TMI Blog2018 (7) TMI 1828X X X X Extracts X X X X X X X X Extracts X X X X ..... in CIT v. Triumph International Finance (I) Ltd.(2012 (6) TMI 358 - BOMBAY HIGH COURT). Accordingly, both the penalties were not exigible in the present case as the assessee was under a bona fide belief and there was no contravention as per the law prevailing as on the date of passing the journal entries. The orders of the CIT (A), therefore, do not call for any interference. - decided in favour of assessee - ITA No.6607/Mum/2016 & 6609/Mum/2016 - - - Dated:- 6-6-2018 - SHRI R.C.SHARMA, AM SHRI RAVISH SOOD, JM Revenue by Shri Rajeev Harit Assessee by Shri Vijay Mehta O R D E R PER R.C.SHARMA (A.M): These are the appeals filed by Revenue against the order of CIT(A)- 48, Mumbai dated 31/08/2016 for A.Y.2011-12 I the matter of penalty imposed u/s.271E and 271D of the IT Act. 2. Rival contentions have been heard and record perused. The facts of the case in brief are that during the course of assessment proceedings, the AO noticed that the assessee has violated the provisions of section 269SS and 269T of the Act. Therefore, after completing the assessment u/s 143(3) vide order dated 31.03.2013, the AO made a reference to the Addl. CIT through a letter dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le Mumbai ITAT's decision in its sister concern case wherein the order of penalty u/s 271D was quashed in its favour. The relevant concluding paragraph of the Hon'ble Mumbai ITAT (ITA 476/Mum/2014 -order dated 27/06/2014 is as follows: 22. In the instant case, it is an undisputed fact that the Assessing Officer discussed the details as to the violation of the provisions of section 269SS and 269T of the Act in the assessment order. It also contains a reference to the requirement of making a reference to the Addl. CIT, CH-6, and Mumbai for necessary action. Para 6 of the assessment order, which is already extracted above paras, bears witness to the above findings. Further, to give effect to his findings in the assessment order, the AO wrote a letter to the Addl. CIT on 11.1.2012, intimating to him about the violation to the said provisions of the Act. On receipt of the said reference from the AO, Addl. CIT issued a show cause notice on 15.2.2012 calling for explanation of the assessee as to why the penalty u/s 271D should not be imposed in the case of the assessee. Eventually, Add/. CIT passed a penalty order u/s 271D of the Income Tax Act on 28.9.2012. Considering the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect, I am of the considered view tha the limitation period mentioned in section 275(1)(c) of the Acts starts from the period when JCIT / Addll. CIT issued the notices for levy pf penalty. In the present case, the notice was issued by the Addll. CIT on 27.03.2014 and the order is passed on 10.09.2014 i.e. within six months from the end of the month in which Addll. CIT issued the notice. Since, the order of passed within the period of six months from the end of the month when Addll. CIT issued the notice for levy for penalty u/s 271D of the Act; therefore, the penalty order passed by the Addll. CIT is within the statutory time. Grounds 1 is dismissed 5.3 Ground 2 to 9 -Whether the penalty u/s 271E was leviable or there was a reasonable cause as provided u/s 273B? 5.3.1 The appellant has challenged the levy of penalty u/s 271E on merits by taking various alternative grounds vide Ground No 2 to 9. It has been claimed that the Appellant has transferred/assigned assets and liabilities among the sister concerns by way of passing journal entries to take effect of actionable claims/payments/ received by the sister concerns on behalf of the Appellant company. The Appellant company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The provision of section 2738 of the Act reads as under: Sect/on 273B. Notwithstanding anything contained in the provisions of [clause (b) of sub-section (1) of [section 271, section 271A, [section 271AA], section 271 B, [section 271BA], [section 271BB,] section 271C, [section 271CA,] section 271D, section 271E, [section 271F, [section 271 FA,] [section 271FBJ [section 271GJJ [section 271H,] clause (c) or clause (d) of sub-section (1) or sub-section (2) of section 272A, sub-section (1) of section 272AA] or [section 272B or] [sub-section (1)[or sub-section (1A)] of section 272BB or] [sub-section (1) of section 272BBB or] clause (b) of sub-section (1) or clause (b) or clause (c) of sub-section (1)of section. 273, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provisions if he proves that there was reasonable cause for the said failure.] 24. Brief facts of the present case are that the assessee belongs Lodha group of cases and there are large number of transactions involving the receipts and payments of loans and advances among the sister concerns of the Lodha group settled by way of journal entries' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceiving the amounts by the assessee and its sister concern to the customers. In the absence of any material on record to suggest that me transactions in question were not reasonable or bona fide and in view of section 273B of the Act, we see no reason to interfere with the order of the Tribunal in deleting the penalty of ₹ 22.99 Crs. 26. From the above, it is evident that the Hon'ble High Court has granted relief to the assessee on finding that there is no material to suggest that the transactions in question are not reasonable or bona fide. Of course, it is the finding of the Hon ble High court that the impugned journal entries in that case do not escape the rigors of the provisions of section 269SS/269T of the Act. The CIT (A) did not appreciate the Yeasons1 given by the assessee for receiving loans and advances through journal entries' as ^reasonable causes'. It is the finding of Hon ble High court in the case of M/s Triumph International Ltd supra, that 'the transactions in question were undertaken not with a view to receive loans / deposits in contravention of section 269SS but with a view to extinguish the mutual liability of paying / receiving the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the sentence that Assessee has taken from sister concerns . c. It has been proved before the Addl. CIT and CIT (A) that there is absolutely no cash involved and the source can be traced to A/c payee cheques only. Addl. CIT has failed to refute this but only in order to strengthen 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 assesses that the Hon ble High Court has laid down the broad ,-principles for determining the seasonable cause within the meaning of section 273B of the Act. judgment in the case of Triumph International (I) Ltd dated 12.6.2012 (this judgment is .different from that of judgment of Triumph International (I) Ltd dated 17.8.2012) and it explains '- guidelines for the expression reasonable cause . 