TMI Blog2021 (12) TMI 1174X X X X Extracts X X X X X X X X Extracts X X X X ..... e‟ in Section 273B for non-imposition of penalty under section 271E - HELD THAT:- Journal entries which had been passed by the assessee company in its books for mutual extinguishment of liabilities between various entities and assignment of debts / receivables from one entity to another entity would not be hit by the provisions of Section 269SS and 269T of the Act as there is sufficient reasonable cause for the same within the meaning of section 273B of the Act. We find that the ledger accounts produced by the assessee before the ld. AO in the quantum assessment proceedings and before the ld. Addl. CIT during the penalty proceedings had not raised any doubt in respect of genuineness of the transactions and the transactions being entered into in the normal course of business of the assessee. Hence, it could be safely concluded that those entries were passed out of business exigencies with bonafide belief that they are not in contravention of provisions of Section 269SS and 269T of the Act. It is a well known fact that concealment should always be established and could never be presumed. Assessee was under a bonafide belief that passing of journal entries do not violate prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Mahavir Singh, Vice President And Shri M.Balaganesh, Accountant Member For the Revenue : Shri Prakash Chhotaray For the Assessee : Shri Anuj Kisnadwala ORDER PER BENCH: ITA No.3143/Mum/2017 3144/Mum2017 (A.Y.2012-13) These appeals in ITA Nos.3143/Mum/2017 3144/Mum/2017 for A.Y.2012-13 arise out of the order by the ld. Commissioner of Income Tax (Appeals)-49, Mumbai in appeal No.CIT(A)-49/IT-199 198/2015-16 dated 08/02/2017 (ld. CIT(A) in short) in the matter of imposition of penalty u/s.271D 271E of the Income Tax Act, 1961 (hereinafter referred to as Act). ITA No.3147/Mum/2017 3148/Mum/2017 (A.Y.2007-08) These appeals in ITA Nos.3147/Mum/2017 3148/Mum/2017 for A.Y.2007-08 arise out of the order by the ld. Commissioner of Income Tax (Appeals)-49, Mumbai in appeal No.CIT(A)-49/IT-191, 192 267, 266/2015-16 dated 16/02/2017 (ld. CIT(A) in short) in the matter of imposition of penalty u/s.271D 271E of the Income Tax Act, 1961 (hereinafter referred to as Act. ITA No.7134/Mum/2016 7135/Mum/2016 (A.Y.2008-09) These appeals in ITA Nos.7134/Mum/2016 7135/Mum/2016 for A.Y.2008-09 arise out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Objections Nos.5/Mum/2019 6/Mum/2019 arising out of ITA Nos.7136/Mum/2016 7137/Mum/2016 for A.Yrs. 2010-11 arise out of the order by the ld. Commissioner of Income Tax (Appeals)-48, Mumbai in appeal No. CIT(A)-48/IT-353 352/Addl.CIT, C.R-06/2014-15 dated 08/09/2016 (ld. CIT(A) in short) in the matter of imposition of penalty u/s.271D 271E of the Income Tax Act, 1961 (hereinafter referred to as Act). ITA No.7138/Mum/2016 7139/Mum/2016 (Assessment Year : 2010-11) These appeals in ITA Nos.7138/Mum/2016 to 7139/Mum/2016 for A.Yrs. 2010-11 respectively arise out of the order by the ld. Commissioner of Income Tax (Appeals)-48, Mumbai in appeal No.CIT(A)-48/IT-366 367/Addl.CIT, C.R-06/2014-15 dated 14/09/2016 (ld. CIT(A) in short) in the matter of imposition of penalty u/s.271D 271E of the Income Tax Act, 1961 (hereinafter referred to as Act). CO No.7/Mum/2019 8/Mum/2019 (Arising out of ITA No.7138/Mum/2016 7139/Mum/2016) (Assessment Year : 2010-11) These Cross Objections Nos.7/Mum/2019 8/Mum/2019 arising out of ITA Nos.7138/Mum/2016 7139/Mum/2016 for A.Yrs. 2010-11 arise out of the order by the ld. Commissioner of Income Tax (Appeals)-48 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that assessee has accepted loans / deposits from various sister concerns through journal entries and had repaid loans to various sister concerns through journal entries as according to ld. DCIT, the same were in violation of provisions of Section 269SS and 269T of the Act. The total of acceptance of loan entries / deposits otherwise than by way of account payee cheque / account payee draft and transacted through journal entries are as under:- Sl. No. Name of the sister concerns Credits (Rs.) 1 Lodha Developers Ltd., 17,69,41,354 2 Siddhnath Residential Paradise Pvt. Ltd., 5,13,58,339 Total 22,82,99,693 3.1. Similarly, the details of transactions which are repayment of loans / deposits to various sister concerns otherwise than by way of account payee cheque / account payee draft and transacted through journal entries are as under:- Sl. No. Name of the sister concerns Deb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of cases on 10/01/2011 and that the said group had made disclosure before the Hon'ble Income Tax Settlement Commission, Mumbai on account of undisclosed income arising out of transactions with various group entities which are also subject matter of investigation pursuant to directions of Hon'ble Income Tax Settlement Commission. Hence, the ld. Addl. CIT observed that it cannot be ruled out that the entities through whom such repayment / acceptance are done are not a part of chain of entities involved in the transaction for the purpose of tax evasion. With these observations, the ld. Addl. CIT held that assessee had violated the provisions of Section 269SS and Section 269T of the Act and proceeded to levy penalty u/s.271D and 271E of the Act respectively. 3.3. The assessee pleaded before the ld. CIT(A) that during the course of original scrutiny assessment proceedings, the entire transactions with the group entities were subject matter of verification by the ld. AO and no infirmity was found thereon, either on its business purposes or on its genuineness. All those transactions were accepted in toto by the ld. AO in the original quantum scrutiny assessment proceedings an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terpretation of fiscal enactment is open to doubt, the construction most beneficial to the subject should be adopted. The assessee also placed reliance on the Co-ordinate Bench decision of the Delhi Tribunal in the case of Dinesh Jain in ITA No.3597/D/2013 wherein the Tribunal upheld the order of the ld. CIT(A) which stated that the penalty was time barred by limitation u/s.275(1)(c) of the Act and that the provisions of Section 269SS of the Act are not attracted, in case of assigning of liabilities on the journal entries. In that case, the loan was assigned by that assessee to his wife by way of journal entry. It was pointed out that the department did not even challenge this decision on merits and only contested the limitation aspect before the Hon'ble Delhi High Court and the Hon'ble Delhi High Court upheld the Tribunal decision vide its order in ITA N.751/D/2014. The department further carried this matter by way of Special Leave Petition (SLP) before the Hon'ble Supreme Court. The Hon'ble Supreme Court held that while rejecting the SLP that since on merit, it has been found that there is no penalty, this SLP is dismissed, however, leaving the question of law o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should be doubted (ii) Unaccounted income of either the depositor or receiver should be involved in the transaction. (iii) There has to be a finding that the transactions were meant to evade tax. (iv) There has to be a finding that the transaction is not bonafide. 