TMI Blog2020 (2) TMI 1221X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 273B of the Act in passing the journal entries for the loans/deposits taken and repaid by the assessee, as all these entries were made prior to 12.06.2012 and the ratio of the decision of the Hon'ble Bombay High Court in the case of CIT v. Ajinath Hitech Builders Private Ltd and Others [ 2018 (2) TMI 603 - BOMBAY HIGH COURT] is squarely applicable. Thus, we do not see any infirmity in the order passed by the Ld.CIT(A) in deleting the penalty. In so far as the request of the Ld. Senior Standing counsel to refer the matter to the Special Bench is concerned, this Bench is of the view that, since the issue in all these appeals is decided by the Hon'ble Jurisdictional High Court and SLPs were also dismissed by the Hon'ble Supreme Court no purpose would be served even if the issue is referred for Special Bench, as we are bound by the decision of the Hon'ble Jurisdictional High Court particularly when the issue was decided in assessee s own case by the Hon'ble Jurisdictional High Court. Thus, the request made by the Ld. Senior standing counsel for referring the matter to the Special Bench has no merit and accordingly rejected. Whether the order u/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 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 from the initiation of penalty proceedings from the date of Assessment Order and the date of reference mad to Addl. CIT in these cases, are barred by limitation and accordingly the said penalty orders are quashed. - Decided in favour of assessee - ITA NO. 6610, 6611, 6613 to 6617/MUM/2016, ITA.No. 136 to 138, 597, 601, 603 to 605 & 617, 607 to 614, 616 3145 & 3152, 2577, 2578 & 2579, 3140 to 3142 & 3146, 3151/MUM/2017, And CO.NO. 155, 156, 158 to 160/MUM/2018 - - - Dated:- 31-1-2020 - SHRI C.N. PRASAD AND SHRI RAJESH KUMAR, JJ. Appellant by: Shri Vijay Mehta Respondent by: Shri P.C. Chhotary ORDER PER BENCH 1. All these appeals are filed by the Revenue and cross objection by assessee against different orders of the Learned Commissioner of Income Tax (Appeals), Mumbai [hereinafter in short Ld.CIT(A) ] for various assessment years in deleting the penalty levied u/s. 271D/271E of the Act. 2. Briefly stated the facts are that, the Assessing Officer in the course of the assessment proceedings noticed that assessee recorded journal entries ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l entries for the loans/deposits received and repaid by the assessee and therefore the provisions of section 269SS/269T are violated thereby attracting the penalties u/s.271D/271E of the Act. Ld. Sr. Standing Counsel submitted that Assessee has not explained each and every entry as to why there is a reasonable cause within the meaning of provisions of section 273B of the Act for not attracting the penalties u/s. 271D/271E of the Act. The Learned Sr. Standing Counsel for the department referring to the decision of the Mumbai Coordinate Bench in the case of M/s. V.N. Parekh Securities Pvt Ltd v. ACIT in ITA.No. 6082 6083/Mum/2009 dated 16.08.2013 submits that the observation of the Coordinate Bench was that each and every entry should be explained and therefore, since the assessee failed to explain each and entry, these appeals should go back to the file of the Assessing Officer. Learned Senior Standing Counsel submitted that, if this bench is not agreeing with the view expressed by the Division Bench in the case of M/s. V.N. Parekh Securities Pvt Ltd v. ACIT (supra) the matter be referred to the Special Bench for adjudication. 5. Learned Counsel Shri Vijay Mehta appearing for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uildmart Pvt. Ltd., in SLP (Civil) No. 44666/2018 dated 03.01.2019 and CIT v. Lodha Properties Development Pvt. Ltd., in SLP (Civil) No. 42738/2018 dated 21.01.2019, submitted that the SLPs filed by the Department against the Judgments of the Hon'ble Bombay High Court in affirming the order of the Tribunal in deleting the penalties was dismissed by the Hon'ble Supreme Court. 