CIT, JALANDHAR vs. M/S SPEEDWAYS RUBBER PVT. LTD.

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ITA/361/2009HC Punjab & HaryanaPHHC01084461200922 October 2009Author: MR. JUSTICE ADARSH KUMAR GOEL,MR. JUSTICE GURDEV SINGH3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the appeal preferred by the Revenue did not involve any substantial question of law. The Court found no merit in the Revenue's contention that the amount should have been treated as a loan or deposit. The finding of the lower authorities that the transaction was bonafide and the default was of a technical nature, which did not justify the levy of penalty, was not shown to be perverse or unreasonable. Therefore, the ITAT's deletion of the penalty was upheld. The appeal was dismissed. No issue was expressly left undecided.

What were the facts?

The Revenue, CIT, Jalandhar I, appealed against an order of the Income Tax Appellate Tribunal (ITAT), Amritsar Bench, for the assessment year 2001-02. The ITAT had deleted a penalty imposed under Section 271D of the Income Tax Act, 1961. The penalty was levied for alleged violation of Section 269SS, as the assessee, M/s Speedways Rubber Pvt. Limited, Jalandhar, accepted Rs. 20,000/- in cash as share application money. The Assessing Officer initiated proceedings, and the CIT(A) upheld the penalty. However, the CIT(A) also noted that the amount was not a loan or deposit, no interest was payable, the transaction was bonafide, the default was technical, and the amount was received from the public.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the ITAT was right in law in deleting the penalty imposed under Section 271D of the Income Tax Act, 1961, having violated the provision of Section 269SS of the Act? Assessee's contentions: The assessee argued that the amount received was not a loan or deposit, no interest was payable on it, the transaction was bonafide, and the default was of a technical nature. Furthermore, the amount was received from the public, not from directors or shareholders. The ITAT affirmed this view, relying on judgments such as Hindustan Steel Limited v. State of Orissa, CIT v. Kharaiti Lal & Co., CIT v. Maheshwari Nirma Udyog, CIT v. Lakshmi Trust Co., CIT v. Indore Plastics P.Limited, CIT v. Idhayam Publications Limited, and CIT v. Bazpur Coop.Sugar Factory Limited. The judgment of Jharkhand High Court in Bhalotia Engineering Works Limited v. CIT was distinguished. Revenue's contentions: The Revenue pressed the point that the amount should have been held to be a loan or deposit, as held in Bhalotia Engineering Works (supra).

Which sections of the Income-tax Act were involved?

Section 269SS,Section 271D,Section 260A

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH.

Date of decision: 22.10.2009 CIT, Jalandhar I, Jalandhar -----Appellant Vs. M/s Speedways Rubber Pvt. Limited, Jalandhar ----Respondent CORAM:- HON'BLE MR JUSTICE ADARSH KUMAR GOEL HON'BLE MR. JUSTICE GURDEV SINGH Present:- Mr. Vivek Sethi, Standing Counsel for the revenue. Adarsh Kumar Goel,J.

1.

This appeal has been preferred by the revenue under section 260A of the Income Tax Act, 1961 (in short, ‘the Act’) against the order dated 31.12.2008 of the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar passed in ITA No.388/(ASR)/2008, for the assessment year 2001-02, proposing to raise following question of law:- “Whether on the facts and in the circumstances of the case (having violated the provision of section 269SS of the Act) the ITAT was right in law in deleting the penalty imposed under section 271D of the Income Tax Act, 1961?”

2.

The Assessing officer initiated proceedings for alleged violation of section 269SS of the Act in as much as the assessee accepted share application money being Rs.20,000/- in cash. Thereafter, penalty was imposed. On appeal, CIT(A) upheld the stand of the assessee that the amount received was not loan or deposit and no interest was payable. It was further held that transaction was bonafide and default was of technical nature and in any case, the amount was received from public and not from directors or share holders. The Tribunal affirmed the said view. Reliance was placed on following judgments:- (i) Hindustan Steel Limited v. State of Orissa, 83 ITR 26 (SC). (ii) CIT v. Kharaiti Lal & Co

. (2004) 270 ITR 445 (P&H). (iii) CIT v. Maheshwari Nirma Udyog

, (2008) 302 ITR 201(Raj.) (iv) CIT v. Lakshmi Trust Co

., (2008) 303 ITR 99 (Mad.) (v) CIT v. Indore Plastics P.Limited

, (2003) 262 ITR 163 (MP). (vi) CIT v. Idhayam Publications

Limited, (2006) 285 ITR 221(Mad.) (vii) CIT v. Bazpur Coop.Sugar

Factory Limited, 172 ITR 321(SC).

3.

Judgment of Jharkhand High Court in Bhalotia Engineering Works Limited v. CIT, 275 ITR 399 was held to be distinguishable.

4.

We have heard learned counsel for the appellant.

5.

Only point which has been pressed is that amount should have been held to be loan or deposit, as held in Bhalotia Engineering Works (supra).

6.

We do not find any merit in the contention raised. The finding to the effect that transaction was bonafide and default was of technical nature which did not justify levy of penalty is not shown to be, in any manner, perverse or unreasonable.

7.

No substantial question of law arises.

8.

The appeal is dismissed. (Adarsh Kumar Goel) Judge October 22, 2009 (Gurdev Singh) ‘gs’ Judge 3

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