3.6.1. The assessee submitted that the ld. Addl. CIT had tried to circumvent conditions by misinterpreting the judgment of the Hon'ble Bombay High Court in the case of Triumph International referred to supra by stating that the spirit of Bombay High Court judgment is that only such transactions which are in the nature of squaring up with the same party can only claim the benefit of reasonable cause. It was argued that there is absolutely no such conclusion in the judgement of the Hon'ble Bombay High Court. It was also argued that the ld. Addl. CIT had also tried to circumvent the examination of the aforesaid points by making the observation regarding the disclosure made by the assessee group before the Hon'ble Income Tax Settlement Commission. The assessee submitted that the order of Hon'ble Income Tax Settlement Commission u/s.245D(4) of the Act was passed on 28/11/2014 whereas the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt, the said 'journal entries' constitute one of the recognized modes of recording the loan/deposit. The commercial nature and occurrence of these transactions by way of journal entries is in the normal course of business operation of the group concerns. In this regard, there is no adverse finding by the AO in the regular assessment. AO has not made out in the -assessment that any of the impugned transactions is aimed at noncommercial reasons and outside the normal business' operations. 3.8. The assessee also stated that the facts prevailing in the instant case are identical with the facts of the assessee company as each of the transactions passed through journal entries would fall in one of the seven categories cited below. For the sake of convenience, the details of 7 categories are mentioned as under:- i. Alternate mode of raising funds ii. Assignment of receivables iii. Squaring up transactions iv. Operational efficiencies / MIS purpose v. Consolidation of family member debts vi. Correction of errors; and vii. Loans taken in cash 3.9. Therefore, it was pleaded that the assessee‟s case is clearly covered by reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is not possible for tax auditors to verify whether loans deposits have been taken or accepted/repaid otherwise than by an account payee cheque or account payee bank draft, as the necessary evidence is not in the possession of the assessee. 2. Amount repaid /accepted in certain cases are by way of transfer of liabilities by accounting entries. These observations of the auditors show that the correctness of the accounts on this issue has not been certified by the auditors and the same is contrary to the claim of the assessee. The ld. Addl. CIT followed the judgment of the Hon'ble Bombay High Court in the case of CIT v. Triumph International Finance (India) Ltd dated 12.06.2012 [2012] 345 ITR 270 (Bom) and held that there has been contraventions of the provisions of 269SS and 269T of the Act. He quoted from the judgment to highlight that the section does not make any distinction between bona fide and non- bona fide transactions. He also relied on the judgment of the Hon'ble ITAT F Bench, Mumbai in the case of V.N. Parekh Securities v. ACIT, Central Circle 40, ITA Nos.6082 6083/ Mumbai dated 16.08.2013 where it has been held that there can be no d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 269SS or 269T are concerned. These are mandatory provisions and have to be followed. Secondly, the number of transactions are high. It is humanly impossible for the Assessing Officer to investigate each transaction. In fact, to counter such tendencies of tax evasion, accepting/repaying loans/deposits through account payee cheques/ bank drafts became mandatory by introducing the relevant provisions so that a screening of the prima facie bona fide transactions could have been effected making the task of the Assessing Officer easy. But the assessee violated the mandatory provision of law by not doing the transaction through the banking channel and by that act denied the Assessing Officer the instrument provided by law to investigate and find out the non-genuine transactions. Thus, the assessee is taking advantage of its own wrong. So, it is incorrect to say that the genuineness of the transactions is not in doubt, when this aspect has not been examined by the Assessing Officer. As regards application to the Settlement Commission, it is elementary that one can approach the Settlement Commission, only if it makes additional disclosure of income not disclosed before the Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that only way of escaping penalty is that the assessee has to prove reasonable cause and this is question of fact. Each case has to be decided on the fact of the case and there cannot be any covered matter. Reliance was also placed on the decision of the Hon'ble Jurisdictional High Court in the case of Triumph International Finance (I) Ltd., reported in 345 ITR 270 wherein it was observed as under:- (a) When loan/ deposit has been repaid by debiting accounts through journal entries, it was held that the assessee has contravened the provisions of section 271T of the Act. However, the Hon ble High Court gave relief holding that there was reasonable cause for the default. (b) The assessee had accepted ₹ 4,29,04,722/- as and by way of inter-corporate deposit from Investment Trust of India which was repayable during the impugned assessment year 