TaxTMI 
TaxTMI 
2014 (8) TMI 872
X X X X Extracts X X X X
X X X X Extracts X X X X
....er. Appeal wise and ground wise adjudication is given in the following paragraphs. To start with, we shall undertake to adjudicate the appeal in the case of Lodha Builders Pvt Ltd in the succeeding paragraphs involving two penalties u/s 271D & 271E of the Act. 2. This appeal ITA No.476/M/2014 filed by the assessee on 21.1.2014 is in connection with penalty levied u/s 271D of the Act and the effective grounds raised in the appeal read as under: "1. On the facts and in the circumstances of the case and in law, the Ld CIT (A) erred in upholding the order passed by the Addl. CIT under section 271D of the Act on the basis that the appellant had violated the provisions of section 269SS of the Act and also argued that there was no reasonable cause for such alleged contravention. 2. On the facts and in the circumstances of the case and in law, the CIT (A) erred in upholding the penalty imposed under section 271D of the Act without appreciating the fact that the appellant had not accepted any loan or deposit of money more so in contravention of the provisions of section 269SS of the Act. 3. On the facts and in the circumst....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dentical to all the appeals and the same reads as under: "On the facts and in the circumstances of the case and in law, the Ld CIT (A) erred in holding that the penalty order passed by the Addl. CIT is within the limitation date. The impugned penalty order is time barred under section 275(1)(c) of the Act and hence, the said order is liable to be quashed." 4. Briefly stated relevant facts of the case are that the assessee who belongs to the Lodha group of cases, is engaged in the business of land development and construction of real estate properties. Assessee filed the return of income declaring the total income at Rs. NIL and the same was subsequently revised to adjust carry forward losses. Assessment was completed determining the total income of Rs. 26,69,084/- under the special provisions of section 115JB of the Act. In the scrutiny assessment, there is a solitary and minor addition made by the AO u/s 14A of the Act. There is no further appeal against the said order of the AO before the CIT (A). Thus, the assessment reached finality. In the assessment, vide para 6, the AO, otherwise, mentioned about "Accepting / repayment of loans other than account pay....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lated as under: Lodha Builders Pvt Ltd AY 2009-2010 Name of the lender JV through Amt Accepted thro' JV Abhinandan Lodha Lodha Developers Lodha Properties Development P Ltd Rs. 16,06,564/- Rs. 37,38,000/- Abhishekh Lodha Lodha Hi-Rise Builders Pvt Ltd Rs. 19,08,000/- Lodha Properties Development Rs. 8,00,000/- Lodha Developers Rs. 1,99,54,541/- Ananthnath Contrn & farm P Ltd Lodha Hi-rise Rs. 1,20,06,768/- Arihant Premises Dharmanath Infra & Agro Rs. 51,45,000/- Lodha Developers Rs. 40,000/- Balaji Hitech Macrotech construction Pvt Ltd Rs. 3,00,00,000/- Durgeshwari Hi-rise Farms Pvt Ltd Lodha Hi-rise Builders Pvt Ltd Rs.2,22,51,23,478/- Macrotech Constructions Rs. 1,20,50,00,000/- Gajanand Buildtech & Agro Pvt Ltd Vamadevi Developers & Farms P Ltd Rs. 78,462/- Ganeshji realty and Agro P Ltd M.P. Lodha Rs. 1,00,000/- Lodha Buildcon Pvt Ltd Lodha Hi-Rise Builders Pvt Ltd Rs. 36,52,594/- Lodha Designer construction Pvt Ltd Lodha Developers Ltd Rs.1,78,13,002/- Lodha Developers Dharmnath Infra & Agro Pvt Ltd R....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... occasions. Some of the contents and submissions are reproduced in para 7 of the penalty order dated 28.9.2012. Briefly stated, the submissions of the assessee include that the loans received are by way of 'journal entries' and there is no acceptance of cash by any method other than the one prescribed in the statute. The core transactions were undertaken by way of cheque only and however, the assessee resorted to the journal entries for transfer / assignment of loan among the group companies for business consideration. In case of journal entries, as per the assessee, the liabilities are transferred / assigned by the group companies to the assessee or to take effect of actionable claims / payments / received by group companies on behalf of the company. The journal entries were also passed in the books of accounts for reimbursement of expenses and for sharing of the expenses within the group. In such cases, the provisions of section 269SS of the Act have no application and for this, the assesse relied on the judgment of the Hon'ble Madras High Court in the case of CIT vs. Idhayam Publications Ltd [2007] 163 Taxman 265 (Mad.) which is relevant for the proposition that the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ia Limited dated 12th June, 2012 reported in 22 taxmann.com 138 to submit that in the absence of any finding recorded in the assessment order or in the penalty order to the effect that the repayment of loan / deposit was not a bona fide transaction and was made with a view to evade tax the cause shown by the assessee was a reasonable cause and, therefore, in