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TMI Blog2018 (5) TMI 1745X X X X Extracts X X X X X X X X Extracts X X X X ..... sonable cause for having transactions in respect of each and every journal entry with its group concerns. At the outset it was submitted by AR that issue is covered by the order of Bombay High Court in the case of group concern. 3. Rival contentions have been heard and record perused. The brief facts of the case are that the assessee is a Private Limited company engaged in the business of Land Development and construction of real estate properties. The assessee filed its return of income on 10.07.2008 declaring loss at Rs. 50,965/- for A.Y. 2008-09. The case was reopened vide notice dated 4.10.2013 u/s.148. The assessment u/s.143(3) r.w.s. 147 of the Act was completed on 31.3.2015 determining total income at Rs. 4,68,320/-. A reference for consideration of penalty u/s.271D & 271E of the IT. Act was received by the Addl. CIT Central range-7 from the A.O. (DCIT, Cent. Cir.-7(3), Mumbai through letter dated 25.6.2015 intimating that the assessee has accepted loans/deposits from various sister concerns through Journal Entries i.e otherwise than account payee cheque/draft, thereby stating that the assessee has violated the provisions of section 269SS of the Income tax Act. Accordingly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asion. 7.2. The appellant has submitted that the journal entries passed for transactions assigning debts and liabilities among sister concerns and reimbursement of expenses do not constitute acceptance of loan or deposit of money as per provisions of section 269SS of the Act. It has been submitted that out of the total credits, an amount of Rs. 55,18,391/- has been credited in the account of Lodha Hi-Rise Builders Pvt. Ltd (LHRBPL) on 31,3.2008 being amount payable to Ajitnath Hi-tech Builders Pvt Ltd transferred to LHRBPL. Similarly, the account of LHRBPL has been credited by Rs. 53,82,6137- on 31.3.2008 on transfer of amount payable to Lodha Builders Pvt Ltd to LHRBPL and by Rs. 37,89,912/- on transfer of amount payable to LDPL to LHRBPL. The account of Ajitnath Hi-Tech Builders Pvt Ltd has been credited by Rs. 30,02,422/-on account of payment made by it to Land vendor on behalf of the appellant company. It is also submitted that the account of Ajitnath Hi-tech Builders Pvt Ltd has been credited by Rs. 5000/- in cash on 26.3.2008. These transactions have been categorised as transfer of inter-company balance, assignment of debt and on behalf payment etc. Penalty has been levied u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egard reliance is placed on the decision of the jurisdictional High Court in the case of CIT vs Triumph International Finance(l) Ltd dated June 12, 2012 (22 Taxmann.com 138 BOM) for A.Y, 2003-04 and the case of CIT vs M/s. Triumph International Finance(l) Ltd ITA No.5745 of 2010 dated 17.8.2012 for A.Y.2000-01. The decision for A.Y.2003-04 is with respect to contravention of provisions of section 269T, since there was a repayment of loan by making journal entries in the books of account and it was held by the Hon'ble Court that repayment of loan/deposit, except by the modes specified in Section 269T, would amount to contravention of the said provision. The decision for the A.Y.2000-01 is with respect to contravention of provisions of Section 269SS wherein the appellant company and its sister concern M/s. Triumph Securities Ltd had transactions of sale and purchase with common customers and the credit/debit liabilities were settled through journal entries. The Hon'ble Court held, applying the ratio laid down in ITA No.5746 of 2010 decided on 12th June 2012 (the decision for A.Y.2003-04), that receiving loans/deposits through journal entries would be in violation of section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entries did not violate the provisions of section 269T of the Act. (ii) That it would have been an empty formality to repay the loan or deposit amount by account-payee cheque or draft and receive back almost the same amount towards the sale price of the shares. Neither the genuineness of the receipt of loan or deposit nor the transaction of repayment of loan by way of adjustment through book entries carried out in the ordinary course of business had been doubted in the regular assessment. There was nothing on record to suggest that the amounts advanced by Investment Trust of India to the assessee represented the unaccounted money of the Investment Trust of India or the assessee. The fact that the assessee-company belonged to the Ketan Parekh group involved in the securities scam could not be a ground for sustaining penalty imposed under section 271E of the Act if reasonable cause was shown by the assessee for failing to comply with the provisions of section 2697. Settling claims by making journal entries in the respective books is also one of the recognized modes of repaying loan or deposit. Therefore, on the facts, in the absence of any finding recorded in the assessment order or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able cause within the meaning of section 273B of the Act, particularly in light of the fact that there is no finding that such transactions were undertaken to evade tax. Reliance is placed on the decision of the ITAT dated 27.6.2014 in the case of Lodha Builders Pvt Ltd vs ACIT ITA No.476/M/2014 and ITA No.481/M/2014 A.Y.2009-1Q and five other group cases, wherein under similar facts and circumstances, it has been held that the assessee has shown reasonable cause and therefore, the penalty imposed U/S.271D/271E of the Act are not sustainable. However, there is a contravention of section 269SS in respect of the cash loan of Rs. 5000/- taken on 26.3.2008 from Ajitnath Hi-tech Builders Pvt Ltd when the credit balance was Rs. 42,88,239/- i.e. more than Rs. 20,000/-. Therefore, levy of penalty u/s.271D in respect of Rs. 5000/- is found to be justified. 7.5.2. In the penalty order the Addl.CIT has observed that the plea of the assessee for the benefit of reasonable cause cannot be accepted as the spirit of the Bombay High Court judgement ( in the case of CIT vs Triumph International Finance(l) Ltd) is only that such transactions which are in the nature of squaring up with the same party ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been contended that the Addl.CIT erred in not following the decision of the ITAT, Mumbai in ITA No.475 to 481 of 2014 in respect of identical penalties levied in assessee's own and associate company cases. In view of the findings given in para 7.3.2. and 7.5.1. above, wherein the above said decision of the ITAT, Mumbai has been followed, this ground is allowed. 5. We have considered rival contentions and carefully gone through the orders of the authorities below. We have deliberated on the judicial pronouncements referred by lower authorities in their respective orders as well as cited by learned AR and DR during the course of hearing before us in the context of factual matrix of the case. We had also carefully gone through the orders of the Tribunal in the group cases of the assessee which was upheld by the Hon'ble Jurisdictional High Court as stated above. 6. From the record we found that AO has levied penalty u/s.271D for accepting loan by way of Journal entries. The Assessing Officer had placed reliance on the judgment of the Hon'ble jurisdictional High Court in the case of CIT v. Triumph International Finance (I) Ltd. (345 ITR 270) rendered on 12.06.2012. It is no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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