TaxTMI 
TaxTMI 
2019 (3) TMI 1719
X X X X Extracts X X X X
X X X X Extracts X X X X
....e assailing the order of the CIT(A) against the deletion of penalty of Rs. 38,09,55,274/- under Sec. 271D has raised before us the following grounds of appeal : 1. "On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the penalty of Rs. 38,09,55,274/- levied u/s.271D of the Income Tax Act, 1961 on the ground that genuineness of the transaction made through journal entries is not in doubt." 2. "On the facts and in the circumstances of the case and in law, the Ld.CIT(A) having held that the assessee had contravened the provisions of section 269SS of the Income Tax Act, 1961, ought to have upheld the levy of penalty u/s.271D as the assessee failed to establish the compelling reasons or genuine business constraints or reasonable cause for having transactions in respect of each and every journal entry with its group concerns." Apart there from, the revenue has assailed the deletion of penalty of Rs. 35,52,90,732/- imposed by the Addl. CIT under Sec. 271E on the following grounds of appeal : 1. "On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the penalty of Rs. 35,52,90,732/- levied u/s.271E o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o the "sister concern‟ by the assessee by way of journal entries did not constitute loan of money within the meaning of Sec. 269SS/269T of the IT Act; (ii). that there was neither any avoidance of any tax liability by transfer of assets/liabilities through journal entries, nor was there any revenue loss to the department; (iii). that the journal entries passed by the assessee were genuine with corresponding journal entries in the books of the "sister concerns‟ and the said fact had been verified by the A.O during the course of the assessment proceedings; (iv). that the journal entries were passed to avoid the delay in procedural hassles of preparing cheques and obtaining signatures of authorised persons; avoid temporary arrangement of funds for clearance of cheques and earlier settlement of the transactions which otherwise would involve delay of 3-5 days besides blocking huge funds for a temporary period without any commercial gain; for squaring off and consolidation of receivable and payable, operational efficiency and ease of MIS and correction of errors while passing the entries, therefore, there were business exigencies for passing the journal entries. On the basis ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... submission filed by the assessee was however not persuaded to accept the same. It was observed by the Addl. CIT that the assessee company which was a part of the Lodha Group, which was a major construction group engaged in the construction business and development of real estate had received/accepted and repaid the loans from/to various concerns through Journal entries i.e by way of a mode other than that envisaged u/ss. 269SS and 269T of the I.T Act. The Addl. CIT holding a conviction that the assessee by contravening the provisions of Section 269SS and Section 269T of the I.T Act, had thus rendered itself liable for penalty u/ss. 271D and 271E, respectively. The contention advanced by the assessee that the journal entries pointed out by the A.O did not involve raising of any loan or deposit of money did not find favour with the Addl. CIT. In support of his aforesaid view that the assessee had contravened the provisions of Sec. 269SS and Sec. 269T of the I.T Act, the Addl. CIT relied upon the judgment of the Hon‟ble High Court of Bombay in the case of CIT(Central)-4 vs. Triumph International Finance (India) Ltd. (2012) 345 ITR 0270. It was observed by the Addl. CIT that the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Insofar the contravention of the provisions of Sec. 269SS and 269T was concerned, it was observed by the CIT(A) that as the assessee had accepted and repaid the loans amounting to Rs. 38,09,55,274/- and Rs. 35,52,90,732/- by way of journal entries i.e other than by way of account payee cheques and drafts, therefore, there was a violation of the mode of accepting and repaying of the loans as envisaged in the aforesaid statutory provisions. As regards the contention of the assessee that there was a "reasonable cause‟ for carrying out the aforesaid transactions by way of Journal entries, the CIT(A) was persuaded to accept the same. The CIT(A) after deliberating on the scope and gamut of the term "reasonable cause‟ in the backdrop of certain judicial pronouncements, observed that the same means an honest belief founded upon reasonable grounds of the existence of a state of circumstances, which, assuming them to be true would reasonably lead any ordinary prudent and cautious man, placed in the position of the person concerned, to come to the conclusion that the same was the right thing to do. The CIT(A) after referring to the judgment of the Hon‟ble High Court of Bomba....
