TaxTMI 
TaxTMI 
TaxTMI 
2020 (2) TMI 1221
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....e penalty levied u/s. 271D/271E of the Act. 2. Briefly stated the facts are that, the Assessing Officer in the course of the assessment proceedings noticed that assessee recorded journal entries in its books of accounts accepting and repaying loans/deposits otherwise than account payee cheque or draft more than Rs..20,000/- from various group concerns of the assessee.. The Assessing Officer was of the view that there is contravention of provisions of section 269SS/269T of the Act since assessee received and repaid loan/deposit over and above Rs..20,000/- otherwise than by Account Payee Cheque or draft and accordingly an order u/s. 271D/271E was passed levying penalty. 3. On appeal the Ld. CIT(A) deleted the penalties observing as under: "5.3.4 Respectfully, following the above decision, the contention of the appellant that the journal entries are not covered within the violation of Section 269T is rejected. However, the transactions covered by the journal entries are made in regular course of business with the sister concerns by the appellant. Even in the present case, there is no adverse finding of the AO either in the penalty order u/s 271E of the Act or in the remand report ....
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....e case of M/s. V.N. Parekh Securities Pvt Ltd v. ACIT (supra) the matter be referred to the Special Bench for adjudication. 5. Learned Counsel Shri Vijay Mehta appearing for the assessee, at the outset submitted that the issue in all these appeals is squarely covered by the decision of the Coordinate Benches in various assessee group cases wherein on identical facts the penalties levied u/s. 271D/271E of the Act were deleted. Ld. Counsel for the assessee placed reliance on the decision of the Coordinate Bench in the case of the DCIT v. Lodha Constructions and others in ITA.No. 110, 111, 139 to 142/Mum/2017 dated 30.07.2018 and a copy of the order was placed on record. Referring to this order Ld. Counsel for the assessee submitted that the Coordinate Bench following the decision of the Hon'ble Bombay High Court in the case of the CIT v. Ajinath Hitech Builders Private Ltd and Others in ITA.Nos. 171, 172, 202, 203, 218 & 219 of 2015 dated 06.02.2018 and decision of the Coordinate Bench in assessee's group case in the case of Aashthavinayak Estate Company Ltd., in ITA.No. 602/Mum/2017 dated 31.05.2018 and also considering the decision in the case of the Triumph International Fina....
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....eals relates to the journal entries passed by the assessee for the loans/deposits taken and repaid within the group concerns of the assessee is squarely covered by the above decisions. 9. We have heard the rival submissions, perused the orders of the authorities below and the decisions relied on. The only issue in all these appeals is as to whether there is a reasonable cause within the meaning of the provisions of section 273B of the Act on the loans/deposits taken and repaid through journal entries by the assessee within its group concerns. On a perusal of the orders passed by different Benches of this Tribunal and the decision of the Hon'ble Jurisdictional High Court and also the dismissal of SLPs filed by the revenue, we notice that identical issue has been decided by the Tribunal in various cases in assessee's group concerns and which were travelled to Hon'ble Bombay High Court and also the Hon'ble Supreme Court wherein the Special Leave Petitions filed by the Revenue were dismissed. 10. The Hon'ble Bombay High Court in the case of CIT v. Ajinath Hitech Builders Private Ltd and Others (supra) it was held that prior to the decision in the case of the Triumph I....
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....a case of assignment of debt by one group entity to another group entity and journal entries have been passed to record such assigned transactions. The provision of section 269SS and 269T are not applicable on such genuine transactions. The Assessing officer in the assessment order has not made any observation that transactions in question are not out of business exigency or was done with a motive to evade tax. Penalties cannot be levied in a mechanical manner. The provisions of section 269SS and section 269T are not applicable where transaction is between sister concerns. The ld. CIT(A) after considering the contention of the assessee concluded that the assessee has violated the provisions of section 269SS and 269T of the Act. However, the ld CIT(A) concluded that the assessee has given sufficient explanation within the meaning of section 273B , particularly in the facts that there is no finding that such transactions were undertaken to evade the tax. The ld CIT(A) also followed the decision of Tribunal in Lodha Builder Pvt Ltd Vs ACIT in (ITA No. 476/M/2014 and 481/M/2014 dated 27.06.2014 for AY 2009-10. 8. The Hon'ble Bombay High Court in assessee's group case in CIT Vs. A....