view of section 273B of the Act, no penalty under section 271E could be imposed for contravening the provisions of section 269T of the Act." 7. On considering the above submissions of the assessee, Addl. CIT examined the provisions of section 269SS/T of the Act, as the case may be, and discussed certain judgments including the binding judgment of the Hon.ble Bombay High Court in the case of Triumph International (I) Ltd, dated 12th June, 2012 reported in 22 taxmann.com 138. Further, he reproduced the contents of the said judgment of the Hon'ble High Court (supra) which is relevant for the proposition that where the loan / deposit were repaid by debiting the amount through journal entries, it must be held that the assessee has contravened the relevant provisions. Though the said judgment was delivered in the context of pr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed to establish "reasonable cause" as required u/s 273B of the Act accordingly, the penalties levied amounting to Rs. 495,23,61,634/-; Rs. 39,11,30,396/-; Rs. 32,81,39,868/-; Rs. 61,50,900/-; Rs. 81,75,244/- and Rs. 36,67,81,854/- in the cases of M/s. Lodha Builders Pvt Ltd., M/s. Lodha Properties Development Pvt Ltd., M/s. Adinath Builders Pvt Ltd., M/s. Aasthavinaya Real Estate Pvt Ltd., M/s. Ajitnath Hi-tech Builders Pvt Ltd and M/s. Infratech Buildes and Agro Pvt Ltd respectively are hereby confirmed." 9. During the proceedings before the first appellate authority, assessee filed written submissions common to all appeals of the group. Referring to the judgment of the Hon'ble High Court in the case of Triumph International (I) Ltd (supra), assessee submitted that the commercial expediency of the group concerns is held to be acceptable reason for squiring up/swapping of the transactions by passing the journal entries and therefore, it constitutes a 'reasonable cause' in the instant case too. For this, assessee relied on the judgment in the case of Sun Engineering works Pvt Ltd 198 ITR 297 and others. It is the case of the assessee that the Hon'ble High Court of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ournal entries unlike the present case and also in the case of M/s. Triumph International Finance (I) Ltd (supra). Eventually, CIT (A) confirmed the penalties as mentioned above. 10. On Limitation of Time: During the proceedings before the CIT (A), there was also an issue relating to 'limitation' u/s 275 of the Act. It is the submission of the assessee that the present orders being penalty in nature, which are unconnected with the assessment of income which are covered by the clause (a) of section 275(1) of the Act, the provisions of clause (c) of section 275(1) of the Act are relevant. Considering the date of initiation of the penalty proceedings during the very assessment itself (assessment dated 5.12.2011) (para 6 extracted above), the penalty order passed by the Addl. CIT on 28.9.2012 is barred by limitation of time. Assessee relied on the judgment of the Rajasthan High Court in the case of Jitendra Singh Rathore [352 ITR 327] (Raj). However, CIT (A) did not considered the said judgment of the Hon'ble High Court. Instead, he relied on the decision of ITAT, Chandigarh Special Bench in the case of Dewan Chand Amit Lal [283 ITR (AT) 203]. In the said judgment, the S....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Ld Counsel for the assessee detailed certain dates relevant for deciding the issue under consideration. In this regard, a chart is filed by the assessee's counsel showing the names of various group assessee's where the penalty was levied, details of dates of AO or date of referral to the Addl CIT or others. The said details are inserted as under: S No Entity name Date of AO order Order passed by Date of ref. to ADIT Penalty u/s Date of Penalty SCN by JC End of FY in which proceedings are initiated Six Months from end of month in which penalty was initiated (Asst. Order) Six months from the end of months in which penalty was initiated (SCN) Limitation for levy of penalty Extention of limitation u/s 275(2) Exp (i)r.w. 129 Extended limitati on Date of penalty order 1 Lodha Builders Pvt Ltd 5.12.11 ACIT 11.1.12 271E 15.2.12 31.3.12 30.6.12 31.8.12 31.8.12 30 30.9.12 28.9.12 2 Lodha Builders Pvt Ltd 5.12.11 ACIT 11.1.12 271D 15.2.12 31.3.12 30.6.12 31.8.12 31.8.12 30 30.9.12 28.9.12 3 Ashtavinayak Real Estate Pvt Ltd 25.11.11 ACIT 11.1.12 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ons 'action for imposition of penalty., Mr Pardiwala mentioned that such 'action. if any is always anterior (= earlier) in time qua the initiation of the penalty. 