M/s Eqbal Inn & Hotels Ltd., Patiala V. JCIT, Patiala

ITA 876/CHANDI/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73432 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 21-11-2013
• Assessment Year: 2003-2004
• Appeal Filed On: 03-09-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Bonafide belief; Question of law; Reasonable cause; Tax effect
• Section: 273B; 143(3); 147; 68; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI T.R. SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 876 TO 879/CHD/2013 ASSESSMENT YEARS: 2003-04, 2005-06, 2006-07 & 2007- 08 M/S EQBAL INN & HOTELS LTD., V THE JCIT, C/O SHRI TEJ MOHAN SINGH, ADVOCATE, PATIALA RANGE , PATIALA CHANDIGARH PAN NO. AABCE2887M (APPELLANT) (RESPONDENT) DATE OF HEARING : 21.11.2013 DATE OF PRONOUNCEMENT : 30.01.2014 APPELLANT BY : SHRI TEJ MOHAN SINGH RESPONDENT BY : SHRI AKHILESH GUPTA ORDER PER T.R.SOOD, A.M. THESE APPEALS FILED BY THE ASSESSEE ARE DIRECTED A GAINST THE COMMON ORDER DATED 27.8.2013 OF LD. CIT(A), PATIALA. 2. IN ALL THESE APPEALS, IDENTICAL ISSUE REGARDING CONFIRMATION OF PENALTY U/S 271D OF THE ACT HAS BEEN RAISED. SINCE THE FACTS A RE IDENTICAL IN ALL THESE CASES, THEREFORE, BY THE CONSENT OF PARTIES ITA NO. 876/CH D/2013 WAS TAKEN FOR DETAILED HEARING. THE GROUNDS OF APPEAL FILED BY THE ASSESSE E READS AS UNDER:- 1. THAT THE LD. COMMISSIONER OF INCOME TAX(APPEALS) HAS ERRED IN LAW HOLDING THAT THE PENALTY NOTICE ISSUED AND SUBSEQUENT PENALTY ORDER PASSED UNDER SECTION 271D OF THE ACT 2 BY THE JOINT COMMISSIONER OF INCOME TAX WAS NOT BAR RED BY LIMITATION WHICH IS ILLEGAL, ARBITRARY AND UNJUSTIF IED. 2. THAT WITHOUT PREJUDICE TO THE ABOVE, THE LD. COM MISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN UPHOLDING THE IMPOSITION OF PENALTY OF RS. 4,15,440/- UNDER SECTION 271D OF THE ACT WHICH IS ARBITRARY AND UNJUSTIFIED. 3. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED IN LAW AS WELL AS ON FACTS IN HOLDING THAT TH E PROVISIONS OF SECTION 271D ARE ATTRACTED IN RESPECT OF SHARE A PPLICATION MONEY RECEIVED FROM DIRECTORS WHICH IS ILLEGAL, ARB ITRARY AND UNJUSTIFIED. 4. THAT IN ANY CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS FAILED TO APPRECIATE THE REASONABLE C AUSE PLEADED BEFORE HIM IN THE CORRECT PERSPECTIVE AND A S SUCH THE ORDER PASSED BY HIM IS ARBITRARY AND UNJUSTIFIED . . 3. OUT OF THE ABOVE, GROUND NO.1 WAS NOT PRESSED AN D, THEREFORE, THE SAME IS DISMISSED AS NOT PRESSED. 4. GROUND NOS. 2, 3 & 4: AFTER HEARING BOTH THE PA RTIES, WE FIND THAT ITO, WARD NO.1, PATIALA INTIMATED THE JCIT, PATIALA RANG E THAT ASSESSEE HAS ACCEPTED SHARE APPLICATION MONEY IN CASH FROM SHRI KAMALPREE T SINGH PROP. M/S SARAN ENTERPRISES, PATIALA, SHRI BALWINDER SINGH, PROP. M /S M.P. TRADERS, PATIALA & SMT. PRITAM KAUR PROP M/S JAIMAL SONS ENTERPRISES. I T WAS FURTHER INTIMATED THAT THIS IS IN VIOLATION OF PROVISIONS OF SECTION 269SS PART ICULARLY IN VIEW OF THE DECISION OF HON'BLE JHARKHAND HIGH COURT IN THE CASE OF BHAL OTIA ENGINEERING WORKS PVT LTD VS CIT 275 ITR 399 . IN VIEW OF THIS INFORMATION, JCIT, PATIALA ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE FOR IMPOSITION OF PENA LTY U/S 271D OF THE ACT. IN RESPONSE TO THE NOTICE, IT WAS MAINLY SUBMITTED THA T FACTS IN THE CASE OF BHALOTIA ENGINEERING WORKS PVT LTD (SUPRA) ARE DISTINGUISHAB LE BECAUSE ASSESSEE HAS 3 ACCEPTED SHARE APPLICATION MONEY IN CASH FROM DIREC TORS ONLY AND NOT FROM ANY OUTSIDERS. FURTHER, THE LOANS HAVE BEEN ACCEPTED AS GENUINE EVEN BY THE ASSESSING OFFICER AFTER SCRUTINY ASSESSMENT. IT WAS FURTHER SUBMITTED THAT SHARE APPLICATION MONEY IS NOT GOVERNED BY THE DEFINITION OF DEPOSIT AS PER RULE 2(B)(IX) OF THE COMPANYS (ACCEPTANCE OF DEPOSIT) RULES, 1975, BECA USE IT CLEARLY PROVIDES THAT DEPOSITS WOULD NOT INCLUDE ANY AMOUNT RECEIVED FROM PERSON WHO AT THE TIME OF RECEIPT WAS DIRECTOR OR RELATIVE TO THE DIRECTOR O R MEMBER OF A COMPANY. FURTHER, IT WAS SUBMITTED THAT HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT V IDHAYAM PUBLICATIONS LTD 285 ITR 22 (MAD.) DELETED THE PENA LTY BY OBSERVING THAT SHARE APPLICATION MONEY CANNOT BE INCLUDED IN THE DEFINIT ION OF DEPOSIT. IN ANY CASE THE MONEY WAS GIVEN BY THE DIRECTORS FOR DAY TO DAY CON STRUCTION OF THE HOTEL WHICH WAS BEING CONSTRUCTED BY THE ASSESSEE COMPANY. THE MONEY WAS REQUIRED BECAUSE LOANS HAVE NOT BEEN SANCTIONED BY THE BANKS AND CON STRUCTION COULD NOT BE STOPPED AND, THEREFORE, THERE WAS URGENT NEED OF MONEY AND IT WAS A REASONABLE CAUSE. IN THIS REGARD, RELIANCE WAS PLACED ON THE DECISION OF HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF CIT V MAHESHWARI NIRMAN UDYOG 302 IT R 201 AND HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V SUNIL KUM AR GOEL 315 ITR 163. RELIANCE WAS ALSO PLACED ON VARIOUS TRIBUNAL DECISI ONS THAT PENALTY CANNOT BE LEVIED IN THESE CIRCUMSTANCES. FINALLY, IT WAS SU BMITTED THAT TRANSACTIONS ARE GENUINE AND ASSESSEE WAS NOT KNOWING THAT ASSESSEE COULD NOT ACCEPT THE SHARE APPLICATION MONEY IN CASH AND WAS IGNORANT OF THIS PROVISION. FOR THIS PROPOSITION, RELIANCE WAS PLACED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF MOTI LAL PADAMPAT SUGAR MILLS CO LTD VS VS STATE OF UTTAR PRADESH & ORS 118 ITR 326 (SC). 5. THE JCIT EXAMINED THESE SUBMISSIONS AND DID NOT FIND MUCH FORCE IN THE SAME. HE OBSERVED THAT THERE WAS EXPLANATION PROVID ED FOR RECEIPT IN SECTION 269SS AND THE NATURE OF TRANSACTION ENVISAGED IN A DIFFERENT STATUTE CANNOT BE 4 IMPORTED TO THE NATURE OF TRANSACTION ENVISAGED IN THE INCOME TAX ACT. HE FURTHER OBSERVED THAT IN CASE OF BHALOTIA ENGINEERING WORKS PVT LTD. (SUPRA) ALSO, THE EXPLANATION WAS THAT THE SHARE APPLICATION MONEY WO ULD NOT CONSTITUTE A DEPOSIT WAS REJECTED BY THE HON'BLE JHARKHAND HIGH COURT. HE ALSO OBSERVED THAT MONEY PAID TO A COMPANY ALONG WITH AN APPLICATION FOR SHA RES IS ALSO A DEPOSIT OF MONEY IN THE COMPANY WHICH IS REPAYABLE BY SUCH COMPANY A FTER THE PERIOD FOR ALLOTMENT OF SHARES COMES TO AN END OR DECISION IS TAKEN REGA RDING ALLOTMENT OF SHARES. THEREAFTER, THE AMOUNT IS REPAYABLE TO THE PERSON W HO PAID MONEY EVEN WITHOUT DEMAND IN THAT BEHALF. IN THE CASE, BEFORE HIM TH E ASSESSEE HAS NOT ALLOTTED SHARES EVEN AFTER FIVE YEARS AGAINST THE SHARE APPLICATION S RECEIVED BY IT AND LATER ON STARTED RETURNING THE MONEY IN SPECIE WHICH CLEARLY ESTABLISHES THAT SUCH SHARE APPLICATION MONEY WAS IN THE NATURE OF DEPOSIT. IT WAS ALSO OBSERVED THAT PERUSAL OF THE BOOKS OF ACCOUNT SHOWS THAT THE MONEY WAS IN ITIALLY CREDITED TO THE RESPECTIVE CURRENT ACCOUNTS AND ASSESSEE COMPANY RE PEATEDLY RECEIVED MONEY IN CASH OVER A PERIOD OF SIX YEARS IN SEVERAL TRANCHES AT TIMES ON DAILY BASIS OR WEEKLY BASIS. ACCORDING TO HIM, NO COMPANY CAN KEE P ON RECEIVING THE CASH IN GARB OF SHARE APPLICATION MONEY FOR SUCH A LONG SPA N OF TIME. HE ALSO EXAMINED THE POSITION REGARDING AUTHORIZED CAPITAL, PAID OF CAPITAL, SHARE APPLICATION MONEY AND OBSERVED THAT FROM ASSESSMENT YEARS 2005-06 TO 2010-11, PAID UP CAPITAL AND SHARE APPLICATION EXCEEDED AUTHORIZED CAPITAL WHICH IS NOT POSSIBLE. THE COMPANY FAILED TO GIVE ANY DOCUMENTARY EVIDENCE TO SHOW THA T IT HAS APPLIED FOR ENHANCEMENT OF AUTHORIZED CAPITAL WITH REGISTRAR OF COPANIES. HE ALSO EXAMINED THE BOOKS OF ACCOUNT OF VARIOUS PROPRIETARY CONCERN S AND NOTED THAT CASH WAS COMING TO THE COMPANY FROM PROPRIETARY CONCERNS OF THE VARIOUS INDIVIDUALS. HE ALSO NOTED THAT ASSESSEE DID NOT ALLOT A SINGLE SHA RE IN ASSESSMENT YEAR 2005-06. IN FINANCIAL YEAR 2005-06, THE SUM TOTAL OF PAID UP CA PITAL AND SHARE APPLICATION MONEY WAS RS. 2,90,31,774/- WHICH WAS QUITE IN EXCE SS OF THE AUTHORIZED CAPITAL. IN LATER YEARS, THE ASSESSEE RECEIVED FURTHER SHARE APPLICATION MONEY. IT WAS ALSO 5 SURPRISING ACCORDING TO HIM THAT PROPRIETARY CONCER N AND COMPANY WERE HAVING BANK ACCOUNTS WHILE MONEY WAS TAKEN IN CASH. 6. ON REASONABLE CAUSE, HE OBSERVED THAT ASSESSEE H AS NOT BEEN ABLE TO GIVE ANY REASONABLE CAUSE FOR ACCEPTING THE CASH. SIMPLY SH OWING THAT HOTEL / BUILDING CONSTRUCTION WAS IN FULL SWING AND NO LOAN FROM BAN KS WAS SANCTIONED DOES NOT EXPLAIN AS TO WHAT