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2018 (7) TMI 2243
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.... order by claiming that the impugned issue is covered by the decision from Hon'ble Delhi High Court in the case of Commissioner of Income-tax v. Noida Toll Bridge Co. Ltd. 262 ITR 260 (Del.) and also from jurisdictional High Court in the case of CIT vs Ajinath Hi- Tech Builders Pvt. Ltd. (ITA NO.171 of 2015) and Lodha Crown Buildmart Pvt. Ltd./Lodha Builders Pvt. Ltd. (ITA NO.202 of 2015 and 213 of 2015), order dated 06/02/2018. It was also pleaded that the issue in hand is also covered by the decision of the Tribunal in the case of Vimal Enterprises vs JCIT (ITA NO.6390/Mum/2016), order dated 14/06/2017. In reply, the Ld. CIT-DR, relied upon the decision from Hon'ble Bombay High Court in CIT vs Triumph International Finance (I) Ltd. (2012) 22 taxmann.com 138 (Bom.). 2.1. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee is engaged in the business of construction and land development. A search and seizure action under section 132 of the Act was carried out upon Lodha Group on 10/01/2011, wherein, undisclosed transactions were found and as a result about 200 crores was disclosed by the group. ....
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....ior to 1st April 2002, the assessee had accepted a sum of Rs. 4,29,04,722/- as and by way of loan/inter-corporate deposit from the Investment Trust of India which was repayable during the assessment year 2003-2004. During the previous year relevant to the assessment year in question, the assessee on 3rd October 2002 had transferred 1,99,300 shares of Rashal Agrotech Limited held by it to the Investment Trust of India for an aggregate consideration of Rs. 4,28,99,325/-. Thus, in the assessment year in question, the assessee was liable to repay the loan/inter-corporate deposit amounting to Rs. 4,29,04,722/- to the Investment Trust of India and receive Rs. 4,28,99,325/- from Investment Trust of India towards sale price of the shares of Rashal Agrotech Limited sold by the assessee to the Investment Trust of India. Instead of repaying the loan/inter-corporate deposit to the Investment Trust of India and receiving the sale price of the shares from the Investment Trust of India, both the parties agreed that the amount payable/receivable be set-off in the respective books of account by making journal entries and pay the balance by account payee cheque. Accordingly, after setting off of the....
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....T of the Act is clear and unambiguous, the Tribunal ought to have held that repayment of the loan/inter-corporate deposit otherwise than by account payee cheque or demand draft was in violation of the provisions of Section 269T of the Act and, hence, the penalty imposed under Section 271E of the Act was justified. 9. Mr. Pardiwala, learned Senior Advocate appearing on behalf of the respondent - assessee, on the other hand submitted that Section 269T of the Act has been enacted to curb the menace of giving false explanation of the unaccounted money found during the course of search and seizure. He submitted that the bona fide transaction of repayment of loan or deposit by way of adjustment through book entries carried out in the ordinary course of business would not come within the mischief of the provisions of Section 269T of the Act. Referring to the legislative history as also the circulars issued by the Central Board of Direct Taxes from time-to-time, Mr.Pardiwala submitted that Sections 269SS and 269T were not meant to hit the genuine transactions and the legislative intent is to mitigate any unintended hardships caused by the provisions to genuine transactions. He sub....
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....ed from the scheme of the legislation and if another construction is possible apart from the strict and literal construction, then, that construction should be preferred to strict literal construction. 12. Referring to the provisions contained in the Code of Civil Procedure and books on accountancy, counsel for the assessee submitted that set off of the claim/counter-claim otherwise than by account-payee cheque or bank draft are legally permissible in commercial transactions as also in the accounting practice. Therefore, it must be held that genuine transactions like the transaction in the present case involving repayment of loan through journal entries do not violate Section 269T of the Act. In any event, it is contended that having regard to the commercial dealings between the parties it must be held that there was reasonable cause for repaying the loan through journal entries and in view of Section 273B of the Act penalty was not imposable under Section 271E of the Act. In support of the above contention, reliance was placed on the decision of the Delhi high Court in the case of CIT v. Noida Toll Bridge Co. Ltd. [2003] 262 ITR 260/[2004] 139 Taxman 115 , decision of the....
