TaxTMI 
TaxTMI 
2017 (8) TMI 447
X X X X Extracts X X X X
X X X X Extracts X X X X
....s. 271D of the Income Tax Act of 1961. 3. The Joint Commissioner of the Income Tax-31(3), Mumbai, based on the observations of the assessing officer, initiated penalty proceedings u/s. 271D of the I.T. Act, 1961 and accordingly, issued a show cause notice dated 01.09.2015 which was duly served on the assessee, requiring it to show cause as to why penalty shall not be levied u/s.271D of the Act, for contravention of provision of Section 269SS of the I.T. Act, 1961. 4. In response to show cause notice, the assessee has filed its reply vide letter dated 30.08.2015 and submitted that there is no contravention of Section 296SS, as it has accepted loans by way of book adjustment, by passing necessary journal entries in the books accounts for transfer of existing unsecured loans borrowed by its sister concern M/s. Atlanta International. The assessee further submitted that the reason for transfer of loans appearing in the books of M/s. Atlanta International is that, its bankers were insisting for additional capital contribution from the partners/their friends and relatives for the purpose of availing financial facilities, therefore it has transferred unsecured loans taken in the name....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ransferred existing loans from its sister concerns to its books accounts, therefore it cannot be considered as acceptance of loans other than by way of account payee cheque or bank drafts. In support of its arguments, relied upon the decision of Hon'ble Bombay High Court, in the case CIT vs. Triumph International Finance (India) Ltd. (2012) 245 ITR 270 (Bom). 7. The CIT(A), after considering the relevant submissions of the assessee, held that accepting loans by way of book adjustment through journal entries is violation of Section 269SS and the penalty u/s. 271D of the Act, was correctly imposed. With these observations, upheld penalty levied by the A.O and dismissed appeal filed by the assessee. Aggrieved by the CIT(A) order, the assessee is in appeal before us. 8. The Ld. A.R for the assessee, submitted that the Ld. CIT(A) without giving proper/sufficient opportunity and disregarding the bonafide and genuine explanation of the assessee erred in holding that accepting loan by way of book transaction through journal entry is a violation of Section 269SS, which attracts penalty u/s.271D of the Act. The A.R further submitted that the assessee was under bonafide belief that the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rd both the parties, perused the materials available on record and gone through the orders of the authorities below. The A.O levied penalty u/s.271D of the Act, for contravention of provision of Section 269SS of the Act. According to the A.O, the assessee accepted unsecured loans otherwise then by way of account payee cheque or bank drafts in contravention of provisions of Section 269SS of the Act. It is the contention of the assessee that there is no contravention of provisions of Section 269SS of the Act, as it has accepted loans by way of book adjustments through journal entries to transfer existing loans appeared in the books of its sister concerns. The assessee further contended that the reasons for accepting loans by way of book adjustment is that its bankers insisting for additional contribution from its partners or from their friends and relatives for the purpose of extending credit facility. The assessee has accepted loans under bonafide belief that acceptance of loans by book adjustments would not attract provision of section 269SS and also there was a business exigency in accepting loans which come under reasonable cause as defined u/s. 273B of the Act. 11. The provis....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 13. Having heard both the sides and considered material on record, we find that the assessee has accepted loans by way of journal entries. The assessee has transferred loans standing in the name of its sister concern to its books of accounts for the purpose of enhancing its own funds as per the requirement of its bankers for the purpose availing credit facilities. The assessee has filed a paper book containing details of loan ledgers of parties appeared in the books of account of M/s. Atlanta International and also ledger accounts of loan creditors in the books of accounts. On perusal of details field by the assessee, we find that these loans have been transferred by book adjustment by way journal entries. We further noticed that the assessee has paid interest on these loans after duly deducting applicable TDS. We further observed that, it's not a case of A.O that these loans are not genuine transactions. The AO neither doubted genuineness of the loan nor these are not a bonafide transaction or that the entries were made with a view to evade tax. In the absence of any finding as to genuineness of the transactions or the loans were accepted to evade taxes, penalty cannot be levie....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ct. ii) That it would have been an empty formality to repay the loan or deposit amount by account-payee cheque or draft and receive back almost the same amount towards the sale price of the shares. Neither the genuineness of the receipt of loan or deposit nor the transaction of repayment of loan by way of adjustment through book entries carried out in the ordinary course of business had been doubted in the regular assessment. There was nothing on record to suggest that the amounts advanced by I to the assessee represented the unaccounted money of I or the assessee. The fact that the assessee-company belonged to a group involved in the securities scam could not be a ground for sustaining penalty imposed under section 271E of the Act if reasonable cause was shown by the assessee for failing to comply with the provision of section 269T. Settling claims by making journals entries in the respective books is also one of the recognized modes of repaying loan or deposits. Therefore, on the facts, in the absence of any finding recorded in the assessment order of in the penalty order to the effect that the repayment of loan or deposit was not a bona fide transaction and was made wit....