WAS REASONABLE CAUSE IN ACCEPTIN G THE MONEY IN CASH. HE ALSO OBSERVED THAT PROVISIONS OF SECTION 269SS ARE APPLI CABLE EVEN IF IT WAS A CASE OF GENUINE LOANS. IN THIS BACKGROUND, HE LEVIED A PENA LTY OF RS. 4,15,440/- FOR ASSESSMENT YEAR 2003-04, RS. 1,07,49,200/- FOR AS SESSMENT YEAR 2005-06, AND RS. 29,33,000/- FOR ASSESSMENT YEAR 2006-07 AND RS. 66, 50,000/- FOR ASSESSMENT YEAR 2007-08 U/S 271D OF THE ACT. 7. AGGRIEVED BY THE ABOVE ORDER, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A). BEFORE CIT(A), WRITTEN SUBMISSIONS WERE F ILED WHICH ACCORDING TO FIRST APPELLATE AUTHORITY, THE ASSESSEE HAS LARGELY RESUB MITTED THE SUBMISSIONS MADE BEFORE THE JCIT. HE DID NOT FIND MUCH FORCE IN THE SE SUBMISSIONS AND OBSERVED THAT CASH HAS BEEN RECEIVED BY THE ASSESSEE ON REGU LAR INTERVALS AND SOMETIMES ON CONSECUTIVE DAYS. IT WAS OBSERVED THAT INITIALLY AMOUNT RECEIVED BY THE ASSESSEE WAS CREDITED TO THE CURRENT ACCOUNT OF THE DIRECTOR , THEREFORE, IT WAS IMPOSSIBLE TO COMPREHEND THAT PUBLIC LIMITED COMPANY WOULD BE RAI SING CAPITAL ON DAY TO DAY BASIS. ACCORDING TO HIM, IF THE AMOUNTS WERE RECEI VED TOWARDS SHARE APPLICATION MONEY THEN THE SAME WOULD NOT HAVE BEEN CREDITED TO A CURRENT ACCOUNT OF A PRINCIPAL DIRECTOR OR A CREDIT SHOULD HAVE GONE TO SHARE APPLICATION MONEY ACCOUNT, IT IS ONLY AT THE END OF THE YEAR THAT MONEY HAS BE EN TRANSFERRED TO SHARE APPLICATION MONEY ACCOUNT. THEREFORE, ACCORDING TO HIM, THE CASH RECEIVED ON VARIOUS DATES WAS NOT ON ACCOUNT OF SHARE APPLICATI ON MONEY. ACCORDING TO HIM, EVEN IF IT WAS PRESUMED THAT JOURNAL ENTRY FOR TRA NSFERRING THE MONEY TO SHARE 6 APPLICATION MONEY ACCOUNT ON 31 ST MARCH WAS NOT A AFTER THOUGHT, EVEN THEN THE APPLICABILITY OF SECTION 269SS HAS TO BE SEEN AT TH E POINT OF TIME WHEN MONEY IS ACTUALLY RECEIVED. IT WAS POINTED OUT THAT IT WAS NOT IN THE SHAPE OF SHARE APPLICATION MONEY. HE FURTHER OBSERVED THAT IN CAS E OF KAMALPREET SINGH, THE TOTAL CREDIT STANDING IN HIS ACCOUNT WAS RS. 76,07, 169/-. THE FACE VALUE OF THE SHARE OF THE APPELLANT COMPANY WAS RS. 10/-. THERE FORE, THE AMOUNT OF RS. 76,07,169/- COULD NOT BE INFERRED TO BE SHARE APPLI CATION MONEY BECAUSE NORMALLY SHARES COULD NOT BE ISSUED IN FRACTIONS. HE ALSO N OTED THAT AUTHORIZED CAPITAL OF THE COMPANY WAS NOT SUFFICIENT TO EXTENT TO WHICH S HARE APPLICATION MONEY HAS BEEN RECEIVED. THE ASSESSEE COULD NOT HAVE RECEIVE D SHARE APPLICATION MONEY AS THE AUTHORIZED CAPITAL OF THE COMPANY WAS NOT SUFFI CIENT AND NORMALLY NO SHARES CAN BE ALLOTTED BEYOND THE AUTHORIZED SHARE CAPITAL . HE ALSO REFERRED TO CIRCULAR NO. 387 DATED 6.7.1984 AND CIRCULAR NO. 345 DATED 2 6.8.1982 AND OBSERVED THAT THERE WAS NO FORCE IN THE SUBMISSIONS AND IF THE TR ANSACTION WAS GENUINE THEN PENALTY COULD NOT BE LEVIED BECAUSE THE VERY PURPOS E OF THE PROVISION WAS TO PLUG THE SITUATION, WHERE CASH FOUND DURING THE SEARCH WAS LATER ON EXPLAINED BY WAY OF LOANS FROM VARIOUS PARTIES. HE ALSO DID NOT FIN D FORCE IN THE SUBMISSIONS THAT DEFAULT, IF ANY, WAS TECHNICAL AND VENIAL IN NATURE BECAUSE PENALTY U/S 271D COULD BE LEVIED EVEN ON PERSONS WHO WERE NOT ASSESSED TO TAX AND, THEREFORE, WHERE DEFAULT WAS NOT POINTED OUT BY THE CHARTERED ACCOUN TANT, IT CANNOT BE TAKEN AS A REASONABLE CAUSE. IN THIS BACKGROUND, THE LD. CI T(A) CONFIRMED THE LEVY OF PENALTY. 8. BEFORE US, LD. COUNSEL FOR THE ASSESSEE CARRIED US THROUGH THE PENALTY ORDER POINTING OUT VARIOUS FACTS. HE SUBMITTED THAT JCIT HAS LEVIED THE PENALTY MAINLY ON THE BASIS OF DECISION OF HON'BLE JHARKHAND HIGH COURT IN THE CASE OF BHALOTIA ENGINEERING WORKS PVT LTD. (SUPRA). FIRST OF ALL, THIS DECISION IS TOTALLY DISTINGUISHABLE BECAUSE IN THAT CASE MONEY WAS RECE IVED FROM OUTSIDERS. THE SHARE 7 APPLICATION MONEY WAS RECEIVED FROM 10 PERSONS WHO WERE NEITHER DIRECTORS NOR RELATIVES. IN THE CASE BEFORE US, THE SHARE APPLIC ATION MONEY HAS BEEN RECEIVED FROM THE DIRECTORS ONLY. IN ANY CASE THE DECISION OF THE HON'BLE JHARKHAND HIGH COURT HAS ALREADY BEEN DISTINGUISHED BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS I.P. INDIA P. LTD 343 ITR 353(DELHI). IN SIMILAR CIRCUMSTANCES, IT WAS HELD THAT SHARE APPLICATION MONEY WOULD NOT CONSTIT UTE LOANS OR DEPOSITS FOR THE PURPOSE OF SECTION 269SS. FURTHER, THE HONB LE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS SPEEDWAYS RUBBER PVT. LIMITED 326 ITR 31 HAS TAKEN A SIMILAR VIEW. IN ANY CASE, WHEN DIFFERENT VIEWS HAVE BEEN TAKEN BY DIFFERENT HIGH COURTS, THEN THE DECISION WHICH IS FAVORABLE T O THE ASSESSEE HAS TO BE ADOPTED AND FOR THIS PROPOSITION HE RELIED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT V . VEGETABLE PRODUCTS LTD. (1973) 88 ITR 192 (SC) AND PODAR CEMENTS (P) LTD. (1997) 226 ITR 625 (SC). 9. THE LD. COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THAT IN ANY CASE THERE WAS A REASONABLE CAUSE FOR ACCEPTING THE CASH FROM DIRECT ORS. THE ASSESSEE COMPANY WAS IN THE BUSINESS OF CONSTRUCTION OF THE HOTEL. THE A SSESSEE COMPANY HAD APPLIED FOR VARIOUS LOANS BUT THE LOANS WERE NOT SANCTIONED AND , THEREFORE, THE DIRECTORS WERE LEFT WITH NO OPTION BUT TO CONTRIBUTE MONEY TOWARDS CONSTRUCTION OF SUCH HOTEL. INITIALLY, MONEY WAS RECEIVED BY THE COMPANY IN THE CURRENT ACCOUNT AND SINCE THE LOANS WERE NOT FORTHCOMING IT WAS DECIDED TO TRANSF ER THE CREDIT BALANCE LYING IN THE CURRENT ACCOUNT AT THE END OF THE YEAR TO SHARE APPLICATION ACCOUNT. ACCORDING TO HIM, THIS WAS A REASONABLE CAUSE AND IN THIS REG ARD HE RELIED ON THE DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V SUNIL KUMAR GOEL (SUPRA) WHEREIN IT WAS CLEARLY HELD THAT A FAMILY TRANSFER BETWEEN TWO INDEPENDENT ASSESSEES FOR BUSINESS EXIGENCIES WOULD CONSTITUTE A REASONABLE CAUSE. HE ALSO RELIED ON THE DECISION OF HON'BLE RAJASTHAN HIGH C OURT IN THE CASE OF CIT VS MAHESHWARI NIRMAN UDYOG (SUPRA) A ND DECISION OF HON'BLE PUNJAB & HARYANA 8 HIGH COURT IN THE CASE OF CIT VS SAINI MEDICAL STOR E REPORTED IN 276 ITR 79 (P&H) . HE ALSO SUBMITTED THAT MONEY RECEIVED IN CURRENT ACCOUNT CAN ALSO NOT CONSTITUTE LOAN OR DEPOSITS FOR THE PURPOSE OF LEVY OF PENALTY U/S 271D AND IN THIS REGARD RELIED ON THE DECISION OF HON'BLE MADRAS HIG H COURT IN THE CASE OF CIT V IDHAYAM PUBLICATIONS LTD (SUPRA). 10. HE ALSO SUBMITTED THAT SHARE APPLICATION MONEY HAS BEEN HELD TO BE GENUINE BECAUSE ASSESSMENTS HAS BEEN FRAMED U/S 147 READ W ITH SECTION 143(3) OF THE ACT AND NO ADDITION HAS BEEN MADE. THE ACCOUNTS WERE AU DITED BY THE CHARTERED ACCOUNTANT WHO NEVER POINTED OUT THAT THERE WAS ANY VIOLATION OF ANY OF THE PROVISIONS OF INCOME TAX ACT AND THIS WOULD ALSO LE AD TO CONCLUSION THAT THERE WAS BONAFIDE BELIEF AND REASONABLE CAUSE FOR ACCEPTING THE SHARE APPLICATION MONEY IN CASH. HE POINTED OUT THAT OBSERVATION OF THE ASSES SING OFFICER THAT MONEY PAID TO A COMPANY ALONG WITH AN APPLICATION FOR SHARE IS A DEPOSIT OF MONEY IN THE COMPANY WHICH IS REPAYABLE BY IT AFTER THE PERIOD F OR ALLOTMENT OF SHARES OR DECISION IS TAKEN REGARDING THE ALLOTMENT OF SHARES IS NOT CORRECT BECAUSE UNDER THE COMPANIES ACT NO TIME LIMIT HAS BEEN PRESCRIBED FOR THE ALLOTMENT OF SHARES. FURTHER, THE JCIT ALSO OBSERVED THAT INITIALLY MONE Y WAS CREDITED TO THE CURRENT ACCOUNT AND LATER ON IT WAS TRANSFERRED TO SHARE AP PLICATION MONEY ACCOUNT, THAT ITSELF WOULD NOT ATTRACT THE PENALTY PROVISION OF S ECTION 271D BECAUSE EVEN CURRENT ACCOUNT WITH A DIRECTOR WOULD NOT AMOUNT TO DEPOSIT . HE SUBMITTED THAT OBSERVATION OF THE JCIT THAT SHARE APPLICATION MONE Y HAS EXCEEDED THE AUTHORIZED CAPITAL FROM ASSESSMENT YEAR 2005-06 IS TO NO CONSE QUENCE. THE ONLY RESTRICTION IN THE COMPANIES ACT IS THAT SHARES CANNOT BE ALLOT TED I.E. PAID UP CAPITAL CANNOT EXCEED THE AUTHORIZED CAPITAL BUT THERE IS NO RESTR ICTION WITH REGARD TO ACCEPTANCE OF SHARE APPLICATION MONEY. IN ANY CASE, THE SHARE S HAVE BEEN ALLOTTED AT THE PREMIUM OF RS. 90/- PER SHARE AND, THEREFORE, AT NO STAGE THE SHARE APPLICATION MONEY HAS EXCEEDED THE AUTHORIZED CAPITAL. THE JCIT HAS ALSO OBSERVED THAT 9 MONEY HAS BEEN TRANSFERRED FROM THE PROPRIETARY CON CERN OF THE INDIVIDUAL TO THE COMPANY E.G. IN CASE OF SHRI KAMALPREET SINGH THE P ROPRIETOR OF SARAN ENTERPRISES FROM WHERE MONEY HAS BEEN TRANSFERRED. HE SUBMITTE D THAT PROPRIETARY CONCERN IS OWNED BY THE INDIVIDUAL AND THERE IS NO BAR IN WITH DRAWING THE MONEY FROM THE PROPRIETARY CONCERN FOR THE PURPOSE OF MAKING SHARE APPLICATION WITH THE COMPANY. FURTHER, THERE IS OBSERVATION THAT SHARES HAVE BEEN ALLOTTED ONLY AFTER FIVE YEARS IS OF NO CONSEQUENCE BECAUSE THERE IS NO TOME LIMIT FI XED FOR ALLOTMENT OF SHARES FROM THE DATE OF RECEIPT OF SHARE APPLICATION MONEY . FURTHER, IN THE CASE OF SHRI KAMALPREET SINGH, SHARES WERE ALLOTTED IN FINANCIAL YEAR 2002-03 ALSO WHICH BECOMES CLEAR FROM THE COPY OF ACCOUNT. HE ALSO SUBMITTED THAT JCIT HAS ALSO OBSERVED THAT WHEN PROPRIETARY CONCERN WERE ALSO HA VING BANK ACCOUNT WHY MONEY WAS NOT TRANSFERRED THROUGH CHEQUES IS OF NO CONSEQ UENCE BECAUSE MONEY WAS TRANSFERRED FOR THE CONSTRUCTION OF HOTEL AS AND WH EN THE SAME WAS REQUIRED AND MOST OF THE TIME MONEY WAS REQUIRED FOR PAYMENT OF LABOUR AND SOME OTHER CASH ITEMS. MONEY HAS ALSO BEEN TRANSFERRED THROUGH CHEQ UES ON VARIOUS ACCOUNTS WHICH IS CLEAR FROM THE COPY OF THE ACCOUNTS. 