X X X X Extracts X X X X
X X X X Extracts X X X X
....a Builders Pvt. Ltd. Vs. ACIT [ITA No. 476 to 481/Mum/2014; dt. 27.06.2014) for A.Y 2009-10 and five other group cases, wherein under identical facts and circumstances the penalty imposed u/ss. 271D and 271E was quashed for the reason that there was a reasonable cause for the assessee to have undertaken such transactions by way of journal entries. Insofar the observation of the Addl. CIT that the spirit of the judgment of the Hon‟ble High Court of Bombay in the case of CIT Vs. Triumph International Finance (India) Ltd. (2012) 345 ITR 270 (Bom) was that only such transactions which were in the nature of squaring up with the same party would be entitled to claim the benefit of "reasonable cause‟ u/s 273B was concerned, the same did not find favour with the CIT(A). It was observed by the CIT(A) that in the case before the Hon‟ble High Court the assessee and its sister concern viz. M/s Triumph Securities Ltd. had transactions of purchase and sale with common customers and the credit/debit liabilities were settled through journal entries and it was held that the transactions in question were undertaken not with a view to receive loans/deposits in contravention of Sec. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ved by us hereinabove, the CIT(A) had concluded that as the journal entry transactions of the assessee with its "sister concerns‟ were for more than the amount of Rs. 20,000/- and the same were not through account payee cheque or bank drafts, therefore, there was a violation of the provisions of Sec. 269SS/269T of the I.T Act. Apart therefrom, the CIT(A) has supported his aforesaid observation by relying on the judgment of Hon‟ble High Court of Bombay in the case of CIT Vs. Triumph International Finance (I) Ltd. (2012) 345 ITR 270 (Bom) for A.Y 2003-04 and ITA No. 5745 of 2010, dated 17.08.2012 for A.Y 2000-01, wherein the Hon‟ble High Court had observed that receiving loans/deposits through journal entries would be in violation of Sec. 269S of the I.T Act. Insofar the observation of the CIT(A) that the loans or deposits accepted/repaid by the assessee from/to its "sister concerns‟ by journal entries was in contravention of the provisions of Sec. 269SS and Sec. 269T is concerned, we are in agreement with the view therein taken that as the said transactions are not through account payee cheque or draft, therefore, the same is in violation of the mode prescrib....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 the judgment of the Hon'ble jurisdictional High Court in the case of CIT v. Triumph International Finance (I) Ltd. (345 ITR 270) rendered on 12.06.2012. It is not disputed that in this judgment it was held that there was violation of the provisions of S. 269T of the Act in a case where the loan was repaid by way of a journal entry entailing levy of penalty u/s. 271E of the Act. However, at the same time it was also held that levy of penalty could be avoided on showing reasonable cause. In the premises, levy of penalty u/ss. 271D and 271E of the Act is not automatic, but the gen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e 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. LalaMurari 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 Section 269SS of the Act. This particularly in the absence of any payment being made in cash. (i) In the present facts, the period during which the journal entries were made by the respondents was in the previous year relevant to the Assessment Year 2009-10 i.e. Financial Year 2008-09. At that time, the decisions of the Tribunal in the cases of Triumph International (Supra) and decision of V.H. Parekh (P) Ltd.. Ketan V. Parekh, Sunflower Builders (supra), Ruchika Chemicals (supra). La/a Murari La/ (supra) and the decision of the Delhi High Court In Noida Toll Bridge Co. Ltd, (su....
X X X X Extracts X X X X
X X X X Extracts X X X X
....unal 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, there was clearly violation of the provisions of the Act. He further argued that the assessee has not explained reasonable cause in respect of each and every entry and, hence, the penalties were correctly levied. 11. As regards the first argument of the ld. DR, we observe that the identical argument was raised before the Hon'ble High Court in the case of Ajinath Hi-Tech Builders Pvt. Ltd. (and other group companies of the assessee) (supra). However, finding no merit in the plea canvassed, it was rejected as per observations in sub-para (i) of para 3 on page No. 10 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e fact, although the assessee had not filed any appeal or cross objection, it is entitled to raise the said issue before the Hon'ble Tribunal. In support of this plea, attention of bench was invited to Rule 27 of the IT(AT) Rules which reads as under: "The respondent, though he may not have appealed, may support the order appealed against on any of the grounds decided against him." 15. Hence, reliance was placed on the judgment of the Hon'ble Gujarat High Court in the case of Pr. CIT v. Sun Pharmaceuticals Industries Ltd., (2017) 86 taxmann.com 148) and also on the judgment of the Hon'ble Kerala High Court in the case of CIT v. Commonwealth Trust (India) Ltd. (221ITR 474). 16. We have considered rival contentions and gone through the orders of the authorities below. Since, we have already decided the issue on merit by following the order of the jurisdictional High Court in the group cases of the assessee, we do not consider the plea taken by the assessee under Rule 27 of the ITAT Rules. 17. In the result, appeals filed by the Revenue are dismissed. 9. We have given a thoughtful consideration to the facts of the case and have perused the aforesaid order of ....