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....** ** ** "Penalty for failure to comply with the provisions of Section 269T 271E.- (1) If a person repays any loan or deposit referred to in Section 269T otherwise than in accordance with the provisions of that section, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit so repaid. (2) Any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner." ** ** ** "Penalty not to be imposed in certain cases. 273B.- Notwithstanding anything contained in the provisions of clause (b) of sub-section (1) of section 271, section 271A, section 271AA, section 271B, section 271BA, section 271BB, section 271C, section 271D, section 271E, section 271F, section 271G, clause (c) or clause (d) of sub-section (1) or sub-section (2) of section 272A, sub-section (1) of section 272AA or section 272B or sub-section (1) of section 272BB or sub-section (1) of section 272BBB or clause (b) of sub-section (1) or clause (b) or clause (c) of sub-section (2) of section 273, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said pr....
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....as been omitted and Section 271E has been inserted which provides penalty for failure to comply with Section 269T of the Act. Section 269T has been substituted by Finance Act 2002 with effect from 1st June 2002 wherein the provision relating to repayment of deposit exceeding the prescribed limit by account payee cheque/draft has been extended to repayment of loans as well. Thus, with effect from 1st June 2002, it is mandatory under Section 269T of the Act for the persons specified therein to repay any loan/deposit together with interest, if any, exceeding the limits prescribed therein, by account payee cheque/bank draft and failure to do so is made liable for penalty under Section 271E of the Act. 19. In the present case, it is not in dispute that the assessee has repaid loan/deposit by debiting the account through journal entries. The question is, whether such repayment of loan/deposit is in contravention of the modes of repayment set out in Section 269T ? The argument advanced by the counsel for the assessee that the bonafide transaction of repayment of loan/deposit by way of adjustment through book entries carried out in the ordinary course of business would not come wi....
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....sion retained by the Company. In our opinion, the aforesaid decision of the Apex Court has no relevance to the facts of the present case, because, Section 80-O and Section 269T operate in completely different fields. The object of Section 80-O is to encourage Indian Companies to develop technical knowhow and make it available to foreign companies and foreign enterprises so as to augment the foreign exchange earnings, where as, the object of Section 269T in Chapter XXB of the Act is to counteract evasion of tax. For Section 80-O, receiving income in convertible foreign exchange is the basic requirement, where as, for Section 269T, compliance of the conditions set out therein is the basic requirement. Section 80-O does not prescribe any particular mode for receiving the convertible foreign exchange, where as, Section 269T bars repayment of loan or deposit by any mode other than the mode stipulated under that Section and for contravention of Section 269T penalty is imposable under Section 271E of the Act. In these circumstances, the decision of the Apex Court rendered in the context of Section 80-O cannot be applied while interpreting the provisions of Section 269T of the Act. ....
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....able may not be a sufficient cause. Thus, the expression 'reasonable cause' would have wider connotation 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 I....
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....e issues raised by the assessees in all the seven appeals are identical. Therefore, for the sake of convenience, they are clubbed, heard combinedly and disposed of in this consolidated order. Appeal wise and ground wise adjudication is given in the following paragraphs. To start with, we shall undertake to adjudicate the appeal in the case of Lodha Builders Pvt Ltd in the succeeding paragraphs involving two penalties u/s 271D & 271E of the Act . 2. This appeal ITA No.476/M/2014 filed by the assessee on 21.1.2014 is in connection with penalty levied u/s 271D of the Act and the effective grounds raised in the appeal read as under: "1. On the facts and in the circumstances of the case and in law, the Ld CIT (A) erred in upholding the order passed by the Addl. CIT under section 271D of the Act on the basis that the appellant had violated the provisions of section 269SS of the Act and also argued that there was no reasonable cause for such alleged contravention. 2. On the facts and in the circumstances of the case and in law, the CIT (A) erred in upholding the penalty imposed under section 271D of the Act without appreciating the fact that the appellant had no....
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....271E, the assessee raised identical grounds. 3. During the proceedings before us, assessee filed an additional ground on 23.4.2014 identical to all the appeals and the same reads as under: "On the facts and in the circumstances of the case and in law, the Ld CIT (A) erred in holding that the penalty order passed by the Addl. CIT is within the limitation date. The impugned penalty order is time barred under section 275(1)(c) of the Act and hence, the said order is liable to be quashed." 4. Briefly stated relevant facts of the case are that the assessee who belongs to the Lodha group of cases, is engaged in the business of land development and construction of real estate properties. Assessee filed the return of income declaring the total income at Rs. NIL and the same was subsequently revised to adjust carry forward losses. Assessment was completed determining the total income of Rs. 26,69,084/- under the special provisions of section 115JB of the Act. In the scrutiny assessment, there is a solitary and minor addition made by the AO u/s 14A of the Act. There is no further appeal against the said order of the AO before the CIT (A). Thus, the assessment reach....
