Income Tax Appellate Tribunal - Delhi
Goldman Properties Pvt. Ltd., New Delhi vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH 'C' : NEW DELHI)
SHRI I.C. SUDHIR, JUDICIAL MEMBER
and
BEFORE SHRI B.C. MEENA, ACCOUNTANT MEMBER
ITA No.724/Del./2012
(ASSESSMENT YEAR : 2006-07)
ITO, Ward 12 (2), vs. M/s. Goldman Properties Pvt. Ltd.,
New Delhi. UG - 28 & 29, Som Dutt Chamber-I,
5, Bhikaji Cama Place,
New Delhi.
(PAN : AABCG6106F)
(APPELLANT) (RESPONDENT)
ASSESSEE BY : Shri Baldev Raj, CA
REVENUE BY : Shri Satpal Singh, Senior DR
ORDER
PER B.C. MEENA, ACCOUNTANT MEMBER :
This appeal filed by the revenue emanates from the order of the CIT (A)-VII, New Delhi dated 19.12.2011 for the Assessment Year 2006-07. The grounds fo appeal read as under :-
"1. Ld. Commissioner of Income Tax (Appeal) erred, in law and on the facts and circumstances of the case, in deleting the penalty u/s 271D of Rs.7,00,000/- imposed by the Addl. C.I.T. by observing that the AO has not recorded satisfaction for initiation of penalty proceedings u/s 271D of the I. T. Act, 1961.
2. Ld. Commissioner of Income Tax (Appeal) erred, in law and on the facts and circumstances of the case, in deleting the penalty u/s 271D of Rs.7,00,000/- imposed by the Addl. C.I.T. by observing that the acceptance of money in cash for Share Capital by the assessee was only a technical mistake.2 ITA No.724/Del./2012
3. The appellant craves to add, alter, amend, modify, add or forego any ground of appeal at any time before or during the hearing of this appeal."
2. During the year, the assessee company has received share application money of Rs.7 lacs in cash from 26 persons. The Assessing Officer initiated the penalty proceedings u/s 271D. The penalty was levied u/s 271D of the Income-tax Act, 1961. The assessee filed the appeal. The CIT (A) has deleted the penalty by holding as under :-
"3.1 I have carefully considered the submission made on behalf of the appellant, findings of the Assessing Officer and the facts on record. I have also perused the case laws relied upon by the appellant. Admittedly, the assessee received an amount of Rs.7,00,000/- in cash on account of share application money in violation of the provisions of section 269SS of the Act. Therefore, the penal provisions of section 271D get triggered.
3.2 Section 269SS was inserted by the Finance Act, 1984, with effect from 1.4.1984, which lays down the mode of taking and accepting certain loans and deposits. From a bare reading of the aforesaid provision, it is manifestly clear that after the insertion of the aforesaid section, no person should take or accept from any other person any loan or deposits otherwise than by an account payee cheque or account payee bank draft if the amount is Rs.20,000 or more. Section 271D provides that if a person takes or accepts any loan or deposit in contravention of the provisions of section 269SS, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit so taken or accepted. However, there is one exception to the above provisions under section 273 of the Act and no penalty shall be imposable on the person or assessee, as the case may be, for any failure referred to in the said provisions, if he proves that there was reasonable cause for the said failure. The words 'reasonable cause' have not been defined under the Act but they could receive the same interpretation which is given to the expression 'sufficient cause'. Therefore, in the context of the penalty provisions, the words 'reasonable cause' would mean a 3 ITA No.724/Del./2012 cause which is beyond the· control of the assessee. 'Reasonable cause' obviously means a cause which prevents a reasonable man of ordinary prudence acting under normal circumstances, without negligence or inaction or want of bonafides. Before imposition of penalty under section 271D , the Assessing Officer must be satisfied, not arbitrarily but judiciously, that the assessee has without reasonable cause failed to comply with the provisions.