8. Ld. Counsel for the assessee further submits that all the journal entries passed by the assessee s in all these cases are prior to the decision rendered in the case of Triumph International Finance (I) Ltd (supra) on 12.06.2012 and therefore it constitutes reasonable cause as held by the Hon'ble Bombay High Court in the case of CIT v. Ajinath Hitech Builders Private Ltd and Others (supra) therefore no penalty u/s.271E/271D is attracted for the journal entries passed on the loans/deposits taken and repaid within the group concerns of the assessee. Thus, the Ld. Counsel for the assessee submitted that, the issue in all these appeals relates to the journal entries passed by the assessee for the loans/deposits taken and repaid within the group concerns of the assessee is squarely covered by the ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 269SS was introduced by the Finance Act, 1984. The Circular, gave the purpose of introduction of Section 269SS. The broad purpose of insertion of section 269SS was with the view to counter the device, which enables the tax payer to explain away un accounted cash or unaccounted deposits, the new section 269SS debars person from taking or accepting after 30/6/1984 from any person loan or deposit otherwise by an account payee cheque or account payee bank draft if the amount of loan or deposit or aggregating amount of such loan is ₹ 10,000/- or more. The object of insertion of section 269SS was to ensure that tax payer is not allowed to give false explanation for his unaccounted money or if he has given some false entries in his accounts, he should not escape by giving some false entries in his account, he shall not escape by giving false explanation for the same. The assessee further contended that there is no receipt of any loan/deposit or repayment in any other mode other than the account payee cheque. It is merely a case of assignment of debt by one group entity to another group entity and journal entries have been passed to record such assigned transactions. The provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 273B of the Act. This for the reason that there was a reasonable cause for the failure to comply with Section 269SS of the Act. (b) On merits of the issue, the parties before us are agreed that the Tribunal was correct in holding that receipt of any advance / loan by way of journal entries is in breach of Section 269SS of the Act as the decision of this Court in Commissioner of Income Tax Vs. Triumph International Finance (I) Ltd. 345 ITR 270 is binding upon it. However, the Revenue's grievance is with the impugned order dated 27th June, 2014 of the Tribunal further holding no penalty under Section 271D of the Act is imposable in view of Section 273B of the Act in the present facts. This is so as the Tribunal holds that the failure to comply with Section 269SS of the Act was on account of reasonable cause on the part of the respondents. This finding of reasonable cause was on the application of parameters laid down by this Court in Triumph International Finance (supra) to determine reasonable cause for not complying with the provisions of Section 269SS of the Act. (c) Mr. Mohanty, the learned Counsel for the Revenue seeks to challenge the impugned order of the Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn in Triumph International Finance (supra) will have no application in the present facts in view of the large number of entries in this case as compared to only one entry in the case before this Court. The test of reasonable cause can not, in the present facts be determined on the basis of the number of entries. If there was a reasonable cause for making the journal entries, then, the number of entries made, will not make any difference. Besides, on facts, the Tribunal was satisfied with the reasons given by the Assessee for reasonable cause and this finding is not shown to be perverse. Finally, the issue of there being a reasonable cause or not is an issue of fact. No inference of law and / or issue of interpretation is to be made. The decision relied upon by the Revenue in case of Premier Breweries Ltd.(supra) concerned itself with the issue of a claim for deduction under Section 37 of the Act on the basis of the Agreements entered into between the parties. The inference of law in that case was whether on the facts, it could be inferred that the claim for deduction is in respect of expenditure incurred wholly and exclusively for the purposes of the business. Thus, it would invol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 4.85 crores made by the assesses by a journal entry in its books of account by crediting the account of ILFS, would not fall foul of Section 269SS of the Act. This particularly in the absence of any payment beingmade in cash. (i) In the present facts, the period during which the journal entries were made by the respondents was in the previous year relevant to the Assessment Year 2009-10 i.e. Financial Year 2008-09. At that time, the decisions of the Tribunal in the cases of Triumph International (Supra) and decision of VH. Parekh (P) Ltd., Ketan V Parekh, Sunflower Builders (supra), Ruchika Chemicals (supra), Lala Murari Lal (supra) and the decision of the Delhi High Court in Noida Toll Bridge Co. Ltd. (supra) were