TaxTMI 
TaxTMI 
2022 (10) TMI 165
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....enience. 2. At the outset, we find that there is a delay of 51 days in filing of appeal by the revenue. We find that the order of ld. CIT(A) had been passed during Covid pandemic period and hence in view of the relaxation granted by the Hon'ble Supreme Court , the delay is hereby condoned and appeal of the revenue is admitted for adjudication. ITA No. 1290/Mum/2022 - Asst Year 2015-16 - Revenue Appeal against cancellation of penalty u/s 271D of the Act by the ld. CIT(A) 3. The only identical issue involved in this appeal is as to whether the ld. CIT(A) was justified in deleting the penalty levied u/s 271D of the Act in the facts and circumstances of the case. 4. The grounds raised by the revenue are as under:- 1. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) is justified in deleting the penalty levied w/s. 271D of the Act since the assessee has not shown the reasonable cause us. 273B of the Act for entering into such transactions through journal entries? 2."On the facts and in the circumstances of the case and in law, the Ld. CIT(A) is erred in deleting the penalty without giving a finding on transaction to transaction basis in the given case....
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....,086 2 12/03/2015 Lafarge Aggregates & Concrete 1,32,463 3 31/03/2015 Yash Enterprise 697 TOTAL 75,93,246 LEDGER OF SHREENIWAS COTTON MILLS LTD. Sr. No. Date Name of the Party Credits (Rs.) 1 09/10/2014 Alakh Advertising And Publicity 3,72,545 TOTAL 3,72,545 LEDGER OF PALAVA DWELLERS. Sr. No. Date Name of the Party Credits (Rs.) 1 12/01/2015 Shubham Earthmovers Pvt. Ltd., 67,753 TOTAL 67,753 6. The explanation given by the assessee before the ld. AO is as under:- Bennett Coleman & Co. Ltd - Rs 74,60,086/- Amount Payable to Bennett Coleman & Co. Ltd (BCCL) by the assessee company adjusted against the amount receivable on account of flat booking made by the BCCL in the sister concern In the current year the following journal entry was passed by the Assessee Company in the ledger account of LodhaPranik Landmark Developers Put Mad Crita (LPLDPL) (Now known as Lodha Developers Ltd as LodhaPranik Landmark Developers Pvt Ltd merged into Lodha Developers Limited) Bennett Coleman & Co. Ltd.....................Dr 74,60,086 To Lodha Developers Pvt Ltd...........
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....Concrete in the books of assessee company on account of income booked towards recovery of Electricity charges and Royalty Income is adjusted against amount payable by LDL, a sister concern. In order to avoid the empty formality of making the payment to Lafarge Aggregates & Concrete through LDL and also simultaneously receiving the amount in Assessee Company from Lafarge Aggregates & Concrete, the Assessee company issued a credit note to Lafarge Aggregates & Concrete and passed the journal entry in order to adjust the amount receivable by Lafarge Aggregates & Concrete against amount payable by Lafarge Aggregates & Concrete to LDL. Accordingly, for squaring up the mutual transactions of payable and receivable, the above journal entry was passed. Copy of The Screenshot of entry as passed in the books of Assessee company are enclosed herein as Annexure-IV. The assessee submits that it has undertaken the above transaction with a view to extinguish the mutual liability of paying/receiving the amounts by the Assessee and its sister concern. In view of the above facts the assessee submits that it's action of extinguishing the mutual liability of paying/receiving through journal entri....
