2018 (9) TMI 2068 - AT - Income Tax

Tribunal Upholds Income Tax Penalty Deletion, Emphasizes Genuine Transactions

The Tribunal upheld the deletion of a penalty under Section 271E of the Income Tax Act, 1961, amounting to Rs. 6,77,10,573, as it found the transactions ... Penalty levied u/s.271E - genuineness of the transaction made through journal entries - HELD THAT:- As decided in LODHA BUILDERS PVT LTD AND OTHERS [2018 (7) TMI 2090 - ITAT MUMBAI] and M/S. AASTHAVINAYAK ESTATE COMPANY LTD. [2018 (5) TMI 1745 - ITAT MUMBAI] wherein under identical circumstances, the deletion of penalty was upheld. Since the Hon’ble Jurisdictional High Court has already upheld the deletion of the penalty on the identical grounds, therefore while following the judicial consistency and judicial principles, we dismiss the appeal filed by the revenue. Issues Involved:1. Deletion of penalty under Section 271E of the Income Tax Act, 1961.2. Contravention of the provisions of Section 269T of the Income Tax Act, 1961.3. Establishment of reasonable cause under Section 273B of the Income Tax Act, 1961.4. Applicability of judicial precedents in determining the penalty.Detailed Analysis:1. Deletion of Penalty under Section 271E:The Revenue challenged the deletion of a penalty amounting to Rs. 6,77,10,573 levied under Section 271E of the Income Tax Act, 1961, by the CIT(A). The CIT(A) had deleted the penalty on the grounds that the transactions made through journal entries were genuine and did not involve unaccounted income. The Tribunal upheld this view, noting that the genuineness of the transactions was not in doubt and there was no evidence suggesting that the transactions were undertaken to evade tax.2. Contravention of Section 269T:The Revenue argued that the assessee had contravened the provisions of Section 269T by not repaying loans through account payee cheque or bank draft, thereby justifying the penalty under Section 271E. The Tribunal referred to the CIT(A)'s order, which acknowledged the contravention but accepted the assessee's reasonable cause for the same, thus deeming the penalty unjustifiable.3. Establishment of Reasonable Cause under Section 273B:The CIT(A) found that the assessee had shown reasonable cause under Section 273B for the contravention of Section 269SS and 269T. The Tribunal agreed, noting that the transactions were made for commercial reasons such as assigning receivables and operational efficiency, and were not intended to evade tax. The Tribunal also referenced the decision of the Hon'ble Bombay High Court in the case of Triumph International Finance (I) Ltd, which held that reasonable cause could be shown if the transactions were genuine and not intended for tax evasion.4. Applicability of Judicial Precedents:The Tribunal relied on various judicial precedents, including the decisions of the Hon'ble Bombay High Court in the case of Triumph International Finance (I) Ltd and the ITAT's decision in the case of Lodha Builders Pvt Ltd. These precedents supported the view that transactions through journal entries, if genuine and undertaken for commercial reasons, do not warrant penalties under Sections 271D and 271E. The Tribunal noted that similar facts and circumstances were present in the current case, justifying the deletion of the penalty.Conclusion:The Tribunal dismissed the Revenue's appeals, upholding the CIT(A)'s order to delete the penalty under Section 271E, except for a minor penalty of Rs. 5000 for a cash loan, which was found justified. The Tribunal emphasized judicial consistency and principles, referencing the Hon'ble Bombay High Court's decision and the ITAT's previous rulings in similar cases. The appeals filed by the Revenue were dismissed with no order as to costs.Order Pronounced:The order was pronounced in the open court on 26/09/2018.