TaxTMI 
TaxTMI 
2018 (6) TMI 1791
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.... this appeal of Revenue and the cross objection of the assessee is against the order of CIT(A) deleting the penalties levied by the additional CIT central range, Mumbai under sections 271 D & 271E of the 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: - "1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in deleting the penalty levied u/s. 271D & 271E of the Income Tax Act, 1961 on the ground that the 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 LLCJT(A) having held that the assessee had contravened the provisions of section 269SS & 269T' of the Income Tax Act 1961, ought to have up....
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....he payments from/to various sister concerns through journal entries due to business expediency and reasonable cause. It was explained that the transferring the asset and the liabilities to the sister concerns by way of journal entries does not constitute the loan or deposit in term of money within the provisions of section 269SS and 269T of the Act. It was also explained that back to back entries while receiving payment or making final payment is always by account payee cheques and this can be verified by the AO. The Additional CIT was not convinced with the explanation of the assessee and vide different orders under section 271D and 271E of the Act levied the penalty for both the defaults by observing as under: - "In view of the above, the assessee company is a part of the Lodha Group which is a major construction group engaged in the construction business and development of real estate. Lodha Developers Ltd. is the parent holding company which has further subsidiaries and step down subsidiaries. The reference received from the assessing officer reveals that the assessee has received/ accepted loans from various concerns through a mode other than that specified in section....
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....dent from the manner in which journal entries have been passed. Without prejudice to the genuineness of the transactions carried out, even bonafide transactions, if carried out in violation of section 269SS/269T, shall attract penalty as has been held by the jurisdictional High Court in the case to Triumph International Finance (India) Ltd. The assessee has also not made out any case of reasonable cause u/s 273B following the guidelines laid down by the Bombay High Court in Triumph International Finance (India) Ltd. The Mumbai [TAT 'F' Bench in its order in the case of M/s. V.N. Parekh Securities Vs. ACIT, Cent.Cir.40. ITA Nos. 6082 & 6083/ Mum/2009 dated 16.08.2013 has stated " In view of the judgement of the Hon'ble jurisdictional High Court (in CIT Vs Triumph International Finance (I) Ltd (2012) 345 ITR 270), it is apparent that there can be no deletion of penalty if simply there is a receipt of loan or repayment of loan through journal entries. Each and every case is required to be considered as to whether there was some reasonable cause in accepting such loans or repaying loan in contravention of provision of sec.269SS / 2692". The assessee in the instant case has ....
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....hain of entities involved in transaction for the purpose of tax evasion. From the entire conspectus of facts and law adumbrated above, I am satisfied that the assessee company has violated the provisions of Section 269SS of the Income Tax Act, 1961 and committed default within the meaning of section 271D of the IT Act, 1961, for which a penalty is leviable. I therefore, levy a sum of Rs. 1372,17,45,978/- (Rupees One Thousand Three Hundred and Seventy Two Crore Seventeen Lakh Forty Five Thousand Nine Hundred and Seventy Eight Only) by way of penalty u/s 271D of the Act, 1961." 5. Similar is the finding for levy of penalty under section 271E of the Act for the quantum of Rs. 1,615,47,23,035/-. Aggrieved, assessee preferred the appeal before CIT(A). 6. The CIT(A) hold that the assessee has committed default under section 269SS and 269T of the Act and therefore, the assessee himself has exposed to the provisions of section 271D and 271E of the Act. For this, he gave finding in Para 6 to 6.3.1 as under: - "6.0. I have considered the facts of the case, the stand taken by the Addl. CIT. Central Range-7 in the penalty order, the grounds of appeal and the written sub....
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....details furnished and submissions made it is noted that the penalty has been levied with respect to journal entries with group concerns, which have been undertaken to assign receivables, payment on behalf of group concern for squaring up transactions and for ease in consolidation of accounts, rectification entries etc. As a result of these entries the receivables have gone up or down resulting in taking of loan/ repayment of loan. Since the transactions are for more than the amount of Rs. 20,000/- and the same are not through account payee cheque or bank draft, there is violation of the provisions of Section 269SS/269T In this regard reliance is placed on the decision of the jurisdictional High Court in the case of CIT vs Triumph International Finance(l) Ltd dated June 12, 2012 (22 Taxmann.com 138 BOM) for AY. 2003-04 and the case of CIT vs MIs. Triumph International Finance(I) Ltd ITA No-5745 of 2010 dated 17 8.2012 for A.Y.2000-01, The decision for AY 2003-04 is with respect to contravention of provisions of section 269T, since there was a repayment of loan by making journal entries in the books of account and it was held by the Hon'ble court that repayment of - loan/deposit, exc....
