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.”