2018 (10) TMI 1926 - AT - Income Tax

Penalty u/s 271D 271E - accepting repayment in cash loan/ deposit/ transactions made through journal entries in excess of Rs.20, 000/-in violation of the provisions of section 269SS 269T - HELD THAT - In view of the judgement of Lodha developers Pvt. Ltd 2018 (2) TMI 603 - BOMBAY HIGH COURT and case of Triumph International Finance (I) Ltd 2012 (6) TMI 358 - BOMBAY HIGH COURT wherein it is held that where loan / deposit has been repaid by day to day accounts of the parties through journal entries it must be held that the assessee has committed default for the contravention of provisions of section 269SS or 269T as the case may be. But the Hon ble Bombay High Court has clarified the position with effect from 12.06.2012 date when the judgement was pronounced and prior the date of decision of Hon ble Bombay High Court in the case of Triumph International Finance (I) Ltd 2012 (6) TMI 358 - BOMBAY HIGH COURT there was a reasonable cause for the assessee to receive deposit of loan or repayment of the same through journal entries. Accordingly the assessee s case is squarely falls under a reasonable cause under section 273B of the Act and therefore in our view penalties levied by the addl. CIT under section 271D and 271E of the Act has rightly been deleted by CIT(A). Hence we confirm the order of CIT(A) and this issue of Revenue s appeal is dismissed. - Decided in favour of assessee.

Summary

Issues Involved:
1. Deletion of penalties levied under section 271D of the Income Tax Act, 1961.
2. Deletion of penalties levied under section 271E of the Income Tax Act, 1961.
3. Reasonable cause for accepting and repaying loans/deposits through journal entries in violation of section 269SS and 269T of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Deletion of Penalties under Section 271D:

The Revenue's primary contention was against the CIT(A)'s order deleting the penalties levied by the Additional CIT under section 271D for accepting loans/deposits in cash or through journal entries exceeding Rs. 20,000, which contravened section 269SS. The CIT(A) held that the genuineness of the transactions made through journal entries was not in doubt, and there was a reasonable cause for such transactions.

The CIT(A) referenced the Hon’ble Bombay High Court's decision in CIT vs. Triumph International Finance (I) Ltd., which clarified that the acceptance of loans through journal entries would attract penalties under section 271D. However, the CIT(A) noted that before this decision dated 12.06.2012, there was a reasonable cause for such transactions, as established in the case of CIT vs. Lodha Properties Development Pvt. Ltd. The CIT(A) concluded that the transactions were genuine and undertaken for business reasons, such as operational efficiency and consolidation of accounts, thus constituting a reasonable cause under section 273B.

2. Deletion of Penalties under Section 271E:

Similarly, the Revenue contested the deletion of penalties under section 271E for repaying loans through journal entries, which contravened section 269T. The CIT(A) observed that the transactions were genuine and undertaken for legitimate business purposes. The CIT(A) emphasized that the decision of the Hon’ble Bombay High Court in Triumph International Finance (I) Ltd. was delivered on 12.06.2012, and prior to this, there was a reasonable cause for such transactions.

The CIT(A) detailed that the debits in question represented transfers and adjustments for operational reasons, and no adverse finding suggested that these transactions were meant to evade tax. The CIT(A) relied on the consistent view taken by the Tribunal and the Hon’ble Bombay High Court's decisions, affirming that the penalties were not justified.

3. Reasonable Cause for Accepting and Repaying Loans/Deposits through Journal Entries:

The Tribunal consistently upheld that the transactions through journal entries were genuine and undertaken for business purposes. The Tribunal referenced the Hon’ble Bombay High Court's decision in CIT vs. Lodha Properties Development Pvt. Ltd., which held that there was a reasonable cause for such transactions before the decision in Triumph International Finance (I) Ltd. on 12.06.2012.

The Tribunal emphasized that the issue of reasonable cause is a question of fact and not law, and the CIT(A)'s findings were not perverse. The Tribunal concluded that the penalties under sections 271D and 271E were rightly deleted by the CIT(A) as the assessee had shown reasonable cause under section 273B.

Conclusion:

The Tribunal confirmed the CIT(A)'s orders, dismissing the Revenue's appeals. The consistent view was that the transactions through journal entries were genuine, undertaken for business purposes, and constituted a reasonable cause under section 273B, thus justifying the deletion of penalties under sections 271D and 271E.