AI Drafter 
TaxTMI 
TaxTMI 
2021 (11) TMI 131
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....) is justified in deleting the penalty of Rs. 1,99,68,616/- 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), d....
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....To Lodha Novel Buildfarms Pvt. Ltd.....................Cr. 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....
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....tising And Publicity 11,90,960 13.11.2013 Riddhi Siddhi Bullions Ltd. 7,94,899 08.03.2014 Alakh Advertising And Publicity 1,10,740 Total 26,84,505 The journal entry passed in the ledger account of Shreeniwas Cotton Mills Ltd, inter alia, was as follows: "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 th....
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....t, it was observed by the Addl. CIT that the said contention was contrary to the view taken by the Hon'ble jurisdictional High Court in the case of CIT Vs. Triumph International Finance (I) Ltd. (2012) 345 ITR 270 (Bom). Although, it was the claim of the assessee that the transactions in question were genuine and made by the lender companies 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....
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....at the issue was squarely covered by the order passed by the Tribunal in the case of assessee's group company, viz. DCIT Vs. M/s Macrotech Developers Limited (Successor to Macrotech Construction Pvt. Ltd.), ITA No. 1415 & 1416/Mum/2018, dated 08.04.2021. 8. We have heard the ld. Authorized Representatives for both the parties and perused the 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 Landm....
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....tions entered in the normal course of business. Hence if the aforesaid transactions are looked into from the perspective of the object and intention behind introduction of provisions of section 269SS and 269T of the Act , then the provisions of section 269SS and 269T of the Act cannot be made applicable to the facts of the instant case. Moreover, from the detailed explanation of the aforesaid 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 caus....
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....ion 271E of the Act if reasonable cause is shown by the assessee for failing to comply with the provisions of Section 269T. It is not in dispute that settling the claims by making journal entries in the respective books is also one of the recognized modes of repaying loan/deposit. Therefore, in the facts of the present case, in our opinion, though the assessee has violated the provisions of Section 269T, 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....
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....n 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 cash either by the assessed or on its behalf, (iii) no loan was accepted by the assessee in cash, and (iv) the payment of Rs. 4.85 crores made by the assessee through IL & FS, which holds more than 30 per cent. of the paid-up capital of the assessee, by 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 subsequen....
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....evelopers Pvt Ltd and others wherein 7 reasons have been listed which could be considered as 'reasonable cause'. The same are as under:- a) Alternate mode of raising funds b) Assignment of receivables c) Squaring of transactions d) Operational efficiency/MIS purpose e) Consolidation of family member debts f) Correction of error g) Loans taken in cash 5.1. In the instant case, these journal entries in the name of Joystar India amounting to Rs. 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....
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.... 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." 11. Briefly stated, on a reference received from the A.O that the assessee had 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 87,5....