11. ON THE OTHER HAND, THE LD. DR STRONGLY SUPPORTE D THE PENALTY ORDER OF JCIT AS WELL AS THE ORDER OF CIT(A). HE REFERRED TO VAR IOUS OBSERVATIONS MADE BY JCIT. HE SUBMITTED THAT ASSESSEE COMPANY HAS ACCEPTED SHA RE APPLICATION MONEY EXCEEDING THE AUTHORISED CAPITAL, WHICH IS NOT POSS IBLE. HOWEVER, WHEN THE BENCH PUT A SPECIFIC QUERY WHETHER HE CAN SHOW ANY PROVIS ION IN COMPANIES ACT THROUGH WHICH THERE WAS ANY BAR ON ACCEPTANCE OF SHARE APPL ICATION MONEY IN EXCESS OF AUTHORIZED CAPITAL, HE COULD NOT SHOW ANY PROVISION IN THE COMPANIES ACT. THE LD. DR FURTHER SUBMITTED THAT IT WAS STATED BY THE LD. COUNSEL THAT SHARES HAVE BEEN ISSUED AT PREMIUM BUT NO PERMISSION SEEMS TO H AVE BEEN TAKEN FROM ANY AUTHORITY FOR ISSUING THE SHARES AT PREMIUM. HE C ONTENDED THAT CASE WAS SQUARELY 10 COVERED BY THE DECISION OF HON'BLE JHARKHANAD HIGH COURT IN THE CASE OF BHALOTIA ENGINEERING WORKS PVT LTD (SUPRA). 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFU LLY. SECTION 269 SS OF THE ACT READS AS UNDER:- 269SS NO PERSON SHALL, AFTER THE 30TH DAY OF JUNE, 1984, TAKE OR ACCEPT FROM ANY OTHER PERSON (HEREAFTER IN THIS SECTION REFERRED TO AS THE DEPOS ITOR), ANY LOAN OR DEPOSIT OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE BANK DR AFT IF, ( A ) THE AMOUNT OF SUCH LOAN OR DEPOSIT OR THE AGGREGA TE AMOUNT OF SUCH LOAN AND DEPOSIT ; OR ( B ) ON THE DATE OF TAKING OR ACCEPTING SUCH LOAN OR D EPOSIT, ANY LOAN OR DEPOSIT TAKEN OR ACCEPTED EARLIER BY SUCH PERSON FROM THE DEPOSITOR IS REMAINING UNPAID (WHETHER REPAYMENT HAS FALLEN DUE OR NOT), THE AMOU NT OR THE AGGREGATE AMOUNT REMAINING UNPAID ; OR ( C ) THE AMOUNT OR THE AGGREGATE AMOUNT REFERRED TO IN CLAUSE ( A ) TOGETHER WITH THE AMOUNT OR THE AGGREGATE AMOUNT REFERRED TO IN CLAUSE ( B ), IS [TWENTY] THOUSAND RUPEES OR MORE : PROVIDED THAT THE PROVISIONS OF THIS SECTION SHALL NOT APPL Y TO ANY LOAN OR DEPOSIT TAKEN OR ACCEPTED FROM, OR ANY LOAN OR DEPOSIT TAKEN OR ACCE PTED BY, ( A ) GOVERNMENT ; ( B ) ANY BANKING COMPANY, POST OFFICE SAVINGS BANK OR CO-OPERATIVE BANK ; ( C ) ANY CORPORATION ESTABLISHED BY A CENTRAL, STATE O R PROVINCIAL ACT ; ( D ) ANY GOVERNMENT COMPANY AS DEFINED IN SECTION 617 OF THE COMPANIES ACT, 1956 (1 OF 1956) ; ( E ) SUCH OTHER INSTITUTION, ASSOCIATION OR BODY OR CL ASS OF INSTITUTIONS, ASSOCIATIONS OR BODIES WHICH THE CENTRAL GOVERNMENT MAY, FOR REASON S TO BE RECORDED IN WRITING, NOTIFY IN THIS BEHALF IN THE OFFICIAL GAZE TTE : [ PROVIDED FURTHER THAT THE PROVISIONS OF THIS SECTION SHALL NOT APPL Y TO ANY LOAN OR DEPOSIT WHERE THE PERSON FROM WHOM THE LOAN OR DEPO SIT IS TAKEN OR ACCEPTED AND THE PERSON BY WHOM THE LOAN OR DEPOSIT IS TAKEN OR ACCE PTED ARE BOTH HAVING AGRICULTURAL INCOME AND NEITHER OF THEM HAS ANY INCOME CHARGEABL E TO TAX UNDER THIS ACT.] EXPLANATION. FOR THE PURPOSES OF THIS SECTION, [( I ) BANKING COMPANY MEANS A COMPANY TO WHICH THE BANKING REGULATION ACT, 1949 (10 OF 1949), APPLIES AND INCLUDES ANY BANK OR BANK ING INSTITUTION REFERRED TO IN SECTION 51 OF THAT ACT ;] ( II ) CO-OPERATIVE BANK SHALL HAVE THE MEANING ASSI GNED TO IT IN PART V OF THE BANKING REGULATION ACT, 1949 (10 OF 1949) ; ( III ) LOAN OR DEPOSIT MEANS LOAN OR DEPOSIT OF MONEY .] 11 13. THE ABOVE PROVISION CLEARLY SHOWS THAT W.E.F. 30 TH DAY OF JULY 1984, NO PERSON CAN ACCEPT LOAN OR DEPOSIT FOR A SUM EXCEEDI NG RS. 20,000/- IN CASH. SOME EXCEPTIONS HAVE BEEN PROVIDED BUT OBVIOUSLY THE ASS ESSEE IS NOT COVERED BY THOSE EXCEPTIONS. HOWEVER, IT IS WORTH NOTING THAT CLAUS E (III) OF THE EXPLANATION TO THIS SECTION HAS DEFINED LOAN OR DEPOSIT AS LOAN OR DEPOSITS MEANS LOANS OR DEPOSIT OF MONEY . THIS MEANS PRACTICALLY NO DEFINITION HAS BEEN GIVEN FOR THE EXPRESSION LOAN AND DEPOSIT. 14. SECTION 271-D SIMPLY PROVIDES THAT IF A PERSON TAKES OR ACCEPTS ANY LOAN OR DEPOSIT IN CONTRAVENTION OF PROVISIONS OF SECTION 2 69SS, HE SHALL BE LIABLE TO PAY BY WAY OF PENALTY A SUM EQUIVALENT TO THE AMOUNT OF LOAN OR DEPOSIT SO TAKEN OR ACCEPTED. THEREFORE, ONCE SECTION 269SS IS CONTRAV ENED, THEN THAT WOULD INVITE PENAL CONSEQUENCES. HOWEVER, SECTION 271D IS SUBJE CT TO THE PROVISIONS OF SECTION 273B, WHICH READS AS UNDER:- 273B - PENALTY NOT TO BE IMPOSED IN CERTAIN CASES NOTWITHSTANDING ANYTHING CONTAINED IN THE PROVISIO NS OF [CLAUSE (B) OF SUB- SECTION (1) OF] [SECTION 271 , SECTION 271A , [SECTION 271AA ,] SECTION 271B [, SECTION 271BA ], [SECTION 271BB ,] SECTION 271C , [SECTION 271CA ,] SECTION 271D , SECTION 271E , [SECTION 271F , [SECTION 271FA ,] [SECTION 271FB ,] [SECTION 271G ,]] CLAUSE (C) OR CLAUSE (D) OF SUB-SECTION (1) OR SUB-SECTION (2) OF SECTION 272A , SUB-SECTION (1) OF SECTION 272AA ] OR [SECTION 272B OR] [SUB-SECTION (1) [OR SUB-SECTION (1A)] OF SECTION 272BB OR] [SUB-SECTION (1) OF SECTION 272BBB OR] CLAUSE (B) OF SUB-SECTION (1) OR CLAUSE (B) OR CLAUSE (C) OF SUB-SECTION (2) OF SECTION 273 , NO PENALTY SHALL BE IMPOSABLE ON THE PERSON OR THE ASSESSEE, AS THE CAS E MAY BE, FOR ANY FAILURE REFERRED TO IN THE SAID PROVISIONS IF HE PROVES THAT THERE W AS REASONABLE CAUSE FOR THE SAID FAILURE.] THEREFORE, IF AN ASSESSEE IS ABLE TO SHOW A REASONA BLE CAUSE THEN THE PENALTY U/S 271D MAY NOT BE LEVIABLE. 15. NOW THE FIRST QUESTION ARISES WHETHER THE ASSE SSEE HAS CONTRAVENED THE PROVISIONS OF SECTION 269SS. AS OBSERVED EARLIER, NO DEFINITION HAS BEEN GIVEN 12 CLEARLY FOR THE EXPRESSION LOAN OR DEPOSIT. IN TH E NORMAL BUSINESS WORLD, A LOAN CONNOTES A TRANSACTION IN WHICH BORROWER APPROACHES THE LENDER FOR A CERTAIN SUM FOR A FIXED PERIOD ON THE TERMS AND CONDITIONS WHIC H MAY BE AGREED BETWEEN BORROWER AND LENDER WHICH WOULD INCLUDE THE RATE OF INTEREST, TENURE OF THE LOAN AND OTHER CONDITIONS REGARDING SECURITY ETC. SIMIL ARLY, THE WORD DEPOSIT WOULD CONNOTE A TRANSACTION IN WHICH THE DEPOSITOR GIVES TO ANOTHER PERSON GENERALLY A BANK OR SOME OTHER PERSON A DEPOSIT OF HIS BELONGIN GS WHICH MAY BE MONEY ALSO ON CERTAIN TERMS AND CONDITIONS E.G. IN CASE OF A BANK THE DEPOSITOR WOULD DEPOSIT THE MONEY TO BE REFUNDED AFTER CERTAIN PERIOD ALONG WIT H PRE-DEFINED INTEREST. DEPOSITS CAN ALSO BE MADE BY PERSON FOR ASSURING TH E OTHER OF THE PERFORMANCE OF A CONTRACT E.G. IN CASE OF BAILMENT CONTRACTS. THE H ON'BLE JHARKHAND HIGH COURT IN THE CASE OF BHALOTIA ENGINEERING WORKS PVT LTD (SUP RA) HAS OPINED THAT EVEN SHARE APPLICATION MONEY WOULD AMOUNT TO DEPOSIT. HOWEVER , THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS I.P. INDIA P. LTD (SUPRA) DIFFERED FROM THIS VIEW. THE HON'BLE HIGH COURT IN THIS CASE OBSERVED AT PARA 8 THAT IN CASE OF BAIDYA NATH PLASTIC INDUSTRIES (P) LTD V K.L. ANAND, ITO 230 IT R 572(DELHI), THE LD. SINGLE JUDGE OF THIS COURT POINTED OUT THAT THE DISTINCTIO N BETWEEN A LOAN AND A DEPOSIT IS THAT IN THE CASE OF THE FORMER IT IS ORDINARILY TH E DUTY OF THE DEBTOR TO SEEK OUT THE CREDITOR AND TO REPLAY 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 MADE THE DEMAND F OR IT. THE HIGH COURT FURTHER NOTED THAT THIS OBSERVATION WAS APPROVED LATER BY D IVISION BENCH IN THE CASE OF DIRECTOR OF INCOME TAX (EXEMPTION ) VS ACME EDUCATI ON SOCIETY 326 ITR 146(DELHI). THE HON'BLE HIGH COURT FURTHER OBSERVED THAT IF THESE TESTS WERE APPLIED THEN SHARE APPLICATION MONEY FOR ALLOTMENT OF SHARES IN A COMPANY CANNOT BE TREATED AS A RECEIPT OF LOAN OR DEPOSIT. 