2003-04. During the relevant previous year the assessee had transferred shares worth ₹ 4,28,99,325/- to Investment Trust of India. Thus, in the assessment year in question, the assessee was liable to repay the loan/ inter-corporate deposit amounting to ₹ 429,04,722/- to the Investment Trust of India and r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deposit except by the modes specified therein. Therefore, in the present case, where loan/deposit has been repaid by debiting the account through journal entries, it must be held that the assessee has contravened the provisions of section 269T of the Act. - Para 24- It would have been an empty formality to repay the loan/deposit by account pay cheque/draft and receive back almost the same amount towards the sale price of shares. The ld. Special Counsel for the Revenue argued that in the peculiar facts of the case, it was held by the Hon'ble High Court that there was reasonable cause for the default. The only explanation, which is now being given in a number of appeals of this group, is that up to 12th June 2012 when the judgment was delivered by the Hon'ble Bombay High Court in the case of Triumph International Finance (India) Ltd. [2012] 345 ITR 270 (Bom.), the assessee was under the bona fide belief that transactions through journal entries are not hit by the provisions of 269SS and 269T of the Act. This belief was based on some prevailing judicial pronouncements on the issue. The assessee pleaded that this was a reasonable cause for not complying wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court given in the context of the few appeals before them turned out to be the chief arguments of the ITAT in deleting penalty in all subsequent appeals before it. The analysis of the submissions of the assessees and exercise of probing into the existence of reasonable cause became no longer necessary and the ITAT gave relief in all the appeals of the group across the board where the transactions took place before 12th June 2012, the day of judgment in the case of Triumph International Finance (I) Ltd. (supra) Consequently, to my knowledge, not a single penalty under section 271D and 271E has been sustained on the issue of transaction through journal entries in spite of the significant judgment of the Hon'ble Bombay High Court in the case of M/s Triumph International Finance (I) Ltd. (supra). 5. Per contra, the ld. AR defended each and every argument of the ld. Special Counsel for the Revenue. The gist of various arguments advanced by the ld. AR are as under:- With regard to loan discrepancies in the tax audit report and the financial statements of the assessee company as pointed out by the ld. Special Counsel for the Revenue, the ld. AR argued that the Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n respect of penalty u/s.271D of the Act and para 10 in page 20 in respect of penalty u/s.271E of the Act. These factual findings recorded by the ld. CIT(A) stating that assessee had passed journal entries within the business exigencies, are not controverted by the ld. Special Counsel for the Revenue. Hence, he argued that it is grossly incorrect on the part of the ld. Special Counsel for the Revenue to say that assessee had not given any explanations in respect of transactions passed through journal entries. No false explanation was given by the assessee with regard to journal entries passed in its books. The explanation given by the assessee for adjustment of transactions between the group entities were not disputed by the Revenue in the original quantum proceedings. The ld. AR further argued that according to the ld. Special Counsel for the Revenue, the transactions which had been passed through only regular banking channels are genuine and bonafide. This argument cannot be accepted at all in as much as bonafide transactions passed through journal entries would also be genuine. He vehemently argued that no entity in this world could survive without passing of journal entrie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded in favour of the assessee by various decisions of Mumbai Tribunal as under:- Sr. No. Name of Assessee Appeal No Assessment Year Bench Date of Order 1 Aashthavinayak Estate Company Pvt Ltd 602/Mum/2017 2009-10 H Bench 07.08.2019 2 Galaxy Premises Pvt Ltd 7124/M/16and 7125/M/16 2007-08 G Bench 13.07.2018 3 Galaxy Premises Pvt Ltd 7126/M/16and 7127/M/16 2008-09 4 Galaxy Premises Pvt Ltd 7128/M/16and 7129/M/16 2009-10 5 Jineshwer Real Estate And Farms Pvt Ltd 598/Mum/2017 2012-13 J Bench 26.06.2018 6 Lodha Construction (Dombivli) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... D Bench 23.10.2018 21 Mahavir Premises Pvt Ltd 143/M/17and 144/M/17 2007-2008 22 Roselabs Finance Limited 131/M/17and 132/M/17 2012-2013 D Bench 23.10.2018 23 Naminath Builders Farms Pvt Ltd 112/M/17and 113/M/17 2008-2009 B Bench 15.10.2018 24 Naminath Builders Farms Pvt Ltd 114/M/17and 115/M/17 2009-2010 25 National Standard India Limited 133/M/17and 134/M/17 2012-2013 26 Hi Class Buildcon Pvt. Ltd. 1 21 /M/ 17 and 122/M/17 2008-2009 H Bench 26.09.2018 27 Hi Class Buildcon Pvt. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot lead to the presumption that all the transactions are genuine. In this regard, the ld. AR argued that assessee had entered into similar transactions with its group concerns which are listed out independently in those 300 entries by way of journal entries. The assessee had given explanation about the nature of transactions carried out by it before the ld. AO. If the ld. AO finds it impossible to examine the same, then logically no adverse presumption could be drawn on the assessee that the said transactions are not genuine. The assessee had given an explanation in detail covering the broad nature of the transactions carried out by way of journal entries. Those explanations have never been found to be either false or not supported by any evidence. The assessee at best can only provide details before the ld.AO. If those details were chosen not to be examined by the ld. AO terming it to be an impossible task, in the language of the ld. Special Counsel for the Revenue, then why should the assessee be invited with penal proceedings for the very same transactions by presuming that those transactions are not genuine. The ld. AR argued that bonafide belief while passing the journal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act. The ld. AR pleaded that assessee‟s case is squarely covered by the decision of the Hon'ble Jurisdictional High Court in the case of CIT vs. Ajinath High-Tech Builders Pvt. Ltd., and others (various sister concerns of the assessee group) dated 06/02/2018 reported in 92 Taxmann.com 228, wherein under similar facts and circumstances in respect of transactions entered though journal entries penalty u/s.271D and 271E of the Act were sought to be deleted by the Hon'ble Jurisdictional High Court on the ground that assessee had sufficient reasonable cause within the meaning of Section 273B of the Act. The ld. AR also placed reliance on yet another decision of the Hon'ble Jurisdictional High Court in the case of CIT vs. Lodha Builders Pvt. Ltd., in Income Tax Appeal No.199 of 2015 dated 06/02/2018 in support of the same proposition. The ld. AR also placed on record the evidences wherein the Special Leave petitions (SLP) filed by the Revenue against the aforesaid orders of the Hon'ble Jurisdictional High Court were dismissed by the Hon'ble Supreme Court vide various orders dated 03/12/2018, 10/12/2018, 03/01/2019, 04/01/2019 and 21/01/2019. The ld. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eflected in both debit as well as in credit side of the respective ledger accounts (i.e debit entries totaling to 9 and credit entries totaling to 15). Hence effectively the ld Addl CIT should have verified only 24 entries falling in group company current account transactions for the purpose of ascertaining the veracity of the transactions passed through journal entries. We find that these transactions have been duly examined by the ld CIT(A) and had given categorical finding in para 7.2 and para 10 of his order in detail. We find that no false explanations were given by the assessee with regard to journal entries passed in its books. The explanation given by the assessee for adjustment of transactions between the group entities were not disputed by the Revenue in the original quantum proceedings. We find that the ld. Special Counsel for the Revenue argued that transactions through journal entries cannot be held as bonafide and those passed through regular banking channels alone are bonafide. This argument cannot be accepted at all in as much as bonafide transactions passed through journal entries would also be genuine. We cannot remain oblivious of the fact that no entity in this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actions through journal entries have been carried out for the purpose of the business of the assessee company in the normal course of its business. We also find that settling the mutual claims between parties through journal entries is certainly one of the recognized modes of repaying the loan / deposit. There is absolutely no material to suggest that the transactions entered through journal entries were not bonafide transactions. There is nothing on record to suggest that those entries were passed with a malafide intent to evade payment of taxes. In this regard, it would be relevant to reproduce the relevant portion of the judgement of Hon'ble Jurisdictional High Court in the case of CIT vs Triumph International Finance (I) P Ltd reported in 345 ITR 270 (Bom) wherein in para 24 and 25 it was observed as under:- 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 emp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en entered into in normal course of its business and accepted all those transactions as genuine and bonafide. This is evident from the fact that the ld. AO had not resorted to make any addition in respect of these journal entries in the original scrutiny assessment in the quantum proceedings. Hence it would be unfair on the part of the ld. Special Counsel for the Revenue to mention those alleged discrepancies at this stage of appeal, which was never disputed by the ld. AO. If there is any grievance left to the department on this, the department should proceed on the assessee company in the manner known to law. A settled issue cannot be reopened or reviewed at an appellate stage , especially when this tribunal does not have any power of enhancement of income. Hence the objections raised in this regard by the ld. Special Counsel for the Revenue are rejected. 6.3. It is pertinent to note that the assessee had given explanations for the total entries found in the ledger accounts of the two parties i.e Lodha Developers Ltd and Siddhnath Residential Paradise Pvt ltd which contains lot of cheque entries and also minimum journal entries. The explanations offered by the assessee had be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in ITA No. 6082, 6083/Mum/2009 for Asst Year 2005-06 dated 16/08/2013 is also factually distinguishable in as much as in that case, the assessee could not prove why it was not able to open a fresh bank account and the matter was remanded back to the AO for ascertaining as to whether there existed a reasonable cause. Hence the reliance placed by the ld Special Counsel for the Revenue on this case does not advance the case of the department. 6.7. The ld. Special Counsel for the Revenue strongly relied on the celebrated quote of Justice P N Bhagwati in the case of Distributors Baroda Case which reads as under :- To perpetuate an error is no heroism. To rectify the same is the compulsion of judicial conscience. In this regard, we find that there was absolutely no error in the orders passed by this tribunal earlier which were heavily relied upon by the ld. AR before us. Moreover, some of these tribunal orders were even upheld by the Hon'ble Jurisdictional High Court and SLP preferred by the revenue before the Hon'ble Apex Court had been dismissed. Hence where is the error to perpetuate ? Hence the argument advanced by the ld. Special Counsel for the Revenue d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ‟s own case for the immediately preceding assessment year, the Tribunal has accepted that the assessee was under the bonafide belief. In any case, the ld. AO having not disbelieved the explanation nor made any inquiry, the revenue cannot allege contrary at this stage. 