TaxTMI 
TaxTMI 
2018 (7) TMI 1828
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....ssued a notice to the assessee on 27.03.2014 to show cause as to why the penalty u/s 271D and 271E should not be levied for the viloation of Section 269SS and 269T of the Act. The assessee raised various contentions before the Addl. CIT in support of its claim that the penalty is not leviable which included unjustified initiation of penalty proceedings, journal entries not being covered by Sections 269SS/269T, Section 269T not applicable to the transactions between sister concerns, no tax evasion on account of passing of such journal entries, existence of reasonable cause as provided u/s 273B of the Act etc. The Addl. CIT rejected all such contentions of the assessee and held that the assessee company has violated the provisions of Section 269SS and 269T by repaying loans through journal entries and levied a penalty u/s 271D and 271E vide order dated 10.09.2014. 3. By the impugned order, CIT(A) deleted the penalty so imposed u/s.271E after having the following observation: 5.1 I have given my careful consideration to the rival submissions, perused the material on record and duly considered the factual matrix of the case as also the applicable legal position. 5.2 Ground 1 -Whet....
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....with section 129 of the Act, extended limitation expires on 30.7,2012 against the above due dates, the penalty order passed by the Addl. CIT on 28.9.2012, which is barred by the limitation. Thus, the orders of the penalty of this kind have to be explained considering the provisions of clause (c) of section 275(1) of the Act Further, it is the summary of the decision cited above that any case where AO made a reference in the assessment order, after discussing the same with the assessee during the regular assessment proceedings or made a referral to the Addl. CIT for imposition of the penalty. In our opinion, these preliminary acts constitute "action for the imposition of penalty". An action for imposition of penalty is always anterior in time to the "actual" imposition of penalty. In our opinion, the AO?s discussion given in para 6 of the assessment order and AO's letter dated 6 to the Addl. CIT constitutes "action for imposition of penalty". Therefore, we are of the opinion, the assessee should succeed on the legal issue. Accordingly, ground raised by the assessee is allowed." 5.2.3 Thus, it has been held that when the AO raised an issue in violation of relevant provisions, discu....
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....ns of Sec 269T and hence it cannot be considered as repayment of loans as understood within the meaning of 269T. ii. The transactions were bonafide and made out of commercial expediency. Further, the appellant was under a bonafide belief that assigning of debts and liabilities through journal entries does not amount to breach of Section 269T. Hence, there was a reasonable cause as provided u/s 273B and penalty is not leviable. iii. The source was not unaccounted and not leading to any tax evasion or avoidance. 5.3.3 The appellant has relied on the Hon'ble ITATs decision in its group companies case No. 475/M/2014) wherein the issue before the ITAT was levy of penalty u/s 271D for accepting loans through journal entries in violation of the provision of section 269SS. The ITAT -55 passed a consolidated order dated 27-06-2014 in the case of appellant's sister concerns involving the identical issue. The issue before the ITAT was regarding acceptance of loans in violation of provision of Section 269SS. The issue before me is regarding repayment of loans in violation of provisions of Section 269T. However the ratio laid down by the Honourable ITAT shall squarely apply to the....
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....s' 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 first appellate proceedings also, assessee made a detailed submission on various aspects of the reasonable causes which were already discussed in the paras above. On perusal of the impugned order, we find that CIT (A) relied heavily on the judgment of the jurisdictional High Court in the case of Triumph International (I) Ltd, supra dated 17.8.2012 for the proposition that the receiving loans and repayments through &....
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....' 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 transactions' 4. Operational efficiencies/MIS purpose; 5. Consolidation of family member debts; 6. Correction of errors; and 7. Loans taken in case 27.1. All the transactions that involved the impugned journal entn'es fall in one of the above seven reasons and they are only for business purposes' of the assessees' under consideration. 28. Further, the assessee also classified the impugned transactions amounting the said seven groups and the said chart is inserted here as under for completeness of thi....
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....) 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 v 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 otherwise than by account-payee cheque/bank draft was on account of the fact that the assessee was liable to receive amount towards the sale price of the shares sold by the assessee to the person from whom loan/deposit was received by the assessee. It would have been an empty formality to repay the loan/deposit amount by account-payee cheque / draft and receive back almost the same amount towards the sale price of the shares. 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....
