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2015 (5) TMI 470 - ITAT MUMBAI

2015 (5) TMI 470 - ITAT MUMBAI - TMI - Penalty levied under section 271D & 271E - Repayment of loan by any other mode except by way of account payee cheque/draft - transfer of amount by way of Journal entries. - Held that:- In the case in hand, the transactions were carried out between the director of the assessee company and the company itself. All the loans were originally received by the assessee company through account payee cheque but due to the reasons explained by the assessee, some amoun .....

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fully following the finding of the Tribunal given in almost similar circumstances in Lodha Builders Pvt. Ltd. vs. ACIT [2014 (8) TMI 872 - ITAT MUMBAI], we hold that in the case in hand, the explanation put forth by the assessee-company, falls within the scope of phrase "reasonable cause" as provided under Section 273B of the Income Tax Act, 1961. So, in view of our observations made above, the penalty imposed upon the assessee by the AO and further confirmed by the CIT(A) is hereby ordered to b .....

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ed 16.10.2014 in relation to penalty levied under section 271D and 271E of the Income Tax Act (hereinafter referred to as the Act). 2. For the sake of convenience, we take up the facts from ITA No.7197/M/2014 agitating the confirmation of penalty levied under section 271D of the Act. ITA No.7197/M/2014 3. The brief facts of the case as brought out by the Ld. CIT(A) in his order are that the assessee company has been engaged in the business of developer and builder. During the assessment proceedi .....

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ated the penalty proceedings. The assessee submitted that there were valid reasons for accepting the loans by way of adjustments through journal entries. However, the AO did not accept the explanation of the assessee and levied penalty of ₹ 15,23,37,169/- under section 271D of the Act. 4. In appeal before the Ld. CIT(A), it was submitted that as per the detail, the assessee had received loan of ₹ 14,40,57,000/- from Mr. R.R. Chaturvedi by account payee cheque which was out of the pur .....

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Shinrai Automobiles Ltd. and ₹ 10,754/- towards Club Membership from his bank account. Since the payment was made on behalf of the assessee company, the same was transferred through J/V crediting to Mr. R.R. Chaturvedi loan account. It was also submitted that all the entries routed through journal entries were originally received by the assessee company by way of account payee cheque and no cash was involved in it. In the tax audited report, the auditor had erroneously mentioned that enti .....

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Chaturvedi and balance amount of ₹ 1,43,00,552/- was paid by the assessee company from its own account by way of account payee cheque. It was further submitted that out of the total loan accepted of ₹ 15,23,37,169/- from Mr. R.R. Chaturvedi, only ₹ 3,20,000/- was received by cash which was received for payment of stamp duty. In relation to the purchase of land in Kalapur which is a remote area and lacks banking facilities, the transaction was made in cash due to the compelling .....

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iolated the provisions and accordingly upheld the order of the AO levying the penalty. 5. Before us, the Ld. A.R. of the assessee reiterated the submissions made before the Ld. CIT(A). He has submitted that the assessee had not done any transaction to circumvent the provisions of law, even, originally all the amount was received by way of account payee cheque and that the AO had not considered the submissions of the assessee regarding the necessity of the transactions and wrongly relied upon the .....

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f Mumbai Income Tax Tribunal in case of Lodha Builders Pvt. Ltd. pronounced on 27 June 2014 (163 TTJ 778) 2. Decision of Bombay High C ourt in case of Triumph International Finance India Ltd pronounced on 12 June 2012 (345 ITR 270) 3. Decision of Bombay High C ourt in case of Triumph International Finance India Ltd (ITA 5745 of 2010) dated 17 August 2012. 4. Decision of Delhi High Court in case of Worldwide Township Projects Ltd pronounced on 21 May 2014 (269 CTR 444) 5. Decision of Delhi Income .....

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mode of repayment of certain deposits. It stipulates that no company including a banking company, cooperative society or firm shall repay to any person any deposit made with it otherwise than by an account payee cheque or account payee bank draft drawn in the name of the person who had made the deposit if, the amount of deposit together with interest is ₹ 20,000 or more. Section 271E deals with penalties imposable for failure to comply with the provisions of Section 269T. Section 273B of t .....