holding the field. Thus, not in breach of Section 269SS of the Act. In the above view, while agreeing with the submission of Mr. Mohanty, learned Counsel for the appellant that the decision of this Court in Triumph International Finance (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (P) Ltd. v. ACIT [2014] 163 TTJ 778 (Mum), a bunch of appeals belonging to Lodha group (to which the present assessee belongs) involving identical issue, was disposed of by the coordinate 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. and others, 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, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... servation by relying on the judgment of Hon‟ble High Court of Bombay in the case of CIT Vs. Triumph International Finance (I) Ltd. (2012) 345 ITR 270 (Bom) for A.Y 2003-04 and ITA No. 5745 of 2010, dated 17.08.2012 for A.Y 2000-01, wherein the Hon‟ble High Court had observed that receiving loans/deposits through journal entries would be in violation of Sec. 269S of the I.T Act. Insofar the observation of the CIT(A) that the loans or deposits accepted/repaid by the assessee from/to its sister concerns‟ by journal entries was in contravention of the provisions of Sec. 269SS and Sec. 269T is concerned, we are in agreement with the view therein taken that as the said transactions are not through account payee cheque or draft, therefore, the same is in violation of the mode prescribed under the aforesaid statutory provisions. However, we are persuaded to subscribe to the observation of the CIT(A) that there was a reasonable cause for the assessee to have carried out the transactions with its sister concerns‟ by journal entries viz. (i). the journal entries had been made with the group concerns under the bonafide belief that such transactions would not be hit by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urisdictional High Court as stated above. 6. From the record we found that AO has levied penalty u/s.271D and 271E for accepting and repaying 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 not disputed that in this judgment it was held that there was violation of the provisions of S. 269T of the Act in a case where the loan was repaid by way of a journal entry entailing levy of penalty u/s. 271E of the Act. However, at the same time it was also held that levy of penalty could be avoided on showing reasonable cause. In the premises, levy of penalty u/ss. 271D and 271E of the Act is not automatic, but the genuineness or otherwise of the reasons due to which repayment was made by journal entry has to be considered judiciously. 7. In the order reported as Lodha Builders (P) Ltd. v. ACIT [2014] 163 TTJ 778 (Mum), a bunch of appeals belonging to Lodha group (to which the present assessee belongs) involving identical issue, was disposed of by the coordinate Bench in which levy of similar p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner of Income Tax Noida Toll Bridge Co. Ltd. 262 ITR 260 inter alia held that payment of ₹ 4.85 crores made by the assesses by a journal entry in its books of account by crediting the account of lLFS, would not fall foul of Section 269SS of the Act. This particularly in the absence of any payment being made in cash. (i) In the present facts, the period during which the journal entries were made by the respondents was in the previous year relevant to the Assessment Year 2009-10 i.e. Financial Year 2008-09. At that time, the decisions of the Tribunal in the cases of Triumph International (Supra) and decision of V.H. Parekh (P) Ltd.. Ketan V. Parekh, Sunflower Builders (supra), Ruchika Chemicals (supra). La/a Murari La/ (supra) and the decision of the Delhi High Court In Noida Toll Bridge Co. Ltd, (supra) were holding the field. Thus, not in breach of Section 269SS of the Act In the above view, while agreeing with the submission of Mr. Mohanty, learned Counsel for the appellant that the decision of this Court in Triumph International Finance (supra) has only clarified/stated the position as always existing in law, the receiving of deposits/ loans through journal entries w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; and (xi) Order of Ahmedabad Bench of Hon'ble Tribunal in ACIT v. Western India Ceramics (P.) Ltd (20 taxmann. Com 317), dated 12.10.2010. 10. It was argued by learned DR that the Hon'ble High Court declares the law as it was always and, hence, there was clearly violation of the provisions of the Act. He further argued that the assessee has not explained reasonable cause in respect of each and every entry and, hence, the penalties were correctly levied. 