TMI Blog2018 (7) TMI 2242X X X X Extracts X X X X X X X X Extracts X X X X ..... is not applicable. In the said discussion, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage. Accordingly, these issues are decided in favour of the assessee against the revenue. - I.T.A. Nos.599, 600, 606 & 615/M/2017 - - - Dated:- 9-7-2018 - SHRI RAJENDRA, AM AND SHRI AMARJIT SINGH, JM Appellant by: Shri Vijay Mehta (AR) Respondent by: Shri Aarju Garariya (DR) ORDER PER AMARJIT SINGH, JM: The revenue has filed the above mentioned appeals against the different order passed by the Commissioner of Income Tax (Appeals)- 49, Mumbai [hereinafter referred to as the CIT(A) ] relevant to the assessment years2008-09 2009-10. ITA NO.606/M/2017 615/M/2017:- 2. The revenue has raised the following grounds: - On the facts and in the circumstances of the case and in law. the LdCIT{A) erred in deleting the penalty of ₹ 2,14,69,391/- levied u/s. 271D of the income Tax Act, 1961 on the ground that genuineness of the transaction made through journal entries is not in doubt. 2. On the fat- ant! in the circumstances of the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting the provision of Section 269T of the I.T. Act. The entries are as under: - Sr. No. Name of the Sister Concerns Debits (Rs.) 1 Lodha Developers Pvt. Ltd. 2,07,34,391 2 Vardhvinayak Builders Pvt. Ltd. 7,35,000 Total 2,14,69,391 5. On the letter of the AO, the notice was issued to the assessee on 03.07.2015 in which the assessee was asked to explain as to why the penalty u/s 271E of the Act should not be levied. The assessee filed the reply to the notice and thereafter considering the reply of the notice, the Assessing Officer levied the penalty to the tune of ₹ 2,14,69,391/- u/s 271E of the Act. The assessee also received the loan to the tune of ₹ 1,96,38,939/- through journal entries, therefore, after giving the notice to the assessee, the penalty to the tune of ₹ 1,96,38,939/- was levied u/s 271D of the Act. Feeling aggrieved, the assessee filed an appeal against both the orders and the CIT(A) has deleted the penalty levied u/s 271D an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passing journal entries were with respect So the same party. The Addl.CIT has also observed that in view of the disclosure made by the group companies before the Income Tax Settlement Commission, Mumbai, following search in the Lodha group of cases on 10.1 2011, it could not be ruled out that the entities through whom such repayment/acceptances are done by way of journal entries are not part of a chain of entities involved in transaction for the purpose of tax evasion. 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 ban 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 ₹ 18168,679/- has been credited in the account of Lodha Hi-Rise Builders Pvt Ltd (LHRBPL) since the amount payable to LDPL has been transferred/assigned to LHRBPL. An amount of ₹ 735000/-- has been credited in the account Shri Vardhvinayak Builders Pvt Ltd, out of which the amount of ₹ 73,50000- represents on behalf payment to vendors and an amount of ₹ 5000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ister 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 IT A No.5746 of 2010 decided on 12* June 2012 (the decision for A.Y 2003-04), that receiving loans/deposits through journal entries would be in violation o! section 26SSSoftheAct. 7.3.2 Further, I find that the issue regarding levy of penalty u/s.271D/271E of the I.T. Act in the case of various other companies of Lodha group (Ladha Builders Pvt Ltd vs ACIT and five other group concerns) for A.Y 2009-10 has been decided by the ITAT 'E1 Bench, Mumbai vide order dated 27.6.2014. In the said order, under similar facts and circumstances, the ITAT is of the opinion that The assesses has violated the provisions of section 269SS/269T of the Act in respect of journal entries. Accordingly, following the above said decision, it is held that the appellant has received the loan amount of ₹ 1,96,36,939/- by way of journal entries, as noted in the penalty order, in contravention of the provision of section 269SS and ground No.3 taken by the appellant in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 271E of the Act if reasonable cause was shown by the assesses for failing to comply with the provisions of section 269T. 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 assessment order the penalty order to the effect that the repayment of loan or deposit was not a bonafide transaction and was made with a view to evade tax, the cause by the assesses was a reasonable cause and in view of section 2736 of the Act, penalty under section 271 E could for contravened the provisions of section 269T of the Act. 1 5. In the appellant's case the genuineness of the transaction made through journal entries is not in doubt and it has not been shown either in the assessment proceedings or in the penalty proceedings that unaccounted income of the lender or the borrower was involved. From the assessment order passed u/s.143(3) dated 30.3.2015, it is noted that the total income has been assessed alter making the following additions i) Land brokerage income- ₹ 5,00,000/- arid penalty proceedings u/s.271(1)(c) have been initialed. This additional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he plea of the assessee tor 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 can only claim the benefit of reasonable cause. This observation is found to be without merit particularly in light of the decision of High Court of Bombay in the case of CIT vs M/s. Triumph international Finance(l) Ltd 1TA No.5745 of 2010 dated 17.3.2012 for the A.Y.2000-01,as noted in para 6 3 above, 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 and it was held 'that the transactions in question were undertaken not with a view to receive loans/deposits in contravention of Section 269SS, but in a view to extinguish the mutual liability of paying/receiving the amounts by the assesses and its sister concern to the customers In (he absence of any material on record to suggest that the transactions in question were not reasonable or bonafide and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee pertains to the A.Y. of 2008-09, therefore, the ratio of decision in case title as CIT Vs Trump International (I) Ltd dated 12 June 2012 (345 ITR 270)/ [22 Taxmann.com 138(Bom)] is not applicable. In the said discussion, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage. Accordingly, these issues are decided in favour of the assessee against the revenue. ITA NO. 615/M/2017:- 8. In this appeal, the CIT(A) has deleted the penalty levied u/s271E of the Act on account of repaid of loans to various concerns on the basis of journal entries otherwise then the account payee cheque, draft which was held to be in violation of provision of Section 269SS of the Act by the AO. Before going further, we deemed it necessary to advert the finding of the CIT(A) on record.: - 10 The grounds taken by the appellant and the facts of the case are similar to those taken in appeal against levy of penalty u/s 271D of the Act for the A.Y. 2008-09, discussed in paras above. The AO has levied the penalty of ₹ 2,14,69,391/- u/s 271E of the Act, holding that he ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s held that the appellant has made the repayment of loan by way of journal entries, as noted In the penalty order, in contravention of the provision of section 269T. Accordingly, ground No.3 taken by the appellant is dismissed. 10.4. Ground No.4 to 9 are against the finding of the Addl. CIT that penalty was leviable u/s.271E of the Act since no reasonable cause could tie found in this case. Following the decision in paras 7.4 to 7.5 3 above, it is held that although the transactions by way of journal entries are in contravention of provision of section 259T of the Act. the appellant has shown reasonable cause vj's.273B of the Act and the levy of penalty was not justified. Accordingly, the levy o1 penalty of ₹ 2,14,65,391,1 - is hereby cancelled. Ground No.4 to 9 are allowed, 10.5. In Ground No. l0 it has been contended that the AddL ClT 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. Following the decision in para 9 above, this ground is allowed. 9. On appraisal of the above mentioned finding, we noticed that the levying of penalty u/s 271 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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