Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “F” BENCH, MUMBAI
Before: SHRI AMARJIT SINGH, JM & AMARJIT SINGH, AM
O R D E R
PER AMARJIT SINGH, JM:
The Revenue as well as assessee have filed the above mentioned appeal as well as cross-objection against the order dated 24.09.2020 passed by the Commissioner of Income Tax (Appeals)-48, Mumbai [hereinafter
C.O. No.10/Mum/2022 A.Y.2010-11 referred to as the “CIT(A)”] relevant to the A.Y.2010-11 in which the penalty levied by the AO has been ordered to be deleted.
CROSS OBJECTION NO. 10/MUM/2022 2. The cross-objection filed by the assessee against the order dated 24.09.2020 passed by the Commissioner of Income Tax (Appeals)-48, Mumbai relevant to the A.Y.2010-11 in which the penalty levied by the AO has been ordered to be deleted.
The assessee has raised the following cross-objection: -
1. The Ld. CIT(A) erred in upholding the levy of penalty u/s 271D of the Act vide order dated 28.08.2014 2. It is submitted that the penalty order passed by the learned AO is barred by limitation hasty and bad in law and ought to be cancelled. 3. The respondent reserves the right to add, to alter or to amend the grounds of appeal
.”
4. The brief facts of the case are that the during the course of assessment proceeding, the AO observed that the appellant had violated the provisions of Section 269SS of the Act. After completion of the assessment u/s 143(3) vide order dated 20.03.2013, the AO made a reference to the Addl. CIT through a letter dated 20.02.2014 intimating that the appellant had accepted loan amounting Rs.7.46 crores from the various sister concerns, through journal Entry and hence otherwise than through account payee cheque/draft, thereby resulting into violation of Section 269SS of the I. T. Act. Subsequently, Addl. CIT issued a notice to the assessee on C.O. No.10/Mum/2022 A.Y.2010-11 27.02.2014 to show cause as to why the penalty u/s 271D should not be levied for the violation of provisions of Section 269SS of the Act. The assessee raised the various contentions in support of its claim that the penalty is not leviable which including unjustified initiation of penalty proceeding, journal entries not being covered by Section 269SS, Section 271D not applicable to the transaction between sister concerns, no tax evasion on account of passing of such journal entries, existence of a reasonable cause as provided u/s 273B etc. The Addl. CIT rejected all the contention and levied the penalty in view of the provisions u/s 269SS of the Act by virtue of order dated 28.08.2014. Subsequently, the assessee filed an appeal before the CIT(A) by raising the contention to the fact that the penalty order is barred by limitation and also raised other ground and on the basis of this merit to the fact that the penalty is not leviable when journal entry has been passed. The CIT(A) allowed the claim of the assessee on merits but rejected the contention of limitation. The assessee filed the cross- objection on merits. The revenue has filed the appeal against the deletion of penelty before us.
CROSS-OBJECTION 10/MUM/2022 5. We have heard the argument advanced by the Ld. Representative of the parties and perused the record. The assessee has raised the cross- objection to the fact that the penalty is barred by limitation, hence, the penalty order is not liable to be sustainable in the eyes of law. The facts which are not in dispute that the AO initiated the penalty on 20.03.2013 and brought this fact to the notice of the Addl. CIT on 20.02.2014. The Addl. CIT issued the notice u/s 274 r.w. 271 of the Act on 27.02.2014 and C.O. No.10/Mum/2022 A.Y.2010-11 subsequently passed the order on 28.08.2014. The contention of the assessee is that the order passed by Addl. CIT for levy the penalty is barred by limitation. The Ld. Representative of the assessee has placed reliance upon the decision of the Hon’ble High Court in the case of CIT Vs. Hissaria Brothers 291 ITR 244 (Raj). However, on the other hand, the Ld. Representative of the Department has strongly relied upon the finding of the CIT(A) on the issue of limitation. Anyhow, the penalty was initiated on 20.03.2013 by issuance of notice by AO. Thereafter, the AO brought this fact to the notice of Addl. CIT on 20.02.2014. The notice was issued on 27.02.2014 by Addl. CIT. Thereafter, the penalty order was passed on 28.08.2014. The period is required to be reckoned from 20.03.2013 then no doubt the limitation period has been expired and if the limitation period be reckoned from 27.02.2014 i.e. the date of issuance of penalty notice by Addl. CIT even then the limitation has been expired on 26.08.2014. However, the penalty was passed on 28.08.2014. On