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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
These are two appeals filed by the Dy. Commissioner of Income-tax, Central Circle 7(3), Mumbai for Assessment Years 2013-14 and 2014-15 against the deletion of penalty under section 271D of the income-tax Act, 1961 (hereinafter referred to as 'Act’) in case of assessee. Both the appeals involved identical facts and therefore, they are heard together and dispose off by this common order.
Similarly, in is for Assessment Year 2014-15, wherein the penalty under Section 271D of the Act levied by the Assessing Officer of ₹1,17,23,991/- is also stands deleted by the CIT(A)-49, Mumbai dated 12.02.2019.
Therefore, the LD Assessing Officer is aggrieved with that and has preferred both these appeals.
The grounds of appeal
raised by learned Assessing Officer are as under :- for Assessment Year 2014-15
1. Whether on the facts and circumstances of the case and in law, the Hon'ble CIT(A) is justified in deleting the penalty of ₹1,17,23,991/- under section 271D holding that there was reasonable cause under section 273B for entering on transaction to transaction basis the given case for the existence of reasonable cause under section 273B which led to the exigency of contravention of provisions of Sections 269SS/ ST?
2. Whether on the facts and circumstances of the case and in law, the Hon'ble CIT(A) is justified in holding that the journal entries should enjoy equal immunity on part with account payee cheques and bank drafts?
3. whether on the facts and circumstances of the case and in law, the Hon'ble CIT(A) is justified in merely relying upon the High Court order in assessee’s group case company, Lodha Builders (P_ Ltd. In of 2015 vide order For Assessment Year 2013-14
1. Whether on the facts and in the circumstances of the case and in law, the Hon'ble CIT(A) is justified in deleting the penalty of ₹1,05,36,585/- under section 271D holding that there was reasonable cause under section 273B for entering on transaction to transaction basis in the given case for existence of reasonable cause under section 273B which led to the exigency of contravention of provisions of Sections 269SS/ST?
2. Whether on the facts and in the circumstances of the case and in law, the Hon'ble CIT(A) is justified in holding that the journal entries should enjoy equal immunity on part with account payee cheques and bank drafts?
3. Whether on the facts and in the circumstances of the case and in law, the Hon'ble CIT(A) is justified in merely relying upon the High Court Order in assessee’s group case company, Lodha Builders (P) Ltd. in of 2015 vide order dated 06.02.2018 without examining the cause behind each instance of default which, therefore, rendered the impugned order perverse, and thereby rendered the applicability of any judicial precedent as otiose?”
The facts for Assessment Year 2013-14 show that assessee is engaged in the business of land development and construction of real estate properties. It was assessed under section 143(3) of the Act on 30 March 2016 by the Dy. Commissioner of income tax, Central Circle 7(3), Mumbai.
Therefore, learned Jt. Commissioner of income tax [the LD Adjudicating Authority] issued show cause notice to the assessee on 29 July 2016.
Assessee filed a submission stating that assessee has not accepted any loan as well as there is no violation of provisions of section 269SS of the Act. Assessee also submitted raised several judicial precedents before the learned Adjudicating Authority. The learned Adjudicating Authority rejected the contention of the assessee and held that there is a violation of Provisions of Section 269SS of the Act and in absence of any reasonable cause, the assessee is exposed to the penalty under section 271D of the Act equivalent to the amount of loan. Accordingly, the penalty order under section 271D was passed on 30th September, 2016 levying the penalty of ₹1,05,36,585/-.
The assessee preferred the appeal before the learned CIT (A) who passed an order dated 28 February 2019. The learned CIT (A) after considering the decision of the sisters concern of assessee on identical facts and circumstances, he held that the journal entries resulting into the credit liability into the books of the assessee were held as loan acceptance by ld Adjudicating authority, therefore whether on such transaction where no loans are accepted but merely journal entries are passed is reasonable cause even if there is a violation of provision of section 269 SS of The Act. He held that there is a reasonable cause as envisaged u/s 273 B of the Act and therefore no penalty can be levied.
