COULD NOT CONTROVERT THE FA CT THAT THE ASSESSEE COMPANY HAD RECEIVED THE SHARE APPLICATION MONEY AN D ALLOTTED THE SHARES SUBSEQUENTLY. NO OTHER DECISION WAS BROUGHT ON RECORD TO SUPPORT THE REVENUES CASE. THEREFORE, WE DO NOT FI ND ANY INFIRMITY IN THE ORDER OF THE CIT(A) AND THE SAME IS UPHELD. ITA NO.466/VIZAG/2016 M/S. R.R. CHICKEN PVT. LTD., VIJAYAWADA 6 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT O N 21 ST FEB18. SD/- SD/- ( . ) ( . .. . . . . . ' ) (V. DURGA RAO) (D.S. SUNDER SINGH) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 21.02.2018 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE DCIT, CIRCLE-2(1), VIJAYAWAD A 2. / THE RESPONDENT M/S. R.R. CHICKEN PVT. LTD., 40 -7-3, NEAR JAMMICHETTY CENTRE, MOGHALRAJAPURAM, VIJAYAWADA 3. + / THE CIT, VIJAYAWADA 4. + ( ) / THE CIT (A), VIJAYAWADA 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM