TaxTMI 
TaxTMI 
TaxTMI 
2021 (11) TMI 131
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....,68,616/- u/s 271D holding that there was reasonable cause u/s 273B for entering on transaction to transaction basis in the given case for the existence of reasonable cause u/s 273B which led to the exigency of contravention of provisions of sections 269SS/ST. 2. Whether on the facts and circumstances of the case and in law, the Hon'ble CIT(A) is justified in holding that the journal entries should enjoy equal immunity on par with account payee cheques and bank drafts. 3. Whether on the facts and circumstances of the case and in law, the Hon'ble CIT(A) is justified in merely relying upon the High Court Order in Asessee's group case company, Lodha Builders (P) Ltd. in ITA Nos. 171/172/202/2013/2018/2019 of 2015 vide order dated 06.02.2018 without examining the cause behind each instance of default which, therefore, rendered the impugned order perverse, and thereby rendered the applicability of any judicial precedent as otiose." 2. Briefly stated, the assessee company is engaged in the business of land development and construction of real estate. Assessment was framed by the A.O vide his order passed u/s 143(3), dated 20.12.2016 and the income of the assessee was determined at R....
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....; Rs. 228,278." As per the records Mangal Paper Mart (MPL) was a vendor that had provided printing and advertisement material, printing of visiting cards etc. to the assessee company. The assessee had an amount payable to MPL on account of printing and advertisement. On the other hand MPL had booked flats in a project that was being developed by the 'sister concern' of the assessee, viz. LNBPL (now merged with Lodha Developer Pvt. Ltd.). The amount payable to MPL by the assessee was adjusted against the amount receivable by LNBPL from MPL towards flat booking. Accordingly, the aforesaid adjustment was given effect to by way of the abovementioned journal entry. (B). Lodha Pranik Landmark Developers Pvt. Ltd. Date Particulars Credit Amount 30.11.2013 Bennett Coleman & Co. Ltd. 68,43,911 07.03.2014 Bennett Coleman & Co. Ltd. 14,42,999 07.03.2014 Bennett Coleman & Co. Ltd. 93,195 Total 83,80,105 Journal entry passed in the ledger account of Lodha Pranik Landmark Developers Pvt. Ltd. (LPLDPL) was as follows: "Bennett Coleman & Co. Ltd..............................Dr ....
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....: "Alakh Advertising And Publicity.............Dr Rs. 18,89,606 To Shreeniwas Cotton Mills Ltd....................Cr. Rs. 18,89,606." Alakh Advertising and Publicity (AAP) is a vendor that had provided advertisement services on hoardings to the assessee company. The assessee had an amount payable to AAP on account of advertisements given through them. On the other hand AAP had booked flats in a project that was being developed by Shreeniwas Cotton Mills Ltd. (SNCML), a sister concern of the assessee. The amount payable to AAP by the assessee was adjusted against the amount receivable from it towards flat booking in SNCML. The adjustment was given effect by way of the abovementioned journal entry. 4. It is claimed by the assessee company that the aforementioned amounts represented the payments that were made by the lender company to a third party on behalf of the assessee due to business expediency/necessity. However, the Addl. CIT was of the view that the assessee except for making a general statement that the aforesaid transact....
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....nies to the third parties on the behalf of the assessee due to business expediency/necessity, however, it was observed by the Add.CIT that the assessee had failed to demonstrate any such business expediency. Observing, that the case of the assessee was not as that of a simple squaring up or mutual extinguishment of liability which could be done by passing journal entries, it was noticed by the Addl. CIT that the party from whom the amount was shown to be accepted in the nature of loan or deposit was not the same party to whom the same amount was repaid. It was further observed by 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 (I) ltd. (2012) 345 ITR 270 (Bom) was that only such transactions where there is squaring up with the same party could claim the benefit of a reasonable cause u/s 273B of the Act. However, it was observed by the Addl. CIT that the assessee had failed to discharge the onus that was cast upon it for proving that there was a reasonable cause for carrying out each of the transactions in question for bringing its case within the realm of Sec. 273B of the Act. Insofar the relianc....
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....orders of the lower authorities a/wthe material available on record. Before adverting any further, it would be relevant to first consider the nature of transactions between the assessee and its 'sister concerns' on the basis of which the CIT(A) had held the same as assigning of receivables, which are for a fair appreciation culled out as under : A). Lodha Novel Buildfarms Private Limited : (i). Mangal Paper Mart (MPM) had entered into an agreement with Lodha Novel Buildfarms Pvt. Ltd. (LNBPL) according to which 50% of the value of invoices for advertisement services raised by the MPM on the group companies will be adjusted against the flat booked by MPM in LNBPL. B). Lodha Pranik Landmark Developers Pvt. Ltd. : (i). Bennett Coleman & Co. Developers Pvt. Ltd. (BCCL) had entered into an agreement with Lodha Pranik Landmark Developers Pvt. Ltd. (LPLDPL) according to which 66.67% of the value of invoices raised by BCCL for advertising services on group companies will be adjusted against the flat booked by BCCL in LPLDPL. C). Lodha Crown Buildmart Private Limited : (i). Bennett Coleman & Co. Developers Pvt. Ltd. (BCCL) had entered into an agreement with Lodha Crown Buildmart Pr....
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....aid transactions together with the purpose for which those journal entries were passed, it could be safely concluded that these entries neither reflect any receipt of loan nor repayment of loan. At the cost of repetition, we find that the journal entries are passed towards amount receivable from BETL towards sale of flats which was adjusted against amount payable to LDPL and SNCML on an understanding that both these companies are liable to pay BETL towards advertisement expenses. Hence it could be safely concluded that these entries were passed out of business constraints and exigencies and for administrative convenience with no malafide intent to evade payment of tax. In our considered opinion, 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 sec....
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...., the assessee has shown reasonable cause and, therefore, the decision of the Tribunal to delete the penalty imposed under Section 271E of the Act deserves acceptance. 25. In the result, we hold that the Tribunal was not justified in holding that repayment of loan/deposit through journal entries did not violate the provisions of Section 269T of the Act. However, in the absence of any finding recorded in the assessment order or in the penalty order to the effect that the repayment of loan/deposit was not a bonafide transaction and was made with a view to evade tax, we hold that the cause shown by the assessee was a reasonable cause and, therefore, in view of Section 273B 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 accepte....
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....y journal entry in the books of account of the assessed by crediting the account of IL & FS. Having regard to the aforenoted findings, which are essentially findings of fact, we are in complete agreement with the Tribunal that the provisions of section 269SS were not attracted on the facts of the case. Admittedly, neither the assessee nor IL & FS had made any payment in cash. The order of the Tribunal does not give rise to any question of law, much less a substantial question of law. We accordingly decline to entertain the appeal. Dismissed." 9. In our view, the present appeal is bereft of any merit and is, accordingly, dismissed." 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 ju....
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.... 98,263/- ; Shree Ganesh Enterprise amounting to Rs. 14,675/-(twice) ; Macrotech Construction amounting to Rs. 1,600/- (twice) ; Sonal Super Services amounting to Rs. 3,94,100/- ; RCIL amounting to Rs. 1,852/- ; Super Fabrication amounting to Rs. 13,100/- ; J K Enterprises amounting to Rs. 2,621/- ; Shree Sai Enterprise amounting to Rs. 800/- and UK Enterprises amounting to Rs. 66,912/-, were passed towards assignment of genuine and bonafide receivables/payables arising out of business expediencies and exigencies in the normal course of business. Hence the same would certainly constitute reasonable cause within the meaning of section 273B of the Act and hence no penalty u/s 271D and 271E of the Act could be levied for the aforesaid sums. Reliance in this regard is placed on the decision of Hon'ble Jurisdictional High Court in the case of Triumph International reported in 208 Taxman 299 (Bom) supra wherein the relevant operative portion is already reproduced hereinabove. Respectfully following the same, we do not find any infirmity in the order of the ld CITA cancelling the levy of penalty in the aforesaid sums of various parties u/s 271D and 271E of the Act. Accordingly, the ground....
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....repaid loans in violation of the provisions of Sec. 269T of the Act, the Addl. CIT issued a 'Show cause' notice (SCN) on 02.06.2017 and called upon the assessee to explain as to why penalty under Sec. 271E may not be imposed on it. 12. On a perusal of the books of accounts of the assessee company, it was observed by the Addl. CIT that the same revealed following 'debit entries' in the ledger accounts of two of its associate concern's : Sr. No. Name of the Sister concerns Credits (Rs.) 1. Lodha Novel Buildfarms Private Limited 13,54,043 2. Lodha Crown Buildmart Private Limited 73,99,798 Total 87,53,841 On a perusal of the respective "ledger a/cs" of the aforesaid 'sister concerns' (as appearing in the books of accounts of the assessee), it was gathered by the Addl. CIT that the debit entries therein appearing found its genesis in the payments made by the assessee company to third parties at behest of the aforesaid lender companies, bifurcated details of which are as under : (A). Lodha Novel Buildfarms Private Limited Date Particulars Debit Amount 02.08.2013 Ralph Philip Raymond Coutinho 7,822 02.08.2013 Ralph Philip Raymond Coutinho 11,33,....