11. As regards the first argument of the ld. DR, we observe that the identical argument was raised before the Hon'ble High Court in the case of Ajinath Hi-Tech Builders Pvt. Ltd. (and other group companies of the assessee) (supra). However, finding no merit in the plea canvassed, it was rejected as per observations in sub-para (i) of para 3 on page No. 10 of their judgment which read as under: (i) ........................,..... In the above view, while agreeing with the submission of Mr. Mohanty. learned Counsel for the appellant that the decision of this Court in Triumph International Finance (supra) has only clarified/ stated the position as always existing in law, the receiving of deposits/loans t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the judgment of the Hon'ble Gujarat High Court in the case of Pr. CIT v. Sun Pharmaceuticals Industries Ltd., (2017) 86 taxmann.com 148) and also on the judgment of the Hon'ble Kerala High Court in the case of CIT v. Commonwealth Trust (India) Ltd. (221ITR 474). 16. We have considered rival contentions and gone through the orders of the authorities below. Since, we have already decided the issue on merit by following the order of the jurisdictional High Court in the group cases of the assessee, we do not consider the plea taken by the assessee under Rule 27 of the ITAT Rules. 17. In the result, appeals filed by the Revenue are dismissed. 9. We have given a thoughtful consideration to the facts of the case and have perused the aforesaid order of the coordinate bench of the Tribunal i.e. ITAT B bench, Mumbai in the case of the sister concern‟ of the assessee viz. DCIT CC-7(3), Mumbai vs. M/s. National Standard India Ltd. (ITA no. 6607/Mum/2016) for AY 2011-12, and are persuaded to subscribe to the view therein taken. In the backdrop of our aforesaid deliberations, as observed by us at length hereinabove, as the assessee had remained under a bonafid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is of the view that, since the issue in all these appeals is decided by the Hon'ble Jurisdictional High Court and SLPs were also dismissed by the Hon'ble Supreme Court no purpose would be served even if the issue is referred for Special Bench, as we are bound by the decision of the Hon'ble Jurisdictional High Court particularly when the issue was decided in assessee s own case by the Hon'ble Jurisdictional High Court. Thus, the request made by the Ld. Senior standing counsel for referring the matter to the Special Bench has no merit and accordingly rejected. 15. Coming to the cross objections filed by the assessee, the assessee raised the following ground in its cross objections: - The Ld. CIT(A) ought to have held that the order u/s. 271D/271E of the Act was illegal and bad in law as it was passed beyond the period of limitation provided in clause(c) of section 275(1) of the Income-tax Act, 1961. 16. Ld. Counsel for the assessee, at the outset submits that in all these cases the Addl. CIT passed penalty orders u/s. 271D/271E of the Act beyond a period of six months from the end of the month in which action for the imposition of penalty is initiated as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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 operative from 01.04.1989, the provision of divided cases f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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 the other relevant proceedings, as the case may be. The penalty proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings 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 clause (c) would arise. 18. Similar interpretations were taken by the ITAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt 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 the ambit of the provision of section 269SS of the Act, because pasing such entrie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... io 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 Addl CIT, who is authorized to impose penalty. 22. In the instant case, it is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 29.05.13 26.06.2013 271E 27.03.14 31.03.14 30.11.13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 by the Assessing Officer holding that the assessee has violated the provisions of section 269SS/269T and 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 from the initiation of penalty proceedings from the date of Assessment Order and the date of reference mad to Addl. CIT in these cases, are barred by limitation and accordingly the said penalty orders are quashed. 21. Since we have allowed the cross ..... X X X X Extracts X X X X X X X X Extracts X X X X
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