TMI Blog2021 (11) TMI 131X X X X Extracts X X X X X X X X Extracts X X X X ..... receivables or extinguishment of mutual liability of paying/receiving the amounts by the assessee and its sister concerns AND rectification of an error. Accordingly, finding no infirmity in the view taken by the CIT(A), we uphold his order. - Decided in favour of assessee. - ITA Nos.3050 & 3051/MUM/2019 - - - Dated:- 11-10-2021 - Shri Pramod Kumar (Vice President) And Shri Ravish Sood (Judicial Member) For the Assessee : Shri Neraj Sheth, A.R For the Revenue : Ms. Shreekala Pardeshi, D.R ORDER PER RAVISH SOOD, J.M: The captioned appeals filed by the revenue are directed against the respective orders passed by the CIT(A)-49, Mumbai, dated 12.02.2019, which in turn arises from the respective orders passed by the Additional Commissioner of Income Tax, Central Range-7, Mumbai (for short Addl. CIT ) under Sec. 271D and Sec. 271E of the Income-tax Act, 1961 (for short Act ), dated 29.06.2017 for A.Y. 2014-15. As the issues involved in the aforementioned appeals are interwoven or in fact intertwined, therefore, the same are being taken up and disposed off by way of a consolidated order. The revenue has assailed the impugned order on the following ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sister concerns Credits (Rs.) 1. Lodha Novel Buildfarms Private Limited 2,28,278 2. Lodha Pranik Landmark Developers Pvt. Ltd. 83,80,105 3. Lodha Crown Buildmart Private Limited 86,75,738 4. Shreeniwas Cotton Mills Ltd. 26,84,505 Total 1,99,73,256 On a perusal of the respective ledger a/cs of the aforesaid sister concerns (as appearing in the books of accounts of the assessee), it was gathered by the Addl. CIT that the credit entries therein appearing found its genesis in the payments made by the lender companies to the third parties at the behest of the assessee company, bifurcated details of which are as under : (A). Lodha Novel Buildfarms Private Limited Date Particulars Credit Amount 23.05.2013 Mangal Paper Mart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vertisements given through them. On the other hand BCCL had booked flats in a project that was being developed by Lodha Pranik Landmark Developers Pvt. Ltd. (LPLDPL), a sister concern of the assessee. The amount payable to BCCL by the assessee compny was adjusted against the amount receivable from BCCL towards flat booking in LPLDPL. The said adjustment was given effect by way of the abovementioned journal entry. (C). Lodha Crown Buildmart Private Limited Date Particulars Credit Amount 09.08.2013 Bennett Coleman Co. Ltd. 86,75,728 Total 86,75,728 Journal entry passed in the ledger account of Lodha Crown Buildmart Pvt. Ltd. (LCBPL) was as follows: Bennett Coleman Co. Ltd ...Dr. ₹ 86,75,728 To Lodha Crown Buildmart Private Limited Cr. ₹ 86,75,728. Bennett Coleman Co. ltd. (BCCL) is a vendor through which advertisements were provided by the assessee company in newspapers. The assessee had an amount payable to BCCL on ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT that the assessee company had undertaken transactions with a view to extinguish the mutual liability of paying/receiving the amounts by the assessee and its sister concerns with two parties. On being queried that as to how the aforesaid transactions were as per the mandate of Sec. 269SS and 269T of the Act, it was submitted by the assessee that it had undertaken the said transactions with a view to extinguish the mutual liability of paying/receiving the amounts by the assessee and its sister concerns with third parties. It was the claim of the assessee that as its action of extinguishing the mutual liability of paying/receiving through journal entries constituted a reasonable cause; hence, penalty proceedings initiated u/s 271D/271E should be dropped. After deliberating on the explanation of the assessee it was observed by the Addl.CIT that the submission of the assessee could be categorized into three parts: (i) transaction settled through Journal entries does not constitute accepting the loan or deposits in money; hence the same does not constitute violation of section 269SS of the I.T. Act resulting into levy of penalty u/s 271D of the I.T. Act.; (ii) the journ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Addl. CIT that the said order had not been accepted by the department and had been challenged by way of an appeal before the Hon ble High Court. Accordingly, the Addl.CIT vide his order passed u/s 271D of the Act, dated 29.06.2017 imposed a penalty of ₹ 1,99,68,616/-. 5. Aggrieved, the assessee carried the matter in appeal before the CIT(A). Relying on the order passed by the Tribunal in the case of the assessee s group company, viz. Lodha Builders (P) Ltd. (supra), the CIT(A) was of the view that the acts of assigning of receivables or extinguishment of mutual liability of paying/receiving of amounts by the assessee and its sister concern to third parties was to be assumed as an act carried out in contravention of the provisions of Sec. 269SS, there being a reasonable cause for doing the same would thus not attract the penal provisions for infraction of the provisions of Sec.296SS of the Act. The CIT(A) in support of his aforesaid conviction relied on the orders passed by the Hon ble High Court of Bombay in the case of the assessee s group companies in ITA No. 171/172/202/203/218/2019 of 2015, dated 06.02.2018. Observing, that neither the A.O nor the Addl.CIT had mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... voices raised by BCCL for advertising services on group companies will be adjusted against the flat booked by BCCL in LCBPL. D). Shreeniwas Cotton