M/s Greenline Developers Pvt. Ltd.,, New Delhi v. Addl. CIT, New Delhi

ITA 771/DEL/2010 | 2006-2007
Pronouncement Date: 21-01-2011 | Result: Allowed

Appeal Details

RSA Number 77120114 RSA 2010
Assessee PAN AAACG0221A
Bench Delhi
Appeal Number ITA 771/DEL/2010
Duration Of Justice 11 month(s) 1 day(s)
Appellant M/s Greenline Developers Pvt. Ltd.,, New Delhi
Respondent Addl. CIT, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 21-01-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted C
Tribunal Order Date 21-01-2011
Date Of Final Hearing 05-01-2011
Next Hearing Date 05-01-2011
Assessment Year 2006-2007
Appeal Filed On 19-02-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCH C DELHI ] BEFORE SHRI R. P. TOLANI JM & SHRI K. D. R ANJAN AM I. T. APPEAL NO. 771 (DEL) OF 2010. ASSESSMENT YEAR : 200607. M/S. GREENLINE DEVELOPERS PVT. LTD. ADDL. C OMMISSIONER OF INCOME-TAX L 4 GREEN PARK EXTENTION VS. R A N G E : 12 N E W D E L H I 110 016. N E W D E L H I. P A N / G I R NO. AAA CG 0221 A. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : SHRI T. R. TALWAR ADV.; DEPARTMENT BY : MS. MONA MOHANTY SR. D. R.; O R D E R. PER K. D. RANJAN AM : THIS APPEAL BY THE ASSESSEE FOR ASSESSMENT YEAR 20 06-07 ARISES OUT OF ORDER OF THE LD. CIT (APPEALS)XVI NEW DELHI. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE RE AD AS UNDER :- ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT (APPEALS) HAS ERRED :- I) IN CONFIRMING THE PENALTY UNDER SECTION 271-D R EAD WITH SECTION 269-SS IGNORING THE ASSESSEES EXPLANATION; II) IN EQUATING THE SHARE APPLICATION MONEY RECEIVE D BY THE APPELLANT IN CASH AS LOAN OR DEPOSIT AND THEREBY INVOKING THE PROVISIONS OF SECTION 271-D READ WITH SECTION 269-SS; III) IN CONFIRMING THE PENALTY UNDER SECTION 271-D IGNORING THE PROVISIONS OF SECTION 273-B WHEN THE APPELLANT HAD A REASONABLE C AUSE / BELIEF THAT THE SHARE 2 I. T. APPEAL NO. 771 (DEL) OF 2010. APPLICATION MONEY DID NOT CONSTITUTE LOAN OR DEPOSI T AS TO ATTRACT THE PROVISION OF SECTION 269-SS AND HENCE NOT APPLICABLE TO THE RECE IPT OF SHARE APPLICATION MONEY IN CASH; IV) IN CONFIRMING THE PENALTY UNDER SECTION 271-D WHEN TWO DIFFERENT VIEW ON THE SAME ISSUE ARE POSSIBLE AND WHEN NO CLEAR AND DEFIN ITE INFERENCE CAN BE DRAWN; V) IN IGNORING THE FACT THAT AS PER THE COMPANIE S (ACCEPTANCE OF DEPOSITS) RULES 1979 THERE WAS NO BAR IN RECEIVING SHARE APP LICATION MONEY IN CASH; VI) IN IGNORING THAT THE SHARE APPLICANTS ARE IDE NTIFIABLE ASSESSED TO TAX AND THE TRANSACTION IS GENUINE. 3. THE ONLY ISSUE FOR OUR CONSIDERATION RELATES TO CONFIRMING THE PENALTY UNDER SECTION 271-D READ WITH SECTION 269-SS OF THE INCOME-TAX AC T 1961 [REFERRED TO AS THE ACT]. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOUND THAT THE ASSESSEE HAD RECEIVED SH ARE APPLICATION MONEY OF RS.9 95 000/- EACH FROM M/S. AMBIENCE INDUSTRIES P. LTD. AND SHRI AMAN GAHLOT TOTALING TO RS.19 90 000/- IN CASH WHICH WAS PARTLY UTILIZED FOR CASH DEPOSITS IN THE BOOKS OF ACCOUNTS. ON INVESTIGATION THE AO ACCEPTED THE RECEIPT OF SHARE APPLICATION MONEY AS GENUINE. THE SHARE APPLICATION MONEY WAS REFUNDED BACK DURING THE YEAR ITSELF. HOWEVER THE AO TREATED THE SHARE APPLICATION MONEY AS ACCEPTANCE OF CASH LOAN EXCEEDING RS.20 000/- IN VI OLATION OF SECTION 269-SS OF THE ACT. HE INITIATED PENALTY PROCEEDINGS UNDER SECTION 271D OF THE ACT AS THE SHARE APPLICATION MONEY WHICH WAS TREATED AS LOAN RECEIVED IN CASH. 4. DURING THE COURSE OF PENALTY PROCEEDINGS IT WAS SUBMITTED THAT THE SHARE APPLICANTS IN THE SHARE APPLICATION FORMS HAVE GIVEN THEIR NAMES NUM BER OF SHARES APPLIED FOR THE AMOUNT OF SHARE APPLICATION MONEY MODE OF PAYMENT AND DATE O F RECEIPT. HOWEVER SHARES WERE NOT ALLOTTED TO THESE APPLICANTS BY THE ASSESSEE AND TH E SAID AMOUNTS WERE REFUNDED TO THEM. THE SHARE APPLICANTS ARE REGULARLY INCOME-TAX ASSESSEES FOR SO MANY YEARS AND THEIR ASSESSMENT PARTICULARS WERE FURNISHED TO THE AO ALONG WITH COP Y OF SHARE APPLICATION MONEY FORM AND REFUND ORDERS AND REFUNDS OF SHARE APPLICATION MONE Y WERE MADE TO THEM THROUGH ACCOUNT PAYEE CHEQUES. THE SHARE APPLICANTS ARE ASSOCIATES OR RE LATIVES OF THE ASSESSEE COMPANY AND ITS DIRECTORS. THE SHARE APPLICANTS ARE IDENTIFIABLE; THE GENUINENESS OF THE TRANSACTION AND THEIR CREDITWORTHINESS WAS NOT IN DOUBT. THEREFORE IT W AS PLEADED THAT THE SAID RECEIPT OF SHARE APPLICATION MONEY BY THE ASSESSEE COMPANY DID NOT F ALL IN THE CATEGORY OF LOANS TAKEN OR 3 I. T. APPEAL NO. 771 (DEL) OF 2010. ACCEPTED IN VIOLATION OF SECTION 269-SS OF THE ACT. THIS CONTENTION OF THE ASSESSEE WAS REJECTED BY THE ASSESSING OFFICER AND IMPOSED THE PENALTY OF RS 19 90 000/-. 5. BEFORE LD. CIT(A) IT WAS ALSO SUBMITTED THAT AS PER THE PROVISIONS OF COMPANIES ACT 1956 THE ASSESSEE CAN RAISE CAPITAL BY RECEIVING SH ARE APPLICATION MONEY FROM DIRECTORS FRIENDS RELATIVES ASSOCIATES ETC. EITHER IN CASH CHEQUE DRAFT OR IN KIND DEPENDING UPON CIRCUMSTANCES. THE COMPANY HAS A PREROGATIVE EITHER TO ALLOT THE S HARES TO THE PERSONS FROM WHOM SHARE APPLICATION MONEY IS RECEIVED OR TO REFUND THE SHAR E APPLICATION MONEY SO RECEIVED. IT WAS ALSO SUBMITTED THAT PENALTY UNDER SECTION 271D IS NOT AU TOMATIC AND A BONAFIDE BELIEF TO THE EFFECT THAT THE RECEIPT OF SHARE APPLICATION WOULD NOT BE TERMED LOAN OR DEPOSIT WOULD BE SUFFICIENT TO DROP THE PENALTY PROCEEDINGS AS PER THE PROVISION O F SECTION 273-B OF THE ACT UNLESS AND UNTIL THE MATERIAL ON RECORD POSITIVELY SHOWS THAT THE MO NEY RECEIVED IS ONLY A DEPOSIT OR LOAN. HOWEVER THIS CONTENTION OF THE ASSESSEE WAS REJECT ED BY THE LD. CIT (APPEALS). HE RELIED ON THE DECISION OF ITAT PATNA BENCH IN THE CASE OF ITO VS . NARSINGH RAM ASHOK KUMAR 47 