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....ovisions of Section 269SS of the Act. (c) Mr. Mohanty, the learned Counsel for the Revenue seeks to challenge the impugned order of the Tribunal on the ground that Section 273B of the Act will have no application as the test of reasonable cause is not satisfied :in the present facts for the following reasons :- (i) the decision of this Court in Triumph International Finance (supra) will have no application as that was of the case of only one transaction while in this case, there are numerous transactions reflected through the passing of journal entries; (ii) the reasons set out for taking advances / deposits by way of journal entry would not satisfy the test of reasonable cause; and (iii) the non-satisfaction of showing reasonable cause as required under Section 273B of the Act gives rise to a question of law as it is a legal inference to be drawn from primary facts as held by the Apex Court in Premier Breweries Ltd. Vs. Commissioner of Income Tax 372 ITR 180. Thus, it is submitted this question requires admission as it gives rise to a substantial question of law; (d) We find that the impugned order of the Tribunal has on application of the test laid down for establishmen....
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.... deduction is in respect of expenditure incurred wholly and exclusively for the purposes of the business. Thus, it would involve a question of interpretation of the agreements etc. from which an inference is to be drawn. Further, it also involves application of principles of law to the facts for the purposes of deductions and, therefore, it would lead to a question of law. Therefore, the Court held in the facts of that case that a question of law does arise. (f) In this case, the issue of reasonable cause is an inference of fact from facts and, therefore, a question of fact. The Supreme Court decision in Sree Meenakshi Mills Ltd. Vs. Commissioner of Income Tax, 31 ITR 28 had laid down the tests to determine a question of law and / or fact. In the above context, the Court observed that when the finding is one of fact, the fact that it itself is an inference from other basic facts, will not alter its character as one of fact. Therefore, the issue of there being reasonable cause or not, is a question of fact and unless it is shown to be perverse, we would normally not interfere. (g) In the above circumstances, the view taken by the Tribunal on the facts before it, is a possible vi....
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....ournal entries would certainly be hit by Section 269SS of the Act. Nevertheless, prior to the decision of this Court in Triumph International Finance (supra), there was reasonable cause for respondents to receive deposit / loan through journal entries. This non-compliance with Section 269SS of the Act would certainly be a reasonable cause under Section 273B of the Act for non-imposition of penalty under Section 271D of the Act. (j) In the above circumstances, the view taken by the Tribunal in the impugned order holding that no penalty can be imposed upon the respondents as there was a reasonable cause in terms of Section 271B of the Act for having received loans / deposits through journal entries is at the very least is a possible view in the facts of the case. (k) Therefore, the question as posed does not give rise to any substantial question of law. Thus, not entertained." 9. Further co-ordinate Bench of the Tribunal in Assessee's group case in DCIT vs. Aashthavinayak Estate Company Ltd. (supra), while dealing with identical Ground of appeal held as under:- "5. We have considered rival contentions and carefully gone through the orders of the authorities below. We have del....
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....CIT v. Triumph International Finance (I) Ltd. (345 ITR 270) was rendered on 12.06.2012, it was held, that the assessee could have had a bonafide belief prior to that date that there was no violation of S. 269SS of the Act in accepting loan by journal entry. 9. While deciding the issue, the CIT(A) has also followed the decision of Jurisdictional High Court in case of group concern of the case. The facts and circumstances during the year under consideration are same, accordingly, we do not find any infirmity in the order of CIT(A) for deleting the penalty imposed u/s.271D by relying on the decision of Jurisdictional High Court in group case of the assessee. 10. In the result, appeal of the Revenue is dismissed." 10. Considering the decision of Hon'ble Jurisdictional High Court in assessee group case in Ajinath Hi Tech Builder Pvt Ltd (supra), Triumph International Finance(I) Ltd (supra) dated 12.06.2012 and in Assessee's group case in DCIT vs. Aashthavinayak Estate Company Ltd. (supra) that there was reasonable cause for the assessee to receive deposits of loan or repayment of loans through journal entries. Therefore, in our view the assessees case is squarely falls under a reas....