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....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 described as non-business by any means. Further, we asked ourselves as to why should the assessee under consideration take up issuing number of account payee cheques/bank drafts which can be accounted by the journal entries. This being the spirit of Hon'ble High Court of Bombay, we adopt the same to the present issue. As such, is binding on us. What is the point in issuing hundreds of account payee cheques. Account payee bank drafts between the sister concerns of the group, when transactions can be accounted in books using journal entries, which is also an accepted mode of accounting? In our opinion, on the factual matrix of th....
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....the penalty order u/s 271E of the Act or in the remand report dated 09.08.2016 that any of the impugned transactions is aimed at non commercial reasons and outside the normal business operation. Therefore, though the appellant has violated the provisions of section 269T of the Act in respect of Journal entries, it has shown reasonable cause and therefore the penalty under section 271E is not leviable. 4. Against the above order of CIT(A), Revenue is in further appeal before us. 5. We have considered rival contentions and carefully gone through the orders of the authorities below. We have deliberated on the judicial pronouncements referred by lower authorities in their respective orders as well as cited by learned AR and DR during the course of hearing before us in the context of factual matrix of the case. We had also carefully gone through the orders of the Tribunal in the group case of the assessee exactly on the very same issue, which was upheld by the Hon'ble Jurisdictional High Court as stated above. 6. From the record we found that AO has levied penalty u/s.271D and 271E for accepting and repaying loan by way of Journal entries. The Assessing Officer had placed reliance on....
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.... was rendered on 12th June, 2012. This, was in an appeal filed by the Revenue from the order of the Tribunal dated 29th January, 2008, which had held that deposits/loans received through journal entries do not fall with the mischief of Section 269SS of the Act, so as to invite penalty under Section 271D of the Act. This, the Tribunal did by following its earlier orders in the case of V.N. Parekh Ltd. and Ketan Parekh as indicated in the order of this Court in Triumph International Finance (supra). Our attention was also invited to numerous reported decisions of the Tribunal in the cases of Sunflower Builders Vs. Dy. CIT, 1997 (61) ITD (Pune 227, Asst. CIT Vs. Ruchika Chemicals & Investment P) Ltd. 2004 (88) TTJ (Delhi) 85 and Asst CIT Vs. Lala Murari La I & Sons, 2004(2) SOT (Luck) 543 wherein it has been held journal entries in the book of accounts indicating deposit/ loans will not fall foul of Section 269SS of the Besides, the Delhi High Court in Commissioner of Income Tax Noida Toll Bridge Co. Ltd. 262 ITR 260 inter alia held that payment of Rs. 4.85 crores made by the assesses by a journal entry in its books of account by crediting the account of lLFS, would not fall foul of S....
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.... v. Noida Toll Bridge (262 ITR 260), rendered on 28.01,2003; (iv) Order of Agra Bench of the Hon'ble Tribunal in ITO v. Amarnath Shivraj (HUF) (1 SOT 346), dated 28.02.2003; (v) Order of Ahmedabad Bench of the Hon'ble Tribunal in ACIT v. Gujarat Ambuja Proteins Ltd. (3 SOT 811), dated 28.10.2003; (vi) Order of Kolkata Bench of the Hon'ble Tribunal in Krishna KR Pathak (HUF) (90 TTJ 940), dated 12.03.2004; (vii) Judgment of Hon'ble Rajasthan High Court in CIT v. Hissaria Bros (291 ITR 244), rendered on 21.07.2006; off Mumbai Bench of Hon'ble Tribunal in Triumph International Finance (I) Ltd. in FTA No. 542/Mum/2007, dated 29.01.2008; ix) Judgment of Hon'ble Gujarat High Court in CIT v. Bombay Conductors & Electricals Ltd (301 ITR 328), rendered on 11.02.2008; (x) Order of Ahmedabad Bench of Hon'ble Tribunal in Jitu Builders (P) Ltd. v. Addl. CIT [124 ITD 134 (Ahd) (TM)], dated 16.07.2009; and (xi) Order of Ahmedabad Bench of Hon'ble Tribunal in ACIT v. Western India Ceramics (P.) Ltd (20 taxmann. Com 317), dated 12.10.2010. 10. It was argued by learned DR that the Hon'ble High Court declares the law as it was always and, hence, ....