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..../-. The details of names of the loan lenders, JV through and the amount accepted through JV are tabulated as under: Lodha Builders Pvt Ltd AY 2009-2010 Name of the lender JV through Amt Accepted thro' JV Abhinandan Lodha Lodha Developers Rs. 16,06,564/- Lodha Properties Development P Ltd Rs. 37,38,000/- Abhishekh Lodha Lodha Hi-Rise Builders Pvt Ltd Rs. 19,08,000/- Lodha Properties Development Rs. 8,00,000/- Lodha Developers Rs. 1,99,54,541/- Ananthnath Contrn & farm P Ltd Lodha Hi-rise Rs. 1,20,06,768/- Arihant Premises Dharmanath Infra & Agro Rs. 51,45,000/- Lodha Developers Rs. 40,000/- Balaji Hitech Macrotech construction Pvt Ltd Rs. 3,00,00,000/- Durgeshwari Hi-rise Farms Pvt Ltd Lodha Hi-rise Builders Pvt Ltd Rs. 2,22,51,23,478/- Macrotech Constructions Rs. 1,20,50,00,000/- Gajanand Buildtech & Agro Pvt Ltd Vamadevi Developers & Farms PLtd Rs. 78,462/- Ganeshji realty and Agro P Ltd M.P. Lodha Rs. 1,00,000/- Lodha Buildcon Pvt Ltd Lodha Hi-Rise Builders Pvt Ltd Rs. 36,52,594/- Lodha Designer const....
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....cumbent and therefore, a fresh notice was issued on 21.8.2012. Assesseee replied to both the notices and submitted written submissions at many occasions. Some of the contents and submissions are reproduced in para 7 of the penalty order dated 28.9.2012. Briefly stated, the submissions of the assessee include that the loans received are by way of "journal entries‟ and there is no acceptance of cash by any method other than the one prescribed in the statute. The core transactions were undertaken by way of cheque only and however, the assessee resorted to the journal entries for transfer / assignment of loan among the group companies for business consideration. In case of journal entries, as per the assessee, the liabilities are transferred / assigned by the group companies to the assessee or to take effect of actionable claims / payments / received by group companies on behalf of the company. The journal entries were also passed in the books of accounts for reimbursement of expenses and for sharing of the expenses within the group. In such cases, the provisions of section 269SS of the Act have no application and for this, the assesse relied on the judgment of the Hon‟ble ....
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....High Court in case of Triumph International Finance India Limited dated 12th June, 2012 reported in 22 taxmann.com 138 to submit that 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 bona fide transaction and was made with a view to evade tax 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." 7. On considering the above submissions of the assessee, Addl. CIT examined the provisions of section 269SS/T of the Act, as the case may be, and discussed certain judgments including the binding judgment of the Hon‟ble Bombay High Court in the case of Triumph International (I) Ltd, dated 12th June, 2012 reported in 22 taxmann.com 138. Further, he reproduced the contents of the said judgment of the Hon‟ble High Court (supra) which is relevant for the proposition that where the loan / deposit were repaid by debiting the amount through journal entries, it must be held that the assessee has contravened the relevant pr....
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....37. Considering all the above facts, it is clear that the appellant failed to establish "reasonable cause" as required u/s 273B of the Act accordingly, the penalties levied amounting to Rs. 495,23,61,634/-; Rs. 39,11,30,396/-; Rs. 32,81,39,868/-; Rs. 61,50,900/-; Rs. 81,75,244/- and Rs. 36,67,81,854/- in the cases of M/s. Lodha Builders Pvt Ltd., M/s. Lodha Properties Development Pvt Ltd., M/s. Adinath Builders Pvt Ltd., M/s. Aasthavinaya Real Estate Pvt Ltd., M/s. Ajitnath Hi-tech Builders Pvt Ltd and M/s. Infratech Buildes and Agro Pvt Ltd respectively are hereby confirmed." 9. During the proceedings before the first appellate authority, assessee filed written submissions common to all appeals of the group. Referring to the judgment of the Hon‟ble High Court in the case of Triumph International (I) Ltd (supra), assessee submitted that the commercial expediency of the group concerns is held to be acceptable reason for squiring up/swapping of the transactions by passing the journal entries and therefore, it constitutes a "reasonable cause‟ in the instant case too. For this, assessee relied on the judgment in the case of Sun Engineering works Pvt Ltd 198 ITR 297....