13 16. THIS ISSUE ALSO CAME UP FOR CONSIDERATION BEFOR E THE HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS RUGMINI RAM RAGAV SPINN ERS P. LTD. 304 ITR 417 . IN THAT CASE, THE ASSESSEE HAD RECEIVED CASH OVER A P ERIOD OF TIME AS ADVANCE TOWARDS ALLOTMENT OF SHARES FROM 16 PERSONS WITHOUT STIPUL ATING ANY TIME FRAME TOWARDS RETURN / REFUND OF MONEY WITHOUT INTEREST IN CASE O F NON ALLOTMENT OF SHARES EITHER FULLY OR PARTLY. THE COURT OBSERVED THAT MONEY RET AINED BY THE COMPANY WAS NEITHER DEPOSIT NOR LOAN, BUT IT WAS ONLY SHARE CAP ITAL ADVANCE. THEREFORE, PENAL PROVISIONS U/S 271E WAS NOT ATTRACTED. THE RELEVAN T OBSERVATIONS ARE MADE AT PARA 6, WHICH READS AS UNDER:- HEARD COUNSEL. THE ASSESSEE HAD RECEIVED CASH OVER A PERIOD OF TIME, AS ADVANCE TOWARDS ALLOTMENT OF SHARES FROM 1 6 PERSONS WITHOUT STIPULATING ANY TIME FRAME TOWARDS RETURN/REFUND O F MONEY WITHOUT INTEREST, IN CASE OF NON-ALLOTMENT OF SHARES EITHE R FULLY OR PARTLY. IN THIS CASE, THE MONEY RETAINED BY THE COMPANY WAS NE ITHER DEPOSIT NOR LOAN, BUT IT IS ONLY SHARE CAPITAL ADVANCE. PENALT Y UNDER SECTION 271E IS NOT AUTOMATIC AND TO BE LEVIED ONLY IN THE ABSEN CE OF A REASONABLE CAUSE. NO DOUBT A REASONABLE CAUSE HAS TO BE ESTABL ISHED BY THE ASSESSEE. THE RATIONALE BEHIND THE PROVISIONS OF SE CTIONS 269SS AND 269T IS TO PREVENT TAX EVASION, I.E., THE LAUNDERIN G OF CONCEALED INCOME BY PARTIES IN THE GUISE OF CASH LOANS OR DEP OSITS IN OR OUTSIDE THE ACCOUNTS. THE PROVISION OF SECTIONS 269SS AND 2 69T THEREFORE HAVE APPLICATION ONLY IN A LIMITED WAY IN RESPECT O F DEPOSITS OR LOANS. WHEN IT IS NEITHER DEPOSIT NOR LOAN, THE PROVISIONS OF SECTIONS 269SS AND 269T HAVE NO APPLICATION AT ALL. EVEN IF THERE IS REPAYMENT BY CASH IT COULD NOT BE SAID TO ATTRACT THE LEVY OF PE NALTY AUTOMATICALLY, UNDER SECTION 271E OF THE ACT. THE ADVANCES OF SHA RE APPLICATION MONEY OR REPAYMENTS OF SUCH ADVANCES HAVE NOT FLOWE D FROM ANY UNDISCLOSED INCOME OF THE ASSESSEE OR THE CONCERNED PERSONS. IT IS ALSO SEEN FROM THE RECORDS THAT THE ASSESSEE HAD NO T PAID ANY INTEREST AT ALL ON ANY OF THE ADVANCES REPAID AFTER QUITE SO ME TIME. IF THE INTENTION WAS TO RECEIVE THEM AS LOANS OR DEPOSITS, THEN CERTAINLY THE LENDERS WOULD NOT HAVE MADE THE ADVANCES GRATUITOUS LY. IT IS ALSO A FACTUAL FINDING GIVEN BY THE AUTHORITIES BELOW THAT THE ASSESSEE WAS NOT CALLED UPON TO EXPLAIN THE DEFAULT UNDER SECTIO N 269SS ON RECEIPT 14 OF THE ADVANCES IN EARLIER YEARS, WHICH WOULD SHOW THAT THE ASSESSEES CASE WAS NOT GOVERNED BY THE SAID PROVISIONS. PENA LTY UNDER SECTION 271E IS NOT AUTOMATIC, AND A BONA FIDE BELIEF TO T HE EFFECT THAT THE RECEIPT OF ADVANCES AGAINST ALLOTMENT OF SHARES WO ULD NOT BE TERMED AS LOANS OR DEPOSITS, WOULD BE SUFFICIENT TO DROP THE PENALTY LEVIABLE, UNLESS AND UNTIL THE MATERIAL ON RECORD POSITIVELY SHOWS THAT MONEY RECEIVED IS ONLY A DEPOSIT OR LOAN. THERE IS NO DI SPUTE THAT THE IMPUGNED ADVANCES WERE ONLY AGAINST ALLOTMENT OF SH ARES AND NOT BY WAY OF LOANS OR DEPOSITS. THE AUTHORITIES BELOW HAV E GIVEN A FACTUAL FINDING TO THE EFFECT THAT IT IS NOT A DEPOSIT OR LOAN. THEREAFTER, THE COURT DISCUSSED THE PROVISIONS OF S ECTION 271E AND 269T AS WELL AS THE PROVISIONS OF SECTION 273B AND OBSERVED AT PARA 1 AS UNDER:- THE ABOVE SECTION PROVIDES THAT IF THE ASSESSEE PR OVES THAT THERE IS A REASONABLE CAUSE, HE IS NOT SUBJECT TO L EVY OF PENALTY. THE CASE OF THE ASSESSEE IS THAT, THE AMOUNT RECEIVED B Y THE ASSESSEE IS ONLY FOR THE PURPOSE OF ALLOTMENT OF SHARES AND IT IS NOT A DEPOSIT OR LOAN. IN THIS CASE, THE REASONABLE CAUSE IS THAT TH E ASSESSEE WAS UNDER THE BONA FIDE BELIEF THAT THE MONEY RECEIVED IS ONLY FOR THE PURPOSE OF ALLOTMENT OF SHARES. ALSO, THERE IS NO M ATERIAL OR EVIDENCE OR ANY COMPELLING REASON PRODUCED BY THE R EVENUE TO PROVE THAT THE MONEY RECEIVED IS A DEPOSIT OR LOAN. THE FIRST APPELLATE AUTHORITY AS WELL AS THE TRIBUNAL HAVE CO ME TO A CORRECT CONCLUSION AFTER ACCEPTING THE EXPLANATION OFFERED BY THE ASSESSEE. IT IS A QUESTION OF FACT AND THE ORDER OF THE TRIBU NAL IS NOT A PERVERSE ONE. 17. THE ISSUE WAS ALSO DISCUSSED BY HON'BLE MADRAS HIGH COURT IN ANOTHER DECISION IN THE CASE OF CIT V IDHAYAM PUBLICATIONS LTD (SUPRA). IN THAT CASE, THE ASSESSEE COMPANY HAD ACCEPTED A CASH LOAN OF RS. 2, 94,000/- FROM M/S MANIAN CREATION, A SISTER CONCERN. WHEN A SHOW CAUSE NOTI CE WAS ISSUED FOR LEVY OF PENALTY U/S 271-E, THE ASSESSEE SUBMITTED THAT TRAN SACTION BETWEEN THE ASSESSEE AND MR. S.V.S. MANIAN, PROPRIETOR OF MANIAN CREATION WA S A CURRENT ACCOUNT IN NATURE AND WAS NOT A LOAN OR DEPOSIT. THIS EXPLANATION WA S NOT ACCEPTED BY DY. 15 COMMISSIONER AND PENALTY WAS LEVIED. PENALTY WAS U LTIMATELY DELETED BY THE TRIBUNAL. ON APPEAL FILED BY THE REVENUE, THE HON' BLE HIGH COURT ADJUDICATED THE ISSUE VIDE PARA 4 & 5 WHICH ARE AS UNDER- WE HEARD THE ARGUMENTS OF LEARNED COUNSEL FOR THE REVENUE. WE HAVE PERUSED THE MATERIALS AVAILABLE I N RECORD. ADMITTEDLY MR. S. V. S. MANIAN WAS ONE OF THE DIREC TORS. THEREFORE THE ORDER OF THE LOWER AUTHORITY CLEARLY SHOWS THAT THERE WAS A RUNNING CURRENT ACCOUNT IN THE BOOKS OF ACCOUNT OF THE ASSESSEE IN THE NAME OF MR. S. V. S. MANIAN. MR. S. V. S. MANIA N USED TO PAY THE MONEY IN THE CURRENT ACCOUNT AND USED TO WITHDR AW THE MONEY ALSO FROM THE CURRENT ACCOUNT. THE REVENUE SHOULD E STABLISH THAT WHAT WAS RECEIVED BY THE ASSESSEE IS A LOAN OR DEPO SIT WITHIN THE MEANING OF SECTION 269SS. THE DEPOSIT AND THE WITH DRAWAL OF THE MONEY FROM THE CURRENT ACCOUNT COULD NOT BE CONSIDE RED AS A LOAN OR ADVANCE. FURTHER IT WAS ALSO FOUND THAT THE ASS ESSEE FILED A LETTER DATED SEPTEMBER 29, 1997, AND IN THAT LETTE R HE EXPLAINED THAT THE AMOUNT RECEIVED FROM MR. S. V. S. MANIAN H AD BEEN SHOWN AS UNSECURED LOAN FROM DIRECTORS IN THE BAL ANCE-SHEET. AS PER THE COMPANIES ACT, UNDER THE COMPANIES (ACCEPTA NCE OF DEPOSITS) RULES, 1975, UNDER RULE 2(B)(IX), DEPOSIT DOES NOT INCLUDE ANY AMOUNT RECEIVED FROM A DIRECTOR OR A S HAREHOLDER OF A PRIVATE LIMITED COMPANY. THEREFORE THE TRANSACTION BETWEEN THE APPELLANT AND THE DIRECTOR CUM SHAREHOLDER IS NOT A LOAN OR DEPOSIT AND IT IS ONLY A CURRENT ACCOUNT IN NATURE AND NO I NTEREST IS BEING CHARGED FOR THE ABOVE TRANSACTION. IN THE FOREGOING CONCLUSIONS, WE ARE OF THE VIEW TH AT SINCE THE SAID TRANSACTION DOES NOT FALL WITHIN THE MEAN ING OF LOAN OR ADVANCE, THERE IS NO VIOLATION OF SECTION 269SS OF THE INCOME-TAX ACT. WE FIND NO ERROR IN THE ORDER OF THE TRIBUNAL AND THE SAME REQUIRES NO INTERFERENCE. HENCE, NO SUBSTANTIAL QUE STION OF LAW ARISES FOR CONSIDERATION OF THIS COURT. ACCORDINGLY , WE DISMISS THE ABOVE TAX CASE. 16 FROM THE ABOVE, IT BECOMES CLEAR THAT EVEN WHEN THE MONEY HAS BEEN RECEIVED IN A CURRENT ACCOUNT, IT CANNOT BE COVERED UNDER THE DEFINITION OF LOAN OR DEPOSIT AND CONSEQUENTLY THE PENAL PROVISIONS U/S 2 71-D WOULD NOT BE ATTRACTED. 