9911796707
TMI Blog2022 (1) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... m/2019 (A.Y.2014-15) 2. The only effective issue involved in this appeal is as to whether the ld. CIT(A) was justified in deleting the levy of penalty u/s.271D of the Act in the facts and circumstances of the instant case. 3. We have heard the rival submissions and perused the materials available on record. We find that assessee company is engaged in the business of construction and development of real estate. The scrutiny assessment for the A.Y.2014-15 was completed u/s.143(3) of the Act wherein the ld. AO observed that in respect of loan transactions, it was noticed that the same were taken / settled otherwise done by account payee cheques, for which an explanation was sought for. The assessee filed an explanation for each of the entries as under:- SN Name of the sister concern Amount (Credits) (Rs.) 1. Jawala Real Estate Private Limited 27,333 2. Shreeniwas Cotton Mills Limited 31,95,703 3. Lodha Developers Private Limited 33,78,671 TOTAL 66,01,707 3.1. The transactions were explained by the assessee as under:- * Jawala Real Estate Pvt. Ltd. a sister concern of the assessee had given advance to employee for expenses to be incurred at project b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or initiating penalty proceedings u/s.271D of the Act, as, in his opinion, the aforesaid adjustment entries were passed by way of journal entries which are in violation of provisions of Section 269SS of the Act. Accordingly, the ld. Addl. CIT proceeded to levy the penalty u/s.271D of the Act amounting to Rs. 66,01,707/- being the value of credit entries of the transactions with aforesaid three parties. The assessee submitted that there is no violation of provisions of Section 269SS of the Act in respect of the aforesaid transactions. It was specifically pointed out that the assessee had passed journal entries for creation / assigning of debt and liabilities and that the creation / assigning of debt and liabilities vide journal entries does not attract the provisions of Section 269SS of the Act. The ld. CIT(A) gave a categorical finding that this is not a case of loan or deposit taken or repaid and that it is only a case of assigning of receivables. The ld. CIT(A) observed that M/s. HT Media Ltd. (HTML) entered into an agreement with Lodha Developers Pvt. Ltd.(LDPL) according to which 75% of the value of invoices raised by HTML for advertising services have to be adjusted against th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 12/06/2012 is significant and prior to this judgment, there were series of consistent decisions on Sections 269SS and 269T of the Act holding that mere passing of journal entries will not amount to receipts / payments otherwise done by account payee cheques or draft and accordingly, the same were not in contravention of provisions of 269SS and 269T of the Act and consequently no penalty u/s.271D and 271E of the Act could be levied for the same respectively. The Hon‟ble Jurisdictional High Court held that the reliance placed on these series of consistent decisions of 269SS and 269T of the Act constituted reasonable cause and accordingly, it held that though journal entries fall within the ambit of provisions of 269SS and 269Tof the Act, still in view of series of consistent decisions rendered on the said subject, the Hon‟ble High Court held that the same would constitute reasonable cause within the meaning of Section 273B of the Act as assessee was made to believe by way of series of decisions rendered on the subject. The ld. CIT(A) also placed reliance on the Mumbai Tribunal decision in the case of Lodha Builders Pvt. Ltd.,(Group company of the assessee on the very s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hitech Builders Pvt. Ltd, and others (Group company of the assessee) dated 06/02/2018 in ITA Nos. 171, 172, 202, 203, 218 & 2019/Mum/2015 wherein it was clearly held that since the decision of the Hon‟ble Bombay High Court in the case of Triumph International Finance (I) (345 ITR 270) was rendered on 12/06/2012, it is to be held for prior to that, the assessee was under a bonafide belief that the transactions through journal entries were not hit by the provisions of Section 269SS and 269T of the Act. Hence, there was a reasonable cause available to the assessee within the meaning of Section 273B of the Act. The ld. CIT(A) also gave a categorical finding that neither the ld. AO nor the Addl. CIT (who levied the penalty) had made out a case of any malafide intention on the part of the assessee nor any adverse finding has been brought on record with regard to journal entries passed by the assessee in its books for adjustment / assigning of receivables. Accordingly, the ld. CIT(A) deleted the levy of penalty u/s.271D of the Act. Aggrieved, the Revenue is in appeal before us. 3.5. We find the entire gamut of the case had been dealt in detail by the ld. CIT(A) in his order which h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same. In this regard, we find that the Hon‟ble Jurisdictional High Court had addressed the similar issue whether the aforesaid behaviour of the assessee would constitute reasonable cause u/s 273B of the Act to escape from the rigors of applicability of provisions of section 269SS and 269T of the Act in the case of CIT 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 sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in 229 Taxman 560 (Del) in the similar set of facts and circumstances had categorically observed as under:- 8. A plain reading of the aforesaid Section indicates that (the import of the above provision 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 passing such entries does not involve acceptance of any loan or deposit of money. In the present case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le Delhi High Court on the genuineness of the transactions in the ordinary course of business and the element of "reasonable cause‟ thereon, would still remain applicable and would have more persuasive value. 