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....ns of the Tribunal but most of them do not involve the fact of involving the journal entries unlike the present case and also in the case of M/s. Triumph International Finance (I) Ltd (supra). Eventually, CIT (A) confirmed the penalties as mentioned above. 10. On Limitation of Time: During the proceedings before the CIT (A), there was also an issue relating to "limitation‟ u/s 275 of the Act. It is the submission of the assessee that the present orders being penalty in nature, which are unconnected with the assessment of income which are covered by the clause (a) of section 275(1) of the Act, the provisions of clause (c) of section 275(1) of the Act are relevant. Considering the date of initiation of the penalty proceedings during the very assessment itself (assessment dated 5.12.2011) (para 6 extracted above), the penalty order passed by the Addl. CIT on 28.9.2012 is barred by limitation of time. Assessee relied on the judgment of the Rajasthan High Court in the case of Jitendra Singh Rathore [352 ITR 327] (Raj). However, CIT (A) did not considered the said judgment of the Hon‟ble High Court. Instead, he relied on the decision of ITAT, Chandigarh Special Bench....
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.... to be addressed by the Tribunal apart from the issues relating to the merits of penalty. 12. Ld Counsel for the assessee detailed certain dates relevant for deciding the issue under consideration. In this regard, a chart is filed by the assessee‟s counsel showing the names of various group assessee‟s where the penalty was levied, details of dates of AO or date of referral to the Addl CIT or others. The said details are inserted as under: S N o Entity name Date of AO order Order passed by Date of ref. to ADIT Penal ty u/s Date of Penalty SCN by JC End of FY in which proceedings are initiated Six Months from end of month in which penalty was initiated (Asst. Order) Six months from the end of months in which penalty was initiated (SCN) Limitation for levy of penalty Extent ion of limitation u/s 275(2) Exp (i)r.w. 129 Extended limitation Date of penalty order 1 Lodha Builders Pvt Ltd 5.12.11 ACIT 11.1.12 271E 15.2.12 31.3.12 30.6.12 31.8.12 31.8.12 30 30.9.12 28.9.12 2 Lodha Builders Pvt Ltd 5.12.11 ACIT 11.1.12 271D 15.2.12 31.3.12 30.6.12 31.8.....
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....imposition of penalty is initiated, whichever period expires later". Referring to the interpretation of the expressions "action for imposition of penalty‟, Mr Pardiwala mentioned that such "action‟ if any is always anterior (= earlier) in time qua the initiation of the penalty. 14. Referring to the facts of the present case, Ld Counsel mentioned that the said "action‟ has begun with the first show cause notice issued by the AO in the assessment proceedings (para 6 of the assessment order). Accordingly, the AO has heard the assessee at length on this issue of violation of the provisions of section 269SS and 269T, as the case may be, and the assessee vehemently contested the AO‟s proposals in the matter. Rejecting the assessee‟s explanation, AO formed an opinion in the matter against the assessee and eventually, AO made a referral to the Addl CIT, who is the authority empowered to impose the penalty under the statute. Ld Counsel submitted that the provisions of relevant sections of the Act do not provide on who is empowered to initiate such penalty proceedings. However, it only provides for who is empowered to impose penalty. In this regard, Ld ....
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....roposal to make a reference to the Addl. CIT for imposing the penalty. If the provisions of clause (a) are applied and the date of show cause notice issued by the Addl. CIT is considered, the penalty orders dated 28.9.2012 are very much in time and therefore, they are valid. However, in such case, Ld DR could not demonstrate the circumstances where the provisions of clause (c) of section 275(1) of the Act, can be invoked. It is thus summed up by the assessee‟s counsel that if the penalty matters are covered by the provisions of clause (a) of the said section, the provisions of clause (c) become redundant and vestigial. Legal Issue -Limitation of time - Finding of the Tribunal 16. We have heard both the parties on the legal issues raised in the Additional Ground i.e., applicability of the provisions of clause (c) to section 275(1) of the Act to the impugned penalties and the manner of computing the limitation of time provided in the said clause. To decide the above issues, in our opinion, the provisions of section 275 of the Act are required to analysed. The same read as under: "275(1)[(a) in a case where the relevant assessment or other order is the....