14. Referring to the facts of the present case, Ld Counsel mentioned that the said 'action. has begun with the first show cause notice issued by the AO in the assessment proceedings (para 6 of the assessment order). Accordingly, the AO has heard the assessee at length on this issue of violation of the provisions of section 269SS and 269T, as the case may be, and the assessee vehemently contested the AO.s proposals in the matter. Rejecting the assessee.s explanation, AO formed an opinion in the matter against the assessee and eventually, AO made a referral to the Addl CIT, who is the authority empowered to impose the penalty under the statute. Ld Counsel submitted that the provisions of relevant sections of the Act do not provide on who is empowered to initiate such penalty proceedings. However, it only provides for who is empowered to impose penalty. In this regard, Ld Counsel relied on various decisions to strengthen his legal proposition. Further, he mentioned that the show cause notice first issued by th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Addl. CIT is considered, the penalty orders dated 28.9.2012 are very much in time and therefore, they are valid. However, in such case, Ld DR could not demonstrate the circumstances where the provisions of clause (c) of section 275(1) of the Act, can be invoked. It is thus summed up by the assessee's counsel that if the penalty matters are covered by the provisions of clause (a) of the said section, the provisions of clause (c) become redundant and vestigial. Legal Issue -Limitation of time - Finding of the Tribunal 16. We have heard both the parties on the legal issues raised in the Additional Ground i.e., applicability of the provisions of clause (c) to section 275(1) of the Act to the impugned penalties and the manner of computing the limitation of time provided in the said clause. To decide the above issues, in our opinion, the provisions of section 275 of the Act are required to analysed. The same read as under: "275(1)[(a) in a case where the relevant assessment or other order is the subject matter of an appeal to the Commissioner (Appeals) under section 246 [or section 246A] or an appeal to the Appellate Tribunal under sec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re the relevant assessment is the subject-matter of revision under section 263; and (iii)Category III covers all other cases not falling within category I and category II which is governed by clause (c). By dividing into three categories the period of limitation for cases falling under category (i), i.e., clause (1)(a) is the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed or six months from the end of the month in which the order of the Dy. CIT(A) or the CIT(A) or, as the case may be, the Tribunal is received by the Chief CIT or CIT, whichever period expires later. 22. The period of limitation for the cases falling under category II is six months from the end of the month in which such order on revision is passed and the period of limitation for the cases falling under the above category III is the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, or six months from the end of the month in which action for imposition of penalty is initiated, whic....
X X X X Extracts X X X X
X X X X Extracts X X X X
....edings were initiated does not affect the levy of penalty. On such penalty proceedings, independent of the assessment proceedings, clause (c) has been made applicable. In this category, the period of limitation for completing the penalty proceedings is linked with the initiation of the penalty proceedings itself. In such cases, the penalty proceedings can be initiated independent of any proceedings but obviously, the penalty proceedings can be initiated only when the default is brought to the notice of the concerned authority which may be during the course of any proceedings and, therefore, for this type of cases where the penalty proceedings have been initiated in connection with the defaults for which no statutory mandate is there about any particular proceedings during the course of which only such penalty proceedings can be initiated, a different period of limitation has been prescribed under clause (c) as a separate category. In cases falling under clause (c), penalty proceedings are to be completed within six months from the end of the month in which the proceedings during which the action for imposition of penalty is initiated, are completed, or six mon....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as per the provisions of clause (c) of section 275(1) of the Act. The said Rajkot Bench of ITAT has followed the judgment of the Rajasthan High Court in the case of Jitendra Singh Rathore (supra). In this case, the Hon'ble High Court also observed that the first show cause notice for levy of penalty was issued by the AO though the authority obtained to initiate penalty proceedings has also subsequently issued a show cause notice as well. Hon'ble High Court held that the penalty proceedings were initiated by issue of first notice from the AO and not from the date of issue of notice by the JCIT and thus, the penalty order passed after expiry of 6 months from the end of the month in which the action for imposition of penalty initiated was barred by limitation. The said decision of the ITAT in the case of Dewan Chand Amit Lal (supra) deferred at the relevant point of time that the order of the Tribunal in the case of Hissaria Bros (supra). However, it is a fact that the said decision of the Tribunal in the case of Hissaria Bros (supra) was subsequently upheld by the Hon'ble Rajasthan High Court. Therefore, considering the principle of precedence, it is necessary for the Tri....
