DCIT CEN CIR 8(2), MUMBAI vs. POOJA GANDHI, NAVI MUMBAI

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ITA 4894/MUM/2016Status: DisposedITAT Mumbai30 March 2017AY 2006-074 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that while journal entries might fall under Section 269SS, in the context of business transactions between a firm and its partners, and considering 'reasonable cause' under Section 273B, such entries for transfer of loans do not warrant a penalty under Section 271D.

What were the facts?

The Revenue appealed against the deletion of penalty levied under Section 271D. The penalty was imposed for alleged violations of Section 269SS, where loans were accepted/booked in the firm's books and then transferred to the assessee's account via journal entries.

What were the issues?

Whether journal entries transferring loans between a firm and its partners constitute a violation of Section 269SS warranting penalty under Section 271D, and if reasonable cause under Section 273B can be considered.

Which sections of the Income-tax Act were involved?

Section 271D,Section 269SS,Section 273B

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(2)Show list

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Income Tax Appellate Tribunal, MUMBAI BENCH “I”, MUMBAI

Before: SHRI D.T. GARASIA & SHRI D. KARUNAKARA RAO

For Appellant: Shri Rishabh Shah, A.R
For Respondent: Shri Beena Santosh, D.R
Hearing: 30.03.2017Pronounced: 30.03.2017

Per D.T. Garasia, Judicial Member:

1.

All these appeals are filed by the Revenue involving assessment years 2006-07, 2007-08 & 2009-10. The issues raised in all the appeals are identical, therefore for the sake of convenience they are clubbed and heard combinedly and disposed by this consolidated order. Appealwise adjudication is given in following paras:

2 ITA Nos.4897 & 4899/M/2016 Shri Devang Gandhi 2. In all these appeals the facts are identical. Therefore, the issue raised in appeal for A.Y. 2006-07 reads as under: "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) delete penalty of Rs.17,50,000/- levied u/s. 271D of the I.T. Act without appreciating the facts that the new section 269SS prohibits person from taking or accepting from any other person any loan or deposit otherwise than by account payee cheque or account payee demand draft and in this case, the alleged loans were first accepted / booked in the books of the partnership firm and then transferred to the assessee's account through passing journal entries. These facts clearly shows that the intention behind this was to overcome the provisions of section 269SS. The assessee use this as a devices in a view to beat the provisions of section 269SS of the Act.”

3.

During the course of hearing the Ld. A.R. of the assessee submitted before us that this issue relates to penalty under section 271D of the Act and the facts of the case are that assessee firm has claimed transport of certain loans from their partners and assessee passed general entry in books of firm, therefore it is the contention of the assessee that entries in books of the firm are outside the purview of provisions of section 279SS read with section 271D of the Act. Assessee relied upon the judgment of Hon’ble Delhi High Court in the case of Noida Toll Bridge Co. Ltd. 262 ITR 260 and judgment of Jurisdictional High Court in the case of Triumph International Finance (I) Ltd. 22 taxman.com 138.

4.

The Ld. D.R. submitted that the appeal may be decided accordingly.

5.

We have heard the rival contentions of both the parties. Looking to the facts and circumstances of the case, we find that the issue in controversy is covered by ITA No.4898/M/2016 and ITA No.4895/M/2016 wherein the Tribunal has decided this issue in the case of same assessee by observing as under: “5. We have heard the Ld DR for the Revenue and perused the orders of the Revenue Authorities as well as the relevant material placed before us. We have also perused the cited precedents of the Hon'ble High Courts (supra). After hearing the Ld DR for the Revenue and on perusal of the submissions made by the assessee, as incorporated in the orders of the Revenue Authorities, we find that the 3 ITA Nos.4897 & 4899/M/2016 Shri Devang Gandhi facts in the present cases are identical to that of the one decided by the Hon'ble jurisdictional High Court in the case of Triumph International Finance (I) Ltd (supra). The said judgment is relevant for the proposition that the journal entries may be covered by the provisions of section 269SS of the Act. However, considering the 'business transactions' between the 'firm' and the 'partners', the 'reasonable cause' mentioned in section 273B of the Act, we are of the opinion, such journal entries in the context of current account transactions for transfer of loans from the firm to the partners do not warrant levy of penalty u/s 271D of the Act. From that point of view, the decision of the CIT (A) in all these three cases is fair and reasonable and it does not call for any interference. For the sake of completeness of this case, the relevant para 6.3 is extracted as under:-

“6.3. The facts of the case in Triumph International Finance (I) Ltd (22 Taxman. corn 138) are very similar to the facts of these cases which is before me. In these cases also there was no finding recorded in the assessment orders or in the penalty orders to the effect that the repayments of loans / deposits were not bona fide transactions and were made with a view to evade tax. The appellant submitted that the loans were transferred from the firm in which he was a partner to him by passing necessary journal entries in the books of the firm. In my view, returning the loan amounts to the creditors by account payee cheques by the firm and then receiving the same amount from those creditors by account payee cheques by the appellant would have been a mere formality in this case. Therefore, in my view, the Assessing Officer was not justified in imposing penalty under section 271D of the Act in this case. The grounds of appeal for the 4 assessment years are allowed."

6.

Respectfully following the same, we dismiss the Departmental appeals.

Order pronounced in the open court on 30.03.2017.

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