this point of limitation, the Ld Represent of the Assessee has placed Reliance of the decision of the Hon’ble High Court in case titled as CIT Vs. Hissaria Brothers 291 ITR 244 (Raj). The relevant finding is hereby as under: - “27. We are, therefore, of the opinion that since penalty proceedings for default in not having transactions through the bank as required under sections 269SS and 269T are not related to the assessment proceedings but are independent of it, therefore, the completion of appellate proceedings arising out of the assessment proceedings or the other proceedings during which the penalty proceedings under sections 271D and 271E may have been initiated has no relevance for sustaining or not sustaining the penalty proceedings and, therefore, C.O. No.10/Mum/2022 A.Y.2010-11 clause (a) of sub-section (1) of section 275 cannot be attracted to such proceedings. If that were not so, clause (c) of section 275(1) would be redundant because otherwise, as a matter of fact every penalty proceeding is usually initiated when during some proceedings such default is noticed, though the final fact finding in this proceeding may not have any bearing on the issues relating to establishing default, e.g., penalty for not deducting tax at source while making payment to employees, or contractor, or for that matter not making payment through cheque or demand draft where it is so required to be made. Either of the contingencies does not affect the computation of taxable income and levy of correct tax on chargeable income; if clause (a) was to be invoked, no necessity of clause (c) would arise.
Thus, both on the ground that the transaction in question of retention of sale price by the Kachcha Arhatiya did not amount to deposit and its utilisation and dealing with it at the instance of farmer constituents did not amount to repayment of loan or deposits within the meaning of section 269SS or section 269T, and on the ground that limitation under section 275(1)(c) applies to such proceedings, we hold in favour of the respondent.”
Subsequently, the matter came into the consideration of Hon’ble Supreme Court who dismissed the appeal of the revenue in the case of CIT Vs. Hissaria Bros. 386 ITR 719. No doubt, at the time of argument, the Ld. Representative of the DR has strongly placed reliance upon the decision in the case of Grhalakshmi Vision Vs. ACIT (2015) 379 ITR 100 in which it is specifically held that the penalty is liable to be reckoned from the notice issued by ACIT but in the instant case also if the period be reckoned from the initiation of notice by ACIT then the limitation period
C.O. No.10/Mum/2022 A.Y.2010-11 has also been expired that the said decision is contrary to the decision of the Hissaria Brothers (supra), hence, the same is not helpful to the revenue. Taking into consideration to the factual position of the present case which speaks about the limitation period which had been expired before passing the order specifically speaks about no jurisdiction meaning thereby the order in question is barred by limitation. Taking into account of all the facts and circumstances, we are of the view that the finding of the CIT(A) is not justifiable in this regard to the limitation. Hence, we set aside the same and decide the cross-objection in favour of the assessee against the revenue.
In the result, the cross-objection filed by the assessee is hereby allowed.
7. The appeal filed by the revenue against the order dated 24.09.2020 passed by the Commissioner of Income Tax (Appeals)-48, Mumbai relevant to the A.Y.2010-11 in which the penalty levied by the AO has been ordered to be deleted.
The revenue has raised the following grounds: -
1. “On the facts and the circumstances of the case and in law the Ld. CIT(A} erred in law in deleting the penalty of Rs. 74600000/u/s 271D of the IT Act.” 2. “On the facts and in circumstances of the case and in law the Ld. CIT(A) ered in law in granting the benefit of section 2738 to the assessee, when the assessee had failed to demonstrate existences of any " reasonable cause” during the penalty proceedings.”
C.O. No.10/Mum/2022 A.Y.2010-11 3. “On the facts and in circumstances of the case and in law the Ld. CIT(A) erred in law in deleting the penalty u/s 271D without appreciating the fact that even bonafide transactions cannot be taken out of the sweep of the provisions of section 269SS if the payments are not routed through the specified channels unless and until exceptional circumstances are proved.”
The brief facts of the case are not liable to be repeated because the facts are the same as discussed above while deciding the cross-objection of the assessee bearing C.O. NO.10/Mum/2022.
