Penalty : Deposits/Loans in cash in excess of prescribed limits : S. 269T and S. 271E : Repayment of advance towards share application money : Neither deposit nor loan : Bona fide belief : Penalty not justified.

“(i) The assessee had received cash over a period of time as advance towards allotment of shares from 16 persons without stipulating any time frame towards return/refund of money without interest, in case of non-allotment of shares either fully or partly. The money retained by the company was neither deposit nor loan, it was only share capital advance.

(ii) The advance of share application money and repayment of such advances had not flowed from any undisclosed income of the assessee or the concerned persons. The assessee had not paid any interest at all on any of the advances repaid after some time. If the intention was to receive them as loan or deposit, then certainly the lenders would not have made the advances gratuitously. The assessee was not called upon to explain the default u/s.269SS of the Act on receipt of the advances of the earlier years, which would show that the assessee’s case was not governed by the said provisions.

(iii) Penalty u/s.271E is not automatic, and a bona fide belief to the effect that the receipt of the advance against allotment of shares would not be termed as loan or deposit, would be sufficient to drop the penalty leviable unless and until the material on record positively showed that the money received was only a deposit or loan.

(iv) There was no dispute that the advances were only against allotment of shares and not by way of loans or advances. In this case the reasonable cause was that the assessee was under bona fide belief that the money received was only for the purpose of allotment of shares. There was no material or evidence or any compelling reason produced by the Revenue to prove that the money received was a deposit or loan.”