I.T.D. 38 (PAT.) WHEREIN IT WAS HELD THAT EVEN IF IT WAS GENU INE LOAN OR DEPOSIT IT WAS TO BE EXPLAINED AS TO WHY IT WAS TAKEN IN CASH AND IN ABSENCE OF ANY SATI SFACTORY EXPLANATION PENALTY WAS TO BE LEVIED. THIS DECISION WAS UPHELD BY HONBLE PATNA HIGH COUR T REPORTED IN 234 ITR 414 (PAT). HE ALSO PLACED RELIANCE ON THE DECISION OF HONBLE JHARKHAN D HIGH COURT IN THE CASE OF BHALOTIA ENGG. WORKS PVT. LTD. VS. CIT 275 ITR 399 (JHAR.) WHEREIN IT HAS BEEN HELD THAT SHARE APPLICATION MONEY PARTAKES THE CHARACTER OF DEPOSIT SINCE IT IS REPAYABLE IN SPECIE ON REFUSAL TO ALLOT SHARES AND IS PAYABLE IF RECALLED BY THE APPLICANT BEFORE ALLOTMENT OF SHARES AND THE CONCLUSION OF THE CONTRACT. THEREFORE THE ACCEPTANCE OF SHARE APPLI CATION MONEY IN CASH AMOUNTING TO RS.20 000/- OR MORE VIOLATES THE PROVISIONS OF SECTION 269-SS O F THE ACT. THE LD. CIT (A) FOLLOWING THE DECISION OF HONBLE JHARKHAND HIGH COURT UPHELD THE LEVY OF PENALTY UNDER SECTION 271D OF THE ACT. 6. BEFORE US THE LD. AR OF THE ASSESSEE SUBMITTED T HAT SHARE APPLICATION MONEY IS NOT LOAN OR DEPOSIT AS THE SAME WAS NOT DEPOSITED FOR EARNING O F THE INTEREST. THE ASSESSEE WAS UNDER A BONAFIDE BELIEF THAT SHARE APPLICATION MONEY IS NOT A LOAN OR DEPOSIT AND THEREFORE PROVISIONS OF SECTION 269-SS OF THE ACT ARE NOT VIOLATED. HE PLA CED RELIANCE ON THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. RUGMINI RA M RAGHAV SPINNERS P. LTD. (2008) 304 ITR 417 (MAD). HE PLACED RELIANCE ON THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN 4 I. T. APPEAL NO. 771 (DEL) OF 2010. THE CASE OF CIT VS. SPEEDWAYS RUBBER PVT. LTD. 326 ITR 31 (P & H) WHEREIN ACCEPTING THE SHARE APPLICATION OF RS.20 000/- IN CASH WAS TREATE D THE TRANSACTION AS BONAFODE AND THE DEFAULT BEING TECHNICAL PENALTY WAS NOT LEVIABLE. HE ALSO PLACED RELIANCE ON THE DECISIONS OF ITAT IN THE CASES OF ITO VS. AVADH RUBBER LTD. 8TAXMAN.COM 57(KOL); DCIT VS. EMESKAY FINANCIAL SERVICES LTD. 124 I.T.D. 435 (VISH.); AND JEETU BUI LDERS P. LTD. VS. ADDL. CIT 124 I.T.D. 134 (AHD.) [TM]. ON THE OTHER HAND THE LD. SR. DR SUP PORTED THE ORDER OF THE LD. CIT (APPEALS). 7. WE HAVE HEARD BOTH THE PARTIES. THE ASSESSEE HA D RECEIVED SHARE APPLICATION MONEY FROM TWO PARTIES WHICH WAS REFUNDED IN THE YEAR ITSELF T HROUGH ACCOUNT-PAYEE CHEQUE. UNDER SECTION 269-SS OF THE ACT NO PERSON SHALL AFTER 30-06-1984 TAKE OR ACCEPT FROM ANY OTHER PERSON ANY LOAN OR DEPOSIT OTHERWISE THAN BY AN ACCOUNT-PAYEE CHEQUE OR ACCOUNT-PAYEE DRAFT IF THE AMOUNT OF SUCH LOAN OR DEPOSIT OR THE AGGREGATE AMOUNT OF LOAN AND DEPOSIT IS RS.20 000/- OR MORE. IN A CASE WHERE THE AMOUNT IS ACCEPTED OR TAKEN AS A LOA N OR DEPOSIT IN CASH IN VIOLATION OF PROVISIONS OF SECTION 269-SS PENALTY UNDER SECTION 271-D OF THE ACT SHALL BE LEVIED. FURTHER SECTION 273B OF THE ACT PROVIDES THAT NO PENALTY SHALL BE I