6.10. We hold that the revenue is not justified in expecting the assessee to stop passing the journal entries with effect from 12/06/2012. This is for the reason that the Hon'ble Bombay High Court in the case of Triumph International has not declared all the journal entries to be illegal. In fact, journal entries are part and parcel of accrual system of accounting. The Hon'ble Bombay High Court judgement only requires that the assessee needs to establish the reasonable cause for passing the journal entries. We also find that in none of the case of Lodha group, a single penalty has been sustained itself proves the bonafide of the assessee and hence, the reasonable cause. In fact not only, at the Tribunal level, but no penalty has been sustained by the Hon'ble Bombay High Court as well as the Hon'ble Supreme Court by way of dismissal of SLP in the Lodha Group of cases. The liberal interpretati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee, we are unable to persuade ourselves to accept to the arguments advanced by the ld. Special Counsel for the Revenue that tribunal ought not to have relied upon those observations made by the Hon'ble Jurisdictional High Court. 6.13. Hence in view of our detailed observations and respectfully following the various judicial precedents relied upon hereinabove, we hold that the assessee had proper reasonable cause within the meaning of section 273B of the Act and hence the transactions passed through journal entries though would be hit by the provisions of sections 269SS and 269T of the Act, since reasonable cause is established in the instant case, the assessee company would get immunity from levy of penalty thereon. Accordingly, the grounds raised by the revenue are dismissed. 7. In the result, both the appeals of the revenue are dismissed. ITA No.3147/Mum/2017 (Revenue Appeal) 8. The issue involved in this appeal is with regard to levy of penalty u/s.271D of the Act. In this case, the ld. Addl. CIT levied penalty u/s.271D of the Act in respect of the following transactions passed through journal entries. Sl. No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny has also paid interest on such loans taken. All other legal arguments advanced by the assessee before the ld. CIT(A); conclusions drawn by the ld. CIT(A) and Addl. CIT remain same with those recorded in Sanathnagar Enterprises Ltd., supra. The arguments of the ld. Special Counsel for the Revenue and the arguments of the ld. AR remain the same as was submitted by them in the case of Sanathnagar Enterprises Ltd., supra. Hence, the conclusions drawn by this Tribunal in the case of Sanathnagar Enterprises Ltd., would hold good for this appeal also. Accordingly, the grounds raised by the Revenue are dismissed. ITA No.3148/Mum/2017 (A.Y.2007-08) Revenue Appeal 9. This appeal is filed by the Revenue challenging the action of the ld. CIT(A) deleting the levy of penalty u/s.271E of the Act. In this case, the ld. Addl. CIT levied penalty u/s.271E of the Act in respect of the following transactions passed through journal entries. Sl.No. Name of the sister concerns Amount(Rs.) 1 Lodha Developers Pvt, Ltd. 2 Lodha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 Lodha Developers Private Limited 9,24,925/- 1,17,44,60,169/- 2 Lodha Builders Private Limited 71,53,676/- - TOTAL 80,78,601/- 1,17,44,60,169/- 10.1. The ld. CIT(A) appreciated the basis of passing journal entries in respect of the aforesaid transactions by observing that out of the total credits, an amount of ₹ 10,43,47,019/- represented the amount payable to Lodha Developers Pvt ltd (LDPL) which was transferred by Lodha Construction, Dombivli(LCD) to the assessee company since it became partner in LCD w.e.f 1.4.2007, in place of M/s. LDPL which exited the partnership on 31.3.2007. Further, an amount of ₹ 105,84,00,000/-, was credited since shares of Macrotech Constructions Pvt Ltd were purchased from M/s.LDPL by the assessee company. The balance credit entries are various small amounts reflecting reimbursement of expenses, on account payment etc. From the details furnished and submissions made it is noted that the penal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pra. The arguments of the ld. Special Counsel for the Revenue and the arguments of the ld. AR remain the same as was submitted by them in the case of Sanathnagar Enterprises Ltd., supra. Hence, the conclusions drawn by this Tribunal in the case of Sanathnagar Enterprises Ltd., would hold good for this appeal also. Accordingly, the grounds raised by the Revenue are dismissed. ITA No.7142/Mum/2016 (Revenue Appeal)-A.Y.2007-08 12. The issue involved in this appeal is with regard to levy of penalty u/s.271D of the Act. In this case, the ld. Addl. CIT levied penalty u/s.271D of the Act in respect of the following transactions passed through journal entries. Sl. No. Name of the Sister Concerns Amount (Rs.) 1 Cowtown Land Development Pvt. Ltd. 2,50,00,000 2 Lodha Developers Pvt. Ltd. 28,96,55,853 Total 31,46,55,853 12.1. The ld. CIT(A) appreciated the basis of passing journal entries in respect of the aforesaid transacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sister concerns Amount ( Rs.) 1 Lodha Developers Pvt Ltd 23,95,91,793 Total 23,95,91,793 13.1. The ld. CIT(A) appreciated the basis of passing journal entries in respect of the aforesaid transactions by observing that from the details filed, it is observed that the amount of ₹ 23,95,91,793/- represents the balances of Lodha Developers Pvt. Ltd., which has been transferred by debiting its account, to Lodha Builders Pvt. Ltd., It has been submitted that the transfer of balances has been made for ease in consolidation of accounts and operational efficiency. All other legal arguments advanced by the assessee before the ld. CIT(A); conclusions drawn by the ld. CIT(A) and Addl. CIT remain same with those recorded in Sanathnagar Enterprises Ltd., supra. The arguments of the ld. Special Counsel for the Revenue and the arguments of the ld. AR remain the same as was submitted by them in the case of Sanathnagar Enterprises Ltd., supra. Hence, the conclusions drawn by this Tribunal in the case of Sanathnagar Enterprises Ltd., would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resaid transactions by observing that from the details filed, it is observed that the amount credited to the account of Lodha Developers Pvt. Ltd. represents assignment of debts on various dates. Further, out of the total debits of Q ₹ 2,43,86,906/-, an amount of ₹ 2,43,56,839/- represents the transfer of balance to Lodha Builders Pvt, Ltd. on 