The learned Departmental Representative vehemently supported the orders of the learned Jt. Commissioner of income tax.
The learned Authorised Representative submitted that identical issue has been considered in case of the assessee’s sister concern wherein by series of decisions of co-ordinate Benches the identical penalties were deleted holding that acceptance of loan by journal entry is reasonable cause under section 273B of the Act and therefore, assessee cannot be penalized under section 271D of the Act. He therefore submitted that this issue is squarely covered in favour of assessee of all these decisions.
We have carefully considered the rival contentions and perused the orders of lower authorities. We find that identical issue has been considered by the co- ordinate Bench in case of assessee in DCIT (CC) 7 (3) , mumbai versus m/s. Macrotech developers ltd., (successor to m/s. Bellissimo crown buildmart pvt. Ltd. In AND ITA NO.3046/MUM/2019 AND ITA NO.3049/MUM/2019 AND ITA NO.4054/MUM/2019 dated - 25 November 2021 as under:-
“3.2. The ld. AO while completing the scrutiny assessment u/s.143(3) of the Act accepted the genuineness of the aforesaid transactions and also accepted the fact that these entries were passed by the assessee company in the normal course of its business. Accordingly, the ld AO did not proceed to make any addition with regard to the aforesaid transactions. Even the claim of deduction on account of advertisement expenses incurred by the assessee company through the passing of adjustment entries as detailed above, were duly allowed as deduction by the ld. AO. After the completion of assessment, the ld. AO forwarded the papers to 3.3. The ld. CIT(A) placed reliance on the decision of the Hon‟ble Jurisdictional High Court in the case of CIT vs. Triumph International (I) Finance Ltd., reported in 345 ITR 270 wherein it was held that the transactions through journal entries are also hit by the provisions of 269SS and 269T of the Act. The decision of the Hon‟ble Bombay High Court rendered on 12/06/2012 is significant and prior to this judgment, there were series of consistent decisions on Sections 269SS and 269T of the Act holding that mere passing of journal entries will not amount to receipts / payments otherwise done by account payee cheques or draft and accordingly, the same were not in contravention of provisions of 269SS and 269T of the a) Alternate mode of raising funds b) Assignment of receivables c) Squaring up of transactions d) Operational efficiencies / MIS purpose e) Consolidation of family member debts f) Correction of errors g) Loans taken in cash 3.4. The ld. CIT(A) gave a categorical finding that the transactions carried out with the aforesaid three parties i.e. Jawala Real Estate Pvt. Ltd., Shreeniwas Cotton Mills Limited & Lodha Developers Private Limited, which are subject matter of levy of penalty 3.5. We find the entire gamut of the case had been dealt in detail by the ld. CIT(A) in his order which have already been narrated hereinabove. The same are not reiterated herein for the sake of brevity as they remain undisputed. We find from the aforesaid factual narration and the basis of passing journal entries by the assessee in its books that these entries are merely passed for squaring up of transactions or adjustment of entries. This categorical finding given by the ld. CIT(A) in his order has not been controverted by the Revenue before us. Yet another categorical finding recorded by the ld. CIT(A) which remain uncontroverted by the Revenue before us is that these transactions were not made by the assessee with a malafide intent to evade tax and that there is no evidence brought on record to even remotely suggest that the assessee company by passing the aforesaid journal entries had sought to introduce its unaccounted income into the system. We find that these are genuine transactions carried out in the normal course of the business of the assessee. Hence, if the aforesaid transactions are looked into from the perspective of the object and intention behind introduction of provisions of section 269SS and 269T of the 3.6. We find from pages 5-7 of the impugned penalty order u/s.271D of the Act that assessee has given complete explanation of the transactions before the ld. Addl. CIT by way of detailed explanation together with the purpose of passing a journal entry including relevant journal entry passed in the books of accounts of the assessee company. The same are not reiterated for the sake of brevity herein as