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ribunal in the case of Lodha Builders Pvt. Ltd. vs. ACIT ITA No.476/M/2014 and others decided on 27.06.2014 is squrely applicable to the case of the assessee as the issue before the tribunal was relating to the transfer of amount by way of general entries. The Tribunal in the said case has made the following observations: 29. Submission of the assessee justifying the claim of immunity u/s 273B of the Act to the impugned journal entries is as under: a) "The seven categories of entries and a .....

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his case on flimsy ground he makes a presumptive assertion that these entries has been passed to camouflage the sources and to evade tax. d) There is no attempt either in assessment order or in order to doubt the source of the entries and to take any consequential action under relevant provisions of the Income Tax Act. So, appellant‟s on source of entries being A/c payee cheque is correct." 30. It is the submission of the assessee that the Hon‟ble High Court has laid down the br .....

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ted 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' woul .....

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ice 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 regula .....

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It is not in dispute that settling the claims by making journal entries in the respective books is also one of the recognized modes of repaying loan/deposit. Therefore, in the facts of the present case, in our opinion, though the assessee has violated the provisions of Section 269T, the assessee has shown reasonable cause and, therefore, the decision of the Tribunal to delete the penalty imposed under Section 271E of the Act deserves acceptance." 32. From the above extracts from the judgme .....

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easonable cause‟ within the meaning of section 273B of the Act. In the light of the above ratio of judgment, we analyse the facts of the present case here as under. 33. We find that there is no finding of AO in the order 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 .....

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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, commercial in nature and they cannot be described as non-business by any means. Furthe .....

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journal entries, which is also an accepted mode of accounting? In our opinion, on the factual matrix of these cases under consideration, journal entries should enjoy equal immunity on par with account payee cheques or bank drafts. Of course, the above conclusion apply so long as the transactions are for business purposes and do not involve unaccounted money and they are genuine. In fact, such journal entries shall save large number of cheque books for the banks. 35. Further, There is no dispute .....

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al 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 non commercial reasons and outside the normal business operations. As such, the provisions of section 269SS and 269T of the Act shall not be attracted where there is no involvement of the money as held by the Hon‟ble High Court of Delhi in the a .....

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in para 16 to 22 of the this order. Accordingly, the grounds raised in this regard are allowed. 7. We find that the above observations of the co-ordinate bench of the Tribunal are squarely applicable to the case of the assessee. In the case in hand, the transactions were carried out between the director of the assessee company and the company itself. All the loans were originally received by the assessee company through account payee cheque but due to the reasons explained by the assessee, some .....

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spectfully following the above finding of the Tribunal given in almost similar circumstances, we hold that in the case in hand, the explanation put forth by the assessee-company, falls within the scope of phrase "reasonable cause" as provided under Section 273B of the Income Tax Act, 1961. So, in view of our observations made above, the penalty imposed upon the assessee by the AO and further confirmed by the CIT(A) is hereby ordered to be deleted. Appeal No.7198/M/2012 8. In this case, .....

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he transactions appellant company had with Mr. R.R. Chaturvedi and Mrs. Veena Chaturvedi. The details of the same are as under: Mr. R.R. Chaturvedi S. No. Particulars Amount (Rs.) Amount (Rs.) 1 Amount Repaid by Account Payee Cheque 74,70,909 2 Amount transferred through journal entries Dilip M Jindal 1,17,96,141 Parshuram S. Kadam 5,00,000 Ram Baba Dudhavade 5,00,000 1,27,96,141 3 Amount repaid by Cash 3,20,000 Total 2,05,87,050 Mrs. Veena Chaturvedi S. No. Particulars Amount (Rs.) 1 Amount tra .....

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yee cheque. On the request of those parties, the amount receivable from them was adjusted against the amount payable to Mr. R R Chaturvedi. In case of Mrs. Veena Chaturvedi the appellant had acquired loans from Mrs. Veena Chaturvedi in the preceding years through account payee cheques. During the year under consideration, she requested the company to transfer the loan into her husband's loan account with the company. Therefore, the account of Veena Chaturvedi was debited with ₹ 70.35,0 .....

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e same was receivable which was ultimately transferred to Mr. R. R. Chatuivedi through journal entries (The ledger of Mr. R. R Chaturvedi is enclosed as Annexure 4 of the paper book). It was also submitted that all the entries routed through journal entries were originally advanced by the appellant company by account payee cheque and no cash was involved in it. This was verified by AC as well as Addl. CIT and same forms part of assessment/ penalty records. In the Tax audit report, the auditor ha .....

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