31.03.2008, which is stated to be for consolidation of account at the year end. The balance amount represents various payments on behalf of group concern etc. All other legal arguments advanced by the assessee before the ld. CIT(A); conclusions drawn by the ld. CIT(A) and Addl. CIT remain same with those recorded in Sanathnagar Enterprises Ltd., supra. The arguments of the ld. Special Counsel for the Revenue and the arguments of the ld. AR remain the same as was submitted by them in the case of Sanathnagar Enterprises Ltd., supra. Hence, the conclusions drawn by this Tribunal in the case of Sanathnagar Enterprises Ltd., would hold good for this appeal also. Accordingly, the grounds raised by the Revenue are dismissed. ITA No.7149/Mum/2016 (Revenue Appeal)-A.Y.2011-12 16. The issue involved in this appeal is with rega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id transactions by making the same observations as was made in the earlier appeals referred to supra. All other legal arguments advanced by the assessee before the ld. CIT(A); conclusions drawn by the ld. CIT(A) and Addl. CIT remain same with those recorded in Sanathnagar Enterprises Ltd., supra. The arguments of the ld. Special Counsel for the Revenue and the arguments of the ld. AR remain the same as was submitted by them in the case of Sanathnagar Enterprises Ltd., supra. Hence, the conclusions drawn by this Tribunal in the case of Sanathnagar Enterprises Ltd., would hold good for this appeal also. Accordingly, the grounds raised by the Revenue are dismissed. ITA No.7146/Mum/2016 (Revenue Appeal)-A.Y.2010-11 18. The issue involved in this appeal is with regard to levy of penalty u/s.271D of the Act. In this case, the ld. Addl. CIT levied penalty u/s.271D of the Act in respect of the following transactions passed through journal entries. Sl. No. Name of the Sister Concerns Amount (Rs.) 1 Lodha Developers Pvt, Ltd. 139948104 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed by the Revenue are dismissed. ITA No.7137/Mum/2016 (Revenue Appeal)-A.Y.2010-11 20. The issue involved in this appeal is with regard to levy of penalty u/s.271D of the Act. In this case, the ld. Addl. CIT levied penalty u/s.271D of the Act in respect of the following transactions passed through journal entries. SI. No. Name of the Sister Concerns Amounts (Rs.) l LODHA HIRISE BUILDERS PVT LTD 35951966 2 LODHA NOVEL BUILD FARMS PVT LTD 8315053753 3 ARIHANTPRIMISES 1377 4 MACROTECH CONSTRUCTION PVT LTD 490370738 5 DURGESHWARI HI RISE . FARMS PVT LTD 4432272839 6 LODHA BUILDCON PVT.LTD 169762961 7 LODHA DEVELOPERS LTD 267907388 8 LODHA ESTATE PVT LT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounds raised by the Revenue are dismissed. ITA No. 7136/Mum/2016 (A.Y.2010-11) Revenue Appeal 21. This appeal is filed by the Revenue challenging the action of the ld. CIT(A) deleting the levy of penalty u/s.271E of the Act. In this case, the ld. Addl. CIT levied penalty u/s.271E of the Act in respect of the following transactions passed through journal entries. SI. No. Name of the Sister Concerns Amount (Rs.) 1 ASHTAVINAYAK BUILDMART PVT LTD 36000 2 ASHTAVINAYAK BUILDWELL FARMS PVT LTD 60799 3 LODHA HIRISE BUILDERS PVT LTD 35951966 4 LODHA NOVEL BUILD FARMS PVT LTD 8054634275 5 ARIHANT PRIMISES 590433 6 ARlHANTPRIMtSES 1390611 7 BALAII HITECH REALTY ENGINEERS PVT LTD 23641443 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... LODHA CORE CONST. ENGG. PVT LTD 61000 32 LODHA DESIGNER CONST. PVT LTD 271 33 LODHA DEVELOPERS LTD 715480922 34 LOOHA ENERGETIC DEVELOPERS P LTD 79000 35 LODHA ESTATE PVT LTD 53822176 36 LODHA FLATS HOUSES PVT LTD 140000 37 LODHA FOREMOST CONSTRUCTION P LTD 59000 38 LODHA FOUNDATION DEV. BUILDERS P LTD 58000 39 LODHA HOUSE DEVELOPERS PVT LTD 60000 40 LODHA IDEAL BUILDERS PVT LTD 59000 41 LODHA INFRABUILD FARMS PVT LTD 72000 42 LODHA INFRACON PVT LTD 50000 43 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MAHAVIR PREMISES PVT.LTD. 21615060 67 NAVNATH BUILDERS AND DCVLOPERS PVT. LTD. 66000 68 PADAM PRABHU BUILDMART PVT.LTD. 26757 69 PADMAVATI BUILDTECH AND FARMS PVT. LTD. 220 70 PLEASANT REALTY AND FARMS PVT. LTD. 72000 71 SAMBHAVNATH REALITY AND FARMS PVT.LTD. 19000 72 SHALIBHADRA BUILTECH PVT.LTD. 56989 73 SHAUBHADRA REALTORS AND FARMS PVT. LTD. 62000 74 SHANT1NATH RESIDENTIAL PARADISE PVT. LTD. 56567 75 SHEETALNATH BUILDTECH AND FARMS PVT. LTD. 80000 76 SHEETALNATH CONSTRUCTION AND AGRO PVT. LTD. 74000 77 SID ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entries. SI. No. Name of the Sister Concerns Amount (Rs.) 1 Lodha Developers Pvt. Ltd. 3498236 2 Macroteck Constructions Pvt. Ltd. 12668771 3 Susima Buirtech Pvt. Ltd. 115535042 4 Maa Padmavati Township Pvt. Ltd. 112171357 Total 227706399 22.1. The ld. CIT(A) appreciated the basis of passing journal entries in respect of the aforesaid transactions by making the same observations as was made in the earlier appeals referred to supra. All other legal arguments advanced by the assessee before the ld. CIT(A); conclusions drawn by the ld. CIT(A) and Addl. CIT remain same with those recorded in Sanathnagar Enterprises Ltd., supra. The arguments of the ld. Special Counsel for the Revenue and the arguments of the ld. AR remain the same as was submitted by them in the case of Sanathnagar Enterprises Ltd., supra. Hence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.) 1 Lodha Developers Pvt. Ltd. 776600 2 Lodha Hi-Rise Builders Pvt. Ltd 1925786916 3 Macrotek Constructions Pvt. Ltd. 826928435 4 Ajinath Hi-Tech Pvt. Ltd. 171347289 Total 2924839240 24.1. The ld. CIT(A) appreciated the basis of passing journal entries in respect of the aforesaid transactions by making the same observations as was made in the earlier appeals referred to supra. All other legal arguments advanced by the assessee before the ld. CIT(A); conclusions drawn by the ld. CIT(A) and Addl. CIT remain same with those recorded in Sanathnagar Enterprises Ltd., supra. The arguments of the ld. Special Counsel for the Revenue and the arguments of the ld. AR remain the same as was submitted by them in the case of Sanathnagar Enterprises Ltd., supra. Hence, the conclusions drawn by this Tribunal in the case of Sanathnagar Enterprises Ltd., would hold good for this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s it was passed beyond the period of limitation provided in clause (c) of S. 275(1) of the