MPOSABLE ON THE PERSON OR THE ASSESSEE FOR ANY FAILURE REFERRED TO IN VARIOUS SECTIONS OF IT ACT SPECIFIED IN SECTION 273B IF HE PROVES THAT THERE WAS A REASONABLE CAUSE FOR THE SAID FAILURE. THERE IS NO DOUBT THAT GENUINENESS OF THE TRANSACTION HAS NOT BEEN DOUBTED AND THE SAME HAS BEEN ACCEPTED AS GENUINE. THE PENALTY UNDER SECTION 271D CAN BE IMPOSED IF THERE IS A VIOLATION OF PROV ISIONS OF SECTION 269-SS AND THERE IS NO REASONABLE CAUSE FOR ACCEPTING THE AMOUNT IN CASH B Y THE ASSESSEE. 8. THERE IS A DISTINCTION BETWEEN A LOAN AND A DEP OSIT. IN THE CASE OF LOAN IT IS THE DUTY OF THE DEBTOR TO SEEK THE CREDITOR AND REPAY THE MONEY TO HIM OR REPAY THE MONEY ACCORDING TO THE AGREEMENT. IN THE CASE OF DEPOSIT IT IS GENERALLY THE DUTY OF THE DEPOSITOR TO GO TO THE BANKER OR THE PERSON WITH WHOM THE MONEY HAS BEEN DEPOSITED AS THE CASE MAY BE AND MAKE A DEMAND FOR THE REPAYMENT OF THE SAME. IN BOTH THE CASES THE PE RSON MAKING LOAN OR DEPOSIT EXPECTS THE RETURN OF INTEREST BUT IN CASE SHARE APPLICATION MONEY HE EXPECTS ALLOTMENT OF SHARES AND THEREBY INTENDS TO PARTICIPATE IN THE PROFIT/LOSS OF THE COMPANY. T HEREFORE DEPOSIT OF SHARE APPLICATION MONEY CANNOT BE TREATED AS LOAN OR DEPOSIT AND HENCE PROV ISIONS SECTION 269SS WILL NOT BE APPLICABLE. 5 I. T. APPEAL NO. 771 (DEL) OF 2010. 9. IN THE CASE OF CIT VS. SPEEDWAYS RUBBER PVT. LTD. (SUPRA) THE LD. CIT (A) UPHELD THE STAND OF THE ASSESSEE THAT THE AMOUNT RECEIVED BY W AY OF SHARE APPLICATION MONEY WAS NOT LOAN OR DEPOSIT AND NO INTEREST WAS PAYABLE. THAT THE T RANSACTION WAS BONAFIDE; THAT THE DEFAULT WAS TECHNICAL IN NATURE; AND THAT IN ANY CASE THE AMOU NT WAS RECEIVED FROM PUBLIC AND NOT FROM DIRECTOR OR SHARE-HOLDERS. THE ORDER OF THE LD. CI T (A) WAS UPHELD BY THE ITAT. HONBLE PUNJAB & HARYANA HIGH COURT ON FURTHER APPEAL HELD THAT IN VIEW OF THE FINDING TO THE FACT THAT THE TRANSACTION WAS BONAFIDE AND THE DEFAULT WAS OF TECHNICAL NATURE THE CANCELLATION OF PENALTY WAS JUSTIFIED. 10. HONBLE MADRAS HIGH COURT IN THE CASE OF CIT V S. RUGMINI RAM RAGHAV SPINNERS P. LTD. (SUPRA) HAD HELD THAT MONEY RECEIVED ON SHARE APPLICATIONS WHICH WAS RETAINED BY THE COMPANY WAS NEITHER DEPOSITS NOR LOANS IT WAS ONL Y SHARE CAPITAL ADVANCE. THE ADVANCES OF SHARE APPLICATION MONEY OR RE-PAYMENT OF SUCH ADVAN CES HAD NOT FLOWED FROM ANY UNDISCLOSED INCOME OF THE ASSESSEE OR THE CONCERNED PERSON. THE ASSESSEE HAD NOT PAID ANY INTEREST AT ALL ON ANY OF THE ADVANCES REPAID AFTER SOME TIME. IF THE INTENTION WAS TO RECEIVE THEM AS LOANS OR DEPOSITS THEN CERTAINLY THE LENDERS WOULD NOT HAVE MADE THE ADVANCE GRATUITOUSLY. IT WAS ALSO HELD THAT PENALTY UNDER SECTION 271E OF THE ACT WAS NOT AUTOMATIC AND BONAFIDE BELIEF TO THE EFFECT THAT THE RECEIPT OF ADVANCE AGAINST ALLOTMEN T OF SHARES WOULD NOT BE TERMED AS LOANS OR DEPOSITS WOULD BE SUFFICIENT