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....evant assessment is the subject-matter of revision under section 263; and (iii)Category III covers all other cases not falling within category I and category II which is governed by clause (c). By dividing into three categories the period of limitation for cases falling under category (i), i.e., clause (1)(a) is the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed or six months from the end of the month in which the order of the Dy. CIT(A) or the CIT(A) or, as the case may be, the Tribunal is received by the Chief CIT or CIT, whichever period expires later. 22. The period of limitation for the cases falling under category II is six months from the end of the month in which such order on revision is passed and the period of limitation for the cases falling under the above category III is the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, or six months from the end of the month in which action for imposition of penalty is initiated, whichever period expires later. In the last ....
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....ent proceedings, clause (c) has been made applicable. In this category, the period of limitation for completing the penalty proceedings is linked with the initiation of the penalty proceedings itself. In such cases, the penalty proceedings can be initiated independent of any proceedings but obviously, the penalty proceedings can be initiated only when the default is brought to the notice of the concerned authority which may be during the course of any proceedings and, therefore, for this type of cases where the penalty proceedings have been initiated in connection with the defaults for which no statutory mandate is there about any particular proceedings during the course of which only such penalty proceedings can be initiated, a different period of limitation has been prescribed under clause (c) as a separate category. In cases falling under clause (c), penalty proceedings are to be completed within six months from the end of the month in which the proceedings during which the action for imposition of penalty is initiated, are completed, or six months from the end of the month in which action for imposition of penalty is initiated, whichever period expires later. There is ....
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....t in the case of Jitendra Singh Rathore (supra). In this case, the Hon‟ble High Court also observed that the first show cause notice for levy of penalty was issued by the AO though the authority obtained to initiate penalty proceedings has also subsequently issued a show cause notice as well. Hon‟ble High Court held that the penalty proceedings were initiated by issue of first notice from the AO and not from the date of issue of notice by the JCIT and thus, the penalty order passed after expiry of 6 months from the end of the month in which the action for imposition of penalty initiated was barred by limitation. The said decision of the ITAT in the case of Dewan Chand Amit Lal (supra) deferred at the relevant point of time that the order of the Tribunal in the case of Hissaria Bros (supra). However, it is a fact that the said decision of the Tribunal in the case of Hissaria Bros (supra) was subsequently upheld by the Hon‟ble Rajasthan High Court. Therefore, considering the principle of precedence, it is necessary for the Tribunal to follow the order of the High Court where there is no contrary judgment from the jurisdictional High Court. As stated earlier, the sai....
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....n view of this admitted position, no infringement ofsection 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 Assesing 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 (A) affirmed the penalty. The order of the CIT was successfully impugned by the assesee before the ITAT. On appeal, this Court held as under: "While holding that the provisions of section 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 assesee IL & FS, which holds more than 30 per cent of the paid-up capital of the assessee, by journal entry in the boo....
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....Para 6 of the assessment order, which is already extracted above paras, bears witness to the above findings. Further, to give effect to his findings in the assessment order, the AO wrote a letter to the Addl. CIT on 11.1.2012, intimating to him about the violation to the said provisions of the Act. On receipt of the said reference from the AO, Addl. CIT issued a show cause notice on 15.2.2012 calling for explanation of the assessee as to why the penalty u/s 271D should not be imposed in the case of the assessee. Eventually, Addl. CIT passed a penalty order u/s 271D of the Income Tax Act on 28.9.2012. Considering the fact that the assessment order is dated 5.12.2011 and as per the provisions of clause (c) to section 275(1) of the Act, 6 months from the end of the month in which the action was initiated expires on 30.6.2012. After considering the explanation of limitation u/s 275(2), Explanation 1 read with section 129 of the Act, extended limitation expires on 30.7.2012 against the above due dates, the penalty order passed by the Addl. CIT on 28.9.2012, which is barred by the limitation. Thus, the orders of the penalty of this kind have to be explained considering the provisions of ....