Income-tax Act, 1961 27. Brief facts relating to the above issue are that the assessment was framed by the AO u/s 143(3) of the Act vide order dated 21.03.2013 for the assessment year 2010-11. The AO during the course of assessment proceedings noted the fact that the assessee has violated the provisions of section 269SS and 269T of the Act and therefore made a reference to Addl. CIT, CR-6 Mumbai for levying penalty under section 271D and 271E of the Act. The AO recorded this fact vide para 8b of his order, which reads as under: 8.b By not accepting the loans through account payee cheque or bank draft and also the repayment the same other than through banking mode, the assessee in fact has violated the provision of section 269SS/269T which prohibits such transactions. The proviso to section 269SS exempt certain categories mentioned as (a) to (e) where loan or deposit taken can be accepted other than by account payee cheque or draft but the assessee does not fall under any of the exempt category. Hence, by not accepting the loan / deposit or the repayment of the same by account pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h when Addl. CIT issued the notice for levy for penalty u/s 271D of the Act; therefore, the penalty order passed by the Addl. CIT is within the statutory time. 28. Aggrieved, assessee preferred cross objections against the order of the CIT(A). 29. Before us the Ld. Counsel for assessee Shri Vijay Mehta referred to the provisions of section 275(1)(c) of the Act and stated that the action of the Addl. CIT levying penalty under section 271E of the Act is barred by limitation and for that he referred to the following dates: (a) Date of order passed being the date of action for imposition of penalty is initiated by the AO 21.03.2013 (b) End of the financial year in which penalty proceedings initiated 31.03.2013 (c) Six months from the end of the month in which action for imposition of penalty is initiated 30.09.2013 (d) Last date stated in column (b) or (c) 30.09.2013 29.1. Accordingly, Ld. Counsel argued that coming to the period of time barring stated in clause (c), no order imposing pena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgment of Hon'ble Kerala High Court in the case of Grihalaxmi Vision vs. Addl. CIT, Range-1, Kozhikode in ITA No.83 86 of 2014 dated 07.08.2015. Ld. Special Counsel for the Revenue referred to para 11, 12 13 of the judgment. 30.1. Ld. Standing Counsel stated that the case laws cited by the assessee are distinguishable on facts and he particularly referred to the observations made by Special Bench of this Tribunal in the case of Dewan Chand Amritlal vs. DCIT (2006) 98 ITD 200 (Chandigarh Spl. Bench) by referring to paras 26, 27 28 thereon. 31. We have heard rival contentions and gone through the facts of the case. We noted that the Tribunal in assessee‟s own case and group cases after considering various decisions on the issue held that the discussion by the AO in the assessment order and making reference to the Addl. CIT for imposition of penalty under section 271D or 271E of the Act, constitutes initiation for action for imposition of penalty and that is the date which should be reckoned for the purpose of limitation as specified in clause (c) of section 275(1) of the Act. The Tribunal in assessee‟s group cases in the case of DCIT vs. Lodha Build ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 246 or section 246A, and the Commissioner (Appeals) passes the order on or after the 1st day of June, 2003 disposing of such appeal, an order imposing penalty shall be passed before the expiry of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed, or within one year from the end of the financial year in which the order of the commissioner (Appeals) is received by the Chief Commissioner or Commissioner, whichever is later;] (b) (c) In any other case, after the expiry of 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. 17. The said provisions are explained by various Honble High courts and Tribunal. To start with, Honble High Court of Rajasthan in the case of CIT vs. Hissaria Bros (supra) explained the said provisions vide the para 21 to 27 of the said judgment and the same are produced as under: 21. By substituting section 275(1) which became operat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ders are the subject - matter of an appeal to the CIT(A) under section 246 or an appeal to the Tribunal under section 253, after the expiry of 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 CIT(A) or, as the case may be, of the Tribunal is received by the Chief CIT or CIT, whichever period expires later. Apparently, clause (a) governs the categories which are integrally related to the assessment proceedings and are not independent of it. 24. We have also noticed that this provision was brought into effect in 1970 with effect from 01.04.1971-, so that proceedings may not require rectification or modification depending on the outcome of the appeal against the orders passed in the relevant assessment proceedings or the other proceedings in the course of which the penalty proceedings are required to be initiated. 25. We have also noticed that section 271 and 273 were the two original penalty provisions, which require the penalty proceedings to be initiated during the course of relevant assessment proceedings or th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s required under sections 269SS and 269T are not related to the assessment proceedings but are independent of it, therefore, the completion of appellate proceedings arising out of the assessment proceedings or the other proceedings during which the penalty proceedings under sections 271D and 271E may have been initiated has no relevance for sustaining or not sustaining the penalty proceedings and therefore, clause(a) of sub-section(1) of section 275 cannot be attracted to such proceedings. If that were not so, clause (c) of section 275(1) would be redundant because otherwise, as a matter of fact every penalty proceeding is usually initiated when during some proceedings such default is noticed, though the final fact finding in this proceeding may not have any bearing on the issues relating to establishing default, e.g., penalty for not deducting tax at source while making payment to employees, or contractor, or for that matter not making payment through