X X X X Extracts X X X X
X X X X Extracts X X X X
....annels to land owners. This payment made on behalf of the assessee was recorded by the assessee in its books by crediting the account of M/s. PACL India Ltd. In view of this admitted position, no infringement of section 269SS of the Act is made out. This court, in the case of Noida Toll Bridge Co. Ltd (supra), considered a similar case where a company had paid money to the Government of Delhi for acquisition of a land on behalf of the assessee therein. The Assesing officer levied a penalty under section 271D of the Act for alleged violation of the provisions of section 269SS of the Act since the books of the assessee reflected the liability on account of the lands acquired on its behalf. On appeal, the CIT (A) affirmed the penalty. The order of the CIT was successfully impugned by the assesee before the ITAT. On appeal, this Court held as under: "While holding that the provisions of section 269SS of the Act were not attracted, the Tribunal has noticed that (i) in the instant case, the transaction was by an account payee cheque; (ii) no payment on account was made in cash either by the assessed or on its behalf; (iii) no loan was accepte....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Officer discussed the details as to the violation of the provisions of section 269SS and 269T of the Act in the assessment order. It also contains a reference to the requirement of making a reference to the Addl. CIT, CR-6, Mumbai for necessary action. Para 6 of the assessment order, which is already extracted above paras, bears witness to the above findings. Further, to give effect to his findings in the assessment order, the AO wrote a letter to the Addl. CIT on 11.1.2012, intimating to him about the violation to the said provisions of the Act. On receipt of the said reference from the AO, Addl. CIT issued a show cause notice on 15.2.2012 calling for explanation of the assessee as to why the penalty u/s 271D should not be imposed in the case of the assessee. Eventually, Addl. CIT passed a penalty order u/s 271D of the Income Tax Act on 28.9.2012. Considering the fact that the assessment order is dated 5.12.2011 and as per the provisions of clause (c) to section 275(1) of the Act, 6 months from the end of the month in which the action was initiated expires on 30.6.2012. After considering the explanation of limitation u/s 275(2), Explanation 1 read with section 129 of the Act, exte....
X X X X Extracts X X X X
X X X X Extracts X X X X
....yments of loans and advances among the sister concerns of the Lodha group settled by way of 'journal entries'. During the assessment proceedings, AO asked the assessee to show cause as to why loans were accepted / repaid other than by the account payee cheque / draft. In this regard, assessee informed that the said loans / advances were transacted with the sister concerns only by way of 'journal entries' and there is no cash transactions involved the provisions of section 269SS and 269T have no application to the facts of the case. Thus, it is the case of the assessee that the said transactions with the sister concerns are for commercial reasons and they should be kept outside the scope of the provisions of sections 269SS/269T of the Act. During the penalty proceedings before the Addl CIT, there was an inquiry into the reasons for violation of the said provisions of the Act and the assessee explained the said reasons (vide para 7.5 of the penalty order) which are already extracted above. The Addl. CIT did not consider the 'explanations' as the 'reasonable causes' and imposed the penalties in all the seven cases under consideration. 25. During the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ken not with a view to receive loans / deposits in contravention of section 269SS but with a view to extinguish the mutual liability of paying / receiving the amounts by the assessee and its sister concern to the customers. In the absence of any material on record to suggest that the transactions in question were not reasonable or bona fide and in view of section 273B of the Act, we see no reason to interfere with the order of the Tribunal in deleting the penalty..' He ignored the above finding of the Court and confirmed the penalty levied by the Addl. CIT. Aggrieved with the above decision of the CIT (A), the assessee is in appeal before the Tribunal with the argument that the assessee's reasons constitutes a reasonable cause. 