TaxTMI 
TaxTMI 
2018 (10) TMI 1926
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....e Act for accepting & repayment in cash loan/ deposit/ transactions made through journal entries in excess of Rs.20,000/-in violation of the provisions of section 269SS & 269T of the Act by holding that the genuineness of transactions made through journal entries is not in doubt and consequently there is a reasonable cause for accepting & repayment in cash loan/ deposit/ transactions made through journal entries in excess of Rs.20,000/-. For this Revenue has raised the following two grounds in ITA No. 113/Mum/2017 for deletion of penalty levied under section 271D of the Act: - "1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the penalty of Rs. 22,90,605/- levied under section 271D of the Income Tax Act, 1961 on the ground that genuineness of the transaction made through journal entries is not in doubt. 2. On the facts and in the circumstances of the case and in law, the ld. CIT(A) having held that the assessee has contravened the provisions of section 269SS of the Income Tax Act, 1961, ought to have upheld the levy of penalty under section 271D as the assessee failed to establish the compelling reasons or genuine b....
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.... the case of CIT vs. Triumph International finance (I.) Ltd. dated 12.06.2012 the loan taken or repayment of loan through general entries in the books of accounts attracts penalty under section 271D and 271E of the Act. But, before 12.06.2012 there is a reasonable cause in view of the decision of Hon'ble Bombay High Court in the case of assessee's group concerns in the case of CIT vs. Lodha Properties Development Pvt. Ltd. in ITA No. 172 of 2015 and others, wherein the Hon'ble High Court exactly on similar circumstances and transactions arising out of the same group of companies deleted the penalty by holding that the assessee has reasonable cause under section 273B of the Act for entering into such transactions through journal entries for the reason that the decision of Hon'ble Bombay High Court in the case of Triumph International Finance (I) Ltd, the same was delivered only on 12.06.2012 and on that date Hon'ble Bombay High Court has clarified the position that the receiving of deposits or loans through journal entries would certainly be hit by the provisions of section 269SS and 269T of the Act. The CIT(A) observed as under:- "Ground No.4 to 9 are against the finding o....
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....hown by the assessee for failing to comply with the provisions of section 2697. Settling claims by making journal entries in the respective books is also one of the recognized modes of repaying loan or deposit. Therefore, on the facts, in the absence of any finding recorded in the assessment order or in the penalty order to the effect that the repayment of loan or deposit was not a bonafide transaction and was made with a view to evade tax, the cause shown by the assessee was a reasonable cause and 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. 7.5. In the appellant's case the genuineness of the transaction made through journal entries is not in doubt and it has not been shown either in the assessment proceedings or in the penalty proceedings that unaccounted income of the lender or the borrower was involved. From the assessment order passed u/s.143(3) dated 30.3.2015, it is noted that the total income has been assessed after making the following additions i) land & brokerage incomers. 5,00,000/- (ii) P&L difference in ROI filedRs. 568 (iii) disallowance u/s.37 towards capi....
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....e of CIT vs Triumph International Finance(l) Ltd) is only that such transactions which are in the nature of squaring up with the same party can only claim the benefit of reasonable cause. This observation is found to be without merit particularly in light of the decision of High Court of Bombay in the case of CIT vs MIs. Triumph International Finance(l) Ltd ITA No.5745 of 2010 dated 17.8.2012 for the A.Y.2000-01, as noted in para 6.3 above, wherein the appellant company and its sister concern MIs. Triumph Securities Ltd had transactions of sale and purchase with common customers and the credit/debit liabilities were settled through journal entries and it was held 'that the transactions in question were undertaken not with a view to receive loans/deposits in contravention of Section 269S3, but in a view to extinguish the mutual, liability of paying/receiving the amounts by the assessee and its sister concern to the customers. In the absence of any material on record to suggest that the transactions in question were not reasonable or bonafide and in view of section 273B of the Act, we see no reason to interfere with the order of the Tribunal in deleting the penalty of Rs. 22....
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....ech Builders Pvt. Ltd 10,810 4. Lodha Buuilders Pvt. Ltd 10,33,525 5. Shantinath Designer Constructions Pvt. Ltd. 2,72,931 6. Shri Vardhvinayak Builders Pvt. Ltd 5000 Total 26,49,622/- The reasons for levying the penalty u/s.271E is on the same lines as stated in the penalty order u/s.271D of the Act. The submissions made by the appellant are on the same lines as for the appeal with respect to penalty u/s.2710 of the Act. From the details filed, it is observed that out of the amount of Rs. 2649,622/-, the debit amounts of Rs. 10,33,525/represents transfer of credit balance of Lodha Builders Pvt Ltd to LDPL Similarly, the debit amount of Rs. 430,9761- in the account of Asthavinayak Real Estate Pvt Ltd and of Rs. 272,931/- in the account of MIs. Shantinath Designer Construction Fvt Ltd represents the transfer of credit balance from these accounts to LDPL. The debit amount of Rs. 896,270/- in the account of LDPL represents reduction in its credit balance by way of allotment of equity shares of the said value to it. Other smaller amounts are also of similar nature. I find that penalty has been levied in respect of journal ....
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....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 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 w....