TMI Blog2018 (10) TMI 1926X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment of the same through journal entries. Accordingly, the assessee s case is squarely falls under a reasonable cause under section 273B of the Act and therefore, in our view, penalties levied by the addl. CIT under section 271D and 271E of the Act has rightly been deleted by CIT(A). Hence, we confirm the order of CIT(A) and this issue of Revenue s appeal is dismissed. - Decided in favour of assessee. - ITA No. 112 to 115, 133, 134/Mum/2017 - - - Dated:- 15-10-2018 - SRI MAHAVIR SINGH, JM AND SRI MANOJ KUMAR AGGARWAL, AM Appellant by : Shri Puruchottam Tripuri, CIT DR Respondent by : Shri Ravikant Pathak, AR ORDER These appeals filed by the Revenue are arising out of the orders of Commissioner of Income Tax (Appeals)-49, Mumbai [in short CIT(A)], in appeal Nos. CIT(A)-49/IT269,268,270 271/2015-16, CIT(A)-49/IT190,189,258,259/2015-16 vide order dated 19.10.2016, 18.10.2016. The penalties were levied by Addl. Commissioner of Income Tax, Central Circle Range-7, Mumbai for AYs 2008-09, 2009-10 2012-13 vide order of even date 28.09.2015 under section 271D 271E of the Income Tax Act, 1961 (hereinafter the Act ). 2. The only common issue in these appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 of the Act was completed on 30.3.2015 determining total income at ₹ 4.83,160/-. A reference for consideration of penalty u/s.271D 271E of the I.T. 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. The total of such entries are as under: - Sl. No. Name of the Sister Concerns Credits (₹) 1. Lodha Developers Pvt. Ltd 17,6,666 2. Shantinath Designer Construction Pvt. Ltd. 2,38,939 3. Shri Vardhvinayak Builders Pvt. Ltd 3,05,000 Total 22,90,605 A show cause notice was issued to the assessee on 3307.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 grounds, of the existence of a state of circumstances, which, assuming them to be true, would reasonably lead any ordinary prudent and cautious man, placed in the position of the person concerned, to come to the conclusion that the same was the right thing to do. In the case of CIT vs Triumph International Finance (I.) Ltd. (supra), the Hon ble Bombay High Court has held: (i) that the Tribunal was not justified in holding that repayment of loan or deposit through journal entries did not violate the provisions 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 assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ease in consolidation of accounts, rectification entries etc. In this regard I find that the decision dated June 12, 2012, of the Hon'ble Bombay High Court in the case of CIT vs. Triumph International Finance(l) Ltd (supra), holding that repayment of loan/deposit by way of journal entries was in contravention of provision of section 269T has been given after the close of the financial year 2011-12 relevant to A.Y.2012- 13. In my considered opinion the above said reasons do constitute reasonable 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.4761M/2014 and ITA No.481/M/2014 A.Y.2009-10 and five other group cases. wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5D(4) was passed on 28.11.2014. Thus, the above said observation is found to be based on presumptions and do not justify the levy of penalty u/s.271D of the Act. 8.0. In view of above discussion, the levy of penalty of ₹ 22,90,605/- u/s.271D is found to be not justified and the same is hereby cancelled, Ground No.4 to 9 taken by the appellant are allowed. 9.0. In ground No.10 it has been contended that the AddI.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. 6. Similar are the grounds in ITA No. 112/Mum/2017 and CIT(A) deleted the penalty by observing as under: - The grounds taken by the appellant and the facts of the case are similar to those taken in appeal against levy of penalty uls.271D of the Act for the A.Y 2008-09, discussed in paras above. The AD. has levied the penalty of ₹ 2649622/- u1s.271E of the Act, holding that the appellant has contravened the provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng as under: 11. Before us, it was claimed by the assessee that the journal entries pointed out by the AO and during penalty proceedings by the Addl.CIT, are not loan or deposits of money in view of explanation (III) to section 269SS of the Act, which gives the definition of loan or deposit for the purpose of this section. The learned Counsel for the assessee relied on the Bombay High Court decision in the case of assessee s group concerns in the case of CIT vs. Lodha Properties Development Pvt. Ltd. in ITA No. 172 of 2015 and others, wherein the Hon ble High Court exactly on similar circumstances and transactions arising out of the same group of companies deleted the penalty by holding that the assessee has reasonable cause under section 273B of the Act for entering into such transactions through journal entries for the reason that the decision of Hon ble Bombay High Court in the case of Triumph International Finance (I) Ltd, the same was delivered only on 12.06.2012 and on that date Hon ble Bombay High Court has clarified the position that the receiving of deposits or loans through journal entries would certainly be hit by the provisions of section 269SS and 269T of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered 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 involve a question of interpretation of the agreements etc. from which an inference is to be drawn. Further, it also involves application of principles of law to the facts for the purposes of deductions and, therefore, it would lead to a question of law. Therefore, the Court held in the facts of that case that a question of law does arise. (f) In this case, the issue of reasonable cause is an inference of fact from facts and, therefore, a question of fact. The Supreme Court decision in Sree Meenakshi Mills Ltd. Vs. Commissioner of Income Tax, 31 ITR 28 had laid down the tests to determine a question of law and / or fact. In the above context, the Court observed that when the finding is one of fact, the fact that it itself is an inference from other basic facts, will not alter its character as one of fact. Therefore, the issue of there being reasonable cause or not, is a question of fact and unless it is shown to be perverse, we wo ..... 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