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TMI Blog2007 (7) TMI 237X X X X Extracts X X X X X X X X Extracts X X X X ..... law: "1. Whether, on the facts and under the circumstances of the case, the Appellate Tribunal was right in holding that cash payments made by the assessee pertains to refund of share application money and not repayment of deposit or loan? 2. Whether, on the facts and under the circumstances of the case, the Appellate Tribunal was right in holding that penalty under section 271E is not leviable ?" 2. The facts leading to the above substantial questions of law are as under: 3. The assessee is a closely-held company in which the public are not substantially interested. The relevant assessment year is 1990-91 and the corresponding accounting year ended on March 31, 1990. The assessee filed its return of income on December 31, 1990, admitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lying with the provisions of section 269T. Further, it is contended that the assessee had availed of 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. 5. Learned counsel appearing for the assessee submitted 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 the 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. 6. Heard counsel. The assessee had received cash over a period of time, as advance towards allotment of shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elow 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 "269T.(1) No company (including a banking company), co-operative society or firm shall repay to any person any deposit otherwise than by art account payee cheque or account payee bank draft where the amount of the deposit, or where the amount of the deposit is to be repaid with any interest, the aggregate of the amount of the deposit and such interest, is ten thousand rupees or more: Provided that where the repayment is by a banking company or co-operative bank, such repayment may al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to or in relation to the repayment of any deposit before the date on which the Income-tax (Second Amendment) Act, 1981, receives the assent of the President." 9. The above section provides that no branch of a banking company, co operative bank and no other company or co-operative society or partnership firm or other person, can repay any deposit made with such entity otherwise than by an account payee cheque or an account payee draft drawn in the name of the person who has made the deposit. The specific word used in the provision is "deposit". In this case, the finding is that there is no deposit. Section 273B of the Act deals with "penalty not to be imposed in certain cases". Section 273B, as on the relevant period, reads as under: "273B ..... X X X X Extracts X X X X X X X X Extracts X X X X
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