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....ayments of loans and advances among the sister concerns of the Lodha group settled by way of "journal entries‟. During the assessment proceedings, AO asked the assessee to show cause as to why loans were accepted / repaid other than by the account payee cheque / draft. In this regard, assessee informed that the said loans / advances were transacted with the sister concerns only by way of "journal entries‟ and there is no cash transactions involved the provisions of section 269SS and 269T have no application to the facts of the case. Thus, it is the case of the assessee that the said transactions with the sister concerns are for commercial reasons and they should be kept outside the scope of the provisions of sections 269SS/269T of the Act. During the penalty proceedings before the Addl CIT, there was an inquiry into the reasons for violation of the said provisions of the Act and the assessee explained the said reasons (vide para 7.5 of the penalty order) which are already extracted above. The Addl. CIT did not consider the "explanations‟ as the "reasonable causes‟ and imposed the penalties in all the seven cases under consideration. 25. During the f....
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....e loans / deposits in contravention of section 269SS but with 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 bona fide 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..‟ He ignored the above finding of the Court and confirmed the penalty levied by the Addl. CIT. Aggrieved with the above decision of the CIT (A), the assessee is in appeal before the Tribunal with the argument that the assessee‟s reasons constitutes a reasonable cause. 27. During the proceedings before us, Ld Counsel for the assessee summarized all the transactions involving all the sister concerns and grouped the various transactions entered in the books of accounts by way of journal entries into 7 categories. The details of these seven groups are submitted as under: 1 Alternate mode of raising funds; 2 Assignment o....
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....nternational (I) Ltd dated 12.6.2012 (this judgment is different from that of judgment of Triumph International (I) Ltd dated 17.8.2012) and it explains the guidelines for the expression "reasonable cause". 31. The contents of paras 23 and 24 of the said of judgment of the Hon‟ble High Court in the case of Triumph International (I) Ltd, dated 12.6.2012 reported in 345 ITR 370 (Bom) are relevant and the same reads as under: "23. The expression 'reasonable cause' used in Section 273B is not defined under the Act. Unlike the expression 'sufficient cause' used in Section 249(3), 253(5) and 260A(2A) of the Act, the legislature has used the expression 'reasonable cause' in Section 273B of the Act. A cause which is reasonable may not be a sufficient cause. Thus, the expression 'reasonable cause' would have wider connotation 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 rep....
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.... of the AO during the assessment proceedings that the impugned transactions constitutes unaccounted money and are not bona fide or not genuine. As such, there is no information or material before the AO to suggest or demonstrate the same. In the language of the Honble High court, "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. Admittedly, the transactions by way of journal entries are aimed at the extinguishment of the mutual liabilities between the assessees and the sister concerns of the group and such reasons constitute a reasonable cause. 34. In the present case, the causes shown by the assessee for receiving or repayment of the loan/deposit otherwise than by account-payee cheque/bank draft, was on account of the following, namely: alternate mode of raising funds; assignment of receivables; squaring up transactions; operational efficiencies/MIS purpose; consolidation of family member debts; correction of errors; and loans taken in case. In our opinion, all these reasons are, prima facie, co....
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....of the Act are not sustainable. Regarding an amount of "money‟ said to have been paid in violation of the said provisions, the same needs to be deleted in view of our decision on the legal issue discussed in para 16 to 22 of the this order. Accordingly, the grounds raised in this regard are allowed. 1. I.T.A. No.475/M/2014 (AY 2009-10) (Lodha Properties Development Pvt Ltd) 2. I.T.A. No.477/M/2014 (AY 2009-10) (Asthavinayak Real Estate Pvt Ltd) 3. I.T.A. No.478/M/2014 (AY 2009-10) (Aadinath Builders Pvt Ltd) 4. I.T.A. No.479/M/2014 (AY 2009-10) (Ajitnath Hi-Tech Builders Pvt Ltd) 5. I.T.A. No.480/M/2014 (AY 2009-10) (Lodha Crown Buildmart Pvt Ltd) 36. All these appeals relate to the penalty u/s 271D of the Act. The facts, arguments and the legal propositions are identical, in principle, in all the five appeals under consideration. Therefore, our findings given in the context of the appeal in the case of Lodha Builders P Ltd (supra) are applicable to all the other five appeals of the assessees. Accordingly, the grounds raised in these appeals under consideration are also allowed. 37. In the result, all the 7 appeal....
