2022 (12) TMI 1079 - AT - Income Tax

Tribunal upholds journal entries in penalty appeal, citing genuine commercial transactions.

The Tribunal dismissed the revenue's appeal against the penalty order under section 271E for A.Y. 2009-10. It upheld that the journal entries were valid ... Penalty u/s. 271D - assessee has repaid loans/ deposits from various sister concerns through journal entries, i.e., otherwise than account payee cheques/draft, thereby violating the provisions of section 269T - assessee has not shown the reasonable cause u/s. 273B of the Act for entering into such transactions through journal entries - CIT-A deleted the penalty levy - HELD THAT:- As decided in assessee’s group company i.e. Lodha Builder Pvt. Ltd [2021 (12) TMI 1174 - ITAT MUMBAI] there is no adverse finding by the AO in the regular assessment. AO has not made out in the -assessment that any of the impugned transactions is aimed at non commercial reasons and outside the normal business’ operations? As such, the provisions of ss. 269SS and 269T of the Act shall not be attracted where there is no involvement of the ‘money’. Therefore, in the fact of the present case, in our opinion, though the assessee has violated the provisions of ss. 269SS/269T of the Act in respect of journal entries, the assessee has shown reasonable cause and, therefore, the penalty imposed u/s 271D/271E of the Act are not sustainable. Regarding an amount of 'money' said to have been paid in violation of the said provisions, the same needs to be deleted. Appeal filed by the Revenue is dismissed. Issues:Appeal against penalty order u/s. 271E of the Income-tax Act, 1961 for A.Y. 2009-10.Detailed Analysis:1. Background and Assessment:The appellant, engaged in land development and real estate construction, faced a penalty u/s. 271D for repaying loans through journal entries instead of account payee cheques, violating section 269T of the Act. The ACIT levied the penalty after the assessee's submissions were rejected.2. Appeal to CIT(A):The appellant appealed to the CIT(A), who deleted the penalty citing reasonable cause under section 273B. The revenue challenged this decision on various grounds, questioning the examination of each transaction's cause and reliance on case laws without individual scrutiny.3. Arguments and Precedents:During the hearing, the appellant's representative argued that the journal entries were part of routine business transactions, not loans, and even if considered loans, a reasonable cause existed under section 273B. The representative cited multiple ITAT decisions supporting the view that journal entries in group concerns constitute a reasonable cause.4. Tribunal's Decision:After considering submissions and precedents, the Tribunal noted similar cases where journal entries were deemed to have a reasonable cause under section 273B, as they were part of commercial operations and not aimed at non-commercial reasons. The Tribunal emphasized that the transactions were genuine, commercial in nature, and did not involve unaccounted money, aligning with the High Court's findings.5. Legal Analysis and Conclusion:The Tribunal dismissed the revenue's appeal, relying on a previous decision related to section 271D, which set a precedent applicable to section 271E. The Tribunal upheld that the journal entries were valid business transactions, exempt from penalties under sections 269SS and 269T, as they were genuine, commercial, and part of normal business operations.In conclusion, the Tribunal's decision favored the assessee, emphasizing the commercial nature of the transactions and the absence of non-commercial motives or unaccounted money, leading to the dismissal of the revenue's appeal against the penalty order u/s. 271E for the A.Y. 2009-10.