31. The contents of paras 23 and 24 of the said of judgment of the Hon b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 judgment of jurisdictional High court, it is clear that the journal entries are hit by the relevant provisions of section 269SS of the Act. However, it is the finding of the Hon ble High court that completing the empty formalities of payments and repayments by issuing/receiving cheque to swap/squire up the transactions, is not the intention of the provisions of section 269SS of the Act, when the transactions are otherwise bonafide or genuine. Such reasons of the assessee constitute .seasonable 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 Hon ble High court, ,,neither the genuineness of the receipt of lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rence 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 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 above cited cases, supra. Therefore, in the facts of the present case, in our opinion, though the assessee has violated the provisions of Section 269SS / 269T of the Act in respect of journal entries, the assessee has shown reasonable cause and, therefore, the penalty imposed under Section 271D/E of the Act are not sustainable. Regarding an amount of 'money' said to have been paid in violation of the said provisions, the same needs to be deleted in view of our decision on the legal issue discussed in para 16 to 22 of the this order. Accordingly, the grounds raised in this regard are allowed. 5.3.4 Respectfully, following the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich the present assessee belongs) involving identical issue, was disposed of by the co-ordinate Bench in which levy of similar penalties was held to be not sustainable as there was a reasonable cause, copies of which have been placed on record. In deciding the dispute in favour of the assessee, the Hon'ble Tribunal had considered and applied the ratio laid down by the Hon'ble jurisdictional High Court in the case of CIT v. Triumph International Finance (I) Ltd. (345 ITR 270). 8. The aforesaid order of the Hon'ble Tribunal was approved by the Hon ble jurisdictions! High Court in their judgment and order dated 06.02.2018 in the case of CIT v. Ajinath Hi-Tech Builders Pvt Ltd., copies of which have also been placed on record. In this case, it was also held that prior to the judgment in CIT v. Triumph International Finance (I) Ltd. (345 ITR 270), there were series of orders on this point holding that journal entry would not fall foul of S. 269SS of the Act. Since the judgment in CIT v. Triumph International Finance (I) Ltd. (345 ITR 270) was rendered on 12.06.2012, it was held, that the assessee could have had a bona fide belief prior to that date that there was no viol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a) has only clarified/stated the position as always existing in law, the receiving of deposits/ loans through journal entries would certainly be hit by Section 269SS of the Act Nevertheless, prior to the decision of this Court in Triumph International Finance (supra), there was reasonable cause for respondents to receive deposit/loan through journal entries. This non-compliance with Section 269SS of the Act would certainly be a reasonable cause under Section 273B of the Act for non-imposition of penalty under Section 271D of the Act 9. From the record we found that the journal entries in the present case were passed in F.Y. 2010-11. Therefore, indisputably such journal entries were passed prior to 12.06.2012, the date on which judgment of the Hon'ble Bombay High Court in the case of CIT v. Triumph International Finance (I) Ltd was pronounced. Further more, in addition to the orders of the Hon'ble Tribunal, referred to in the aforesaid judgment, there were also many other orders rendered prior to CIT v. Triumph International Finance (I) Ltd. [345 ITR 270 (Bom)] holding that violation of Ss. 269SS and 269T of the Act could not be imputed in accepting and repaying loan by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supra) has only clarified/ stated the position as always existing in law, the receiving of deposits/loans through journal entries would certainly be hit by Section 269SS of the Act Nevertheless, prior to the decision of this Court in Triumph International Finance (supra), there was reasonable cause for respondents to receive deposit/loan through journal entries. (Emphasis supplied). 11. So far as the second argument of the Id. DR is concerned, we observe that as per the above decision of the Hon'ble High Court, the assessee could not be visited with penalty in respect of the period prior to 12.06.2012, the day on which the decision in CIT v. Triumph International Finance (I) Ltd. was pronounced. In light of this, it can safely be concluded that the assessee being under a bona fide belief, could not be visited with penalties u/ss. 271D and 271E of the Act. In any case, in light of this binding decision, there is no requirement to establish reasonable cause in respect of each and every entry as canvassed by the Id. DR. The reasonable cause in respect of all the entries is the bona fide belief of the assessee that there was no violation of any provision of the Act. 13. In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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