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....ans / deposits by way of passing journal entries in its books of accounts, in breach of Section 269SS of the Act. In terms Section 269SS of the Act prohibits a person from taking / accepting any loan / deposit or specified sum, otherwise by an account payee cheque or by an account payee bank draft or by use of electronic clearing system of a bank if the amount involved is in excess of Rs. 20,000/-. This imposition of penalty under Section 271D of the Act, was upheld by a common order dated 31St December, 2013 passed by the Commissioner of Income Tax (Appeals). On further appeal, the impugned order dated 27t1 June, 2014 of the Tribunal, inter a/ia 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 bi....
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....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 2695S 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 th....
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....s earlier orders in the case of VN. Parekh Ltd. and Ketan Parelth as indicated in the order ofthis Court in Triumph International Finance (supra). Our attention was also invited to numerous reported decisions of the Tribunal in the cases of Sunflower Builders Vs. Dy.CIT, 1997 (61) lTD (Pune) 227, Asst.CIT Vs. Ruchika Chemicals & Investment (P) Ltd. 2004 (88) TTJ (Delhi)85 and Asst.CIT Vs. Lala Murari Lal & Sons, 2004(2) SOT (Luck) 543 wherein it has been held journal entries 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 2695S 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 ca....
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....roduced hereunder:- "This appeal filed by the assessee is directed against order of the CIT(A)-42, Mumbai dated 19.08.2016 and it pertains to the assessment year 2012-13. 2. The brief facts of the case are that the assessee is a firm engaged in the business of manufacture of printed polythene bags, filed its return of income for assessment year 2012-13 on 14.09.2012 declaring total income of Rs. 1,38,060/-. The assessment was completed u/s. 143(3) on 27.03.2015, assessing the total income of the assessee at Rs. 1,38,060/-. However, the A.O while completing the assessment, observed that the assessee has accepted loans in excess of prescribed limits otherwise then by way of account pay cheque or drafts, thereby violated the provision of section 269SS of the Act, which attracts penalty u/s. 271D of the Income Tax Act of 1961. 3. The Joint Commissioner of the Income Tax31(3), Mumbai, based on the observations of the assessing officer, initiated penalty proceedings u/s. 271D of the I.T. Act, 1961 and accordingly, issued a show cause notice dated 01.09.2015 which was duly served on the assessee, requiring it to show cause as to why penalty shall not be levied u....
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.... by the penalty order, the assessee preferred an appeal before the CIT(A). Before the CIT(A), the assessee reiterated the submissions made before the A.O. The assessee further submitted that there is no violation of provisions of Section 269SS of the Act, as it has accepted loans by way of book adjustment by passing necessary journal entries in the books of accounts for the existing loans appeared in the books of accounts of its sister concerns. The reasons for transferring existing loans from the books of its sister concerns is that its bankers are instating for additional capital contribution from the partners or their friends & associates for the purpose of extending credit facilities. The assessee under bonafide belief, that acceptance of loans by way of book adjustment, would not attract provision of Section 269SS, has transferred existing loans from its sister concerns to its books accounts, therefore it cannot be considered as acceptance of loans other than by way of account payee cheque or bank drafts. In support of its arguments, relied upon the decision of Hon'ble Bombay High Court, in the case CIT vs. Triumph International Finance (India) Ltd. (2012) 245 ITR 270 (Bom). ....
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....v) Bombay Conductors & Electricals Limited vs. OCIT 56 TT J(Ahd) 580 vi) CIT vs. Govind Kumar 119 Taxman 110 (Raj) vii) Sunflower Builders (P) Ltd. vs. OCIT 61 ITO 227 (Pune) viii) ITO vs. Arnar Nath Shivraj (HUF);1 SOT 346 (Agra) ix) ACIT vs. Gujarat Ambuja Proteins Ltd. 3 SOT 811 (Ahd.) 9. On the other hand, the Ld. DR strongly supported order of the CIT(A). The D.R further submitted that the provisions of section 271D would apply, if assessee accepts loans or deposits in contravention of the provision of Section 269SS of the Act. In this case, the assessee has accepted unsecured loans otherwise then by way of account payee cheque or bank draft, in contravention of Section 269SS of the Act, and hence, the A.O was rightly invoked the provision of Section 271D of the Act. 10. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. The A.O levied penalty u/s.271D of the Act, for contravention of provision of Section 269SS of the Act. According to the A.O, the assessee accepted unsecured loans otherwise then by way of account payee cheque or bank drafts in con....