18. THERE IS ANOTHER ASPECT OF THE CASE I.E. WHETHE R THE PENALTY IS MANDATORY OR IF REASONABLE CAUSE IS GIVEN, THEN SUCH PENALTY IS NOT LEVIABLE. THIS SITUATION HAS BEEN DISCUSSED BY HON'BLE PUNJAB & HARYANA HIGH CO URT IN THE CASE OF CIT V SUNIL KUMAR GOEL (SUPRA). IN THAT CASE, THE ASSESS EE HAD ACCEPTED CASH LOANS ON VARIOUS DATES EXCEEDING RS. 20,000/- AND, THEREFORE , THE PENALTY U/S 271-E WAS LEVIED. WHEN THE ISSUE TRAVELED TO THE HON'BLE HIG H COURT, IT WAS STATED AS UNDER:- HELD, THAT THERE WAS NO DISPUTE ABOUT THE FACT THA T THE CASH TRANSACTIONS OF THE ASSESSEE WERE WITH THE SISTER C ONCERN AND THESE TRANSACTIONS WERE WITHIN THE FAMILY AND DUE TO BUSI NESS EXIGENCY. A FAMILY TRANSACTION, BETWEEN TWO INDEPENDENT ASSES SEES, BASED ON AN ACT OF CASUALNESS, SPECIALLY IN A CASE WHERE THE DISCLOSURE THEREOF WAS CONTAINED IN THE COMPILATION OF ACCOUNT S, AND WHICH HAD NO TAX EFFECT, ESTABLISHED 'REASONABLE CAUSE' U NDER SECTION 273B OF THE ACT. SINCE THE ASSESSEE HAD SATISFACTOR ILY ESTABLISHED 'REASONABLE CAUSE' UNDER SECTION 273B OF THE ACT, H E MUST BE DEEMED TO HAVE ESTABLISHED SUFFICIENT CAUSE FOR NOT INVOKING THE PENAL PROVISIONS OF SECTIONS 271D AND 271E OF THE A CT AGAINST HIM. THE DELETION OF PENALTY BY THE TRIBUNAL WAS VALID. WHILE HOLDING THE ABOVE POSITION, THE HON'BLE PUNJ AB & HARYANA HIGH COURT HAD IN TURN RELIED ON ANOTHER DECISION OF THE SAME COURT IN THE CASE OF SAINI MEDICAL STORE (SUPRA) 277 ITR 420 AND THE FOLLOWING OBSERVATIONS HAS ALSO BEEN EXTRACTED AT PARA 16. AS POINTED OUT EARLIER, THERE IS NO DOUBT ABOUT TH E GENUINENESS OF THE TRANSACTIONS WHICH HAVE BEEN FULLY ACCEPTED IN THE ASSESSMENT MADE FOR THE YEAR UNDER CONSIDERATION. EVEN IF, THE RE IS ANY IGNORANCE, WHICH RESULTED IN THE INFRACTION OF LAW, THE DEFAULT IS TECHNICAL AND VENIAL WHICH DID NOT PREJUDICE THE IN TERESTS OF THE 17 REVENUE AS NO TAX AVOIDANCE OR TAX EVASION WAS INVO LVED. TO MY MIND, BONA FIDE BELIEF COUPLED WITH THE GENUINENESS OF THE TRANSACTIONS WOULD CONSTITUTE REASONABLE CAUSE UNDE R SECTION 273B FOR NOT INVOKING THE PROVISIONS OF SECTION 271E OF THE ACT. THE IMPUGNED ORDER OF PENALTY IS CANCELLED. THE FINDINGS OF THE COMMISSIONER OF INCOME-TAX (APP EALS) HAVE BEEN CONFIRMED IN APPEAL BY THE TRIBUNAL. THEREFORE, THE FINDINGS RECORDED BY THE COMMISSIONE R OF INCOME-TAX (APPEALS) AND THE TRIBUNAL THAT THE ASSESSEE HAD SH OWN REASONABLE CAUSE FOR THE FAILURE TO COMPLY WITH THE PROVISIONS OF SECTION 269T OF THE ACT IS A FINDING OF FACT BASED ON APPRECIATI ON OF MATERIAL ON RECORD. IT DOES NOT GIVE RISE TO ANY QUESTION OF LA W, MUCH LESS SUBSTANTIAL QUESTION OF LAW. ACCORDINGLY, THE APPEA L IS DISMISSED. THE INCOME-TAX APPELLATE TRIBUNAL WAS RIGHT IN RECO RDING ITS CONCLUSION THAT A 'REASONABLE CAUSE HAD BEEN SHOWN BY THE RESPONDENT-ASSESSEE. THE INCOME-TAX APPELLATE TRIB UNAL RELIED ON THE FACT THAT THE RESPONDENT - ASSESSEE HAD PRODUCE D HIS CASH BOOKS, DEPICTING LOANS TAKEN BY HIM UNILATERALLY BEFORE TH E REVENUE. ANOTHER FACT TAKEN INTO CONSIDERATION WAS THAT NO P REJUDICE WAS CAUSED TO THE REVENUE IN THE INSTANT ACTION OF THE RESPONDENT- ASSESSEE INASMUCH AS THE RESPONDENT-ASSESSEE DID NO T ATTEMPT BY THE IMPUGNED ACT TO AVOID ANY TAX LIABILITY. FURTHERMOR E, THERE IS NO DISPUTE ABOUT THE FACT THAT THE INSTANT CASH TRANSA CTIONS OF THE RESPONDENT-ASSESSEE WERE WITH THE SISTER CONCERN AN D THAT THESE TRANSACTIONS WERE BETWEEN THE FAMILY AND DUE TO BUS INESS EXIGENCY. A FAMILY TRANSACTION, BETWEEN TWO INDEPENDENT ASSES SEES, BASED ON AN ACT OF CASUALNESS, SPECIALLY IN A CASE WHERE TH E DISCLOSURE THEREOF IS CONTAINED IN THE COMPILATION OF ACCOUNTS AND WHICH HAS NO TAX EFFECT, IN OUR VIEW ESTABLISHES ' REASONABL E CAUSE' UNDER SECTION 273B OF THE ACT. SINCE THE RESPONDENT-ASSES SEE HAD SATISFACTORILY ESTABLISHED 'REASONABLE CAUSE' UNDER SECTION273B OF THE ACT HE MUST BE DEEMED TO HAVE EST ABLISHED SUFFICIENT CAUSE FOR NOT INVOKING THE PENAL PROVISIONS (SEC TIONS 271D AND 271E OF THE ACT) AGAINST HIM. 18 19. IN CASE OF CIT V MAHESHWARI NIRMAN UDYOG (SUPRA ), THE HON'BLE RAJASTHAN HIGH COURT ALSO DELETED THE PENALTY WHERE THE CASH LOANS WAS ACCEPTED FROM A DIRECTOR FOR MAKING URGENT PAYMENT TO THE LABOURERS BECAUSE THE SAME WAS HELD TO BE A REASONABLE CAUSE. SIMILARLY, THE HON'BLE PUNJA B & HARYANA HIGH COURT IN THE CASE OF CIT V SAINI MEDICAL STORES (SUPRA) WHERE T HE ASSESSEE HAD ACCEPTED THE CASH LOAN OF RS. 50,000/- AND THE PENALTY HAS BEEN IMPOSED U/S 271D BY THE DY. COMMISSIONER THE PENALTY WAS DELETED BY THE CIT(A) WHEN THE MATTER TRAVELED TO THE HIGH COURT, IT WAS HELD AS UNDER:- HELD, THAT IN THE PRESENT CASE THE COMMISSIONER (A PPEALS) IN HIS ORDER DATED JANUARY 18, 1999, WHEREBY THE PENALTY U NDER SECTION 271D OF THE ACT WAS DELETED, HAD ACCEPTED THE VERSI ON GIVEN BY THE ASSESSEE THAT VIOLATION OF THE PROVISIONS OF THE AC T WAS UNDER A BONA FIDE BELIEF OF THE ASSESSEE AND THE SAME WAS N OT WITH ANY INTENTION TO AVOID OR EVADE THE TAX. THE FINDINGS O F THE COMMISSIONER (APPEALS) HAD BEEN CONFIRMED IN APPEAL BY THE TRIBUNAL. THE CANCELLATION OF PENALTY WAS VALID. 20. NOW LET US EXAMINE THE FACTS OF THE PRESENT CAS E IN THE LIGHT OF THE ABOVE DISCUSSION ON THE LEGAL POSITION. IN THE PRESENT C ASE, THE ASSESSEE HAS RECEIVED SOME CASH PAYMENTS WHICH HAVE BEEN INITIALLY CREDIT ED TO THE CURRENT ACCOUNT OF VARIOUS DIRECTORS AND LATER ON TRANSFERRED TO THE S HARE APPLICATION MONEY ACCOUNT. THE RELEVANT COPIES OF ACCOUNT READS AS UNDER:- EQBAL INN & HOTELS LIMITED SST NAGAR, RAJPURA ROAD, PATIALA SHARE APPLICATION MONEY A/C LEDGER ACCOUNT 1-APR-2001 TO 31-MAR-2002 DATE PARTICULARS VCH TYPE VCH NO. DEBIT CREDIT 31-03-2002 DR. (AS PER DETAILS) KAMALPREET SINGH SETHIS A/C 48,71,572.00 DR SARAN KAURS A/C 47,560.00 DR. JOURNAL 49,19,132.00 CR. CLOSING BALANCE 49,19,132.00 49,19,132.00 49,19,132.00 49,19,132.00 19 1-APR-2002 TO 31-MAR-2003 DATE PARTICULARS VCH TYPE VCH NO. DEBIT CREDIT 1-4-2002 DR. OPENING BALANCE 49,19,132.00 31-3-2003 DR. KAMAL PREET SINGH SETHIS A/C JOURNAL 76,07,169.00 CR. PAID UP SHARE CAPITAL A/C TRFD. JOURNAL 4,93,000.00 4,93,000.00 1,25,26,301.00 CR. CLOSING BALANCE 1,20,33,301.00 1,25,26,301.00 1,25,26,301.00 1-APR-2003 TO 31-MAR-2004 DATE PARTICULARS VCH TYPE VCH NO. DEBIT CREDIT 1-4-2003 DR. OPENING BALANCE 1,20,33,301.00 31-3-2004 DR. KAMAL PREET SINGH SETHIS A/C TRFD. JOURNAL 42,86,343.00 1,63,19,644.00 CR. CLOSING BALANCE 1,63,19,644.00 1,63,19,644.00 1,63,19,644.00 1-APR-2004 TO 31-MAR-2005 DATE PARTICULARS VCH TYPE VCH NO. DEBIT CREDIT 1-4-2004 DR. OPENING BALANCE 1,63,19,644.00 31-3-2005 DR. KAMALPREET SINGH SETHIS A/C JOURNAL 22,00,000.00 DR. KAMALPREET SG. SETHI JOURNAL 14,62,930.00 CR. PAID-UP SHARE CAPITAL JOURNAL 1,64,20,000.00 DR. PRITAM KAUR A/C JOURNAL 85,49,200.00 1,64,20,000.00 2,85,31,774.00 1,21,11,774.00 CR. CLOSING BALANCE 2,85,31,774.00 2,85,31,774.00 1-APR-2005 TO 31-MAR-2006 DATE PARTICULARS VCH TYPE VCH NO. DEBIT CREDIT 1-4-2005 DR. OPENING BALANCE 1,21,11,774.00 31-3-2006 DR. KAMAL PREET SINGH SETHI JOURNAL 29,33,000.00 SHARE APP. MONEY OF KPS 1,50,44,774.00 CR. CLOSING BALANCE 1,50,44,774.00 1,50,44,774.00 1,50,44,774.00 1-APR-2006 TO 31-MAR-2007 DATE PARTICULARS VCH TYPE VCH NO. DEBIT CREDIT 1-4-2006 DR. OPENING BALANCE 1,50,44,774.00 31-3-2007 DR. KAMALPREET SINGH JOURNAL 62,50,000.00 RECD. FROM KAMALPREET SINGH- DIRECTOR DR. BALWINDER SINGH JOURNAL 4,00,000.00 RECD. FROM BALWINDER SINGH- DIRECTOR 2,16,94,774.00 CR. CLOSING BALANCE 2,16,94,774.00 2,16,94,774.00 2,16,94,774.00 1-APR-2007 TO 31-MAR-2008 DATE PARTICULARS VCH TYPE VCH NO. DEBIT CREDIT 1-4-2007 DR. OPENING BALANCE 2,16,94,774.00 31-3-2008 DR. BALWINDER SINGH JOURNAL 14,50,000.00 RECD. FROM BALWINDER SINGH- DIRECTOR DR. KAMALPREET SINGH JOURNAL 23,00,000.00 20 RECD. FROM KAMALPREET SINGH- DIRECTOR 2,54,44,774.00 CR. CLOSING BALANCE 2,54,44,774.00 2,54,44,774.00 2,54,44,774.00 1-APR-2008 TO 31-MAR-2009 DATE PARTICULARS VCH TYPE VCH NO. DEBIT CREDIT 1-4-2008 DR. OPENING BALANCE 2,54,44,774.00 20-4-2008 DR. CASH RECEIPT 5,00,000.00 CASH RECEIVED FROM SARAN ENTERPRISES FOR EQBAL INN & HOTELS LTD. 28-4-2008 DR. CASH RECEIPT 5,00,000.00 CASH RECD. FROM SARAN ENTERPRISES FOR EQBAL INN & HOTELS LTD 14-5-2008 DR. CASH RECEIPT 4,00,000.00 CASH RECEIVED FROM SARAN ENTERPRISES FOR EQBAL INN & HOTELS LTD. 21-5-2008 DR. CASH RECEIPT 3,31,250.00 CASH RECEIVED FROM SARAN ENTERPRISES PTA FOR ELECT RICITY SECURITY 16-6-2008 DR. CASH RECEIPT 6,00,000.00 RECEIVED FROM SARAN ENTERPRISES FOR HOTELS LTD. 24-7-2008 DR. CASH RECEIPT 5,00,000.00 RECEIVED FROM SARAN ENTERPRISES FOR EQBAL INN & HO TELS LTD. 11-8-2008 DR. CASH RECEIPT 2,00,000.00 CASH RECEIVED FROM SARAN ENTERPRISES FOR EQBAL INN & HOTELS LTD. 1-9-2008 DR. CASH RECEIPT 5,00,000.00 CASH RECEIVED FROM SARAN ENTERPRISES FOR EQBAL IN N & HOTELS LTD. 22-9-2008 DR. CASH RECEIPT 5,00,000.00 CASH RECEIVED FROM SARAN ENTERPRISES FOR EQBAL INN & HOTELS LTD. 3-10-2008 DR. CASH RECEIPT 5,00,000.00 CASH RECEIVED FROM SARAN ENTERPRISES FOR EQBAL INN & HOTELS LTD. 21-1-2009 DR. CASH RECEIPT 5,00,000.00 