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.... department were dismissed by the Hon'ble Supreme Court in the following cases:- a) CIT vs Ashtavinayak Real Estate Private Limited in SLP No. 44674/2018 dated 4.1.2019 b) CIT vs Lodha Crown Buildmart Private Limited in SLP No. 44666/2018 dated 3.1.2019 c) CIT vs Lodha Builders Private Limited in SLP No. 42738/2018 dated 21.1.2019 d) CIT vs Lodha Properties Development Private Limited in SLP No. 42791/2018 dated 10.12.2018 e) CIT vs Adinath Builders Private Limited in SLP No. 40471/2018 dated 3.12.2018 7.1. Moreover, the assessee submitted that this Tribunal in Lodha Developers Pvt Ltd have listed seven reasons which can be considered as a reasonable cause . The details of the seven reasons / groups are :- (1) Alternate mode of raising funds (2) Assignment of receivables (3) Squaring of transactions (4) Operational efficiency / MIS purpose (5) Consolidation of family member debts (6) Correction of error (7) Loans taken in cash 7.2. It was submitted that the Tribunal in the case of Lodha Developers Pvt Ltd had held that any journal entry passed in the books of accounts which fall under any of the seven categories will be considered as having been passed for....
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....the assessee has contravened the provisions of Section 269T of the Act. 20. Strong reliance was placed by the counsel for the assessee on the decision of the Apex Court in the case of J.B. Boda & Co. (P.) Ltd. (supra). In that case, J.B. Boda & Co. (P.) Ltd. (supra) carrying on business as reinsurance brokers were during the course of business required to remit the entire reinsurance premium payable to the foreign reinsurers in foreign currency and then receive commission in foreign currency from the said foreign insure Rs. Instead of remitting the entire amount to the foreign reinsurers and then receiving commission from the said foreign insurers, J B Boda & Company with the approval of the Reserve Bank of India retained the foreign currency to the extent of the commission and remitted the balance amount to the foreign reinsure Rs. As deduction under Section 80-O of the Act in respect of the amount retained as commission was denied by the income tax authorities as also the High Court, the Company approached the Apex Court and the Apex Court held that to insist on a formal remittance to the foreign reinsurers first and thereafter to receive the commission from the foreign reinsur....
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.... of Section 269T renders the person liable for penalty under Section 271E; and (c) Section 273B provides that no penalty under Section 271E shall be imposed if reasonable cause is shown by the concerned person for failure to comply with the provisions of Section 269T of the Act. 22. The argument advanced on behalf of the assessee that if Section 269T is construed literally, it would lead to absurdity cannot be accepted, because, repayment of loan/deposit by account payee cheque/bank draft is the most common mode of repaying the loan/deposit and making such common method as mandatory does not lead to any absurdity. No doubt, that in some cases genuine business constraints may necessitate repayment of loan/deposit by a mode other than the mode prescribed under Section 269T. To cater to the needs of such exigencies, the legislature has enacted Section 273B which provides that no penalty under Section 271E shall be imposed for contravention of Section 269T if reasonable cause for such contravention is shown. 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(....
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....e 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. 26. The appeal is disposed of in the above terms with no order as to costs. 8.1. We find that the ld. CIT(A) further placed reliance on yet another decision of Hon'ble Jurisdictional High Court in the case of CIT vs Ajinath Hi-tech Builders P Ltd reported in 412 ITR 316 (Bom) and few tribunal decisions rendered in the Lodha group of cases as detailed supra. We find that the ld. CIT(A) had categorically stated in para 6.8.6 of his order that the nature of transactions carried out by the assessee through journal entries in the instant case are not in the form of loan or advance which has been received or repaid and that they are acts of assigning of receivables or extinguishment of mutual liability of paying / receiving the amounts by the a....
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....nd in the circumstances of the case and in law, the Ld. CIT(A) is justified in deleting the penalty levied us. 271E of the Act since the assessee has not shown the reasonable cause w/s. 273B of the Act for entering into such transactions through journal entries? 2. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) is erred in deleting the penalty without giving a finding on transaction to transaction basis in the given case for existence of reasonable cause w/s. 273B which led to the exigency of contravention of provisions of 269T as the fact of each transaction need independent verification?" 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in merely relying upon the various case laws 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? 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) is justified in giving the benefit of reasonable cause to a series of transactions, without appreciating that the such benefit is available as an exceptio....