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....sonable cause as explained by the assessee. The assessee explained that prior to this date there were decisions in favour of assessee in the following cases:- (i) Hon'ble Delhi High Court in the case of CIT vs. Noida Toll Bridge Co. Ltd. [2003] 262 ITR 260 (Delhi) rendered on 28.01.2003. (ii) Hon'ble Rajasthan High Court in the case of CIT vs. Hissaria Bros. [2007] 291 ITR 244 (Rajasthan) rendered on 21.07.2006. (iii) Order of Co-ordinate Bench of this Tribunal in the case of CIT vs. Triumph International Finance (I) Ltd. in ITA No. 542/Mum/2007, dated 29.01.2008. (iv) Order of Co-ordinate Bench of this Tribunal in the case of Muthoot M. George Bankers vs. ACIT [1993] 46 ITD 10 (Cochin), dated 16.04.1993. 8. In view of the above, the CIT(A) held in para 6.4 to 6.8 as under: - "6.4 Ground No. 3 to 9 are against the finding of the Addl.CIT that penalty was leviable u/s.271D of the Act since no reasonable cause could be found in this case. In this regard it is observed that the words 'reasonable cause have not been defined. under the I.T. Act, though, it has been interpreted by various courts. The Hon'ble Delhi High Court has enu....
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....ffect 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. 6.5 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 uls.143(3) dated 31.3.2015, it is noted that the income returned has been accepted as the assessed income after making necessary verification etc. Thus, there is no finding that the transactions by way of Journal entries were undertaken to evade tax. Further, the appellant has submitted that there was reasonable cause for the above said contravention of section 269SS since (i) the journal entries have been made with the group concerns under the bonafide belief that such transactions would not be hit by the provisions of section 269SS in view of various judicial d....
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.... 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. 22.99 crores.' 6.5.2. It has also been observed by the AddI.CIT that it shalt not be out of place to mention that the assessee group has made a disclosure before the Hon'ble Income Tax Settlement Commission, Mumbai, of undisclosed income arising out of transactions with and by various group entities which are also the subject matter of investigation pursuant to the direction of Hon'ble ITSC Hence it cannot be ruled out that the entities through whom such repayment/acceptances are done are not part of a chain of entities involved in transaction for the purpose of tax evasion. In this regard the appellant has submitted that no investigation pursuant to the order of the Settlement Commission was pending on 28.92015 i.e. the date of levy of penalty since the order of the Settlement Commission u....
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....arms Pvt. Ltd 289,64,11,649 4. Lodha Developers Pvt Ltd. 628,83,80,832 Total 1372,17,45,978 10. Similarly, the assessee has also repaid the sum to the sister's concern by way of passing of journal entries to the effect of accountable claims / payments/ receivables by the sister's concerns and the details of the transactions are as under: - Sl No. Name of the sister concerns Debitors(Rs.) Credits (Rs.) 1. Lodha HI-Rise Builders Pvt. Ltd. 7,16,88,501 135,90,17,150 2. Lodha Healthy Construction and Developers Pvt. Ltd 3261868096 317,79,36,347 3. Lodha Novel Buildfarms Pvt. Ltd 2,41,47,16,899 289,64,11,649 4. Lodha Developers Pvt Ltd. 10406449539 628,83,80,832 Total 16154723035 1372,17,45,978 11. Before us, it was claimed by the assessee that the journal entries pointed out by the AO and during penalty proceedings by the Addl.CIT, are not loan or deposits of money in view of explanation (III) to section 269SS of the Act, which gives the definition of loan or deposit for the purpose of this section. The learned Counsel for the assessee relied on the Bombay High Court de....
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....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 into between the parties. The inference of law in that case was whether on the facts, it could be inferred that the claim for deduction is in respect of expenditure incurred wholly and exclusively for the purposes of the business. Thus, it would involve a question of interpretation of the agreements etc. from which an inference is to be drawn. Further, it also involves application of p....