cheque or demand draft where it is so required to be made. Either of the contingencies does not affect the computation of taxable income and levy of correct tax on chargeable income; if clause (a) was to be invoked, no necessity of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Worldwide Township Projects Ltd vide ITA No.232/2014, where Honble Delhi High Court explained the above said provisions in the context of penalty levied u/s 271D of the Act. Para 8 of the said judgment of the High Court is relevant here and the same reads as under: 8. A plain reading of the aforesaid section indicates that (the import of the above provisions is limited) it applies to a transaction where a deposit or a loan is accepted by an assessee, otherwise than by an account payee cheque or an account payee draft. The ambit of the section is clearly restricted to transaction involving acceptance of money and not intended to affect cases where a debt or a liability arises on account of book entries. The object of the section is to prevent transactions in currency. This is also clearly explicit from clause (iii) of the explanation to section 269SS of the Act which defines loan or deposit to mean loan or deposit of money The liability recorded in the books of accounts by way of journal entries, i.e., crediting the account of a party to whom monies are payable or debiting the account of a party from whom monies are receivable in the books of accounts, is clearly outside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 275(1)(c) would only be attracted. This is also relevant for another ratio that the period will be counted from the date of assessment order where the Assessing Officer decided to make a referral to the Addl. CIT. 21. On this aspect, following the said judgment, the Delhi Bench of the Tribunal in the case of Dinesh Jain ITA no 3794/Del/2013 held that it is the AO who applies mind during the assessment proceedings to the issues relating to the violation of section 269SS or 269T of the Act and therefore, the limitation should commence from the date of the Assessment Order. On the facts of squiring up of the loans with the wife by way of journal entries‟, Tribunal held that such journal entries are outside the scope of the relevant penal provisions. Thus, it is the decision of the High Court/Tribunals that the provisions of clause (a) of section 275(1) of the Act would not apply and in alternative, the provisions of section 275(1)(c) only be attracted in the matters of penalties levied u/s 271D/271E of the Act. Further, it is also held that the limitation period would be counted from the date of assessment order with the AO s decision to make referral to his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19. The basic facts pertaining to initiation/reference and passing of penalty orders in these cases are as under: - S.No Entity Name Date of A.O Order U/s 143(3 Date of Ref. to Addl. CIT Penalty u/s Date of penalty SCN by Addl. CIT End of F.Y. 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 from assessment order limitation for levy of penalty from SCN Addl. CIT Date of Penalty order 1 M/s. Lodha Builders Pvt. Ltd 29.05.13 26.06.2013 271D 27.03.14 31.03.14 30.11.13 30.09.14 31.03.14 30.09.14 10.09.14 2 M/s. Lodha Builders Pvt. Ltd 29.05 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2012 and 26.06.2013 made a reference to the Addl. CIT for initiation of penalty proceedings. Therefore, the facts of the assessee‟s case in all these cases are identical to the facts as mentioned by the Tribunal in its order in ITA.No. 475 to 481/Mum/2014 dated 27.06.2014 in assessee‟s own case and associated companies‟ cases. Thus, respectfully following the said decision of the Coordinate Bench in assessee‟s own case, we hold that, as the Assessing Officer in the course of the assessment proceedings called for explanation of the assessee in respect of loans accepted and repaid otherwise than by way of Account payee cheque/drafts, considered the reply of the Assessee and rejected the reply thereon, and the Assessing Officer holding that the assessee has violated the provisions of section 269SS/269T also made a reference to the Addl. CIT for initiation of penalty proceedings in the assessment order, these preliminary acts constitute action for imposition of the penalty as contemplated in the provisions of section clause (c) of section 275(1) of the Act. Thus, the penalty orders passed u/s. 271D/271E of the Act by the Addl. CIT beyond a period of six months ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jasthan High Court was affirmed by Hon'ble Supreme Court in Civil Appeal No.5254 of 2008 (2016) 386 ITR 719 (SC) wherein it is held as under: 1. On perusing the judgment of the High Court, it is found that penalty imposed on the respondent herein was also set aside on the ground that the provisions of Section 271-D and 271-E of the Income Tax Act were invoked after six months of limitation and, therefore, such penalty could not have been imposed. Since the outcome of the judgment of the High Court can be sustained on this aspect alone, it is not even necessary to go into other aspects. Leaving the other questions of law open, the appeal is dismissed. There shall be no order as to costs. 32.2. The assessee also relied on the decision of Hon'ble Rajasthan High Court in the case of CIT vs. Jitendra Singh Rathore (2013) 352 ITR 327 (Raj). In this case also similar proposition was laid down in favour of assessee. 33. We have considered the propositions argued by both the sides and noted that the issue is squarely covered by the decision of Hon'ble Rajasthan High Court in the case of Hissaria Brothers (supra), which was ultimately affirmed by Hon'ble Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dismissed 17-18 CO No.5/Mum/2019 CO No.6/Mum/2019 2010-11 Assessee Allowed 19-20 ITA No.7138/Mum/2016 7139/Mum/2016 2010-11 Revenue Dismissed 21-22 CO No.7/Mum/2019 CO No.8/Mum/2019 2010-11 Assessee Allowed 23-24 ITA No.7141/Mum/2016 7140/Mum/2016 2010-11 Revenue Dismissed 25-26 CO No.13/Mum/2019 CO No.14/Mum/2019 2010-11 Assessee Allowed 27-28 ITA No.3143/Mum/2017 3144/Mum/2017 2012-13 Revenue Dismissed Order pronounced on 17/12 /2021 by way of proper mentioning in the notice board. - - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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