3.9. In view of our aforesaid observations and respectfully following the aforesaid judicial precedents relied upon hereinabove, we hold that the ld. CIT(A) had rightly held that no penalty u/s.271D of the Act could be levied in respect of transactions with Jawala Real Estate Pvt. Ltd., Shreeniwas Cotton Mills Limited & Lodha Developers Private Limited totaling to Rs. 66,01,707/- in the facts and circumstances of the instant case. Accordingly, the grounds raised by the Revenue are dismissed. 4. In the result, appeal of the Revenue in ITA No.3038/Mum/2019 is dismissed. ITA No.3046/Mum/2019 (A.Y.2014-15) 5. The only effective issue involved in this appeal is as to whether the ld. CIT(A) was justified in deleting the levy of penalty u/s.271E of the Act in the facts and circumstances of the instant case. 6. We have heard rival submissions and perused the materials available on record. The scrutiny assessment for the A.Y.2014-15 was completed u/s.143(3) of the Act wherei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of journal entries which are in violation of provisions of Section 269T of the Act. Accordingly, the ld. Addl. CIT proceeded to levy the penalty u/s.271E of the Act amounting to Rs. 2,00,64,445/- being the value of the transactions with aforesaid four parties. The assessee submitted that there is no violation of provisions of Section 269T of the Act in respect of the aforesaid transactions. It was specifically pointed out that the assessee had passed journal entries for creation / assigning of debt and liabilities and that the creation / assigning of debt and liabilities vide journal entries does not attract the provisions of Section 269T of the Act. The ld. CIT(A) gave a categorical finding that this is not a case of loan or deposit taken or repaid and that it is only a case of assigning of receivables. The CIT(A) observed that the assessee had entered into an advertisement contract with M/s. Bennett Coleman & Co. (BCCL) according to which the down payment in respect of advertisement services was to be made to BCCL. As and when invoices are raised by BCCL on the assessee or any of its group companies covered by the agreement, 66.67% of the same would be adjusted against the down ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f loan. 6.5. We find from pages 5-7 of the impugned penalty order u/s.271E of the Act that assessee has given complete explanation of the transactions before the ld. Addl. CIT by way of detailed explanation together with the purpose of passing a journal entry including relevant journal entry passed in the books of accounts of the assessee company. The same are not reiterated for the sake of brevity herein as they are already forming part of the records. Hence, it could be safely concluded that these entries were passed out of business constrains and exigencies and for administrative convenience with no malafide intent to evade payment of tax. In our considered opinion, these business constraints and exigencies and administrative convenience itself constitutes reasonable cause within the meaning of Section 273B of the Act. Hence, no penalty u/s.271E of the Act could be invoked for the same. In this regard, we find that the Hon‟ble Jurisdictional High Court had addressed the similar issue where the aforesaid behavior of the assessee would constitute reasonable cause u/s.273B of the Act to escape from the records of applicability of provisions of Section 269T of the Act in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt would be paid by the respective company on which the invoice is raised, Accordingly the amount payable by Lodha Developers Limited to BETL was adjusted against the down payment made by MCPL. This adjustment was given effect by way of the journal entry. 9.2. The Addl. CIT however, did not agree to the contentions of the assessee and proceeded to levy penalty u/s.271E of the Act amounting to Rs. 1,17,72,637/-, as, according to him, the assessee by passing journal entries had violated the provisions of 269T of the Act. This was deleted by the ld. CIT(A) by repeating the same observations as were recorded by him in the case of M/s. Macrotech Developers Pvt. Ltd., (successor to Bellissimo Crown Buildmart Pvt.Ltd.,) which are narrated hereinabove. Since, the facts are identical with ITA Nos.3046/Mum/2019 discussed hereinabove, the decision rendered thereon shall apply mutatis mutandis to this assessee for this A.Y.2014-15 also. Accordingly, the grounds raised by the Revenue are dismissed. 10. In the result, appeal of the Revenue in ITA No.3049/Mum/2019 for A.Y.2014-15 is dismissed. ITA No.4054/Mum/2019 (A.Y.2015-16) 11. The only effective issue involved in this appeal is as to whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from Niraj Khanna. Accordingly, for squaring Up the mutual transactions, the amount payable by assessee company to Niraj Khanna was adjusted by passing the above journal entry. The Addl. CIT however, did not agree to the contentions of the assessee and proceeded to levy penalty u/s.271D of the Act amounting to Rs. 474,55,723/- as according to him the assessee by passing journal entries had violated the provisions of 269SS of the Act. This was deleted by the ld. CIT(A) by repeating the same observations as were recorded by him in the case of M/s. Macrotech Developers Pvt. Ltd., (successor to Bellissimo Crown Buildmart Pvt.Ltd., which are narrated hereinabove. 12.2. Since, the facts are identical with ITA Nos.3038/Mum/2019 discussed hereinabove, the decision rendered thereon shall apply mutatis mutandis to this assessee for this A.Y.2014-15 also. Accordingly, the grounds raised by the Revenue are dismissed. TO SUM UP: S.No. ITA No. AY Appeal By Result 1. 3038/Mum/2019 2014-15 Revenue Dismissed 2. 3046/Mum/2019 2014-15 Revenue Dismissed 3. 3049/Mum/2019 2014-15 Revenue Dismissed 4. 4054/Mum/2019 2015-16 Revenue Dismissed Order pronounced ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
