TaxTMI 
TaxTMI 
2012 (11) TMI 747
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....ed its return of income on 01-11-2004 declaring total income at Rs.15,52,446/-. As per Tax Audit Report it was sent that the assessee had accepted loan of Rs.66,16,451/- from Eagle Fashion Ltd. and Rs.25,45,999/- from Eagle Synthetics Pvt. Ltd. As per the tax audit report the assessee had repaid the loan of Rs.34,04,950/- to Eagle Fashion Ltd. and of Rs.63,61,035/- to Eagle Synthetics Pvt. Ltd. Since as per details in the tax audit report, the assessee had accepted the loans and repaid the loans otherwise than by a crossed cheques or demand draft, contravening the provisions of Section 269SS and 269T of the IT Act, the assessee was issued notice u/s 271D of the IT Act for receiving the loan and u/s 271E of the IT Act for repaying the loan o....
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....nsactions as stated earlier. Except for the transaction of wrong payments of customers which are rectified through journal entries, all other payments or receipts are by account payee cheques. The assessee further stated that in respect of M/s. Eagle Synthetics Pvt. Ltd. there were two ledger accounts, one for Unit-II and other main account. At the end of the year both the accounts are merged by way of transfer of balance from Unit -II accounts to main accounts. In view of the above, the assessee stated that notices u/s 271D and 271E of the IT Act should be dropped, as they have not violated any provisions of Section 269SS and 279T of the IT Act. The AO did not accept the above explanation and stated that the assessee has failed to prove ho....
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....hases and sales and account payee transactions have been verified and confirmed by the AO. The AO also verified the rectification, journal entries but stated that complete supporting bills have not been produced. The assessee, therefore, submitted that there is no dispute that the entries contained in the accounts of the assessee are rectification entries in respect of wrong payment received which was in fact receivable by the sister concern. The assessee relied upon the decision of the Hon'ble Gujarat High Court in the case of CIT Vs Shree Ambica Flur Mills Corporation, 6 DTR 169 in which it was held that no penalty can be levied in respect of journal entry transactions between the sister concerns. It was, therefore, pleaded that penalty m....
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....ified and he has found that out of total 7 rectification entries the assessee has produced supporting bills in respect of 4 entries only namely Shiv Krupa Associate, Abhishek Textile. Synthetic Sizer & Gopai Udhvoq. However, in those bills also date and amount does not tally. Regarding other entries the assessee has stated that these are not related to purchase and sales but related to inter unit adjustment entries of sister concerns for earlier years. However, no supporting proof could be filed by the assessee in this regard. These eight entries are as under:- Sr. No. of the details filed by the assessee before the A.O. during remand proceedings Date Description Amount Remarks 6 of credit side of Eagle Fashions Pvt. Ltd. ....
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....ounts of sister concern were credited by the assessee by journal entries on account of payment made by sister concern on behalf of the assessee there was no violation of the provisions of Section 269SS and hence no penalty can be levied. I agree with the appellant even though the dates and amounts are not fully tallying but none of these eight transactions violate the provisions of section 269SS & 269T because the journal entries have been passed in respect of all these eight transactions and the corresponding second transaction is Bank A/c. Hence in view of the decisions of the Hon'ble Gujarat High Court and ITAT, Ahmedabad cited above the penalty levied is deleted in respect of journal entry transactions also." 4. The learned DR relied....