CASH RECEIVED FROM SARAN ENTERPRISES FOR EQBAL INN & HOTELS LTD. 9-3-2009 DR. CASH RECEIPT 1,00,000.00 CASH RECEIVED FROM SARAN ENTERPRISES FOR EQBAL INN & HOTELS LTD. 31-3-2009 DR. BALWINDER SINGH JOURNAL 49,00,000.00 CASH RECEIVED FROM BALWINDER SINGH DIRECTOR 3,54,76,024.00 CR. CLOSING BALANCE 3,54,76,024.00 3,54,76,024.00 3,54,76,024.00 1-APR-2009 TO 31-MAR-2010 DATE PARTICULARS VCH TYPE VCH NO. DEBIT CREDIT 1-4-2009 DR. OPENING BALANCE 3,54,76,024.00 31-3-2010 CR. KAMALPREET SINGH JOURNAL 733 1,49,47,716.00 1,49,47,716.00 3,54,76,024.00 CR. CLOSING BALANCE 2,05,28,308.00 3,54,76,024.00 3,54,76,024.00 21 KAMALPREET SINGH SETHIS A/C LEDGER ACCOUNT 1-APR-2001 TO 31-MAR-2002 DATE PARTICULARS VCH TYPE VCH NO. DEBIT CREDIT 21-11-2001 DR. IMPROVEMENT TRUST, PATIALA PAY ORDERBY GIVEN TO IMP. TRUST FROM SAVING A/C NO. 39934 BY CH. NO. 149101 OF S. KAMALPREET SINGH SETHI AS DOWN PAYMENT JOURNAL 20,00,000.00 22-11-2001 DR. IMPROVEMENT TRUST, PATIALA CHE. NO. 149104 GIVEN TO IMP. TRUST FROM SAVING A/C NO. 39934 OF S. KAMALPREET SINGH SETHI UPTO PAYMENT JOURNAL 28,71,572.00 31-3-2002 CR SHARE APPLICATION MONEY A/C AMOUNT PAID BY NEW DIRECTORS TRFD. TO SHARE APP. MONEY. JOURNAL 48,71,572.00 48,71,572.00 48,71,572.00 1-APR-2002 TO 31-MAR-2003 DATE PARTICULARS VCH TYPE VCH NO. DEBIT CREDIT 23-5-2002 DR. IMPROVEMENT TRUST, PTA. - LAND PAYMENT TO I.T. PTA THROUGH CH. NO. 149107 OF SAVING A/C NO. 39934 OF KPS SETHI FOR II INSTALMENT JOURNAL 29,18,520.00 29-10-2002 DR. IMPROVEMENT TRUST, PTA.- INTT. PAYMENT OF INTT. PAID TO I.T. PTA. BY CH. NO. 484264 FROM SAVING A/C NO. 9659 IN PNB LEELA BHAWAN, PTA. OF KAMALPREET SINGH SETHI. DR. COST OF SITE PLAN A/C PAYMENT OF SITE PLAN PAID TO I.T. PTA BY CH. NO. 484265 FROM SAVING A/C NO. 9659 IN PNB, LEELA BHAWAN, PTA OF KAMLPREET SINGH SETHI JOURNAL JOURNAL 9,38,887.00 3,38,242.00 23-11-2002 DR. IMPROVEMENT TRUST, PTA. - LAND PAYMENT TO I.T. PTA. THROUGH CH. NO. 149111 OF SAVING A/C NO. 39934 OF KPS SETHI FOR III INSTALMENT JOURNAL 29,18,520.00 1-3-2003 DR. REGISTRATION FEE FOR AUTH. CAP JOURNAL 77,500.00 DR. CASH RECEIPT 4,15,440.00 CR. SHARE APPLICATION K.P. SINGH JOURNAL 76,07,169.00 DR. BANK CHARGES JOURNAL 60.00 76,07,169.00 76,07,169.00 1-APR-2003 TO 31-MAR-2004 DATE PARTICULARS VCH TYPE VCH NO. DEBIT CREDIT 23-5-2003 DR. IMPROVEMENT TRUST, PTA. - LAND PAYMENT TO I.T. PTA. FOR PART PAYMENT OF IVTH INSTALLMENT BY CH. NO. 149114 OF SAVING A/C OF KPS SETHI (DIR.) JOURNAL 20,00,000.00 26-5-2003 DR. IMPROVEMENT TRUST, PTA-LAND PAYMENT TO I.T. PTA. FOR FULL PAYMENT OF IVTH INSTALLMENT BY CH. NO. 149116 OF SAVING A/C OF KPS SETHI(DIR) JOURNAL 9,18,520.00 3-10-2003 DR. IMPROVEMENT TRUST, PTA. - LAND PAYMENT TO I.T. PTA. FOR FULL PAYMENT OF ----- INSTALLMENT BY CH. NO. 866062 OF SAVING A/C OF KPS SETHI (DIR) JOURNAL 13,67,823.00 31-3-2004 CR. SHARE APPLICATION MONEY A/C TRFD. JOURNAL 42,86,343.00 42,86,343.00 42,86,343.00 22 1-APR-2004 TO 31-MAR-2005 DATE PARTICULARS VCH TYPE VCH NO. DEBIT CREDIT 14-5-2004 DR. SBOP, THE MALL, PTA A/C NO. 37512 CH. NO. 866104 RECD. FROM MR. KAMALPREET SINGH SETHI(DIR.) FROM HIS SAVING A/C NO. 39934 OF OBC, THE MALL, PTA JOURNAL 7,00,000.00 20-5-2004 DR. SBOP, THE MALL, PTA A/C NO. 37512 CH. NO. 866066 RECD. FROM MR. KAMALPREET SINGH SETHI (DIR.) FROM HIS SAVING A/C NO. 39934 OF OBC, THE MALL, PTA. JOURNAL 5,62,930.00 27-11-2004 DR. ARCHITECTS COMBINE, NEW DELHI D.D NO. 150438 OF PUNJAB & SIND BANK ISSUED FROM SARAN ENT. AS ADVANCE JOURNAL 2,00,000.00 31-3-2005 CR. SHARE APPLICATION MONEY A/C JOURNAL 14,62,930.00 14,62,930.00 14,62,930.00 1-APR-2004 TO 31-MAR-2005 DATE PARTICULARS VCH TYPE VCH NO. DEBIT CREDIT 1-10-2004 DR CASH CASH RECEIVED FROM SARAN ENTERPRISES RECEIPT 3,00,000.00 1-11-2004 DR. CASH CASH RECEIVED FROM SARAN ENTERPRISES RECEIPT 4,00,000.00 5-12-2004 DR. CASH CASH RECEIVED FROM SARAN ENTERPRISES RECEIPT 5,00,000.00 2-2005 DR. CASH CASH RECD. FROM KAMALPREET SINGH SETHI- DIRECTOR ENTRY FROM SARAN ENT., PTA RECEIPT 5,00,000.00 3-2005 DR. CASH CASH RECD. FROM KAMALPREET SINGH SETHI- DIRECTOR ENTRY FROM SARAN ENT. PTA RECEIPT 5,00,000.00 31-3-2005 CR. SHARE APPLICATION MONEY- K.P. SINGH TRFD. JOURNAL 22,00,000.00 22,00,000.00 22,00,000.00 1-APR-2005 TO 31-MAR-2006 DATE PARTICULARS VCH TYPE VCH NO. DEBIT CREDIT 6-5-2005 DR CASH CASH RECEIVED FROM SARAN ENTERPRISES RECEIPT 1,00,000.00 13-5-2005 DR. CASH CASH RECEIVED FROM M/S SARAN ENTERPRISES, PATIALA RECEIPT 1,00,000.00 24-5-2005 DR. CASH CASH RECEIVED FROM SARAN ENTERPRISES RECEIPT 1,00,000.00 2-6-2005 DR. CASH CASH RECEIVED FROM SARAN ENTERPRISES RECEIPT 2,00,000.00 9-6-2005 DR. CASH CASH RECEIVED FROM SARAN ENTERPRISES RECEIPT 1,00,000.00 4-7-2005 DR. CASH CASH RECEIVED FROM SARAN ENTERPRISES RECEIPT 1,00,000.00 1-8-2005 DR. CASH CASH RECEIVED FROM SARAN ENTERPRISES RECEIPT 2,00,000.00 2-8-2005 DR. CASH CASH RECEIVED FROM SARAN ENTERPRISES RECEIPT 1,33,000.00 24-8-2005 DR. CASH CASH RECEIVED FROM SARAN ENTERPRISES RECEIPT 2,00,000.00 1-9-2005 DR. CASH CASH RECEIVED FROM SARAN ENTERPRISES RECEIPT 2,00,000.00 23 19-9-2005 DR. CASH CASH RECEIVED FROM SARAN ENTERPRISES RECEIPT 4,00,000.00 12-2005 DR. CASH CASH RECEIVED FROM SARAN ENTERPRISES PTA RECEIPT 3,00,000.00 4-1-2006 DR. CASH CASH RECEIVED FROM SARAN ENTERPRISES PTA RECEIPT 5,00,000.00 13-2-2006 DR. CASH CASH RECEIVED FROM SARAN ENTERPRISES FOR EQBAL INN & HOTELS RECEIPT 3,00,000.00 31-3-2006 CR. SHARE APPLICATION MONEY A/C SHARE APP. MONEY OF KPS JOURNAL 29,33,000.00 29,33,000.00 29,33,000.00 1-APR-2006 TO 31-MAR-2007 DATE PARTICULARS VCH TYPE VCH NO. DEBIT CREDIT 3-6-2006 DR. CASH CASH RECEIVED FROM SARAN ENTERPRISES FOR EQBAL INN & HOTELS LTD. RECEIPT 1,00,000.00 4-6-2006 DR. CASH CASH RECEIVED FROM SARAN ENTERPRISES PTA FOR EQBAL INN & HOTELS LTD. RECEIPT 1,50,000.00 5-6-2006 DR. CASH CASH RECEIVED FROM SARAN ENTERPRISES PTA FOR EQBAL INN & HOTELS LTD. RECEIPT 4,00,000.00 8-6-2006 DR. CASH CASH RECEIVED FROM SARAN ENTERPRISES PTA FOR EQBAL INN & HOTELS LTD. RECEIPT 3,00,000.00 22-6-2006 DR. CASH CASH RECEIVED FROM SARAN ENTERPRISES PTA FOR EQBAL INN & HOTELS LTD. RECEIPT 3,00,000.00 4-7-2006 DR. CASH CASH RECEIVED FROM SARAN ENTERPRISES PTA FOR EQBAL INN & HOTELS LTD. RECEIPT 3,00,000.00 15-7-2006 DR. CASH CASH RECEIVED FROM SARAN ENTERPRISES RECEIPT 1,00,000.00 17-7-2006 DR. CASH CASH RECEIVED FROM SARAN ENTERPRISES PTA FOR EQBAL INN & HOTELS LTD. RECEIPT 3,00,000.00 28-7-2006 DR. CASH CASH RECEIVED FROM SARAN ENTERPRISES PTA FOR EQBAL INN & HOTELS LTD. RECEIPT 3,00,000.00 30-7-2006 DR. CASH CASH RECEIVED FROM SARAN ENTERPRISES PTA FOR EQBAL INN & HOTELS LTD. RECEIPT 3,00,000.00 3-8-2006 DR. CASH CASH RECEIVED FROM SARAN ENTERPRISES PTA FOR EQBAL INN & HOTELS LTD. RECEIPT 3,00,000.00 9-8-2006 DR. CASH CASH RECEIVED FROM SARAN ENTERPRISES PTA FOR EQBAL INN & HOTELS LTD. RECEIPT 3,00,000.00 25-8-2006 DR. CASH CASH RECEIVED FROM SARAN ENTERPRISES PTA FOR EQBAL INN & HOTELS LTD. RECEIPT 2,00,000.00 CARRIED OVER 3350000 KAMALPREET SINGH CURRENT A/C LEDGER ACCOUNT 1-APR-2006 TO 31-MAR-2007 BROUGHT FORWARD 3350000.00 5-9-2006 DR. CASH RECEIPT 1,00,000.00 24 CASH RECEIVED FROM SARAN ENTERPRISES 5-10-2006 DR. CASH CASH RECEIVED FROM SARAN ENTERPRISES RECEIPT 2,00,000.00 18-10-2006 DR. CASH CASH RECEIVED FROM SARAN ENTERPRISES RECEIPT 5,00,000.00 19-10-2006 DR. CASH CASH RECEIVED FROM SARAN ENTERPRISES RECEIPT 1,00,000.00 9-11-2006 DR. CASH CASH RECEIVED FROM SARAN ENTERPRISES RECEIPT 3,00,000.00 23-11-2006 DR. CASH CASH RECEIVED FROM SARAN ENTERPRISES RECEIPT 2,00,000.00 29-12-2006 DR. CASH CASH RECEIVED FROM SARAN ENTERPRISES RECEIPT 3,00,000.00 5-2-2007 DR. CASH CASH RECEIVED FROM SARAN ENTERPRISES RECEIPT 3,00,000.00 27-7-2007 DR. CASH CASH RECEIVED FROM SARAN ENTERPRISES PTA FOR EQBAL INN & HOTELS LTD RECEIPT 2,00,000.00 6-3-2007 DR. CASH CASH RECEIVED FROM SARAN ENTERPRISES PTA FOR EQBAL INN & HOTELS LTD RECEIPT 2,00,000.00 12-3-2007 DR. CASH CASH RECEIVED FROM SARAN ENTERPRISES PTA FOR EQBAL INN & HOTELS LTD RECEIPT 3,00,000.00 21-3-2007 DR. CASH CASH RECEIVED FROM SARAN ENTERPRISES PTA FOR EQBAL INN & HOTELS LTD RECEIPT 2,00,000.00 31-3-2007 CR. SHARE