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....rther claims that these loans were accepted by its sister concern, through proper banking channel. It was further contended that it has transferred existing loans of its sister concerns, because its bankers were insisting for bringing in more capital contribution in the form of own capital or loans and advances from partners or their friends and relative for the purpose extending credit facilities. The assessee claims that these loans are genuine transaction which were accepted by way of cheques by its sister concern. The assessee further claims that it was under the bonafide belief that, acceptance of loans or deposit by book adjustment would not attract the provision of Sections 269SS of the Act. There is a reasonable cause, for failure to comply with the provision of Section 269SS of the Act, therefore penalty cannot be levied u/s. 271D of the Act. 13. Having heard both the sides and considered material on record, we find that the assessee has accepted loans by way of journal entries. The assessee has transferred loans standing in the name of its sister concern to its books of accounts for the purpose of enhancing its own funds as per the requirement of its bankers for ....
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....f Hon'ble High Court, we find that their lordships in the first phase, held that taking of loans/ repaying loans through journal entries is a violation of the provision of section 269SS of the Act. However, in the second phase, the Hon'ble Court observed that in the absence of any finding 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 u/s. 271E could be imposed for contravention of provisions of Section 269T. The relevant portion of the order is extracted below: "Held, (i) that the Tribunal was not justified in holding that repayment of loan or deposit through journal entries did not violate the provisions of section 269T of the Act. ii) That it would have been an empty formality to repay the loan or deposit amount by accountpayee cheque or draft and receive back almost the same amount towards the sale price of the shares. Neither the genuineness of the receipt of loan or deposit nor the transaction of repayment of loan by way of adjustmen....
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.... pertaining to the assessment year 1998-99. According to the Revenue, the said order involves the following substantial questions of law : "1. Whether the Income-tax Appellate Tribunal has erred in deleting the penalty imposed under section 271D of the Act by holding that the appellant did not contravene the provisions of section 269SS of the Income-tax Act ? 2. Whether the order of the Income-tax Appellate Tribunal is perverse on both law and merits ?" Briefly stated, the facts giving rise to the present appeal are that the respondent-assessee, referred to as the 'special purpose vehicle', was promoted by one Infrastructure Leasing and Finance Services Ltd. ('IL & FS'), with 30 per cent holding, to construct and operate a bridge on the river Yamuna on a build, own, operate and transfer basis. For undertaking the said project the assessee had to make a payment of Rs. 4.85 crores to the Government of Delhi in relation to the acquisition of land for the said project. 2. While completing the assessment of the assessee for the assessment year 1998-99, the Assessing Officer initiated penalty proceedings under section 271D of the Act as he was of the v....
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.... by not accepting/not repaying the loans through account payee cheque/bank draft and therefore the Ld. Addl. CIT levied penalty under section 271D with respect to total credit entries amounting to Rs. 59,38,157/- arising in the books with M/s Lodha Development Pvt. Ltd. by way of journal entries, during the Financial Year 2006-07 (Assessment Year 2007-08). It is noted that the Ld. Addl. CIT following the decision from Hon'ble jurisdictional High Court in the case of Triumph International Finance (I) Ltd. ((supra)) (also relied upon by the Ld. CIT-DR) held that there is a contravention of the provisions of section 269SS of the Act and further the assessee could not prove a reasonable cause for contravention of the provision. He observed that since the disclosure was made by the group companies before the income settlement commission, Mumbai, following search in Lodha Group of Cases on 10/01/2011, it could not be ruled out that the entities through such repayment/acceptance by way of journal entries are involved in transactions for the purpose of tax evasion. Whereas, the stand of the assessee is that the journal entries passed for transaction assigning debts and liabilities amon....
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....tion of family member debts 6 Correction of Error 7 Loans taken in cash Explanation Refer Notes attached as Annexure I and II The Group entities entered into various business transactions within the group as well as with outside entities. In order to save time and cost, receivables from various Group entities were assigned by Lodha Builders, as well as assigned to lodha Builders by other group entities Group entities undertook various business transactions amongst themselves and recorded receivables and payables in the books of account. Journal Entries were passed to square-up receivables from one Group entity and payable to another Group entity. Further, at various instances, Lodha Builders received monies from Group entities on behalf of another Group entities. On the same date, Journal Entries were passed in the books of Lodha Builders to record such on behalf transactions. The Group entities entered into various business transactions and outstanding payables/receivables were recorded in the books of the respective entities. As a result of which various payables and receivables were standing in the books of Group entites. Such a ba....