We have heard the argument advanced by the Ld. Representative of the parties and perused the record. Before going further, we deem it necessary to advert the finding of the CIT(A) on record: - “5.2 I have considered the facts of the case, submission and contentions of the assessee as also the order of the AO. Rendezvous Sports World, a non-incorporated. entity, consisting of the assessee, Harshad Mehta, M/s. B. Arun Kumar & Co. etc. alongwith other persons were successful bidder for IPL, Kochi Team of BCCI, in the auction held on 15/16" March 2010. In terms of the memorandum they were supposed to pay a performance deposit of Rs. 46 crs. to the BCCI by 17.00 hrs IST, 19th March, 2010. However, the assessee company did not have sufficient funds with it, to pay its share of 7.6 cr. Only, M/s B. Arun Kumar and Co., another co-bidder had balances of Rs. 35.19 crs and was in position to pay. Since money was to be remitted to the BCCI, within 2 days and normal clearing process of cheque from B. Arun Kumar & Co. account to the assesee‟s bank account and then to BCCI, would have taken a much longer period, B.
C.O. No.10/Mum/2022 A.Y.2010-11 Arun Kumar & Co. paid a sum of Rs. 7.46 crs. to Anchor Earth Ltd , another Co-bidder, on behalf of the assessee who in turn paid it to the BCCI on 18.03.2010. Accordingly B. Arun Kumar & Co debited the assessee's account through a journal entry, which is the ~\ subject matter of this appeal. Had they not done this, they might have lost the franchise of Kochi IPL Team. In my considered view, there is nothing wrong in such a transaction, which was made on account of business expediency and would come under reasonable cause as defined u/s. 273B of the Act. The assessee in this regard has also relied upon varioud judgments and case laws which are discussed below.
5.3. The Hon'ble ITAT, Mumbai, in the case of Lodha Builders in (A.Y. 2007-08) has held that such a transaction (through journal entries) will not come in the ambit of sec. 271D, for the simple reason that this was a reasonable cause as envisaged u/s. 273B of the Act. Relevant observations of the Hon‟ble ITAT‟s finding is reproduced as under:
“23. Now, we shall take upo the applicability of provisions of section 273B of the act qua the reasonable cause to be proved by the assessee. The provision of section 273B of the Act read as under:
“section 273"Section 273B. Notwithstanding anything contained in the provisions of [clause (b) of sub-section (1) of [section 271, section 271A, [section 271AA], section 271B, [section 271BA], [section 271BB,] section 271C, [section 271CA,] section 271D, section 271E, [section 271F, [section 271FA,] [section 271FB,] [section 271G,]}} [section 271H,] clause (c) or clause (ad) of sub-section (1) or sub- section (2) of section 272A, sub-section (1) of section 272AA] or [section 272B or] {sub-section (1)[or sub-section (1A)] of section C.O. No.10/Mum/2022 A.Y.2010-11 272BB or] [sub-section (1) of section 272BBB or] clause (b) of sub- section (1) or clause (b) or clause (c) of sub-section (l)of section 273, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provisions if he proves that there was reasonable cause for the said failure.]”
Brief facts of the present case are that the assessee belongs Lodha group of cases and there are large number of transactions involving the receipts and payments of loans and advances among the sister concerns of the Lodha group settled by way of journal entries'. During the assessment proceedings, AO asked the assessee to show cause as to why loans were accepted / repaid other than by the account payee cheque / draft. In this regard, assessee informed that the said loans / advances were transacted with the Sister concems only by way of „journal entries' and there is no cash transactions involved the provisions of section 269SS and 269T have no application to the facts of the case. Thus, it is the case of the assessee that the said transactions with the sister concerns are for commercial reasons and they should be kept outside the scope of the provisions of sections 269SS/269T of the Act. During the penalty proceedings before the Addl CIT, there was an inquiry into the reasons for violation of the said provisions of the Act and the assessee explained the said reasons (vide para 7.5 of the penalty order) which are already extracted above. The Addl. CIT did not consider the „explanations‟ as the „reasonable causes' and imposed the penalties in all the seven cases under consideration.