APPLICATION MONEY A/C JOURNAL 62,50,000.00 62,50,000.00 62,50,000.00 1-APR-2007 TO 31-MAR-2008 DATE PARTICULARS VCH TYPE VCH NO. DEBIT CREDIT 2-4-2007 DR. CASH CASH RECEIVED FROM SARAN ENTERPRISES FOR EQBAL INN & HOTELS LTD. RECEIPT 2,00,000.00 16-4-2007 DR. CASH CASH RECEIVED FROM SARAN ENTERPRISES FOR EQBAL INN & HOTELS LTD. RECEIPT 2,00,000.00 5-5-2007 DR. CASH CASH RECEIVED FROM SARAN ENTERPRISES FOR EQBAL INN & HOTELS LTD. RECEIPT 2,00,000.00 7-5-2007 DR. CASH CASH RECEIVED FROM SARAN ENTERPRISES FOR EQBAL INN & HOTELS LTD. RECEIPT 3,00,000.00 3-6-2007 DR. CASH CASH RECEIVED FROM SARAN ENTERPRISES FOR EQBAL INN & HOTELS LTD. RECEIPT 2,00,000.00 16-7-2007 DR. CASH CASH RECEIVED FROM SARAN ENTERPRISES FOR EQBAL INN & HOTELS LTD. RECEIPT 4,00,000.00 9-9-2007 DR. CASH CASH FROM SARAN ENTERPRISES FOR HOTEL EQBAL INN & HOTELS RECEIPT 3,00,000.00 28-9-2007 DR. CASH CASH FROM SARAN ENTERPRISES FOR HOTEL EQBAL INN & HOTELS RECEIPT 3,00,000.00 11-10-2007 DR. CASH CASH FROM SARAN ENTERPRISES FOR HOTEL EQBAL INN & HOTELS RECEIPT 2,00,000.00 31-3-2008 CR. SHARE APPLICATION MONEY A/C RECEIVED FROM KAMALPREET SINGH DIRECTOR JOURNAL 23,00,000.00 23,00,000.00 23,00,000.00 25 SARAN KAURS A/C LEDGER ACCOUNT 1-APR-2004 TO 31-MAR-2005 DATE PARTICULARS VCH TYPE VCH NO. DEBIT CREDIT 21-11-2001 DR CASH RECEIPT 47,560.00 31-3-2002 CR. SHARE APPLICATION MONEY A/C AMOUNT PAID BY NEW DIRECTORS TRFD. TO SHARE APP. MO NEY JOURNAL 47,560.00 47,560.00 47,560.00 PRITAM KAUR A/C LEDGER ACCOUNT 1-APR-2004 TO 31-MAR-2005 DATE PARTICULARS VCH TYPE VCH NO. DEBIT CREDIT 1-4-2004 DR OPENING BALANCE 44,800.00 13-5-2004 DR. CASH CASH RECD. (WITHDRAWALS FROM SAVING A/C) SB A/C 430 61 OF OBC. PTA RECEIPT 9,00,000.00 14-5-2004 DR. CASH CASH RECD. (WITHDRAWALS FROM SAVING A/C) SB A/C 430 61 OF OBC. PTA RECEIPT 9,00,000.00 15-5-2004 DR. CASH CASH RECD. (WITHDRAWALS FROM SAVING A/C) SB A/C 430 61 OF OBC. PTA RECEIPT 5,00,000.00 17-5-2004 DR. CASH CASH RECD. (WITHDRAWALS FROM SAVING A/C) SB A/C 430 61 OF OBC. PTA 2,50,000.00 1-6-2004 DR CASH CASH RECD. (FROM JAIMALSON ENT. PTA) 10,00,000.00 15-6-2004 DR CASH CASH RECD. (FROM JAIMALSON ENT. PTA) DR CASH CASH RECD. (FROM JAIMALSON ENT. PTA) 2,15,000.00 3,85,000.00 17-6-2004 DR CASH CASH RECD. (FROM JAIMALSON ENT. PTA) 1,56,000.00 1-7-2004 DR CASH CASH RECD. (FROM JAIMALSON ENT. PTA) DR CASH CASH RECD. (FROM JAIMALSON ENT. PTA) DR CASH CASH RECD. (FROM JAIMALSON ENT. PTA) 7,00,000.00 1,47,000.00 10,00,000.00 13-7-2004 DR CASH CASH RECD. (FROM JAIMALSON ENT. PTA) 1,45,000.00 29-7-2004 DR CASH CASH RECD. (FROM JAIMALSON ENT. PTA) 2,07,000.00 1-8-2004 DR CASH CASH RECD. (FROM JAIMALSON ENT. PTA) 9,00,000.00 17-8-2004 DR CASH CASH RECD. (FROM JAIMALSON ENT. PTA) 29,400.00 27-8-2004 DR CASH CASH RECD. (FROM JAIMALSON ENT. PTA) 1,50,000.00 9-9-2004 DR CASH CASH RECD. (FROM JAIMALSON ENT. PTA) 62,000.00 8-10-2004 DR CASH CASH RECD. (FROM JAIMALSON ENT. PTA) 58,000.00 3-1-2005 DR. CASH CASH RECD. 8,00,000.00 31-3-2005 CR. SHARE APPLICATION MONEY- PRITAM KAUR JOURNAL 85,49,200.00 26 85,49,200.00 85,49,200.00 BALWINDER SINGH LEDGER ACCOUNT 1-APR-2006 TO 31-MAR-2007 DATE PARTICULARS VCH TYPE VCH NO. DEBIT CREDIT 9-10-2006 DR. CASH CASH RECEIVED FROM M.P. TRADERS FOR EQBAL INN & HOT ELS RECEIPT 4,00,000.00 31-3-2007 CR. SHARE APPLICATION MONEY A/C RECD. FROM BALWINDER SINGH DIRECTOR JOURNAL 4,00,000.00 4,00,000.00 4,00,000.00 1-APR-2007 TO 31-MAR-2008 DATE PARTICULARS VCH TYPE VCH NO. DEBIT CREDIT 1-8-2007 DR CASH CASH RECEIVED FROM M.P TRADERS FOR EQBAL INN & HOTE LS RECEIPT 2,00,000.00 7-10-2007 DR. CASH CASH RECEIVED FROM M.P. TRADERS RECEIPT 2,00,000.00 20-10-2007 DR. CASH CASH FROM M.P. TRADERS FOR HOTEL EQBAL INN & HOTELS RECEIPT 3,00,000.00 9-12-2007 DR CASH CASH FROM M.P TRADERS FOR HOTEL EQBAL INN & HOTELS RECEIPT 3,00,000.00 26-12-2007 DR CASH CASH FROM M.P TRADERS FOR HOTEL EQBAL INN & HOTELS RECEIPT 3,00,000.00 24-2-2008 DR CASH CASH FROM M.P TRADERS FOR HOTEL EQBAL INN & HOTELS RECEIPT 1,50,000.00 31-3-2008 CR. SHARE APPLICATION MONEY A/C RECEIVED FROM BALWINDER SINGH DIRECTOR JOURNAL 14,50,000.00 14,50,000.00 14,50,000.00 1-APR-2008 TO 31-MAR-2009 DATE PARTICULARS VCH TYPE VCH NO. DEBIT CREDIT 20-4-2008 DR CASH CASH RECEIVED FROM M.P. TRADERS FOR EQBAL INN & HOT ELS LTD. RECEIPT 5,00,000.00 28-4-2008 DR CASH CASH RECEIVED FROM M.P. TRADERS FOR EQBAL INN & HOT ELS LTD. RECEIPT 5,00,000.00 30-5-2008 DR. CASH RECEIVED FROM M.P. TRADERS FOR HOTEL RECEIPT 6,00,000.00 9-7-2008 DR. CASH RECEIVED FROM M.P. TRADERS FOR HOTELS LTD. RECEIPT 5,00,000.00 8-8-2008 DR. CASH CASH FROM M.P. TRADERS FOR EQBAL INN & HOTELS LTD. RECEIPT 2,00,000.00 9-9-2008 DR CASH CASH RECEIVED FROM M.P. TRADERS FOR EQBAL INN & HOT ELS LTD. RECEIPT 5,00,000.00 22-10-2008 DR CASH CASH RECEIVED FROM M.P. TRADERS FOR EQBAL INN & HOT ELS LTD. RECEIPT 5,00,000.00 14-11-2008 DR. CASH CASH RECEIVED FROM M.P. TRADERS RECEIPT 5,00,000.00 7-1-2009 DR. CASH CASH RECEIVED FROM M.P. TRADERS RECEIPT 2,00,000.00 15-2-2009 DR CASH CASH RECEIVED FROM M.P. TRADERS FOR EQBAL INN & HOT ELS LTD. RECEIPT 5,00,000.00 27-3-2009 DR CASH RECEIPT 4,00,000.00 27 CASH RECEIVED FROM M.P. TRADERS FOR EQBAL INN & HOT ELS LTD. 31-3-2009 CR SHARE APPLICATION MONEY CASH RECEIVED FROM BALWINDER SINGH DIRECTOR JOURNAL 49,00,000.00 49,00,000.00 49,00,000.00 21. FIRST OF ALL READING OF THE ACCOUNT OF THE SHRI K.M. SETHI WHO IS A DIRECTOR CLEARLY SHOWS THAT MONEY HAS NOT COME ONLY THROUGH CASH BUT THROUGH CHEQUES ALSO ON VARIOUS DATES. MONEY HAS BEEN CREDITED TO THE CU RRENT ACCOUNTS. THE SAME FINDINGS HAVE BEEN GIVEN BY THE JCIT AT PARA 3.3. W HICH READS AS UNDER:- 3.3 THE PERUSAL OF ACCOUNT OF EQBAL INN & HOTELS LTD., PATIALA IN THE BOOKS OF SARAN ENTERPRISES REVEAL TH AT IT PAID CASH FOR EQBAL INN & HOTELS WITHOUT SPECIFYING THE NATURE OF THESE PAYMENTS. IN THE BOOKS OF EQBAL INN & HOTELS LTD., THERE IS F REQUENT RECEIPT OF CASH BY THE ASSESSEE IN THE CURRENT ACCOUNTS OF SH. KAMALPREET SINGH, SMT. PRITAM KAUR AND SH. BALWINDER SINGH SETHI AND AT THE END OF THE FINANCIAL YEAR, THE ENTIRE SUM HAS BEEN SHOWN AS SH ARE APPLICATION MONEY WHICH IS QUITE INCONSISTENT WITH THE ESTABLIS HED ACCOUNTING STANDARDS/PRINCIPLES. THE ASSESSEE FAILED TO PRODUC E ANY DOCUMENTARY EVIDENCE REGARDING SHARE APPLICATION MO NEY ACCOUNT. IN OTHER WORDS, THE ASSESSEE HAD BEEN RECEIVING CASH F ROM THE PROPRIETORS OF THE CONCERNS DIRECTLY INTO ITS CURRE NT RUNNING ACCOUNT WHICH CLEARLY ESTABLISHES THAT THE ASSESSEE HAD IN SUBSTANCE VIOLATED THE PROVISIONS OF SECTION 269-SS AS THIS CLEARLY IN DICATES THAT THE ASSESSEE HAS TRIED TO GIVE COLOUR OF SHARE APPLICAT ION MONEY TO THE UNSECURED LOANS RECEIVED IN CASH FROM THE PERSONS A S MENTIONED ABOVE. THE NOMENCLATURE OF A TRANSACTION AS SHARE A PPLICATION MONEY DOES NOT ALTER THE NATURE OF TRANSACTION. 22. THEREFORE, FIRST QUESTION ARISES WHETHER THE MO NEY HAS BEEN RECEIVED IN CURRENT ACCOUNT. THIS HAS TO BE SEEN IN THE CONTEXT THAT ASSESSEE COMPANY WAS CONSTRUCTING A HOTEL AND LOAN HAS NOT BEEN SANCTION ED BY THE FINANCIAL INSTITUTIONS AND BANKS. NATURALLY THE ASSESSEE COMPANY WOULD FA LL BACK TO THE SOURCES OF THE DIRECTORS FOR THE CONSTRUCTION OF HOTEL. NOW THE M ONEY HAS BEEN TRANSFERRED AT THE 28 END OF THE EVERY YEAR TO SHARE APPLICATION ACCOUNT WHICH ONLY SHOWS THAT INTENTION WAS VERY CLEAR THAT THE MONEY CONTRIBUTED BY THE VA RIOUS DIRECTORS AND THEIR RELATIVES WERE TO BE TREATED AS SHARE CAPITAL. ASS UMING FOR THE ARGUMENT SAKE THAT APPLICABILITY OF SECTION 271D HAS TO BE SEEN AT THE PRECISE MOMENT OF RECEIPT EVEN THEN THE MONEY HAS GONE INTO CURRENT ACCOUNT. NOW AS PER OUR OBSERVATION EARLIER THAT MONEY COMING INTO CURRENT ACCOUNT ALSO CANNOT BE CALLED LOAN OR DEPOSIT. EVEN HON'BLE MADRAS HIGH COURT AS DISCUSSED EARLIE R IN THE CASE OF CIT V IDHAYAM PUBLICATIONS LTD (SUPRA) HAS CLEARLY HELD THAT IF MONEY HAS COME INT O CURRENT ACCOUNT AND NO INTEREST WAS BEING CHARGED F OR THE SAME, THEN THAT WOULD NOT BE COVERED BY THE DEFINITION OF LOAN AND DEPOSI T AS ENVISAGED IN SECTION 269SS. IN THAT DECISION IT HAS BEEN FURTHER EMPHASIZED THA T AS PER COMPANIES (ACCEPTANCE