TO DROP THE PENALTY LE VIABLE UNLESS AND UNTIL THE MATERIAL ON RECORD POSITIVELY SHOWED THAT THE MONEY RECEIVED WAS ONLY A DEPOSIT OR LOAN. THERE WAS NO DISPUTE THAT THE ADVANCES WERE ONLY AGAINST ALLOTMENT OF SHARES AND NOT BY WAY OF LOANS OR ADVANCES. THEREFORE THE ASSESSEE WAS UNDER BONAFIDE BELIEF T HAT THE MONEY RECEIVED WAS ONLY FOR THE PURPOSE OF ALLOTMENT OF SHARES. UNDER THESE CIRCUM STANCES HONBLE MADRAS HIGH COURT UPHELD THE ORDER OF THE TRIBUNAL DELETING THE PENALTY. 11. IN THE CASE BEFORE US THE ASSESSEE HAS NOT PAID ANY INTEREST ON THE SHARE APPLICATION MONEY DEPOSITED WITH THE ASSESSEE. THIS IS ALSO NOT A CAS E OF REVENUE. THEREFORE THE ASSESSEES CASE IS SQUARELY COVERED BY THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. RUGMINI RAM RAGHAV SPINNERS P. LTD. (SUPRA) WHEREIN IT HAS BEEN HELD THAT IF THE INTENTION WAS TO RECEIVE THEM AS A LOAN OR DEPOSIT THE LENDERS WOULD NOT HA VE MADE THE ADVANCES GRATUITOUSLY. SINCE NO INTEREST HAS BEEN PAID BY THE ASSESSEE ON THE SHARE APPLICATION MONEY REFUNDED IT CANNOT BE TREATED AS LOANS OR DEPOSITS. FURTHER THE PENALTY UNDER SECTION 271D OF THE ACT CANNOT BE 6 I. T. APPEAL NO. 771 (DEL) OF 2010. IMPOSED IF THE ASSESSEE HAD A REASONABLE CAUSE FOR ACCEPTING THE SHARE APPLICATION MONEY IN CASH. HONBLE MADRAS HIGH COURT ON IDENTICAL FACTS HAS HE LD THAT THERE WAS REASONABLE CAUSE THAT THE ASSESSEE WAS UNDER BONAFIDE BELIEF THAT THE MONEY R ECEIVED WAS ONLY FOR PURPOSE OF ALLOTMENT OF SHARES. THERE WAS NO MATERIAL OR EVIDENCE OR ANY C OMPELLING REASON PRODUCED BY THE REVENUE TO PROVE THAT MONEY RECEIVED WAS DEPOSIT OR LOAN. SIM ILAR IS THE POSITION IN THE CASE BEFORE US. HONBLE JHARKHAND HIGH COURT HAS HELD CONTRARY. IT IS A SETTLED LAW THAT WHERE TWO VIEWS ARE POSSIBLE THE VIEW IN FAVOUR OF THE ASSESSEE HAS TO BE TAKEN AS IS HELD IN THE CASE OF CIT V VEGETABLE PRODUCTS 88 ITR 192(SC). SINCE THE PAYME NT RECEIVED BY WAY OF SHARE APPLICATION MONEY IS NOT IN THE NATURE OF DEPOSIT OR LOAN NOR A NY EVIDENCE HAS BEEN BROUGHT ON RECORD BY THE AO THAT THE ASSESSEE HAS PAID INTEREST AND THE DEPO SIT WAS TAKEN IN THE GARB OF SHARE APPLICATION MONEY FOR EARNING THE INTEREST. IN VIEW OF THESE FA CTS IN OUR CONSIDERED OPINION THE PROVISIONS OF SECTION 269-SS OF THE ACT ARE NOT VIOLATED. ACC ORDINGLY WE DO NOT FIND ANY REASONS TO UPHOLD THE ORDER OF THE LD. CIT (A). ACCORDINGLY PENALTY IMPOSED BY THE ASSESSING OFFICER IS DELETED. 12. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT TODAY ON: 21 ST JANUARY 2011. SD/- SD/- [ R. P. TOLANI ] [ K. D. RA NJAN ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 21 ST JANUARY 2011. * MEHTA * COPY OF THE ORDER FORWARDED TO : - 1. APPELLANT. 2. RESPONDENT. 3. CIT 4. CIT (APPEALS) 5. DR ITAT NEW DELHI. TRUE COPY. BY ORDER. ASSISTANT REGISTRAR ITAT. 7 I. T. APPEAL NO. 771 (DEL) OF 2010.