C.O. No.10/Mum/2022 A.Y.2010-11 25. During the first appellate proceedings also, assessee made a detailed submission on various aspects of the reasonable causes which were already discussed in the paras above. On perusal of the impugned order, we find that CIT (A) relied heavily on the judgment of the jurisdictional High Court in the case of Triumph International (I) Ltd, supra dated 17.8.2012 for the proposition that the receiving loans and repayments through „journal entries' constitutes „violation' within the meaning of provisions of section 269SS and 269T of the Act. The contents of para 9 of the said judgment are relevant here which read as under:
9, The question as to whether loans / deposits can be repaid by debiting the accounts through journal entries has been considered by this Court in the assessees own case in Income Tax Appeal No. 5746 of 2010 decided on 12° June, 2012. Applying the ratio laid down therein we hold that receiving loans / deposits through journal entries would be in violation of section 269SS of the Act. However, as rightly contended by Mr. Pardiwala, Ld Senior Advocate appearing on behalf of the assessee, the transactions in question were undertaken not with a view to receive loans / deposits in contravention of section 269SS but with a view to extinguish the mutual liability of paying / recetving the amounts by the assessee and its sister concern to the customers. In the absence of any material on record to suggest that the transactions in question were not reasonable or bona fide and in view of section 273B of the Act, we see no reason to interfere with the order of the Tribunal in deleting the penalty of Rs. 22.99 Crs.
From the above, it is evident that the Hon'ble High Court has granted relief to the assessee on finding that there is no material to C.O. No.10/Mum/2022 A.Y.2010-11 suggest that the transactions in question are not reasonable or bona fide. Of course, it is the finding of the Honble High court that the impugned journal entries in that case do not escape the rigors of the provisions of section 269SS/269T of the Act. The CIT (A) did not appreciate the reasons' given by the assessee for receiving loans and advances through journal entries' as Reasonable causes‟. It is the finding of Honble High court in the case of M/s Triumph International Ltd supra, that „the transactions in question were undertaken not with a view to receive loans / deposits in contravention of section 269SS but with a view to extinguish the mutual liability of paying / receiving the amounts by the assessee and its sister concern to the customers. In the absence of any material on record to suggest that the transactions in question were not reasonable or bona fide and in view of section 273B of the Act, we see no reason to interfere with the order of the Tribunal in deleting the penalty. He ignored the above finding of the Court and confirmed the penalty levied by the Addl. CIT. Aggrieved with the above decision of the CIT (A), the assessee is in appeal before the Tribunal with the argument that the assessee's reasons constitutes a reasonable cause.
During the proceedings before us, Ld Counsel for the assessee summarized all the transactions involving all the sister concerns and grouped the various transactions entered in the books of accounts by way of journal entries into 7 categories. The details of these seven groups are submitted as under:
I, Alternate mode of raising funds;
Assignment of receivables;
C.O. No.10/Mum/2022 A.Y.2010-11 3. Squaring up transactions;
Operational efficiencies/MIS purpose;
Consolidation of family member debts; . Correction of errors; and
Loans taken in case 27.1. All the transactions that involved the impugned journal entries fall in one of the above seven reasons and they are only for business purposes' of the assessees' under consideration.
it is the submission of assessee that the Hon'ble Court has laid‟ down the broad principles for determining the reasonable cause? within the meaning of section 273B of the Act. The judgment in the case of Triumph International (1) Itd. dated 12.06.2012 ( this judgment is different from that of judgment of Triumph International (D Itd. dated 17.08.2012) and it explains the guidelines for the expression "reasonable cause"
The contents of paras 23 and 24 of the-said judgment of the Hon'ble High Court in the case or Triumph International (Dtd. dated 12.06.2012 reported in 345 ITR 370 (Bom) are relevant and the same reads as under "23. The expression „reasonable cause‟ used in section 273B is not defined under the Act. Unlike the expression „sufficient cause” used in section 249(3), 253(5) and 260A(2A) of the Act, the legislature has used the expression 'reasonable cause‟ in section 273B of the Act. A C.O. No.10/Mum/2022 A.Y.2010-11 cause which is reasonable may not be a sufficient cause. Thus the expression „reasonable cause' would have wider connotation then the expression „sufficient cause. Therefore, the expression „reasonable cause' in section 273B for non-imposition of penalty under sec. 271E would have to be construed liberally depending upon the facts of the case.
