TaxTMI 
TaxTMI 
2021 (5) TMI 341
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....ch Developers Limited vide its letter dated 18.11.2019 had submitted that - (a) Macrotech Constructions Pvt Ltd has been merged with Lodha Hi-Rise Builders Private Limited with effect from appointed date 10.08.2013. The order giving effect to the aforementioned merger was passed on 04.07.2014 by the Hon'ble Bombay High Court. (b) Name of the company Lodha Hi-Rise Builders Private Limited has been changed to Bellissimo Hi-Rise Builders Private Limited on 06.01.2016. Copy of certificate of incorporation pursuant to change of name was placed on record. (c ) Subsequently, Bellissimo Hi-Rise Builders Private Limited has been merged with Lodha Developers Private Limited with appointed date of 01.04.2016. (d) Further, company Lodha Developers Private Limited has been converted into Public Limited Company on 14.03.2018 . Copy of certificate of incorporation consequent upon conversion to Public Limited Company was placed on record. (e ) Subsequently, the name of the company Lodha Developers Limited has been changed to Macrotech Developers Limited on 20.05.2019. Copy of certificate of incorporation pursuant to change of name was placed on record. We find that the revenue ha....
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....ssee has shown reasonable cause u/s. 273B of the Act and the levy of penalty was not justified. Aggrieved by the said order, the revenue had filed these appeals before us. 4.1. We find that the ld CITA had explained the journal entries thereby proving the genuineness of the transactions carried out by the assessee. The ld CITA had observed that on 2.5.2012, Shreeniwas Cotton Mills Ltd (SNCML) gave loan by cheque of Rs. 100 crores to Sahajanand High Tech & Pvt Ltd (Sahajanand). An amount of Rs. 100 crroes was given by Sahajanand to Lodha Developers Pvt Ltd (LDPL). On the date of receiving this loan, LDPL has to receive an amount exceeding Rs. 100 crores from the assessee, Macrotech Construction Pvt Ltd (MCPL). Instead of receiving the amount from MCPL and give the same to Sahajanand, LDPL settled the account by passing journal entries crediting the account of MCPL and debiting the account of Sahajanand. MCPL on the other hand debited the account of LDPL and credited the account of Sahajanand in its books of account. The amount which was payable to LDPL by the assessee is now payable to Sahajanand. Sahajanand had to pay Rs. 100 crores to SNCML and had to receive Rs. 100 crores ....
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....5 16 05/12/2012 Sonal Super Services 22,797 17 05/12/2012 Sonal Super Services 20,247 18 25/12/2012 Sonal Super Services 4,638 19 02/01/2013 RCIL A/c RIS500001206999 926 20 03/01/2013 RCIL A/c RIS500001206999 926 21 15/02/2013 Sonal Super Services 2,773 22 26/02/2013 Sonal Super Services 17,348 23 28/02/2013 Super Fabrication 13,100 24 28/02/2013 JK Enterprises 2,621 25 28/02/2013 Shree Sai Enterprise 800 26 28/02/2013 UK Enterprises 66,912 27 07/03/2013 Brand Equity Treaties Limited 48,77,220 28 28/03/2013 Sonal Super Services 15,906 29 28/03/2013 Sonal Super Services 29,891 30 28/03/2013 Sonal Super Services 40,563 31 28/03/2013 Sonal Super Services 48,276 32 29/03/2013 Sonal Super Services 31,488 Total (C) 1,00,39,63,078 Transactions with Shreeniwas Cotton Mills Ltd Sr No. Date Particulars Amount (Rs.) 1 05/07/2012 Sonal Super Services 3,917 2 02/08/2012 Sonal Super Services 4,135 3 30/09/2012 Br....
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....he Hon'ble Jurisdictional High Court rendered a decision in the case of Triumph International Finance (India) Limited (2012) [345 ITR 270]wherein it was held that the transactions through journal entries are also hit by the provisions of section 269SS and 269T of the Act. The decision of Hon'ble Bombay High Court rendered on 12.6.2012 is the significance of that date. Hence prior to the judgement of the Hon'ble Bombay High Court in the case of Triumph International Finance (India) Limited supra, there were series of consistent decisions on sections 269SS & 269T of the Act, holding that mere passing of journal entries will not amount to receipts / payments otherwise than by way of account payee cheque or draft and accordingly the same were not in contravention of provisions of sections 269SS and 269T of the Act and consequently no penalty u/s 271D and 271E of the Act could be levied for the same respectively. The reliance placed on these series of consistent decisions on sections 269SS and 269T of the Act constituted reasonable cause and it was argued that no penalty u/s 271D and 271E of the Act could be levied on the assessee for passing journal entries on or before 12.6.2012. 4....