27. During the proceedings before us, Ld Counsel for the assessee summarized all the transactions involving all the sister concerns and grouped the various transactions entered in the books of accounts by way of journal entries into 7 categories. The details of these seven groups are submitted as under: 1 Alternate mode of raising funds; 2 Assignment of receivables; 3 Squaring up tr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s different from that of judgment of Triumph International (I) Ltd dated 17.8.2012) and it explains the guidelines for the expression "reasonable cause". 31. The contents of paras 23 and 24 of the said of judgment of the Hon'ble High Court in the case of Triumph International (I) Ltd, dated 12.6.2012 reported in 345 ITR 370 (Bom) are relevant and the same reads as under: "23. The expression 'reasonable cause' used in Section 273B is not defined under the Act. Unlike the expression 'sufficient cause' used in Section 249(3), 253(5) and 260A(2A) of the Act, the legislature has used the expression 'reasonable cause' in Section 273B of the Act. A cause which is reasonable may not be a sufficient cause. Thus, the expression 'reasonable cause' would have wider connotation than the expression 'sufficient cause'. Therefore, the expression 'reasonable cause' in Section 273B for non-imposition of penalty under Section 271E would have to be construed liberally depending upon the facts of each case. 24. In the present case, the cause shown by the assessee for repayment of the loan/deposit otherwis....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at the impugned transactions constitutes unaccounted money and are not bona fide or not genuine. As such, there is no information or material before the AO to suggest or demonstrate the same. In the language of the Hon'ble High court, 'neither the genuineness of the receipt of loan/deposit nor the transaction of repayment of loan by way of adjustment through book entries carried out in the ordinary course of business has been doubted in the regular assessment. Admittedly, the transactions by way of journal entries are aimed at the extinguishment of the mutual liabilities between the assessees and the sister concerns of the group and such reasons constitute a reasonable cause. 34. In the present case, the causes shown by the assessee for receiving or repayment of the loan/deposit otherwise than by account-payee cheque/bank draft, was on account of the following, namely: alternate mode of raising funds; assignment of receivables; squaring up transactions; operational efficiencies/MIS purpose; consolidation of family member debts; correction of errors; and loans taken in case. In our opinion, all these reasons are, prima facie, commercial in nature and they cannot be descri....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f 'money' said to have been paid in violation of the said provisions, the same needs to be deleted in view of our decision on the legal issue discussed in para 16 to 22 of the this order. Accordingly, the grounds raised in this regard are allowed. 1. I.T.A. No.475/M/2014 (AY 2009-10) (Lodha Properties Development Pvt Ltd) 2. I.T.A. No.477/M/2014 (AY 2009-10) (Asthavinayak Real Estate Pvt Ltd) 3. I.T.A. No.478/M/2014 (AY 2009-10) (Aadinath Builders Pvt Ltd) 4. I.T.A. No.479/M/2014 (AY 2009-10) (Ajitnath Hi-Tech Builders Pvt Ltd) 5. I.T.A. No.480/M/2014 (AY 2009-10) (Lodha Crown Buildmart Pvt Ltd) 36. All these appeals relate to the penalty u/s 271D of the Act. The facts, arguments and the legal propositions are identical, in principle, in all the five appeals under consideration. Therefore, our findings given in the context of the appeal in the case of Lodha Builders P Ltd (supra) are applicable to all the other five appeals of the assessees. Accordingly, the grounds raised in these appeals under consideration are also allowed. 37. In the result, all the 7 appe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....800,000 5 Abhisheck Lodha 19,954,541 5 Lodha Hi-Rise Anantnath 12,006,768 2 Constructions & Farms 9 Lodha Builders Private Limited 10 Lodha Builders Private Limited 11 Lodha Builders Private Limited 12 Lodha Builders Private Limited 7 Lodha Builders Private Limited 8 Lodha Builders Private Limited Dharamanath Infra Arihant & Agro Lodha Developers Arihant Macrotech Constructions Lodha Hi-Risg 5,145,000 3 40,000 4 Balaji Hi-Tech 30,000,000 4 Durgeshwari Hi- 2,217,000,000 1 Rise Lodha Hi-Rise Durgeshwari Hi- 8,123,479 1 Rise 13 Lodha Builders Private Limited 14 Lodha Builders Private Limited 15 Lodha Builders Private Limited 16 Lodha Builders Private Limited 17 Lodha Builders Private Limited 18 Lodha Builders Private Limited 19 Lodha Builders Private Limited 20 Lodha Builders Private Limited 21 Lodha Builders Private Limited 22 Lodha Builders Private Limited 23 Lodha Builders Private Limited Macrotech Constructions Vamadevi MP Lodha Lodha Hi-Rise Lodha Developers Dharamanath Construction Lodha Developers 25,350....