“32. In the present case, the cause shown by the assessee for repayment of the loan / deposit otherwise than by account-payee cheque / bank draft was on account of the fact that the assessee was liable to receive amount towards the sale price of the shares sold by the assessee to the person from whom loan / deposit was received by the assessee. It would have been an empty formality to repay the loan / deposit amount by account-payee cheque / draft and receive back almost the same amount towards the sale price of the shares. Neither the genuineness of the receipt of loan / deposit nor the transaction of repayment of loan by way of adjustment through book entries carried out in the ordinary course of business has been doubted in the regular assessment. There is nothing on record to suggest that the amounts advanced by Investment Trust of India to the assessee represented the unaccounted money of the Investment Trust of India or the assessee. The fact that the assessee company belongs to the Ketan Parekh Group which is involved in the securities scam cannot be a ground for sustaining penalty imposed under Section 271E of the Act if reasonable cause is shown by the assessee for failing to comply with the provisions of Section 269T. It is not in dispute that settling the claims by making journal entries in the respective books is also one of the recognized modes of repaying loan / deposit. Therefore, in the facts of the present case, in our opinion, though the assessee has C.O. No.10/Mum/2022 A.Y.2010-11 violated the provisions of Section 269T, the assessee has shown reasonable cause and, therefore, the decision of the Tribunal to delete the penalty imposed under Section 271E of the Act deserves acceptance”
We find that there is no finding of AO in the order of the AO during the assessment proceedings that the impugned transactions constitutes unaccounted money and ave not bona fide or not genuine, As such, there is no information or material before the AO to suggest or demonstrate the same. In the language of the Honble High court, ,neither the genuineness of the receipt of loan/deposit nor the transaction of repayment of loan by way of adjustment through book entries carried out in the ordinary course of business has been doubted in the regular assessment. Admittedly, the transactions by way of journal entries are aimed at the extinguishment of the mutual liabilities between the assessees and the sister concerns of the group and such reasons constitute a reasonable cause.
In the present case, the causes shown by the assessee for receiving or repayment of the loan/deposit otherwise than by account-payee cheque/bank draft, was on account of the following, namely: alternate mode of raising funds; assignment of receivables; Squaring up transactions; operational efficiencies/MIS purpose; consolidation of family member debts; correction of errors; and loans taken in case. In our opinion, all these reasons are, prima facie, commercial in nature and they cannot be described as non-business by any means. Further, we asked ourselves as to why should the assessee under consideration take up tssuing number of account payee cheques / bank drafts which can be accounted by the journal entries. This being the spirit of C.O. No.10/Mum/2022 A.Y.2010-11 Hon'ble High Court of Bombay, we adopt the same to the present issue. As such, the same is binding on us. What is the point in issuing hundreds of account payee cheques / account payee bank drafts between the sister concerns of the group, when transactions can be accounted in books using journal entries, which is also an accepted mode of accounting? In our opinion, on the factual matrix of these cases under consideration, journal entries should enjoy equal immunity on par with account payee cheques or bank drafts. Of course, the above conclusions apply so long as the transactions are for business purposes and do not involve unaccounted money and they are genuine. In fact, such journal entries shall save large number of cheque books for the banks.
Further, There is no dispute that the impugned journal entries in the respective books were done with the view to raise funds from the sister concerns, to assign the receivable among the sister concerns, to adjust or transfer the balances, to consotidate the debts, to correct the clerical errors etc. In the language of the Hon'ble High court, the said „journal entries„ constitutes one of the recognized modes of recording the loan/deposit, The commercial nature and occurrence of these transactions by way of journal entries is in the normal course of business operation of the group concerns. In this regard, there is no adverse finding by the AO in the regular assessment. AO has not made out in the assessment that any of the impugned transactions is aimed at non commercial reasons and outside the normal business operations. As such, the provisions of section 2698S and 269T of the Act shall not be attracted where there is no involvement of the „money „as held by the Hon'ble High Court of Delhi in the above cited cases, supra. Therefore, in the facts of the present case, in our ) provisions
C.O. No.10/Mum/2022 A.Y.2010-11 of Section entries, the assessee penalty opinion, though the assessee has violated the 269SS / 269T of the Act in respect of journal has shown reasonable cause and, therefore, the sustained Imposed under Section 271D/E of the Act are not sustainable. Regarding an amount of money' sold to have been paid m violation of the said provisions, the same needs to be deleted in view of our decision on the legal issue discussed in para 16 to 22 of the this order. Accordingly, the grounds raised in this regard are allowed.
