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Income Tax Appellate Tribunal, MUMBAI BENCH “G” MUMBAI
Before: SHRI D.T. GARASIA & SHRI N.K. PRADHAN
ORDER
PER N.K. PRADHAN, AM
This is an appeal filed by the Revenue. The relevant assessment year is 2011-12. The appeal is directed against the order of the Commissioner of Income Tax (Appeals)-20, Mumbai and arises out of penalty order u/s 271Eof the Income Tax Act 1961, (the ‘Act’). The grievance of the Revenue is that the Ld. CIT(A) was not justified in deleting the penalty u/s 271E, without appreciating the fact that the assessee made repayment of loan to the extent of Rs.27,00,000/- in cash, thus violating the provisions of section 269T of the Act.
M/s Gujrat Gaurav Inn Hotels
Briefly stated, the facts of the case are that the appellant filed its return of income for the assessment year under consideration on 31.03.2013 declaring a total loss of Rs.43,14,659/-. The Assessing Officer (AO) completed the assessment u/s 143(3) on 27.03.2014 determining the income at Rs.11,74,138/-. No addition was made by him in the assessment order on account of loans or deposits accepted and/or repaid by the appellant. However, the Addl. CIT, Range-9(1), Mumbai vide order dated 29.09.2014 levied penalty of Rs.1,14,88,049/- u/s 271E in respect of the following journal entries and cash payments:
Sr. Date Particulars Amount Nature of Entry No. 1. 31.03.2011 Jibran Chamadia to Rs.5,00,000/- Journal Entry Prakash H. Shetye
2. 31.03.2011 Surjetsingh P. Manchanda to Rs.30,00,000/- Journal Entry Jibran Chamadia 3. 31.03.2011 Jibran Chamadia Rs.3,00,000/- Cash Payment 4. 31.03.2011 Late Suleman Chamadia to Rs.1,19,435/- Journal Entry B.D. Vasani 5. 31.03.2011 Late Suleman Chamadia to Rs.50,000/- Journal Entry B.D. Vasani 6. 31.03.2011 Late Suleman Chamadia to Rs.4,17,500/- Journal Entry Prakash H. Shetye 7. 31.03.2011 Late Suleman Chamadia to Rs.29,671/- Journal Entry HDFC Bank loan 8. 31.03.2011 Late Suleman Chamadia to Rs.2,66,477/- Journal Entry Barclays Bank Loan 9. 31.03.2011 Late Suleman Chamadia to Rs.56,031/- Journal Entry Reliance capital finance Loan 10. 31.03.2011 Late Suleman Chamadia Rs.3,00,000/- Cash Payment M/s Gujrat Gaurav Inn Hotels 11. 01.04.2010 Kotak Mahindra Bank to Rs.44,204/- Journal Entry Ruksana Chamadia 12. 23.11.2010 Janseva Sahakari Bank Loan to Rs.1,91,283/- Journal Entry Ruksana Chamadia 13. 18.01.2011 Citi Bank Loan to Rs.35,299/- Journal Entry Ruksana Chamadia 14. 23.03.2011 Kotak Mahindra Bank to Rs.9,27,526/- Journal Entry Ruksana Chamadia 15. 23.03.2011 Religare Finvest Ltd. to Rs.1,82,500/- Journal Entry Ruksana Chamadia 16. 25.03.2011 Religare Finvest Ltd. to Rs.3,05,000/- Journal Entry Ruksana Chamadia 17. 31.03.2011 Gulbanu Chamadia to Rs.5,00,000/- Journal Entry Shri Prakash H. Shetye 18. 31.03.2011 Gulbanu Chamadia Rs.3,00,000/- Cash Payment 19. 31.03.2011 Ruksana Chamadia Rs.18,00,000/- Cash Payment 20. 31.03.2011 Ruksana Chamadia to Rs.21,63,123/- Journal Entry Fixed assets (A.C., etc) ------------------- Total Rs.1,14,88,049/ Journal Entries - – Rs.87,88,049/- Cash – Rs.27,00,000/- ============
Aggrieved by the order of the Addl. CIT, the appellant filed an appeal before the Ld. CIT(A). The Ld. CIT(A) held that (i) neither the genuineness of the repayment 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 had been doubted in the regular assessment where these transactions were accepted as genuine, (ii) there is nothing on record to suggest that the amounts advanced by Directors of the company to the assessee represented the unaccounted M/s Gujrat Gaurav Inn Hotels Directors or the assessee which was being brought in the books disguised as loans or deposit, (iii) though there is a technical breach of provisions of section 269T, the assessee has shown reasonable cause as per provisions of section 273B which was demonstrated during the penalty proceeding, (iv) the assessee had a reasonable cause for entering into the transactions, which were done in the normal course of business.
