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TMI Blog2010 (1) TMI 907X X X X Extracts X X X X X X X X Extracts X X X X ..... en allotted to Vatika Ltd., the purchase price of the land would have been paid by the assessee. There would have been no occasion to receive the money, which could not be termed as loan or deposit. - the assessee did not receive any loan or deposit of money and the debt by way of unpaid purchase price was partly satisfied by allotment of shares to Vatika Ltd. - No penalty. - ITA No. 4627/Del/2009, - - - Dated:- 22-1-2010 - Rajpal Yadav and K.G. Bansal, JJ. C.S. Aggarwal, Sr. Adv., Ravi Pratap Mall, Adv. and D.B. Jain, CA for the Appellant Stephen George, CIT DR for the Respondent ORDER K.G. Bansal:- 1. This appeal of the assessee is directed against the levy of penalty of Rs. 50.00 crore u/s 271D of the Income-tax Act, 1961. The assessee has taken up a number of grounds, the gist of which is that the ld. CIT(Appeals) erred on facts and in law in confirming the levy of penalty of Rs. 50.00 crore u/s 271D of the Act. Other grounds are in the nature of statement of facts and the arguments. However, all the 7 grounds taken by the assessee are reproduced below:- i) "That the ld. Commissioner of Income-tax (Appeals)-XIV, New Delhi has erred both on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d subjective considerations and as such the impugned order is otherwise vitiated in law." 2. On perusal of the penalty order, it is seen that the assessee had purchased land admeasuring 4.20 acres from Vatika Ltd. for a consideration of Rs. 50.50 crore. A sum of Rs. 5.00 crore was payable by 31.12.2004, further Rs. 10.00 crore by 31.3.2005 and balance Rs. 35.50 crore by 30.6.2005. The amount was not paid in cash but adjusted by allotment of shares to the Vatika Ltd. as per resolution of the Board of Directors of the assessee company recorded in their meeting held on 16.6.2006. The AO was of the view that the sum of Rs. 50.00 crore shown as share application money in financial year 2005-06 was received otherwise than by account payee cheque or account payee draft. This was in contravention of the provision contained in section 269SS of the Act. Therefore, a notice u/s 271D was issued and after taking into account the explanation of the assessee, penalty of Rs. 50.00 crore was levied. Aggrieved by this order, the assessee moved an appeal before the CIT(Appeals)-XIX, New Delhi. Various submissions were made before the ld. CIT(Appeals) and in particular it was submitted that it had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee had purchased land from Vatika Ltd. for a consideration of Rs. 50.50 crore, which was paayable in installments of different amounts on three different dates, the last installments of Rs. 35.50 crore to be paid by 30.6.2005. Since the assessee did not make the payment as per the payment schedule, the amount of Rs. 50.00 crore was adjusted towards share application money in financial year 2005-06 and Rs. 50.00 lakh in financial year 2006-07. The shares of the value of Rs. 50.50 crore were allotted to Vatika Ltd. subsequently. It was submitted that the statement made by the AO that during the year under consideration the assessee received share application money of Rs. 50.00 crore is factually incorrect. The correct position is that the assessee had purchased land from Vatika Ltd. and the sale consideration payable was adjusted as share application money. Further, a reference was made to the show cause notice issued by the AO and the reply furnished to the show cause notice dated 23.6.2009. In this reply, it was inter-alia submitted that in the case of Bhalotia Engineering Works (P) Ltd. vs. CIT (2005) 275 ITR 399, the Hon'ble Jharkhand High Court held that the receipt o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of the statutory provision in terms of clause (iii)of the Explanation to section 269SS. 4. In reply, the ld. DR referred to paragraphs 16.2 to 16.4 of the order of the ld. CIT(Appeals), which has already been summarized by us. It is mentioned that Vatika Ltd. had sold the land to the assessee in financial year 2004-05 and its account was credited by an amount of Rs. 50.50 crore on 28.4.2004. In that year, the assessee received and paid amounts on various dates and the closing balance was about Rs. 46.18 crore. In financial year 2005-06, the assessee received amounts on various dates aggregating to about Rs. 19.07 crore and a sum of Rs. 50.00 crore was adjusted on 31.3.2006 towards share application money. The assessee did not prove that these amounts were received by way of account payee cheques or drafts. For the sake of ready reference, these paragraphs are reproduced below:- "16.2 It is seen that the transaction of purchase has taken place in F.Y. 2004-05. The account of M/s Vatika Landbase Pvt. Ltd. (seller of the land) was credited for Rs. 50,50,00,000/- on 28.4.2004. During the F.Y. 2004-05, the assessee received amounts on various dates and the closing balance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also not received by way of account payee cheques or drafts. However, the credit was given to partly discharge the outstanding liability and it was not loan or deposit made by Vatika Ltd. 5.1 Coming to the statutory provisions, clause (iii) of the Explanation to section 269-SS defines "loan or deposit" to mean loan or deposit of money. The credit in the account on 28.04.2004 was not for receipt of money but for purchase of land and the liability was partly discharged by taking Rs. 50.00 crore as share application money. Therefore, we are of the view that it cannot be said that the share application was received in cash. The case of the ld. DR was that the assessee also received other amounts from Vatika Ltd. on different occasions as mentioned by the ld. CIT(Appeals). However, to our mind, the penalty was not levied by the AO in respect of such receipts of about Rs. 19.07 crore. The case of the ld. counsel was that such receipts were also through banking channels. However, on the basis of this statement, we cannot come to a conclusion that the money was received by way of account payee cheque or draft. But, that is not the question before us. The question before us is in regard ..... X X X X Extracts X X X X X X X X Extracts X X X X
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