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....lso observe that in the assessee's group case in the case of DCIT v. M/s. Lodha construction in ITA.Nos. 110, 111, 139 to 142/Mum/2017 dated 30.07.2018 held as under: "6. We have considered the rival submission of the parties and have gone through the orders of authorities below. The ACIT levied penalty u/s.271D as well as u/s.271E on his observation that the assessee has accepted loan/deposit from sister concern through journal entries i.e., otherwise then account payee cheque /draft thereby violated provisions of section 269SS and/ or 269T. The Assessing Officer further held that the assessee has not made out any reasonable cause as prescribed 273B of the Act. 7. Before ld. CIT(A) the assessee urged that journal entries is not loan or deposit of money neither there is any unaccounted cash flow money of the group entities. The assessee further contented that Section 269SS was introduced by the Finance Act, 1984. The Circular, gave the purpose of introduction of Section 269SS. The broad purpose of insertion of section 269SS was with the view to counter the device, which enables the tax payer to explain away un accounted cash or unaccounted deposits, the new se....
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.... of Section 269SS of the Act. This penalty was imposed inasmuch as during the previous year relevant to the subject assessment year, the respondents had accepted loans / deposits by way of passing journal entries in its books of accounts, in breach of Section 269SS of the Act. In terms Section 269SS of the Act prohibits a person from taking / accepting any loan / deposit or specified sum, otherwise by an account payee cheque or by an account payee bank draft or by use of electronic clearing system of a bank if the amount involved is in excess of Rs. 20,000/-. This imposition of penalty under Section 271D of the Act, was upheld by a common order dated 31st December, 2013 passed by the Commissioner of Income Tax (Appeals). On further appeal, the impugned order dated 27th June, 2014 of the Tribunal, inter alia held that penalty under Section 271D of the Act is not imposable in view of Section 273B of the Act. This for the reason that there was a reasonable cause for the failure to comply with Section 269SS of the Act. (b) On merits of the issue, the parties before us are agreed that the Tribunal was correct in holding that receipt of any advance / loan by way of journal entri....
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.... loans / deposits by way of an adjustment through journal entries carried out in the ordinary course of business has been doubted in the regular assessment proceedings. It held in the present facts the transaction by way of journal entries was undisputedly done to raise funds from sister concerns, to adjust or transfer balances to consolidate debts, to correct clerical errors etc. Further, the Tribunal records that as observed by this Court in Triumph International Finance (supra) that journal entries constituted a recognized modes of recording of transactions and in the absence of any adverse finding by the authorities that the journal entries were made with a view to achieve purposes out side the normal business operations or there was any involvement of money, then, in these facts there was a reasonable cause for not complying with Section 269SS of the Act. (e) Mr. Mohanty's submission that the test laid down in Triumph International Finance (supra) will have no application in the present facts in view of the large number of entries in this case as compared to only one entry in the case before this Court. The test of reasonable cause can not, in the present facts be....
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....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 Lal & 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 Act. Besides, the Delhi High Court in Commissioner of Income Tax Vs. 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 ILFS, would not fall foul of Section 269SS of the Act. This particularly in the absence of any payment beingmade in cash. (i) In the presen....
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....ch 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 for accepting 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 of the Act is not automatic, but the genuineness or otherwise of the reasons due to which repayment was made by journal entry has to be considered judiciously. 7. In the order reported as Lodha Builders (P) Ltd. v. ACIT [2014] 163 TTJ 778 (Mum), a bunch of appeals belonging to Lodha group (to which the present assessee belongs) involving identical issue, was disposed of by the coordinate Bench in which levy o....
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.... we do not find any reason to interfere with the finding of ld. CIT(A)." 11. Similarly, in a recent decision in the case of DCIT v. Mahavir Build Estate Pvt. Ltd., in ITA.No. 1480 & 1481/Mum/2017 dated 13.03.2019 the Coordinate Bench held as under: - "8. We have heard the authorised representatives for both the parties, perused the orders of the lower authorities and the material available on record. The revenue has sought our indulgence for adjudicating as to whether the CIT(A) is right in law and the facts of the case in vacating the penalty imposed by the Addl. CIT u/ss. 271D and 271E of the I.T Act. As observed 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....
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.... involved, had upheld the order of the CIT(A) who had deleted the penalty imposed by the A.O under Sec. 271D and 271E for the reason that since the judgment in CIT vs. Triumph International Finance (I) Ltd. (2012) 345 ITR 270 (Bom) was rendered on 12.06.2012, therefore, the assessee could have had a bonafide belief prior to that date that there was no violation of Sec. 269SS of the I.T Act in accepting loan by journal entry. It was observed by the Tribunal in the aforementioned case, as under : "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 Ass....
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....order of this Court in Triumph International Finance (supra) 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. 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....
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....Taxman 138), dated 30,11.1995; (iii) Judgment of Hon'ble Delhi High Court in CIT 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.....