3.3 In the instant case, there is no finding of the Assessing Officer that the transaction made by the assessee in breach of the provisions of section 269SS was not a genuine transaction. On the contrary, no addition on account of Share Application Money was made by the Assessing officer while completing assessment under section 143(3) of the Act. This implies that the receipt of the amount of Rs.7,00,000/- in cash on account of share application money was accepted by the Assessing officer. The Assessing officer has proceeded on the basis that breach of condition provided under section 269SS of the Act shall lead to penal consequences. In my considered view, in the facts and circumstances of the case, the imposition of penalty merely on technical mistake committed by the assessee, cannot be sustained in law. The Assessing officer had relied on the decision of Jharkhand High Court in the case of Bhalotia Engineering Works (P) Ltd. vs. CIT (2005) 275 ITR 399 and imposed penalty u/s 271D of the Act. I find that the jurisdictional High Court of Delhi has recently dealt with the identical issue in the case of CIT Vs IP India (P) Ltd. wherein the decision of the Hon'ble Jharkhand High Court in the case of Bhalotia Engineering Works (P) Ltd. vs. CIT (Supra) was also considered and it was held as under:-
"8. On a careful consideration of the matter, we find that the AO has relied on the judgment of the Jharkhand High Court (supra) and referred the issue of levying penalty to the Additional CIT. He did not examine whether the share application monies can be treated as loan or deposit within the meaning of Section 269S8. The Additional CIT has merely endorsed the view of the AO in passing the penalty order. The CIT(A) has found as a fact that the shares were subsequently allotted to the applicant-companies as shown by the form filed before the Registrar of Companies. Neither the AO nor the Additional CIT has taken the trouble to 4 ITA No.724/Del./2012 examine this aspect while imposing the penalty. They have merely relied on the judgment of the Jharkhand High Court (supra). The reliance on this judgment appears to us to be misplaced. In Baidya Nath Plastic Industries (P) Ltd. and Ors vs KL. Anand (1998) 230 ITR 522, a learned Single Judge of this court pointed out that the distinction between a loan and a deposit is that in the case of the former it is ordinarily the duty of the debtor to seek out the creditor and to repay 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 make a demand for it. This judgment was approvingly cited by a Division Bench of this court in Director of Income Tax (Exemption) vs ACME Educational Society (2010) 326 ITR 146 (Del). In this decision, it was held that a loan grants temporary use of money, or temporary accommodation, and that the essence of a deposit is that there must be a liability to return it to the party by whom or on whose behalf it has been made, on fulfillment of certain conditions. If these tests are applied to the facts of the case before us, it may be seen that the receipt of share application monies from the three private limited companies for allotment of shares· in the assessee-company cannot be treated as receipt of loan or deposit. In any case, the Tribunal has rightly noticed the cleavage of judicial opinion on the point and held that in that situation there was reasonable cause u/S.273B, applying the judgment of the Supreme Court in Vegetable Products (supra). "
3.4 Therefore, considering the entire gamut of facts and circumstances of the case, I am of the considered view that the appellant had a reasonable cause for its failure to accept the impugned amounts in a manner other than those prescribed under section 269SS of the Act thereby rendering it outside the purview of the penal provisions of section 271D. Therefore~ it is held that A.O. was not justified in imposing penalty u/s 271D amounting to Rs.7,00,000/-. Accordingly, the same is cancelled.
3. We have heard both the sides on the issue. While pleading on behalf of the revenue the ld. DR relied on the order of Assessing Officer and the ld. AR relied on the order of the CIT (A) and also submitted that this issue is covered 5 ITA No.724/Del./2012 by the decision of Hon'ble jurisdictional High Court in the case of CIT vs. I.P. India Pvt. Ltd. dated 21.11.2011 wherein the Hon'ble High Court has sustained the deletion of the penalty levied u/s 271D for receiving the share application monies in cash.
4. After considering pleadings of both side, we hold that the issue is covered in favour of the assessee by the decision of Hon'ble jurisdictional High Court wherein the question involved was answered by the Hon'ble High Court as under :
"2.1 Whether learned ITAT/CIT (A) erred in deleting the penalty of Rs.18,00,000/- imposed by the Assessing Officer under section 271D of the Income Tax Act, 1961?
2.2 Whether ITAT was correct in law in holding that the share application money received in cash is not violation of section 269S attracting penalty under section 271D of the Income Tax Act, 1961?
2.3 Whether the decision of the Hon'ble Jharkhand High Court in the case of M/s Bhalotia Engineering Works Pvt. Ltd. reported at 275 ITR 399 is not applicable in the present case."
The Hon'ble jurisdictional High Court has decided the issue by holding as under :-
"8. On a careful consideration of the matter, we find that the AO has relied on the judgment of the Jharkhand High Court (supra) and referred the issue of levying penalty to the Additional CIT. He did not examine whether the share application monies can be treated as "loan" or "deposit" within the meaning of Section 269SS. The Additional CIT has merely endorsed the view of the AO in passing the penalty order. The CIT(A) has found as a fact that the shares were subsequently allotted to the applicant-companies as shown by the form filed before the Registrar of Companies. Neither the AO nor the Additional CIT has taken the trouble to examine this aspect while imposing the penalty. They have merely relied on the judgment of the Jharkhand High Court (supra). The reliance on this judgment appears to us to be misplaced. In Baidya Nath Plastic Industries (P) Ltd. and Ors vs 6 ITA No.724/Del./2012 K.L. Anand (1998) 230 ITR 522, a learned Single Judge of this court pointed out that the distinction between a loan and a deposit is that in the case of the former it is ordinarily the duty of the debtor to seek out the creditor and to repay 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 make a demand for it. This judgment was approvingly cited by a Division Bench of this court in Director of Income Tax (Exemption) vs ACME Educational Society (2010) 326 ITR 146 (Del). In this decision, it was held that a loan grants temporary use of money, or temporary accommodation, and that the essence of a deposit is that there must be a liability to return it to the party by whom or on whose behalf it has been made, on fulfillment of certain conditions. If these tests are applied to the facts of the case before us, it may be seen that the receipt of share application monies from the three private limited companies for allotment of shares in the assessee-company cannot be treated as receipt of loan or deposit. In any case, the Tribunal has rightly noticed the cleavage of judicial opinion on the point and held that in that situation there was reasonable cause u/S.273B, applying the judgment of the Supreme Court in Vegetable Products (supra)."
Considering these, we sustain the order of the CIT (A) and dismiss the revenue's appeal.
5. In the result, the appeal of the revenue is dismissed.
Order pronounced in open court on this 24th day of January, 2013.
Sd/- sd/-
(I.C. SUDHIR) (B.C. MEENA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated the 24th day of January, 2013
TS
Copy forwarded to:
1.Appellant
2.Respondent
3.CIT
4.CIT(A)-VII, New Delhi.
5.CIT(ITAT), New Delhi.
AR, ITAT
NEW DELHI.