9-4 In doing so, the Hon'ble ITAT, Mumbai had relied upon the jurisdictional High Court decision in the case of Triumph International India Ltd. Date 17.08.2012, where in an identical mater was decided. in this case, the Hon bi Court held as under :
"23. The expression „reasonable cause‟ used in section 273B is not defined under the Act. Unlike the expression „sufficient cause” used m section 249(3), 253(5) and 260A(2A) of the Act, the legislature has used the expression „reasonable cause‟ in section 273B of the Act. A cause which is reasonable may not be a sufficient cause. Thus the expression „reasonable cause' would have wider connotation then the expression „sufficient cause" . Therefore, the expression „reasonable cause‟ in section 273B for non-imposition of penalty under sec. 271E would have to be construed liberally depending upon the facts of the case.
“32. In the present case, the cause shown by the assessee for repayment of the loan / deposit otherwise than by account-payee cheque / bank draft was on account of the fact that the assessee was C.O. No.10/Mum/2022 A.Y.2010-11 liable to receive amount towards the sale price of the shares sold by the assessee to the person from whom loan / deposit was received by the assessee. It would have been an empty formality to repay the loan / deposit amount by account-payee cheque / draft and receive back almost the same amount towards the sale price of the shares. Neither the genuineness of the receipt of loan / deposit nor the transaction of repayment of loan by way of adjustment through book entries carried out in the ordinary course of business has been doubted in the regular assessment. There is nothing on record to suggest that the amounts advanced by Investment Trust of India to the assesse the aesessee, The aeeounted money of the Investment Trust of India or at the assessee company belongs to the Ketan Parekh Group which is the securities scam cannot be a for sustaining penalty imposed under Section 271E of the Act if reasonable cause is shown by the assessee for failing to comply with the provisions of Section 269T. It is not in dispute that settling the claims by making journal entries in the respective books is also one of the recognized modes of repaying loan / deposit. Therefore, in the facts of the present case, in our opinion, though the assessee has violated the provisions of Section 269T, the assessee has shown reasonable cause and, therefore, the decision of the Tribunal to delete the penalty imposed under Section 271E of the Act deserves acceptance”
9-6 Similar decision have been rendered by the Hon‟ble Bombay High Court in the case of CIT Vs. Ajinath High Tech Builders (P) Ltd., 92 Taxmann.com 228dated 06.02.2018, wherein, the Court held as under:
C.O. No.10/Mum/2022 A.Y.2010-11 We find that the impugned order of the Tribunal has on application of the test laid down for establishment of reasonable cause, for breach of Section 269SS of the Act by this Court in Triumph International Finance (supra) found that there is a reasonable cause in the present facts to have made journal entries reflecting deposits. The Tribunal while relying upon the order of this Court in Triumph International Finance (supra) has held that in the present facts, neither the genuineness of receipt of loans/deposits by way of an adjustment through journal entries carried out in the ordinary course of business has been doubted in the regular assessment proceedings. It held in the present facts the transaction by way of journal entries was undisputedly done to raise funds from sister concerns, to adjust or transfer balances to consolidate debts, to correct clerical errors etc. Further, the Tribunal records that as observed by this Court in Triumph International Finance (supra) that journal entries constituted a recognized modes of recording of transactions and in the absence of any adverse finding by the authorities that the journal entries were made with a view to achieve purposes out side the normal business operations or there was any involvement of money, then, in these facts there was a reasonable cause for not complying with Section 269SS of the Act. Mr. Mohanty's submission that the test laid down in Triumph International Finance (supra) will have no application in the present facts in view of the large number of entries in this case as compared to only one entry in the case before this Court. The test of reasonable cause can not, in the present facts be determined on the basis of the number of entries. If there was a reasonable cause for making the journal entries, then, the number of entries made, will not make any difference. Besides, on facts, the C.O. No.10/Mum/2022 A.Y.2010-11 Tribunal was satisfied with the reasons given by the Assessee for reasonable cause and this finding is not shown to be perverse. Finally, the issue of there being a reasonable cause or not is an issue of fact. No inference of law and/or issue of interpretation is to be made. The decision relied upon by the Revenue in case of Premier Breweries Ltd. (supra) concerned itself with the issue of a claim for deduction under Section 37 of the Act on the basis of the Agreements entered into between the parties. The inference of law in that case was whether on the facts, it could be inferred that the claim for deduction is in respect of expenditure incurred wholly and exclusively for the purposes of the business. Thus, it would involve a question of interpretation of the agreements etc. from which an inference is to be drawn. Further, it also involves application of principles of law to the facts for the purposes of deductions and, therefore, it would lead to a question of law. Therefore, the Court held in the facts of that case that a question of law does arise. (f) In this case, the issue of reasonable cause is an inference of fact from facts and, therefore, a question of fact. The Supreme Court decision in Sree Meenakshi Mills Ltd. v. CIT [1957] 31 ITR 28 had laid down the tests to determine a question of law and/or fact. In the above context, the Court observed that when the finding is one of fact, the fact that it itself is an inference from other basic facts, will not alter its character as one of fact. Therefore, the issue of there being reasonable cause or not, is a question of fact and unless it is shown to be perverse, we would normally not interfere. (g) In the above circumstances, the view taken by the Tribunal on the facts before tt, is a possible view and does not give rise to any substantial question of law.