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....the assessee was under a bona fide belief and there was no contravention as per the law prevailing as on the date of passing the journal entries. The orders of the CIT (A), therefore, do not call for any interference. 4.9. We find that in the aforesaid order of this tribunal dated 31.1.2020, all the arguments advanced by the ld DR before us had been duly considered. We find that similar decisions were rendered by the Hon'ble Jurisdictional High Court in the case of Lodha Properties Development Pvt Ltd and Lodha Crown Buildmart Pvt Ltd. We also find that the revenue had preferred Special Leave Petitions (SLPs) against the order of the Hon'ble Bombay High Court in the case of Lodha Properties Development Pvt Ltd in SLP (Civil) No. 42791/2018 dated 10.12.2018 ; CIT vs Lodha Crown Buildmart Pvt Ltd in SLP (Civil) No. 44666/2018 dated 3.1.2019 and CIT vs Lodha Properties Development Pvt Ltd in SLP (Civil) No. 42738/2018 dated 21.1.2019 challenging the deletion of penalties and all these SLPs were dismissed by the Hon'ble Supreme Court. 4.10. In view of aforesaid detailed observations and respectfully following the judicial precedents relied upon hereinabove, we hold that there was....
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.... respect of journal entries passed on or before 12.6.2012 in the sum of Rs. 99,60,29,234/-. 4.12. Let us now address the justification for levy of penalty u/s 271D and 271E of the Act in respect of journal entries passed after 12.6.2012. Entries passed after 12.6.2012 Transaction with Brand Equity Treaties Ltd These entries comprise as follows: Penalty u/s 271E Transactions with Lodha Developers Pvt Ltd (LDPL) Sr No. Date Particulars Amount (Rs) 10 30/09/2012 Brand Equity Treaties Limited (BETL) 36,14,531 27 07/03/2013 Brand Equity Treaties Limited 48,77,220 Transactions with Shreeniwas Cotton Mills Ltd (SNCML) Sr No. Date Particulars Amount (Rs.) 3 30/09/2012 Brand Equity Treaties Limited 58,93,873 4 31/10/2012 Brand Equity Treaties Limited 45,22,389 Penalty u/s 271D The following two amounts are debited to the account of LDPL / SNCML and hence, in any case, wrongly considered by the ld AO to be loan received. Transaction with Lodha Developers Pvt Ltd Sr No. Date Particulars Amount (Rs) 1 22/06/2012 Brand Equity Treaties Limit....
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.... this business constraint and exigency and administrative convenience itself constitutes reasonable cause within the meaning of section 273B of the Act . Hence no penalty u/s 271D and 271E of the Act could be invoked for the same. In this regard, we find that the Hon'ble Jurisdictional High Court had addressed the similar issue whether the aforesaid behaviour of the assessee would constitute reasonable cause u/s 273B of the Act to escape from the rigours of applicability of provisions of section 269SS and 269T of the Act in the case of CIT vs Triumph International Finance (I) Ltd reported in 208 Taxman 299 (Bom). The relevant operative portion of the said decision is reproduced hereunder:- 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'. Therefor....
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....of the Act, no penalty under Section 271E could be imposed for contravening the provisions of Section 269T of the Act. 4.15. We also find that the Hon'ble Delhi High Court in the case of CIT vs Worldwide Township Projects Ltd reported in 229 Taxman 560 (Del) in the similar set of facts and circumstances had categorically observed as under:- 8. A plain reading of the aforesaid Section indicates that (the import of the above provision is limited) it applies to a transaction where a deposit or a loan is accepted by an assessee, otherwise than by an account payee cheque or an account payee draft. The ambit of the Section is clearly restricted to transaction involving acceptance of money and not intended to affect cases where a debt or a liability arises on account of book entries. The object of the Section is to prevent transactions in currency. This is also clearly explicit from clause (iii) of the explanation to Section 269SS of the Act which defines loan or deposit to mean "loan or deposit of money". The liability recorded in the books of accounts by way of journal entries, i.e. crediting the account of a party to whom monies are payable or debiting the account of a part....
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....issed. 4.15.1. We find that though the ultimate finding recorded by the Hon'ble Delhi High Court had been subsequently reversed by the decision of Hon'ble Jurisdictional High Court in the case of Triumph International supra, still the observations made by the Hon'ble Delhi High Court on the genuineness of the transactions in the ordinary course of business and the element of 'reasonable cause' thereon, would still remain applicable and would have more persuasive value. 4.16. In view of our aforesaid observations and respectfully following the aforesaid judicial precedents relied upon hereinabove, we hold that the ld CITA had rightly held that no penalty u/s 271D of the Act could be levied in respect of transactions with BETL in the sums of Rs. 47,22,996/- and Rs. 31,40,533/- . Similarly , we hold that the ld CITA had rightly held that no penalty u/s 271E of the Act could be levied in respect of transactions with BETL in the sums of Rs. 36,14,531/-, Rs. 48,77,220/-, Rs. 58,93,873/- and Rs. 45,22,389/-. 5. With regard to the other remaining entries where transactions have been passed through journal entries, the ld AR explained that the other entries which are less than Rs. ....