TaxTMI 
TaxTMI 
2021 (5) TMI 341
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....8.11.2019 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 had also filed revised Form No. 36 before us by duly mentio....
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.... 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 from MCPL. Thus instead of receiving money from assessee and repaying....
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....s 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 Brand Equity Treaties Limited 58,93,873 4 31/10/2012 Brand Equity Treaties Limited 45,22,389 Total (D) 1,04,24,314 Grand total (C + D) 1,01,43,87,392 4.3. The ld AR vehemently argued that the assessee had genuine reasons and justification of passing the above journal entries during the normal course of business. He submitted that the journal entries passed on or before 12.6.2012 and journal entries passed after 12.6.2012 need to be differentiate....
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....ng 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. 4.7. We find that the Hon'ble Jurisdictional High Court in a subsequent decision rendered in the case of Ajinath Hi-Tech Builders Pvt Ltd and others (group concern of the assessee) in ITA Nos. 171, 172, 202, 203, 218 & 219 of 2015 dated 6.2.2018, has laid down that since the decision in the case of Triumph International Finance was rendered on 12.06.2012,it is to be held thatprior to that,the assessee was under a bonafide belief that the transactions through journal entries were not hit by the provisions of section 269SS and 269T of the Act. 4.8. We find that the Co-ordinate Bench....
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....ssee 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 section 269SS debars person from taking or accepting after 30/6/1984 from any person loan or deposit otherwise by an account payee cheque or account payee bank draft if the amount of loan or deposit or aggregating amount of such loan is Rs. 10,000/- or more. The object of insertion of section 269SS was to ensure that tax payer is not allowed to give false explanation for his unaccounted money or if he has given some false entries in his accounts, he should not escape by giving some false entries in his account, he shall not escape by giving false explanation for the same. The assessee further contended that ther....
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....eld 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 entries is in breach of Section 269SS of the Act as the decision of this Court in Commissioner of Income Tax Vs. Triumph International Finance (I) Ltd. 345 ITR 270 is binding upon it. However, the Revenue's grievance is with the impugned order dated 27th June, 2014 of the Tribunal further holding no penalty under Section 271D of the Act is imposable in view of Section 273B of the Act in the present facts. This is so as the Tribunal holds that the failure to comply with Section 269SS of the Act was on account of reasonable cause on the part of the respondents. This finding of reasonable cause was on the application of parameters lai....
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....hieve 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 determined on the basis of the number of entries. If there was a reasonable cause for making the journal entries, then, the number of entries made, will not make any difference. Besides, on facts, the Tribunal was satisfied with the reasons given by the Assessee for reasonable cause and this finding is not shown to be perverse. Finally, the issue of there being a reasonable cause or not is an issue of fact. No inference of law and / or issue of interpretation is to be made. The decision relied upon by the Revenue in case of Premier Breweries Ltd.(supra) concerned itself with the issue of a claim for deduction under Section 37 of the Act on the basis of the Agreements entered in....
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....s 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 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 VH. Parekh (P) Ltd., Ketan V Parekh, Sunflower Builders (supra), Ruchika Chemicals (supra), Lala Murari Lal (supra) and the decision of the Delhi High Court in Noida Toll Bridge Co. Ltd. (supra) were holding the field. Thus, not in breach of Section 269SS of the Act. In the above view, while agreeing with the submission of Mr. Mohanty, learned Counsel for the appellant that the decision of this Court in Triumph International Fina....
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....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 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. and others, 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....
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....,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 prescribed under the aforesaid statutory provisions. However, we are persuaded to subscribe to the observation of the CIT(A) that there was a reasonable cause for the assessee to have carried out ....
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....trix 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 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), ....
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.... 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, (supra) were holding the field. Thus, not in breach of Section 269SS of the Act In the above view, while agreeing with the submission of Mr. Mohanty, learned Counsel for the appellant that the decision of this Cou....
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....; (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 of their judgment which read as under: (i) ........................,..... In the above view, while agreeing with the submission of Mr. Mohanty. learned Counsel for the appellant that the decision of this Court in Triumph Inte....
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....e 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 reasonable cause on the part of the assessee within the meaning of section 273B of the Act to legally believe that loans / deposits repaid through journal entries upto 12.6.2012, would not be in contravention of provisions of section 269T of the Act and consequentially no penalty u/s 271E of the Act could be levied for the same in the sum of Rs. 99,50,34,184/- ( 99,50,00,000 + 22,790+3,096+8,298). Accordingly, we hold that the ld CITA had rightly deleted the penalty u/s 271E of the Act in respect of journal entries passed on or before 12.6.2012 in the sum of Rs. 99,50,34,184/-. 4.11. Similarly journal entries passed on or before 12.6.2012 for which penalty has been levied u/s 271D of the Act are as follows:- Penalty u/s 271D Transaction with Shreeniwas Cotton Mills Ltd Sr No. Date Particulars Amount (Rs) 1. 02/05/2012 Lodha Developers Limited 99,60,29,234 At the outset, it was clarified by the ld AR that in the impugned order passed u/s....
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.... Developers Pvt Ltd Sr No. Date Particulars Amount (Rs) 1 22/06/2012 Brand Equity Treaties Limited 47,22,996 Transaction with Shreeniwas Cotton Mills Ltd Sr No. Date Particulars Amount (Rs) 2 22/06/2012 Brand Equity Treaties Limited 31,40,533 4.13. We find that the ld CITA had observed in para 7.9 of his order that SNCML had to make payment for advertisement to Brand Equity Treaties Limited (BETL) which has purchased flat from the assessee for which amount was receivable from BETL. The amount payable to BETL by SNCML is adjusted against the amount receivable by the assessee by way of passing the journal entries. Similarly, LDPL had to make payment for advertisement to BETL which has purchased flat from the assessee for which amount was receivable from BETL. The amount payable to BETL by LDPL is adjusted against the amount receivable by the assessee by way of passing the journal entries. 4.14. We find that the genuineness of the aforesaid transactions were neither disputed nor doubted by the revenue. These transactions admittedly were not made with a malafide intent to evade tax. We find that there is no evidence brought on record to even remotely suggest....
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....nnotation than the 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 been doubted in the regular assessment. There is nothing on record to suggest that the amounts advanced by Investment Trust of India to the assessee represented the unaccounted money of the Investment Trust of India or the assessee. The f....
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....e payable or debiting the account of a party from whom monies are receivable in the books of accounts, is clearly outside the ambit of the provision of Section 269SS of the Act, because passing such entries does not involve acceptance of any loan or deposit of money. In the present case, admittedly no money 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 Assessing Officer levied a penalty under Section 271D of the Act for alleged violation of the provisions 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 (Appeals) affirmed the penalty. The order of the CIT was suc....
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..... 1 lakh (per entry), are assignment of rights/ liabilities, the assignment of genuine and bonafide receivables / payables and extinguishment of mutual obligations effectuated by passing journal entries. These journal entries passed represent assignment/transfer of assets/debtors and liabilities/creditors having underlying transactions arising out of business expediencies and exigencies. These entries arise in the normal course of day to day business activities. We find that the argument of the ld AR deserves to be accepted on the bare perusal of the figures involved in the said journal entries as no person would either receive or repay loans in such odd amounts. Going by the frequency of the said transactions and the figures involved therein, it could be safely concluded that all those transactions were entered in the normal course of business of the assessee company by way of assignment of rights / liabilities and assignment of genuine receivables / payables. Moreover, the genuineness of those transactions reflected through journal entries have neither been disputed nor doubted by the revenue. These would certainly constitute reasonable cause within the meaning of section 273B of....