OSTRO JAISALMER PRIVATE LIMITED vs. ADDITIONAL COMMISSIONER OF INCOME TAX & ORS.

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W.P.(C)/13541/2024HC DelhiDLHC01065023202426 September 2024Bench: HON'BLE MR. JUSTICE VIBHU BAKHRU,HON'BLE DR. JUSTICE SWARANA KANTA SHARMA2 pages
AI SummaryRemanded

What did the High Court hold?

The Delhi High Court held that if the petitioner's stated facts are correct, the transaction would not constitute a violation of Section 269T of the Income Tax Act, 1961. The Court referred to its own decision in Commissioner of Income Tax VI v. Worldwide Township Projects Ltd. (2014) 367 ITR 433 (Del) as covering this scenario. Consequently, the Court set aside the impugned order imposing the penalty of ₹147 crores. The matter was remanded to the Assessing Officer to verify the petitioner's claims. The petitioner is required to submit its ledger accounts for L&T and Infradebt, along with other necessary documents, to demonstrate that there was no cash inflow or outflow from Infradebt and that the transaction was solely reflected by book entries. The Assessing Officer is to pass a fresh order after providing the petitioner with an opportunity of hearing.

What were the facts?

The petitioner, Ostro Jaisalmer Private Limited, is challenging an order dated 31.08.2024 passed by the Additional Commissioner of Income Tax, imposing a penalty of ₹147 crores under Section 271E of the Income Tax Act, 1961, for Assessment Year 2018-2019. The penalty was levied for alleged violation of Section 269T of the Act. The petitioner had availed a loan of ₹293 crores from L&T Infrastructure Finance Company Limited in 2015. Subsequently, L&T assigned a portion of this loan, ₹147 crores, to India Infradebt Limited via a Deed of Assignment dated 28.06.2017, to which the petitioner was also a party. The petitioner claims it made book entries crediting Infradebt and debiting L&T, reflecting an outstanding of ₹147 crores to Infradebt and ₹146 crores to L&T, without any actual cash inflow or outflow from Infradebt.

What were the issues?

1. Whether the petitioner's act of reflecting a loan assignment through book entries, without actual cash movement from the assignee (India Infradebt Limited), constitutes a violation of Section 269T of the Income Tax Act, 1961, thereby attracting penalty under Section 271E? Assessee's Contention: The petitioner argues that if the facts are as stated, there is no violation of Section 269T. They rely on the decision of the Delhi High Court in Commissioner of Income Tax VI v. Worldwide Township Projects Ltd. (2014) 367 ITR 433 (Del), which they contend covers this situation. The petitioner asserts that the transaction was merely a change in the book entry reflecting the lender, with no actual cash inflow or outflow from India Infradebt Limited. Revenue's Contention: The judgment does not record any specific arguments made by the revenue on this issue.

Which sections of the Income-tax Act were involved?

Section 271E,Section 269T

AI-generated summary — verify with the full judgment below

$~73 * IN THE HIGH COURT OF DELHI AT NEW DELHI + W.P.(C) 13541/2024 CM APPL. 56645/2024 CM APPL. 56646/2024

OSTRO JAISALMER PRIVATE LIMITED .....Petitioner Through: Mr. Rohit Jain, Mr. Deepesh Jain and Mr. Sumarin Chaudhari, Advs.

versus

ADDITIONAL COMMISSIONER OF INCOME TAX & ORS.

.....Respondents

Through:

CORAM:

HON'BLE MR. JUSTICE VIBHU BAKHRU

HON'BLE MS. JUSTICE SWARANA KANTA SHARMA

O R D E R %

26.09.2024 1. Issue notice. 2. Learned counsel for the respondents accepts notice. 3. The petitioner has filed the present petition, inter-alia, impugning an order dated 31.08.2024 (hereafter the impugned order), passed by respondent no. 3, imposing a penalty of ₹147 crores under Section 271E of the Income Tax Act, 1961 (hereafter the Act) in respect of Assessment Year 2018-2019. The impugned order proceeds on the basis that the petitioner has violated the provisions of Section 269T of the Act. 4. The petitioner claims that it had availed a loan of ₹293 crores from L&T Infrastructure Finance Company Limited (hereafter L&T) in the year 2015. Subsequently, in terms of the Deed of Assignment dated 28.06.2017, L&T assigned a part of the said loan, to the extent of ₹147 crores to a company named India Infradebt Limited (hereafter Infradebt). The petitioner is also a party to the said Deed of Assignment. 5. It is the case of the petitioner that the petitioner had made entries in its books of account, crediting the ledger account of Infradebt and debiting the This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 04/10/2024 at 11:53:04

account of L&T. Its books of account now reflect that the petitioner owes an amount of ₹147 crores, out of a total outstanding of ₹293 crores, to Infradebt and ₹146 crores to L&T. 6. Concededly, if the facts as stated by the petitioner are correct, the same would not constitute violation of Section 269T of the Act. The said issue is covered by the decision of this Court in Commissioner of Income Tax VI v. Worldwide Township Projects Ltd.: (2014) 367 ITR 433 (Del). 7. In view of the above, we set aside the impugned order and remand the matter to the Assessing Officer to verify the facts as stated in the present petition. The petitioner shall file a copy of the ledger of account of L&T and Infradebt as maintained in its books of account, along with other documents that the petitioner considers necessary, to establish that there was no inflow or outflow of cash from Infradebt. And, the transaction is reflected solely by the book entries. The Assessing Officer will pass a fresh order after affording an opportunity of hearing to the petitioner. 8. The writ petition is disposed of in the aforesaid terms. Pending applications also stand disposed of.

VIBHU BAKHRU, J

SWARANA KANTA SHARMA, J SEPTEMBER 26, 2024 A

Click here to check corrigendum, if any This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 04/10/2024 at 11:53:04

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