The Ld. CIT(A), then following the judgment of the Hon’ble Bombay High Court in CIT v. Triumph International Finance (I) Ltd. (2012) 345 ITR 270 (Bom) allowed the appeal filed by the assessee.
4. Before us, the Ld. DR supports the order passed by the Addl. CIT in respect of repayment of loan to the extent of Rs.27,00,000/- in cash thus violating the provisions of section 269T of the Act.
On the other hand, the Ld. counsel of the appellant supports the order passed by the Ld. CIT(A) and submits the following explanation.
Sr. Amount Particulars Bonafide No. Explanation/Reasonable A. After death of Mr. Suleman Chamadia on 21.04.2010, the 1. Rs.18,00,000/- RuksanaChamadia Nasik Hotel Project was abandoned and was taken- (15,00,000/- + 3,00,000/-) over by other directors/relatives in their overdue bank loans and 2. Rs.3,00,000/- JibranChamadia interest were repaid by the directors. Also, cash expenditure incurred by the assessee’s hotel was transferred to director’s account; B. The EMI, bank interest and 3. Rs.3,00,000/- Suleman Chamadia bank loans were immediately required to be paid on M/s Gujrat Gaurav Inn Hotels
Rs.3,00,000/- GulbanuChamadia appellant did not have adequate resources to pay such bank loans, thus, the directors/relatives made the payments out of their personal funds and appellant reimbursed such money to them; C. It is not a case of repayment of loan in cash but in a case of reimbursement of money in cash to the director who had repaid the bank loans on urgency basis out of their personal source of funds; D. The genuineness of the transactions is not doubted in assessment.
Reliance is placed by him on the decision in ADIT (Inv.) v. Kum. A.B. Shanti 255 ITR 258 (SC), CIT v. Dimpal Yadav/Akhilesh Kumar Yadav 379 ITR 177 (All-HC), CIT v. Triumph International Finance (I) Ltd. 345 ITR 270 (Bom-HC), CIT v. Shree Ambica Flour Mills Corporation 76 CCH 554 (Guj-HC), CIT v. M. Ramakrishnan 63 taxmann.com 321 (Mad-HC) and CIT v. T. Perumal (Indl.) 53 taxmann.com 17 (Mad-HC).
We have heard the rival submissions and perused the relevant materials on record. In Triumph International Finance (I) Ltd. (supra), the Hon’ble Bombay High Court has held:
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 u/s 271E could be imposed for contravening the provisions of s. 269T of the Act.
M/s Gujrat Gaurav Inn Hotels In the instant case, we find that neither the AO nor the Addl. CIT has recorded a finding in the assessment order or 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. In T. Perumal (Indl.) (supra), the Hon’ble Madras High Court held that “receipt and repayment of loan in cash due to immediate business necessity would amount to reasonable cause for not levying penalty u/s 271D and 271E.” We find that in the present case the receipt and repayment of loan in cash was due to immediate business necessity of the appellant. As noted earlier, we are concerned in this appeal with the penalty u/s 271E on repayment of loan in cash to the extent of Rs. 27,00,000/- only. In view of the factual scenario in the present case, following the ratio laid down in the above decisions, we uphold the order of the Ld. CIT(A).