C.O. No.10/Mum/2022 A.Y.2010-11 In any event, as rightly pointed out by Mr. Sridharan, learned Senior Counsel for the respondents assesses, the order of this Court in Triumph International Finance (supra) was rendered on 12th June, 2012. This, was in an appeal filed by the Revenue from the order of the Tribunal dated 29th January, 2008, which had held that deposits/loans received through journal entries do not fall with the mischief of Section 269SS of the Act, so as to invite penalty under Section 271D of the Act.
This, the Tribunal did by following its earlier orders in the case of V.N. Parekh Ltd. and Ketan Parekh as indicated in the order of this Court in Triumph International Finance (supra). Our attention was also invited to numerous reported decisions of the Tribunal in the cases of Sunflower Builders v. Dy. CIT [1997] 61 ITD 227 (Pune), Asstt. CIT v. Ruchika Chemicals & Investment (P.) Ltd. [2004] 88 TTJ 85 (Delhi) and Asstt. CIT v. Lala Murari Lal & Sons [2004] 2 SOT 543 ( Luck) wherein it has been held journal entries in the book of accounts indicating deposit/loans will not fall foul of Section 269SS of the Act. Besides, the Delhi High Court in CIT vy. Noida Toll Bridge Co. Ltd. [2004] 139 Taxman 115/[2003] 262 ITR 260inter alia held that payment of Rs. 4.85 crores made by the assesses by a journal entry in its books of account by crediting the account of ILFS, would not fall foul of Section 2695S of the Act. This particularly in the absence of any payment being made in cash. (i) In the present facts, the period during which the journal entries were made by the respondents was in the previous year relevant to the Assessment Year 2009-10 i.e. Financial Year 2008-09. At that time, the decisions of the Tribunal in the cases of Triumph International (supra) and decision of V.H. Parekh (P.) Ltd., Ketan V. Parekh, Sunflower Builders (supra),
C.O. No.10/Mum/2022 A.Y.2010-11 Ruchika Chemicals (supra), Lala Murari Lal (supra) and the decision of the Delhi High Court in Noida toll Bridge Co. Ltd clarified/stated the position as always deposits/loans through journal entry less would certainly be hit 269SS of the Act. Nevertheless, court has prior to the decision of this is court in International Finance (supra), there was reasonable cause for respondents to receive deposit/loan through journal entries. This non compliance with Section 26955 of the Act would certainly be a reasonable cause under Section 273B of the Act for non-imposition of penalty under Section 271D of the Act.
In the above circumstances, the view taken by the Tribunal in the impugned order holding that no penalty can be imposed upon the respondents as there was a reasonable cause in terms of Section 271B of the Act for having received loans/deposits through journal entries ts at the very least is a possible view in the facts of the case.” existing in law, the receiving of 5.7 It may be further mentioned that the SLP filed by the department against the above order of Hon'ble Bombay High Court was dismissed by the Hon'ble Supreme Court, vide order dated 03.12.2018, 102 Taxman.Com, 57(SC).