AND DEPOSIT) RULE 1974 DEPOSIT WOULD NOT INCLUDE AN Y AMOUNT RECEIVED FROM THE DIRECTOR OR SHARE HOLDER OF THE COMPANY, THEREFORE, THIS AMOUNT CANNOT BE TERMED AS LOAN OR DEPOSIT FOR THE PURPOSE OF SECTION 269SS READ WITH SECTION 271-D AND THEREFORE, PENALTY COULD NOT HAVE BEEN IMPOSED. IF SUCH SITUATION IS EXAMINED FROM ANOTHER ANGLE THAT IF THE MONEY IS ACCEPTED AS SHARE APPLICATION MONEY THEN THE SAME CANNOT BE CONSTRUED AGAIN AS LOAN OR DEPOS IT AS HELD BY HON'BLE DELHI HIGH COURT IN THE CASE OF I.P. INDIA (P) LTD (SUPR A). THE SAME VIEW HAS BEEN TAKEN BY HON'BLE MADRAS HIGH COURT IN THE CASE OF C IT VS RUGMINI RAM RAGAV SPINNERS P. LTD. DEFINITELY, HON'BLE JHARKHAND HI GH COURT IN THE CASE OF BHATONIA ENGINEERING WORKS (SUPRA) HAS TAKEN A DIFF ERENT VIEW. HERE THOUGH THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE WAS THAT A VIEW FAVORABLE TO THE ASSESSEE PARTICULARLY IN THE CASE OF PENALTY PROVIS IONS SHOULD BE ADOPTED AS PER THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CI T V VEGETABLE PRODUCTS (SUPRA). BUT IN OUR OPINION THIS DOES NOT REQUIRE F URTHER DISCUSSION BECAUSE HON'BLE PUNJAB & HARYANA HIGH COURT ITSELF IN THE CASE OF SPEEDWAYS RUBBER PVT. LIMITED (SUPRA) HAS TAKEN THE SIMILAR VIEW. IN THAT CASE TH E ASSESSEE HAD RECEIVED SHARE APPLICATION OF MONEY RS. 20,000/- IN CASH. T HE PENALTY WAS LEVIED U/S 29 271D OF THE ACT. THE PENALTY WAS DELETED BY CIT(A) WHICH WAS UPHELD BY THE TRIBUNAL. THE HON'BLE HIGH COURT DISTINGUISHED THE DECISION OF HON'BLE JHARKHAND HIGH COURT IN THE CASE OF BHALOTIA ENGINEERING WORK S (SUPRA) AND HELD THAT TRANSACTION WAS BONAFIDE AND DEFAULT WAS OF TECHNIC AL IN NATURE WHICH DID NOT JUSTIFY THE LEVY OF PENALTY. 23. THE JCIT HAS GIVEN ONE MORE FINDING THAT SHARE APPLICATION MONEY ALONG WITH PAID UP CAPITAL HAS EXCEEDED THE AUTHORIZED CA PITAL FROM ASSESSMENT YEAR 2005-06. WE DO NOT FIND ANY THING WRONG WITH THE S AME. FIRST OF ALL, THERE IS NO BAR IN THE COMPANIES ACT FOR RECEIVING SHARE APPLIC ATION MONEY IN EXCESS OF AUTHORIZED CAPITAL. THE ONLY BAR IS THAT PAID UP C APITAL CANNOT BE MORE THEN THE AUTHORIZED CAPITAL. CONSEQUENTLY, THE SHARES HAVE BEEN ISSUED ON 1.4.2011 AS PER FORM NO.2 OF THE ALLOTMENT FILED WITH THE REGISTRAR OF COMPANIES, COPY OF THE SAME HAS BEEN PLACED AT PAGES 74 TO 78 OF THE PAPER BOOK. THE ALLOTMENT FORM CLEARLY SHOWS THAT SHARES HAVE BEEN ISSUED AT A PRE MIUM OF RS. 90/-. IN FACT 2,35,284 EQUITY SHARES WERE ALLOTTED ON 1.4.2011 C ONSISTING OF RS. 10/- AT A PREMIUM OF RS. 90/-, THEREFORE, IF THIS PREMIUM IS EXCLUDED, THEN PAID UP CAPITAL WOULD NOT EXCEED THE AUTHORIZED CAPITAL. THE ASSES SEE HAD FILED FOLLOWING CHART IN RESPECT OF THE AUTHORIZED CAPITAL AND ISSUED & PAID UP CAPITAL IN THE WRITTEN SUBMISSIONS BEFORE CIT(A). FINANCIAL YEAR ENDED AUTHORISED CAPITAL ISSUED & PA ID UP CAPITAL 31.03.2001 RS. 50 LACS RS. 7,000/- 31.03.2002 RS. 50 LACS RS. 7,000/- 31.03.2003 RS. 130 LACS RS. 5 LACS 31.03.2004 RS. 225 LACS RS. 5 LACS 31.03.2005 RS. 225 LACS RS. 169.20 LACS 31.03.2006 RS. 225 LACS RS. 169.20 LACS 31.03.2007 RS. 225 LACS RS. 169.20 LACS 30 FROM THE ABOVE IT BECOMES CLEAR THAT PAID UP CAPITA L NEVER EXCEEDED THE AUTHORIZED CAPITAL, THEREFORE, PROVISIONS OF THE COMPANIES ACT WERE NOT VIOLATED. 24. THE LD. DEPARTMENTAL REPRESENTATIVE HAD ALSO R AISED DOUBTS REGARDING PREMIUM CHARGED BY THE COMPANY. AGAIN, THERE IS NO RESTRICTION IN THE COMPANIES ACT 1956 FOR CHARGING OF PREMIUM ON THE ISSUANCE OF SHARES. THERE USED TO BE RESTRICTION FOR CHARGING OF THE PREMIUM AND A PARTI CULAR AGENCY KNOWN AS CONTROLLER OF CAPITAL ISSUE OF SHARES WHICH USE TO SANCTION THE PREMIUM WHICH COULD BE CHARGED BY THE COMPANIES. HOWEVER, THIS W AS APPLICABLE ONLY IN THE CASE OF LISTED COMPANIES. THE CONTROLLER OF CAPITAL ISS UE WAS ALSO ABOLISHED SOMEWHERE IN 1994 WHEN LIBERALIZATION MEASURES WERE TAKEN BY THE GOVERNMENT AND PRESENTLY THERE IS NO RESTRICTION OF CHARGING O F PREMIUM BY PRIVATE COMPANIES AS WELL AS LISTED COMPANIES. FURTHER THERE WAS NO RESTRICTION EVEN UNDER INCOME TAX ACT REGARDING PREMIUM RECEIVED ON SHARE APPLICA TION. A PROVISO WAS ADDED TO SECTION 68 BY FINANCE ACT, 2012 W.E.F. 1.4.2013 WHI CH READS AS UNDER:- PROVIDED THAT WHERE THE ASSESSEE IS A COMPANY (NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTER ESTED), AND THE SUM SO CREDITED CONSISTS OF SHARE APPLICATION MONEY , SHARE CAPITAL, SHARE PREMIUM OR ANY SUCH AMOUNT BY WHATEVER NAME C ALLED, ANY EXPLANATION OFFERED BY SUCH ASSESSEE-COMPANY SHALL BE DEEMED TO BE NOT SATISFACTORY, UNLESS ( A ) THE PERSON, BEING A RESIDENT IN WHOSE NAME SUCH C REDIT IS RECORDED IN THE BOOKS OF SUCH COMPANY ALSO OFFERS A N EXPLANATION ABOUT THE NATURE AND SOURCE OF SUCH SUM SO CREDITED ; AND ( B ) SUCH EXPLANATION IN THE OPINION OF THE ASSESSING OFFICER AFORESAID HAS BEEN FOUND TO BE SATISFACTORY. THE ABOVE CLEARLY SHOWS THAT NEED OF JUSTIFICATION OF PREMIUM ETC. CAME IN THE STATUTE ONLY FROM ASSESSMENT YEAR 2013-14 ONWARDS. IT WAS ALSO ALLEGED BY THE JCIT THAT SHARE CAPITAL WAS ISSUED ONLY AFTER FIVE YEARS WHICH IS ALSO NOT FULLY CORRECT. THE PERUSAL OF THE SHARE APPLICATION ACCO UNT WOULD SHOW THAT SHARE CAPITAL HAS BEEN FIRST ISSUED IN FINANCIAL YEAR 200 2-03 AMOUNTING TO RS. 4,93,000/-. 31 FURTHER, SHARE CAPITAL AMOUNTING TO RS. 1,64,20,000 /- WAS ALLOTTED IN FINANCIAL YEAR 2004-05. THE BALANCE OF SHARES CAPITAL HAS BEEN IS SUED ON 1.4.2011. IN ANY CASE WE FIND THAT THERE IS NO RESTRICTION IN THE COMPANI ES ACT REGARDING TIME PERIOD FOR ALLOTMENT OF SHARES FROM THE DATE OF RECEIPT OF SHA RE APPLICATION MONEY AT THE RELEVANT POINT OF TIME. THEREFORE, WE FIND NO FORC E IN THESE OBJECTIONS RAISED BY THE DEPARTMENT. 25. WE MAY ALSO NOTE THAT ASSESSMENT ORDERS HAVE BE EN PASSED FOR VARIOUS YEARS U/S 148 / 143(3) OF THE ACT. IT SEEMS THAT NOTICE U/S 148 WAS ISSUED BECAUSE ASSESSEE HAD NOT FILED ANY RETURN OF INCOME FOR ASS ESSMENT YEAR 200-04 AND LATER YEARS. THE ASSESSMENTS WERE COMPLETE LATER ON. TH IS BECOME CLEAR FROM THE ASSESSMENT ORDERS FILED AT PAGES 61 TO 68 OF THE PA PER BOOK. NO ADDITIONS HAVE BEEN MADE ON ACCOUNT OF SHARE APPLICATION MONEY WHI CH CLEARLY MEANS THAT SOURCES OF THE SHARE CAPITAL WERE FOUND TO BE GENUI NE. IT WAS PLEADED BY LD. COUNSEL FOR THE ASSESSEE THAT EVEN CHARTERED ACCOUN TANT WHO HAS CONDUCTED THE AUDIT NEVER POINTED OUT ANY OBJECTION FOR RECEIPT O F SHARE APPLICATION MONEY IN CASH. THE SAME WAS DONE TO MEET THE REQUIREMENT OF FUNDS FOR CONSTRUCTION OF THE HOTEL AND ASSESSEE WAS UNDER THE BONAFIDE BELIEF TH AT NO VIOLATION HAVE TAKEN PLACE, THEREFORE, THE CASE BECOMES TOTALLY COVERED BY THE DECISION OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF SPEEDWAY S RUBBER PVT. LIMITED (SUPRA). IN THAT CASE IT IS CLEARLY HELD THAT IF TR ANSACTION WAS BONAFIDE AND DEFAULT WAS OF TECHNICAL NATURE, THEN THE PENALTY SHOULD NO T BE JUSTIFIED. IN THE CASE BEFORE US, THERE IS NO DEFAULT BECAUSE THE SHARE AP PLICATION MONEY OR DEPOSIT IN THE CURRENT ACCOUNT CANNOT BE INCLUDED IN THE DEFIN ITION OF DEPOSIT BUT IN ANY CASE EVEN IF IT IS ASSUMED OTHERWISE THEN THE DEFECT IS ONLY OF TECHNICAL NATURE AND THERE WAS A BONAFIDE BELIEF ON THE PART OF THE ASSESSEE T HAT THIS IS NOT IN CONTRAVENTION OF PROVISIONS OF THE ACT, THEREFORE, IT IS OF TECHNICA L NATURE AND DOES NOT CALL FOR LEVY OF PENALTY. IN ANY CASE, A REASONABLE CAUSE WAS A LSO EXPLAINED THAT ASSESSEE 32 COMPANY WAS CONSTRUCTING A HOTEL FOR WHICH BANK LOA NS WERE NOT SANCTIONED AND, THEREFORE, DIRECTORS HAD TO CONTRIBUTE THE MONEY TO WARDS CONSTRUCTION OF THE HOTEL. THE PAYMENT WAS GENERALLY REQUIRED FOR LABOUR PAYME NTS AND OTHER CASH ITEMS, THEREFORE, IT IS A REASONABLE CASE FOR ACCEPTING TH E CASH FROM DIRECTORS AND RELATIVES AND EVEN ON THIS BASIS ALSO PENALTY IS NO T LEVIABLE. 26. IN THESE CIRCUMSTANCES, WE SET ASIDE THE ORDER OF LD. CIT(A) AND DELETE THE PENALTIES LEVIED U/S 271-D IN ALL THE YEARS. 27. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.01.2014 SD/- SD/- (SUSHMA CHOWLA) (T.R.SOOD) JUDICIAL MEMBER ACCOUNTANT MEMER DATED : 30 TH JANUARY, 2014 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH 33