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3. Learned Senior Standing Counsel appearing for the Revenue submitted that the provisions are mandatory and hence there is no mens rea or evasion of tax needs to be proved before penalty is imposed. Further, it is submitted that the Tribunal has failed to note that the assessee did not have "reasonable cause" for repaying the share application money in cash and hence, levy of penalty under Section 271E is automatic in cases of not complying with the provisions of Section 269T. Further it is contended that the assessee had availed the loan and had repaid the same in cash under the guise of refund of share application money. Hence the levying of penalty by the Assessing Officer is justified.

4. Learned counsel appearing for the assessee submitted that that there is no repayment of loan involved in the present case and that the assessee has only returned the share application money. Hence there is no violation of provision of Section 269T of the Act by the assessee and therefore, the assessee is not subject to levy of penalty under Section 271E of the Act.

5. Heard the counsel. The assessee had received cash over a period of time, as advance towards allotment of shares from 16 persons without stipulating any time frame towards return / refund of money without interest, in case of non-allotment of shares either fully or partly. In this case, the money retained by the company was neither deposit nor loan, but it is only share capital advance. Penalty under Section 271E is not automatic and to be levied only in the absence of a reasonable cause. No doubt a reasonable cause has to be established by the assessee. The rationale behind the provisions of Section 269SS and 269T is to prevent tax evasion, i.e., the laundering of concealed income by parties in the guise of cash loans or deposits in or outside the accounts. The provision of Section 269SS and 269T therefore have application only in a limited way in respect of 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 penalty automatically, under Section 271E of the Act. The advances of share application money or repayments of such advances have not flowed from any undisclosed income of the assessee or the concerned persons. It is also seen from the records that assessee had not paid any interest at all on any of the advances repaid after quite some time. If the intention was to receive them as loans or deposits, then certainly the lenders would not have made the advances gratuitously. It is also a factual finding given by the authorities below that the assessee was not called upon to explain the default under Section 269SS on receipt of the advances in earlier years, which would show that the assessee's case was not governed by the said provisions. Penalty under Section 271E is not automatic, and a bona fide belief to the effect that the receipt of advances against allotment of shares would 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 dispute that the impugned advances were only against allotment of shares and not by way of loans or deposits. The authorities below have given a factual finding to the effect that it is not a deposit or loan. The Tribunal, in Paragraph-3 of its order, held as under:-

"The Departmental Representative could not bring on record any material that would go to show that the assessee in fact wanted only loan or deposit but tried to show them as share application money. Merely for the reason that some of the applications were rejected and in some of the applications the share allotments were not in full, it cannot be taken to mean that it was not share application money. Upholding the order of the CIT(A) the appeal by the Revenue is dismissed."

Hence the factual finding by the authorities below is that the amount received is not a deposit or loan, but it is only share application money, and the same is based on valid materials and evidence. The relevant provisions of law are Sections 269T, 271D, 271E and 273B of the Act. In the present case, the Assessing Officer levied penalty under Section 271E deals with 'penalty for failure to comply with the provisions of section 269T'. Section 271E, as on the relevant period, reads as follows:-

"271E. (1) If a person repays any deposit referred to in section 269T otherwise than in accordance with the provisions of that section, he shall be liable to pay, by way of penalty, a sum equal to the amount of the deposit so repaid.
(2) Any penalty imposable under sub-section (1) shall be imposed by the Deputy Commissioner."

From a reading of the above, it is clear that if a person repays any deposit referred to in Section 269T otherwise than in accordance with the provisions of that Section, he shall be subjected to levy of penalty. Section 269T deals with 'mode of repayment of certain deposits'. Section 269T, as on the relevant period, reads as follows:-