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....rns under the bonafide belief that such transactions would not be hit by the provisions of Sec. 269SS in view of various judicial decisions on the issue, including the decision of High Court of Delhi in the case of CIT Vs. Noida Toll Bridge Co. Ltd. (2003) 262 ITR 260 (Del); and (ii). such loans by way of journal entry transactions were undertaken for various commercial reasons like assigning of receivables for operational efficiency, payment on behalf of group concern for squaring up transactions, for ease in consolidation of accounts, rectification entries etc. In our considered view the aforesaid reasons do constitute a "reasonable cause‟ within the meaning of Sec. 273B of the Act, particularly in light of the fact that there is no finding that such transactions were undertaken to evade tax. Our aforesaid view is fortified by the orders of the coordinate benches of the Tribunal in the case of "sister concern‟ of the assessee viz. Lodha Builders Pvt. Ltd. vs. ACIT [ITA No. 476 & 481/Mum/2014; dt. 27.06.2014.], wherein it has been held that as the assessee has shown reasonable cause, therefore, penalty imposed u/ss. 271D/271E of the I.T Act cannot be sustained. In fact....
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.... disposed of by the coordinate Bench in which levy of similar penalties was held to be not sustainable as there was a reasonable cause, copies of which have been placed on record. In deciding the dispute in favour of the assessee, the Hon'ble Tribunal had considered and applied the ratio laid down by the Hon'ble jurisdictional High Court in the case of CIT v. Triumph International Finance (I) Ltd. (345 ITR 270). 8. The aforesaid order of the Hon'ble Tribunal was approved by the Hon'ble jurisdictions! High Court in their judgment and order dated 06.02.2018 in the case of CIT v. Ajinath Hi-Tech Builders Pvt Ltd., copies of which have also been placed on record. In this case, it was also held that prior to the judgment in CIT v. Triumph International Finance (I) Ltd. (345 ITR 270), there were series of orders on this point holding that journal entry would not fall foul of S. 269SS of the Act. Since the judgment in CIT v. Triumph International Finance (I) Ltd. (345 ITR 270) was rendered on 12.06.2012, it was held, that the assessee could have had a bona fide belief prior to that date that there was no violation of S. 269SS of the Act in accepting loan by journal entry. Th....
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....iving of deposits/ loans through journal entries would certainly be hit by Section 269SS of the Act Nevertheless, prior to the decision of this Court in Triumph International Finance (supra), there was reasonable cause for respondents to receive deposit/loan through journal entries. This noncompliance with Section 269SS of the Act would certainly be a reasonable cause under Section 273B of the Act for non-imposition of penalty under Section 271D of the Act" 9. From the record we found that the journal entries in the present case were passed in F.Y. 2010-11. Therefore, indisputably such journal entries were passed prior to 12.06.2012, the date on which judgment of the Hon'ble Bombay High Court in the case of CIT v. Triumph International Finance (I) Ltd was pronounced. Further more, in addition to the orders of the Hon'ble Tribunal, referred to in the aforesaid judgment, there were also many other orders rendered prior to CIT v. Triumph International Finance (I) Ltd. [345 ITR 270 (Bom)] holding that violation of Ss. 269SS and 269T of the Act could not be imputed in accepting and repaying loan by passing a journal entry. Some of them are: (i) Order of Cochin Bench of the H....
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....its/loans through journal entries would certainly be hit by Section 269SS of the Act Nevertheless, prior to the decision of this Court in Triumph International Finance (supra), there was reasonable cause for respondents to receive deposit/loan through journal entries. " (Emphasis supplied). 12. So far as the second argument of the Id. DR is concerned, we observe that as per the above decision of the Hon'ble High Court, the assessee could not be visited with penalty in respect of the period prior to 12.06.2012, the day on which the decision in CIT v. Triumph International Finance (I) Ltd. was pronounced. In light of this, it can safely be concluded that the assessee being under a bona fide belief, could not be visited with penalties u/ss. 271D requirement to establish reasonable cause in respect of each and every entry as canvassed by the Id. DR. The reasonable cause in respect of all the entries is the bona fide belief of the assessee that there was no violation of any provision of the Act. 13. In view of the above, we observe that the case of the assessee is squarely covered by the exception carved out in the judgment of the Hon'ble Bombay High Court in CIT v. Triumph ....