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....cking off: This represents the knocking off of amount payable by the assessee company to vendor and amount receivable from the same vendor in its sisters concerns or vice versa. The assessee submits that there was a debit balance/ credit balance in its sister concerns in respect of certain vendors and the amount payable / receivable by the assessee company to such vendors was adjusted against the amount receivables/payable from such vendors in the books of sister concern. This adjustment was given effect by way of the journal entry. The assessee submits that it has undertaken the transaction with a view to extinguish the mutual liability of paying/receiving the amounts by the assessee and its sister concern. Considering, the nature of transactions not being loan, the journal entry should not be considered as violating the provisions of Section 269SS/T. b. Group Mediclaim Policy: Group Mediclaim policy represents policy taken by Lodha Developers Ltd for all the employees of lodha group. Installment or top up cover premium is paid by Lodha Developers Ltd and subsequently same is allocated to group companies. Since the payment represents on behalf payments incurred and allocated to ....
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....ing commission and Service tax) is to be adjusted against the flat booked by BCCL in LPLDPL and the balance amount of the invoice is to be paid. Accordingly the Assessee Co. transferred 66.67% of value of advertisement services to LPLDPL for adjustment against the flat booked in LPLDPL by BCCL and the balance amount was paid through proper banking channels. This adjustment was given effect by way of the above mentioned journal entry. Copy of Entry passed in the books of Assessee Company is attached as Annexure-III. The Assessee submits that it has undertaken the above transaction with a view to extinguish the mutual liability of paying/receiving the amounts by the Assessee and its sister concern to the said vendor. In view of the above facts the Assessee submits that it's action of extinguishing the mutual liability of paying/receiving through journal entries constitute reasonable cause; hence, penalty levied u/s 271E should be deleted. d. Lafarge Aggregates & Concrete: Lafarge Aggregates & Concrete is a vendor of the both the Assessee company as well as Lodha Developers Ltd. (LDL). During the year under consideration the Assessee company had booked Income on account of Roy....
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....,71,894 To Madison Communications Pvt. Ltd. Rs. 3,71,894 M/s Madison Communication Pvt. Ltd. (MCPL), is an agent through which advertisements are placed with different vendors namely Bennett Coleman Co. Ltd. etc. During the year under consideration certain amount was payable by LDL on account of advertising services received by LDL from MCPL. Correspondingly, assessee co. also had certain amount receivable from MCPL towards advance payment for services receivable. The said payable by LDL was adjusted against credit note issued by the Assessee Company. This adjustment was given effect by way of the above mentioned journal entry. (Copy of The Screenshot of entry passed in the books of Assessee Company are enclosed herein as Annexure-V) The Assessee submits that it has undertaken the above transaction with a view to extinguish the mutual liability of paying/receiving the amounts by the Assessee and its sister concern to the said vendor. In view of the above facts the Assessee submits that it's action of extinguishing the mutual liability of paying/receiving throu....
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....of Excess brokerage paid is adjusted against amount payable by SNCML, a sister concern. In order to avoid the empty formality of making the payment to TerraaPropex Put. Ltd. through SNCML and also simultaneously receiving the amount in Assessee Company from TerraaPropex Pvt. Ltd., the Assessee company passed the journal entry in order to adjust the amount receivable from TerraaPropex Pvt. Ltd. against amount payable to TerraaPropex Pvt. Ltd. by SNCML Accordingly, for squaring up the mutual transactions of payable and receivable, the above journal entry was passed. Copy of The Screenshot of entry as passed in the books of Assessee Company are enclosed herein as Annexure-VIII The assessee submits that it has undertaken the above transaction with a view to extinguish the mutual liability of paying/receiving the amounts by the assessee and its sister concern. In view of the above facts the assessee submits that it's action of extinguishing the mutual liability of paying/receiving through journal entries constitute reasonable cause; should not be considered as violation of provisions of Sec 269SS/269T within the meaning of section 273B of the Act and hence no penalty u/s 271E of t....