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2009 (6) TMI 981 - AT - Income TaxLevy of Penalty u/s 271D - Nature of receipt of Share application money in cash - Applicability of provisions of ss. 269SS on receipt - CIT(A) deleted the penalty with regard to receipt for which addition was made by the AO u/s. 68 and he confirmed the balance penalty in connection with receipt of share application money in cash - contentions raised is that s. 269SS is not applicable on receipt of share application money in cash HELD THAT - We find that there are two judgments of two different High Courts available on this issue out of which one judgment of Hon ble Madras High Court is in favour of the assessee whereas the other Judgment of Hon ble Jharkhand High Court is against the assessee. Under these facts we have to decide as to which judgment should be followed by us Under this situation we are guided by Hon ble apex Court and as per the judgment in the case of Vegetable Products Ltd 1973 (1) TMI 1 - SUPREME COURT held by Hon ble apex Court that if two reasonable constructions of a taxing provision are possible that construction which favours the assessee must be adopted. Respectfully following this judgment we are of the considered opinion that we are bound to follow the judgment of Hon ble Madras High Court rendered in the case of Rugmani Ram Raghav 2007 (7) TMI 237 - MADRAS HIGH COURT because this judgment is in favour of the assessee and no judgment of Hon ble apex Court or of Hon ble jurisdictional High Court on the issue before us was brought to our notice. It was held by the Hon ble Madras High Court that receipt of share application money is neither loan nor deposit. Once we hold and accept that receipt of share application money is neither loan nor deposit the provisions of ss. 269SS and 271D are not applicable because the provisions of s. 269SS are in connection with acceptance of the loan and deposit and the provisions of s. 271D are in connection with violation of s. 269SS. We therefore hold that since in the present case the alleged amount was received by the assessee in cash on account of share application money penalty u/s. 271D cannot be levied because the receipt of share application money is neither loan nor deposit and hence the impugned receipt is not governed by s. 269SS. We therefore delete the penalty. In the result the appeal of the assessee is allowed.
Issues:
1. Penalty under section 271D for receipt of share application money in cash. 2. Applicability of section 269SS on receipt of share application money. 3. Reasonable cause under section 273B for not levying penalty. 4. Jurisdictional validity of penalty proceedings under section 271D. 5. Coverage of amount received from relatives under section 269SS. 6. Bar of limitation on penalty order under section 271D. Issue 1: Penalty under Section 271D: The assessee appealed against the penalty imposed under section 271D for receiving share application money in cash. The CIT(A) deleted the penalty for a portion of the amount but upheld it for the remaining sum. The ITAT Delhi considered the arguments presented, including the contention that section 269SS does not apply to share application money in cash. The ITAT referred to judgments of different High Courts on this issue, notably the Madras High Court and the Jharkhand High Court. Ultimately, the ITAT followed the principle that a construction favoring the assessee should be adopted when interpreting taxing provisions. Consequently, the ITAT held that since the share application money was not a loan or deposit, the penalty under section 271D could not be levied. Issue 2: Applicability of Section 269SS: The ITAT examined whether section 269SS applied to the receipt of share application money in cash. Referring to the Madras High Court judgment, it was established that if the money received was not a loan or deposit, sections 269SS and 271D did not apply. The ITAT concluded that since the share application money was not categorized as a loan or deposit, the provisions of section 269SS were inapplicable, leading to the deletion of the penalty. Issue 3: Reasonable Cause under Section 273B: The assessee argued that there existed a reasonable cause under section 273B, warranting no penalty imposition. However, the ITAT did not delve into this argument as the primary issue of the nature of the share application money had already been determined in favor of the assessee. Issue 4: Jurisdictional Validity of Penalty Proceedings: The ITAT considered the jurisdictional validity of the penalty proceedings initiated by the Additional CIT under section 271D. It was contended that since no proceedings were pending at the time of initiation, the proceedings lacked jurisdiction. However, this argument was not discussed further as the main issue of the applicability of the penalty had been resolved in favor of the assessee. Issue 5: Coverage of Amount Received from Relatives: The ITAT briefly addressed the argument that the amount received from relatives should not fall under the ambit of section 269SS. However, this point was not extensively discussed as the main issue of whether the penalty should be levied had been decided in favor of the assessee. Issue 6: Bar of Limitation on Penalty Order: The ITAT noted the contention that the penalty order under section 271D was barred by limitation. However, this issue was not elaborated upon in the judgment as the primary issue of the penalty imposition had been resolved in favor of the assessee. In conclusion, the ITAT allowed the appeal of the assessee, ruling in favor of deleting the penalty imposed under section 271D for the receipt of share application money in cash, based on the interpretation that the money was not a loan or deposit, and thus, the provisions of sections 269SS and 271D did not apply.
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