The Commissioner of Income-tax, Chennai v. M/s.Pride Remedies Private Ltd
[Citation -2014-LL-1203-20]

Citation 2014-LL-1203-20
Appellant Name The Commissioner of Income-tax, Chennai
Respondent Name M/s.Pride Remedies Private Ltd.
Court HIGH COURT OF MADRAS
Relevant Act Income-tax
Date of Order 03/12/2014
Assessment Year 2001-02
Judgment View Judgment
Keyword Tags share application money • account payee cheque • bona fide belief • legal infirmity
Bot Summary: For Appellant: Mr.T.R.Senthil Kumar Standing Counsel for Income Tax JUDGMENT The above Tax Case are filed by the Revenue as against the order of the Income Tax Appellate Tribunal raising the following substantial question of law: 2 Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in deleting the penalty order passed under Section 271D of the Income Tax Act 2. A show cause notice was issued on the ground that the assessee had violated the provisions of Section 269 SS by accepting the share application money instead of account payee cheque or account payee draft. Taking into account the objections filed by the assessee, the Assessing Officer passed an order levying penalty under Section 271D of the Income Tax Act for both the assessment years. The case of the asses-see is that, the amount received by the assessee is only for the purpose of allotment of shares and it is not a deposit or loan. The first appellate authority as well as the Tribunal have come to a correct conclusion after accepting the explanation offered by the assessee. In the present case, the assessee was under the bona fide impression that the money received was only towards allotment of shares and it is not a loan or deposit. Accordingly, the order of the Tribunal stands confirmed and both the Tax Case stand dismissed.


In High Court of Judicature at Madras Dated: 03.12.2014 Coram Honourable Mr.JUSTICE R.SUDHAKAR and Honourable Mr.JUSTICE R.KARUPPIAH Tax Case (Appeal) Nos.982 and 983 of 2014 & M.P.No.1 of 2014 Commissioner of Income Tax Chennai Appellant in both T.CAs Vs. M/s.Pride Remedies Private Ltd. 8/2, 3rd Street, Gill Nagar, Choolaimedu Chennai -600 094.Respondent in boht T.CAs APPEALs under Section 260A of Income Tax Act against order dated 16.12.2010 made in I.T.A.Nos.1686& 1687/Mds/2010 on file of Income Tax Appellate Tribunal, Chennai 'D' Bench. For Appellant: Mr.T.R.Senthil Kumar Standing Counsel for Income Tax JUDGMENT (Delivered by R.SUDHAKAR,J.) above Tax Case (Appeals) are filed by Revenue as against order of Income Tax Appellate Tribunal raising following substantial question of law: 2 Whether on facts and in circumstances of case, Appellate Tribunal was right in deleting penalty order passed under Section 271D of Income Tax Act?" 2. assessment in this case relates to assessment years 2001-02 and 2002-03. assessee company during assessment years in question had accepted share application money in cash from various persons. Assessing Officer was of view that money received as share application was of nature of deposit in hands of company. Hence, show cause notice was issued on ground that assessee had violated provisions of Section 269 SS by accepting share application money instead of account payee cheque or account payee draft. In response to show cause notice issued, assessee filed objections. Taking into account objections filed by assessee, Assessing Officer passed order levying penalty under Section 271D of Income Tax Act for both assessment years. Aggrieved by order of Assessing Officer, assessee filed appeals before Commissioner of Income Tax (Appeals), who after following decision of this Court reported in 304 ITR 417 (CIT V. Rugmini Ram Raghav Spinners Private Limited), held as follows:"19. In view of above discussion, it is hereby held that share application money received by way of transfer of shares held by Smt.Baby Rani and Shri Anand Shah would be outside scope of Section 269SS. amounts of Rs.1,05,000 received as share application money being less than Rs.20,000 from each of 3 8 individuals would also be outside scope of Section 269SS. In view of jurisdictional Madras High Court decision in 285 ITR 221 and 304 ITR 417, it is hereby held that ratio of Jharkhand High Court decision in 275 ITR 399 would not be applicable to facts of assessee's case and share application money received by assessee company would not be in nature of deposit as understood by provisions of Section 269SS. In any case, on facts of assessee's case, it is also hereby held that assessee had reasonable cause for committing default under Section 269SS, if any, as understood by provisions of Section 273B. Accordingly, penalty imposed in terms of Section 271D for Assessment Years 2001-02 and 2002-03 is hereby deleted in its entirety."3. Aggrieved by order of Commissioner of Income Tax (Appeals), Revenue has filed appeals before Income Tax Appellate Tribunal. Tribunal after hearing both parties, dismissed appeals, following decision of this Court cited supra, holding as follows: "5. In this context, it has been considered by CIT(A) in CIT vs. Rugmini Ram Raghav Spinners Ltd., 304 ITR 417. Hon'ble jurisdictional Madras High Court held in this case (304 ITR 417) that share application money is neither deposit nor loan and therefore, provisions under section 269-SS and section 269-T have no application and consequently, there can not be penalties under section 271-D and section 271-E. In view of above, we find that these two appeals filed by Revenue are liable to be dismissed." 4 4. As against order passed by Tribunal, Revenue is before this Court. 5. Heard learned Standing Counsel appearing for Revenue and perused materials placed before this Court. 6. In decision reported in 304 ITR 417 (CIT V. Rugmini Ram Raghav Spinners Private Limited), this Court had occasion to consider similar issue, wherein this Court held as follows: ".....if assessee proves that there is reasonable cause, he is not subject to levy of penalty. case of asses-see is that, amount received by assessee is only for purpose of allotment of shares and it is not deposit or loan. In this case, reasonable cause is that assessee was under bona fide belief that money received is only for purpose of allotment of shares. Also, there is no material or evidence or any compelling reason produced by Revenue to prove that money received is deposit or loan. first appellate authority as well as Tribunal have come to correct conclusion after accepting explanation offered by assessee. It is question of fact and order of Tribunal is not perverse one. concurrent finding given by both authorities below is based on valid materials and evidence. In case of CIT v. P. Mohanakala [2007] 291 ITR 278, Supreme Court held that whenever there is concurrent finding by authorities below, no interference 5 should be called for by High Court. Under these circumstances, we do not find any error or legal infirmity in order of Tribunal so as to warrant interference." 7. In present case, assessee was under bona fide impression that money received was only towards allotment of shares and it is not loan or deposit. Hence, following decision of this Court cited supra, we find no question of law much less any substantial question of law arises for consideration in this appeal. Accordingly, order of Tribunal stands confirmed and both Tax Case (Appeals) stand dismissed. No costs. Consequently, M.P.No.1 of 2014 is also dismissed. Index :Yes/No (R.S.,J) (R.K.,J) Internet:Yes/No 03.12.2014 sl To 1. Income Tax Appellate Tribunal, Chennai 'D' Bench. 2. Commissioner of Income Tax (Appeals), V, Chennai. 3.The Assistant Commissioner of Income Tax, Company Range V Chennai. 6 R.SUDHAKAR,J. AND R.KARUPPIAH,J. Sl T.C.(A) Nos.982 and 983 of 2014 & M.P.No.1 of 2014 03.12.2014 Commissioner of Income-tax, Chennai v. M/s.Pride Remedies Private Ltd
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