TMI Blog2018 (9) TMI 2068X X X X Extracts X X X X X X X X Extracts X X X X ..... nue reads as under: 1. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the penalty of ₹ 6,77,10,573/- levied u/s.271E 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 facts and in the circumstances of the case and in law, the Ld. CIT(A) having held that the assessee had contravened the provisions of section 269T of the Income Tax Act, 1961, ought to have upheld the levy of penalty u/s.271E as the assessee failed to establish the compelling reasons or genuine business constraints or reasonable cause for having transactions in respect of each and every journal entry with its group concerns. 3. The Brief facts of the case are that the appellant is a private limited company engaged in the business of land Development and construction of real estate properties. The appellant filed its return of income on 16.08.2010 declaring loss at ₹ 1,07,24,847/- for A.Y. 2009-10. The case was reopened vide notice dated 11.09.2013 u/s 148. The assessment u/s 147 r.w.s 143(3) of the Act was completed on 30.03.2015 determining total income at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... draft and accordingly a reference was made to the Addl.CIT., Central Range-7, Mumbai. The Addl.CIT has levied the penalty u/s.271D with respect to the total of credit entries amounting to ₹ 2,18,05,667/-, arising in its books by way of journal entries in the account of Lodha Developers Pvt. Ltd., Shri Vardhvinayak Builders Pvt Ltd, Ajitnath Hi Tech Builders Pvt Ltd, Lodha Hi Rise Builders Pvt Ltd reflected during the financial year 2007-08 relevant to A.Y. 2008-09. The Addl.CIT has refied on the decision of Hon'ble Bombay High Court in the case of Triumph International Finance(l) Ltd to hold that the transaction of loan/deposit by way of adjustment through book entries will result in contravention of the provisions of section 269SS of the Act. Further, it was found that the appellant could not prove any reasonable cause for contravention of above said provision, The Addl.CIT has taken the view that in the case of Triumph International (supra) the transaction was in the nature of squaring up with the same party and accordingly the benefit of reasonable cause would be available, if the transactions by way of passing journal entries were with respect to the same party. The A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vt Ltd on 31,3.2008. The A.O. has considered the credit total and debit total of ₹ 31,08,097/- in the account of Shri Vardhvinayak Builders Pvt Ltd towards levy of penalty u/s.271D/271E. This is not correct since the entire debit amount is by way of cheque and provision of interest of ₹ 79,067/- would not attract levy of penalty. Similarly, the credit amounts are by way of cheque and assignment of receivable/debit balance from Shri Vardhvinayak Builders Pvt Ltd to LHRBPL, which does not result in a loan in the account of the former, would not attract levy of penalty u/s 271 D/ 271E. 7.3. From the details furnished and submissions made it is noted that the penalty has been levied with respect to journal entries with, group concern, which have been undertaken to assign receivables, payment on behalf of group concern for squaring up transactions and for ease in consolidation of accounts, rectification entries etc except for cash entry of ₹ 5000/- on 26.3.2008 in the account of Shri Ajitnath Hi-tech Builders Pvt Ltd. As a result of this cash entry the credit balance has increased from ₹ 42,83,2397- to ₹ 42,88,239/-. No explanation for taking this cash l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... noted in the penalty order, in contravention of the provision of section 269SS and ground No,3 taken by the appellant in this regard is dismissed. 7.4. Ground No.4 to 9 are against the finding of the Add!.CIT that penalty was leviable u/s.271D of the Act since no reasonable cause could be found in this case. In this regard it is observed that the words 'reasonable cause' have not been defined under the I.T. Act, though, it has been interpreted by various courts. The Hon'ble Delhi High Court has enunciated the meaning of the term 'reasonable cause' in the case of Azadi Bachao Andolan Vs. Union of India 252 ITR 471 to be a cause which prevents a man of average intelligence and ordinary prudence, acting under normal circumstances, without negligence or inaction or want of bonafides. In Woodward Governors India (P) Ltd. Vs. CIT 118 Taxman 433 (Delhi), the Hon'ble Delhi High Court considered the meaning of reasonable cause and held : Reasonable cause as applied to human action is that which would constrain a person of average intelligence and ordinary prudence. It can be described as a probable cause. It means an honest belief founded upon reasonable grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has been assessed after making the following additions : i) land brokerage income- ₹ 5,00,000/- (ii) capital expenditure -₹ 19.284/- and penalty proceedings u/s.271(1)(c) have been initiated. This additional income represents the additional income disclosed before the Settlement Commission, which was not allowed to be proceeded with vide order u/s.245D(1) dated 12.2.2013. However, there is no finding that the transactions by way of journal entries were not bonafide or had been undertaken to evade tax. 7.5.1. Further, the appellant has submitted that there was reasonable cause for the above said contravention of section 269SS since (i) the journal entries have been made with the group concerns under the bonafide belief that such transactions would not be hit by the provisions of section 269SS in view of various judicial decisions on this issue, including -the decision of High Court of Delhi in the case of Noida Toll Bridge 262 ITR 260 and (ii) such loans by way of journal entry transactions were undertaken for various commercial reasons like assigning of receivables for operational efficiency, payment on behalf of group concern for squaring up transactions, for ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... guish the mutual liability of paying/receiving the amounts by the assessee and its sister concern to the customers, in the absence of any material on record to suggest that the transactions in question were not reasonable or bonafide 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 crores. 7.5.3. It has also been observed by the Addl.CIT that it shall not be out of place to mention that the assessee group has made a disclosure before the Hon'bie Income Tax Settlement Commission, Mumbai, of undisclosed income arising out of transactions with and by various group entities which are also the subject matter of investigation pursuant to the direction of Hon'ble ITSC. Hence it cannot be ruled out that the entities through whom such repayment/acceptances are done are not part of a chain of entities involved in transaction for the purpose of tax evasion- In this regard the appellant has submitted that no investigation pursuant to the order of the Settlement Commission was pending on 28.9.2015 i.e the date of levy of penalty since the order of the Settlement Commission u/s.245D(4) was pas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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