they are already forming part of the records. Hence it could be safely concluded that these entries were passed out of business constraints and exigencies and for administrative convenience with no malafide intent to evade payment of tax. In our considered opinion, this business constraint and exigency and administrative convenience itself constitutes reasonable cause within the meaning of section 273B of the Act . Hence no penalty u/s 271D and 271E of the Act could be invoked for the same. In this regard, we find that the Hon‟ble Jurisdictional High Court had addressed the similar issue whether the aforesaid behaviour of the assessee would constitute reasonable cause u/s 273B of the Act to escape from the rigors of applicability of provisions of section 269SS and 269T of the Act in the case of CIT vs Triumph International Finance (I) Ltd reported in 208 Taxman 299 (Bom). The relevant operative portion of the said decision is reproduced hereunder:-
“23. The expression 'reasonable cause' used in Section 273B is not defined under the Act. Unlike the expression
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
In the result, we hold that the Tribunal was not justified in holding that repayment of loan/deposit through journal entries did not violate the provisions of Section 269T of the Act. However, in the absence of any finding recorded in the assessment order or in the penalty order to the effect that the repayment of loan/deposit was not a bonafide transaction and was made with a view to evade tax, we hold that the cause shown by the assessee was a reasonable cause and, therefore, in view of Section 273B of the Act, no penalty under Section 271E could be imposed for contravening the provisions of Section 269T of the Act.
3.7. We also find that the Hon‟ble Delhi High Court in the case of CIT vs Worldwide Township Projects Ltd reported in 229 Taxman 560 (Del) in the similar set of facts and circumstances had categorically observed as under:-
“ 8. A plain reading of the aforesaid Section indicates that (the import of the above provision is limited) it applies to a transaction where a deposit or a loan is accepted by an assessee, otherwise than by an account payee cheque or an account payee draft. The ambit of the Section is clearly restricted to transaction involving acceptance of money and not intended to affect cases where a debt or a liability arises
"While holding that the provisions of Section 269SS of the Act were not attracted, the Tribunal has noticed that: (i) in
9. In our view, the present appeal is bereft of any merit and is, accordingly, dismissed.
3.8. We find that though the ultimate finding recorded by the Hon‟ble Delhi High Court had been subsequently reversed by the decision of Hon‟ble Jurisdictional High Court in the case of Triumph International supra, still the observations made by the Hon‟ble Delhi High Court on the genuineness of the transactions in the ordinary course of business and the element of “reasonable cause‟ thereon, would still remain applicable and would have more persuasive value.
3.9. In view of our aforesaid observations and respectfully following the aforesaid judicial precedents relied upon hereinabove, we hold that the ld. CIT(A) had rightly held that no penalty u/s.271D of the Act could be levied in respect of
We find that impugned order before us are on same points and squarely covers the issue in favour of the assessee. The learned Departmental Representative could not show us any reason to deviate from it. As the issue is covered by the decision of the co-ordinate Benches, respectfully following the same, we hold that there is no infirmity in the order of the learned CIT(A) in deleting the penalty levied u/s 271 D of the Act for both the years. Therefore, the orders of ld CIT (A) are confirmed.
Accordingly, all the three grounds of appeal raised by the learned Assessing Officer are dismissed.
The facts for Assessment Year 2014-15 are also identical. Both the parties also confirmed that there is no change in the facts and circumstances of the case, except the amount of penalty.
On careful hearing of the above appeal, for the reason given in above appeal of the learned Assessing Officer for Assessment Year 2013-14, we confirm order of ld CIT (A) in deleting penalty u/s 271 D of the Act . Accordingly, appeal of the ld AO for AY 2014-15 is also allowed.
Accordingly, both the appeals filed by the learned Assessing Officer for both the Assessment Years are dismissed.
Order pronounced in the open court on 24.03.2022.