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

सुनवाई की तायीख / Date of Hearing : 22.02.2017 घोषणा की तायीख /Date of Pronouncement : 22.02.2017 आदेश / O R D E R PER D. KARUNAKARA RAO, AM:

There are three appeals under consideration. These appeals are filed by the Revenue, involving two assessees, for the assessment years 2006-07, 2007-08 and 2008-09. Since, the issues raised in these appeals are identical, therefore, for the sake of convenience, they are clubbed, heard combinedly and disposed of in this consolidated order. Appeal wise adjudication is given in the following paras of this order.

in all these three appeals is identical, for the sake of reference and adjudication purpose, the ground raised by the Revenue for the AY 2006-07 (in the case of Devang Gandhi) is extracted and the same reads as under:- “On the facts and in the circumstances of the case and in law, the Ld CIT (A) delete penalty of Rs. 21,50,000/- levied u/s 271D of the 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. Before us, none appeared to represent the case of the assessee. Considering the settled nature of the issue involved in all the appeals, we proceed to adjudicate these appeals with the help of the Ld DR for the Revenue.

4. The common issue raised in all these appeals relates to the levy of penalty u/s 271D of the Act. Briefly stated relevant facts of the case are that the assessee claimed transfer of certain loans from the firm where they are partners. In this regard, assessee passed journal entries in the books of the firm and the assessee‟s. It is the contention of the assessee, such entries are outside the scope of the provisions of section 269SS r.w.s 271D of the Act. In this regard, assessee relied on the judgment of the Hon‟ble Delhi High Court in the case of Noida Toll Bridge Co. Ltd (262 ITR 260) and the judgment of the Hon‟ble jurisdictional High Court in the case of Triumph International Finance (I) Ltd (22 Taxman.com 138). On considering the said binding judgments and also considering the „reasonable cause‟ specified in the assessee‟s submissions, CIT (A) granted relief in favour of the assessee. Aggrieved with the said decisions of the CIT (A), Revenue is in appeal before the Tribunal for the AYs 2006-07 and 2008-09 in the case of Shri Devang Gandhi and for the AY 2007-08 in the case of Shri Pooja Gandhi.

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 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.com 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. Accordingly, grounds raised by the Revenue in all the three appeals are dismissed.

7. In the result, all the three appeals of the Revenue are dismissed. Order pronounced in the open court on 22nd February, 2017.