5.7. Similarly, Hon‟ble ITAT, Mumbai, in the case of Lodha Builders Vs. ACIT, while dealing with an identical issue and while deleting penalty u/s. 271D, observed as under:
C.O. No.10/Mum/2022 A.Y.2010-11 “ (18) Similar interpretations were taken by the ITAT, Rajkot Bench (Third Member) in the case of ACIT vs. Dipak Kantilal Takvani [2013] 39 taxmann.com 53 ( Rajkot - Trib.) (TM) and the penalty orders u/s 271D and 271E of the Act, being unconnected to the income of the assessee, are to be considered as per the provisions of clause (c) of section 275(1) of the Act. The said Rajkot Bench of ITAT has followed the judgment of the Rajasthan High Court in the case of itendra Singh Rathore (supra). In this case, the Hon"ble High Court also observed that the first show cause notice for levy of penalty was issued by the AO though the authority obtained to initiate penalty proceedings has also subsequently issued a show cause notice as well. Hon‟ble High Court held that the penalty proceedings were initiated by issue of first notice from the AO and not from the date of issue of notice by the JCIT and thus, the penalty order passed after expiry of 6 months from the end of the month in which the action for imposition of penalty initiated was barred by limitation. The said decision of the ITAT in the case of Dewan Chand Amit Lal (supra) deferred at the relevant point of time that the order of the Tribunal in the case of Hissaria Bros (supra). However, it is a fact that the said decision of the Tribunal in the case of Hissaria judgment from the jurisdictional High Court, as stated earlier, the said judgment from the Rajasthan High Court was also followed in the case of Jitendra Singh Rathore (supra). Therefore, in a case where the AO made a reference in the assessment order about the requirement of initiating the penalty proceedings and acted by making a reference to the JCIT, who is actually empowered by the statute to impose the penalty u/s 271D and 271E of the Act, the limitation should be counted right from the date
C.O. No.10/Mum/2022 A.Y.2010-11 of such reference in the assessment order/issue of show cause notice by the AO.
Thus, the judgment in the case of M/s Worldwide Township Projects Ltd vide is relevant for the proposition that the provisions of section 275(1 Xa) of the Act would not be applicable to the penalties u/s 271D of the Act and the provisions of section 275(1c) would only be attracted. This is also relevant for another ratio that the period will be counted from the date of assessment order where the Assessing Officer decided to make a referral to the Adal. CIT. In this case, the Hon'ble ITAT also observed that since the payment is not made in cash and it is not unaccounted money, and it is also not 6the case, where, bonafide are not genuine, From the provisions of section 269SS may not be attracted.”
5.8 Further similar decision was also rendered by the Hon'ble Bombay High Court in the case of Lodha Builders Ltd. dated 12.06.2012. It is also noted that SLP filed by the department against the above order was dismissed by the Hon‟ble Supreme Court by its order dated 20.01.2019.
5.9 In view of the above facts and judicial decisions, I held that the assessee was presented by reasonable cause in making payment to BCCI and then receiving a loan of Rs. 7.46 crs. through general entry and the same is, therefore, covered u/s. 273B of the Act. Evidently, there is no cash payment or unaccounted payment or transaction of unexplained nature. The assessee has explained the circumstances, under which the above payments were made. Therefore, considering the overall facts of the case, I am of the view that assessee is not liable for penalty u/s. 271D. The same is, therefore, directed to be deleted.
C.O. No.10/Mum/2022 A.Y.2010-11 Therefore, even on merits, there is no case for levy of penalty against the assessee and it may not be held liable for penalty u/s. 271D of the Act. 5.10. Consequently, the ground no 2 taken by the assessee is allowed.”
On appraisal of the above mentioned finding, we noticed that the Ld. CIT(A) has held that there was reasonable cause in making the payment to BCCI and then received the loan of Rs.7.46 crores through general entry and the same was covered u/s 273B of the Act. There was no cash payment or unaccounted payment or transaction of unexplained nature. The assessee has explained the circumstances under which the above payment was made. The factual position described above is not disputed and while deciding the issue, the Ld. CIT(A) has relied upon the decision in the case of Lodha Builders in and the decision of jurisdiction High Court in the case of Triumph International India Ltd. Dated 17.08.2012 and the decision of the Jurisdictional High Court in the case of CIT Vs. Ajinath High Tech Builders Pvt. Ltd. 92 Taxmann.com 228 dated 06.02.2018 etc. The contention raised by assessee has properly been dealt with by CIT(A) and also properly appreciated by the law. The reasonable cause has properly been explained by assessee and facts are not distinguishable at this stage. Taking into account of all facts and circumstances, we are of the view that the finding of the CIT(A) is quite correct which is not liable to be interfered with at this appellate stage. Accordingly, we affirm the finding of the CIT(A) and decide this issue in favour of the assessee against the revenue.
C.O. No.10/Mum/2022 A.Y.2010-11 12. In the result, the appeal filed by the revenue is hereby dismissed and cross objection filed by the assessee is hereby allowed.