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.... the acceptance and repayment of loans by journal entries did not involve any contravention of the provisions of Sec. 269SS and Sec. 269T of the I.T Act, therefore, we are in agreement with the view taken by the CIT(A) that in the backdrop of the said "reasonable cause‟ within the meaning of Sec. 273B of the I.T Act, no penalty under Sec. 271D and Sec. 271E could have been imposed on the assessee. We thus finding no infirmity in the order of the CIT(A) who had in terms of his aforesaid observations vacated the penalty of Rs. 38,09,55,274/- and Rs. 35,52,90,732/- imposed by the Additional CIT u/s. 271D and 271E of the I.T Act, respectively, uphold his order." 12. Similarly, in the case of DCIT v. M/s. Sahajanand Hi-Tech Construction Pvt. Ltd., in ITA.No. 127 & 128/Mum/2017 dated 26.06.2019 the Coordinate Bench held as under: - "10. Considering the decision of Hon'ble Jurisdictional High Court in assessee group case in Ajinath Hi Tech Builder Pvt Ltd (supra), Triumph International Finance(I) Ltd (supra) dated 12.06.2012 and in Assessee's group case in DCIT vs. Aashthavinayak Estate Company Ltd. (supra) that there was reasonable cause for the assessee to receive deposits of l....
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....5(1) of the Act and therefore, the orders passed u/s. 271D/271E of the Act are barred by limitation. Ld. Counsel for the assessee submits that on identical facts the Coordinate Bench in ITA.No. 475 to 481/Mum/2014 dated 27.06.2014 in assessee own case and associate company's cases held that the penalty orders passed u/s. 271D/271E were time barred. 17. On the other hand, Ld. Senior Standing Counsel strongly placed reliance on the orders of the Ld. CIT(A)who rejected the ground raised by the assessee on limitation. 18. We have heard the rival submissions, perused the orders of the authorities below and case laws relied on. We observed that the tribunal in assessee's own case and group cases after considering various decisions on the issue held that the discussion by the Assessing Officer in the Assessment Order and making referral to the Addl. CIT for imposition of penalty constitutes initiation for "action for imposition of the penalty" and that is the date which should be reckoned for the purpose of limitation as specified in clause(c) of section 275(1) of the Act. While holding so the Tribunal held as under: "16. We have heard both the parties on the legal issues raised in th....
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....penalty proceedings into three categories: (i) Category I covers cases where the assessment to which the proceedings for imposition of penalty relate is the subject - matter of an appeal to the Dy. CIT(A) or the CIT(A) under section 246 or with effect from 1 - 6 - 2000, section 246A or an appeal to the Tribunal under section 253; (ii) Category II covers cases where 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 perio....
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....assessment proceedings. It is only where the assessment proceedings are independent and not directly linked to the assessment proceedings that the result of such proceedings in the course of which the penalty proceedings 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), pe....
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.... 53 (Rajkot - Trib.) (TM) and the penalty orders u/s 271D and 271E of the Act, being unconnected to the income of the assessee, are to be considered 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....
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....was transacted other than through banking channels M/s. PACL India Ltd made certain payments through banking channels 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 provision s 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 IT AT. 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....
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....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, extended limitation expires on 30.7.2012 against the above due dates, the penalty order passe....
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....ns accepted and repaid other than by way of Account Payee Cheque/Drafts. We also observed that the assessee was asked to explain why the loans were accepted other than by Account Payee Cheque and in response to the query raised by the Assessing Officer in the course of assessment assessee submitted its reply. The Assessing Officer records a finding that the contentions of the assessee are not accepted as it is not falling under any exemption categories where loan/deposit can be accepted other than by Account Payee Cheque/draft. Therefore, the Assessing Officer concluded that the assessee by not accepting the loan/deposit by Account Payee Cheque or bank drafts violated the provisions of section 269SS/269T of the Act and accordingly reference for initiation of penalty proceedings u/s. 271D/271E of the Act was made to Addl. CIT, Circle-6, Mumbai in the Assessment Order. After completion of assessments the Assessing Officer by letters dated 11.12.2012 and 26.06.2013 made a reference to the Addl. CIT for initiation of penalty proceedings. Therefore, the facts of the assessee's case in all these cases are identical to the facts as mentioned by the Tribunal in its order in ITA.No. 475 to ....