2026 (7) TMI 1088

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.... order dated 30.09.2016. 2. The Ld. AR advanced arguments on merits as well as on legal grounds and referred to various decisions to support the argument that there being a reasonable cause, impugned penalty would not be justified. The Ld. Sr. Dr justified levy of penalty. Having heard rival submissions and upon perusal of case records, our adjudication would be as under. 3. The facts leading to impugned penalty are that the assessee was assessed u/s 143(3) wherein it was observed that the assessee obtained loan of Rs. 95.05 Lacs from 14 parties of an entity namely M/s KBA Infrastructure Pvt. Ltd. (in short 'KBA') otherwise than through account payee cheque or bank drafts. The loans were transferred via journal entries. The same was i....

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....the business of M/s Karan Builders was taken over by M/s KBA vide agreement dated 01.04.2010. However, both the entities were not in a financial position to repay the loan to these parties. The assessee became shareholders in M/s KBA. Therefore, the lenders requested the assessee to take over the loan for their safety as the assessee had given the guarantee. Accordingly, the loans were transferred to the assessee via journal entries which have been alleged to be in contravention of provisions of Sec.269SS and led to impugned penalty on the assessee. In our considered opinion, the loan transfer was part of financial restructuring of assessee's sister concerns and the loans were transferred through journal entries to address an immediate shor....

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....e 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. It was further observed by Hon'ble Court that settling the claims by making journal entries in the respective books was one of the recognized modes of repaying loan /deposit. It was finally held that though the assessee had ....