Mills Ltd. : (i). Alakh Advertising Publicity Pvt. Ltd. (AAPPL) had entered into an agreement with Shreeniwas Cotton Mills Ltd. (SCML) according to which 50%of the value of invoices raised by AAPPL for advertising services on group companies will be adjusted against the flat booked by AAPPL in SCML. As observed by the CIT(A), the ITAT, Mumbai in the case of the assessee s group concern, viz. Lodha Builders Pvt. Ltd. (supra) had inter alia observed, that acts of assigning of receivables or extinguishment of mutual liability of paying/receiving the amounts by the assessee and its sister concerns to third parties would constitute reasonable cause and would not attract penalty u/s 271D or 271E. Also, such an act of assigning of receivables or extinguishment of mutual liability of paying/receiving the amounts by the assessee and its sister concerns had came up before the Tribunal in the case of a group concern of the assessee, viz. DCIT Vs. M/s Macrotech Developers Limited (Successor to Macrotech Construction Pvt. Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs Triumph International Finance (I) Ltd reported in 208 Taxman 299 (Bom). The relevant operative portion of the said decision is reproduced hereunder:- 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' would have wider connotation than the expression 'sufficient cause'. Therefore, the expression 'reasonable cause' in Section 273B for non-imposition of penalty under Section 271E would have to be construed liberally depending upon the facts of each case. 24. In the present case, the cause shown by the assessee for repayment of the loan/deposit otherwise than by account-payee cheque/bank draft was on account of the fact that the assessee was liable to receive amount towards the sale price of the shares sold by the assessee to the person from whom loan/deposit was received by the assessee. It would have been a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 passing such entries does not involve acceptance of any loan or deposit of money. In the present case, admittedly no money was transacted other than through banking channels. M/s PACL India Ltd. made certain payments through banking channels to land owners. This payment made on behalf of the assessee was recorded by the assessee in its books by crediting the account of M/s PACL India Ltd. In view of this admitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relied upon hereinabove, we hold that the ld CITA had rightly held that no penalty u/s 271D of the Act could be levied in respect of transactions with BETL in the sums of ₹ 47,22,996/- and ₹ 31,40,533/- . Similarly , we hold that the ld CITA had rightly held that no penalty u/s 271E of the Act could be levied in respect of transactions with BETL in the sums of ₹ 36,14,531/-, ₹ 48,77,220/-, ₹ 58,93,873/- and ₹ 45,22,389/-. 5. With regard to the other remaining entries where transactions have been passed through journal entries, the ld AR explained that the other entries which are less than ₹ 1 lakh (per entry), are assignment of rights/ liabilities, the assignment of genuine and bonafide receivables / payables and extinguishment of mutual obligations effectuated by passing journal entries. These journal entries passed represent assignment/transfer of assets/debtors and liabilities/creditors having underlying transactions arising out of business expediencies and exigencies. These entries arise in the normal course of day to day business activities. We find that the argument of the ld AR deserves to be accepted on the bare perusal of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of various parties u/s 271D and 271E of the Act. Accordingly, the grounds raised by the revenue are dismissed. Also, we may herein observe that a similar view had been taken by a coordinate bench of he Tribunal in the case of Lodha Builders Pvt. Ltd. others (39 appeals), vide its consolidated order dated 31.01.2020. As stated by the ld. A.R, and rightly so, the issue involved in the present appeal i.e levy of penalty u/s 271D of the Act as regards the assignment of receivables or extinguishment of mutual liability of paying/receiving the amounts by the assessee and its sister concerns remains the same as was there before the Tribunal in its aforesaid order passed in the case of the sister concern of the assessee, viz. M/s Macrotech Developers Limited (Successor to Macrotech Construction Pvt. Ltd.), ITA No. 1415 1416/Mum/2018, dated 08.04.2021, therefore, we respectfully follow the same. We, thus, finding no infirmity in the order of the CIT(A) uphold the same. 9. Resultantly, the appeal filed by the revenue is dismissed. ITA No. 3050/Mum/2019 A.Y 2014-15 10. We shall now take up the appeal filed by the revenue against the order of the CIT(A) quashin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts genesis in the payments made by the assessee company to third parties at behest of the aforesaid lender companies, bifurcated details of which are as under : (A). Lodha Novel Buildfarms Private Limited Date Particulars Debit Amount 02.08.2013 Ralph Philip Raymond Coutinho 7,822 02.08.2013 Ralph Philip Raymond Coutinho 11,33,662 02.08.2013 Ralph Philip Raymond Coutinho 2,07,284 02.08.2013 Ralph Philip Raymond Coutinho 5,275 Total 13,54,043 Journal entry pertaining to the aforesaid debit balance in the ledger account of Lodha Novel Buildfarms Pvt. Ltd. (LNBPL) was as follows: Lodha Novel Buildfarm Pvt. Ltd. Dr. ₹ 13,54,043 To Ralph Philip Raymond Coutinho Cr. ₹ 13,54,043. Ralph Philip Raymonfd Coutinho (RPRC) had original ..... X X X X Extracts X X X X X X X X Extracts X X X X
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