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TMI Blog2022 (7) TMI 326X X X X Extracts X X X X X X X X Extracts X X X X ..... d and received by modes other than by account payee or any other mode provided in section 269SS & 269T. 2. The Appellant prays that the order of the CIT(Appeals) on the above ground be set aside and that of the AO be restored. 2. At the outset, we may like to mention that delay of 520 days in filing appeal has been pointed by the Registry. The Ld. DR submitted that in view of the order of the Hon'ble Supreme Court in Miscellaneous Application No. 21 of 2022 in suo motu Writ Petition (C) No. 3 of 2020 & others, the appeal is within the extended period. In view of the order of Hon'ble Supreme Court (supra), the period from 15.03.2020 till 28.02.2022 stands excluded for the purposes of limitation prescribed under any general or special laws in respect of all judicial or quasi judicial proceedings. In the case, order of Ld. CIT(A) was received by the respective CIT on 18.02.2020. The appeal was due for filing on or before 19.04.2020 whereas appeal has been filed on 20.09.2021. In view of the order of Hon'ble Supreme Court (supra), the appeal being within the extended period, it is admitted for adjudication. 3. Briefly stated facts of the case are that scrutiny assessment under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in violations of the provisions of sections 271D & 271E of the Act. 3. The Assessee-company was-well within its statutory powers to refuse to oblige to fulfil the desire of the promoter to give a gift his sister - one Which fell within the personal realm of the promoter and had nothing to do with the company or its business. 4. Neither the assessee nor the promoter has brought anything on record to anything on record to suggest as to why the passing of journal entries was the only mode available to it for repaying and accepting the loans otherwise than by in account payee cheque? 5. Also it has not been pointed out with any evidence as to why the Assessee-company could paid the loan by an account payee cheque to the promoter, when it had in fact done in past, as It clear from the entries dated 27-10-2012 and 01-12-2012 vide which an amount of Rs. 90 lakhs and Rs. 70 lakhs was in fact paid to the promoter? Why couldn't the same be done with the remaining amount of Rs. 3.4 cr? At this juncture, It is Important to take note of the fact that the Assessee has a team of accounting professionals at its disposal not only to take decisions to conduct its business but also to ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... doing what the Assessee-company has done, it has not only contravened the provisions of s. 2695S as well as S: 269T of the Act, but also has: failed- to establish any reasonable cause mandated under section 273B which led it to engage or undertake the impugned transactions." 5. The Ld. JCIT finally levied the penalty under section 271D and 27 E of the Act of observing as under: On the basis of the discussion in the preceding paragraphs, I hold that there was no business exigency or business connection for passing of entries in books of account and the same was done to execute a personal transaction of the promoter of the Assessee-company Sh. Chandan Asrani vis-a-vis his sister, Ms. Daya Asrant. Also, the said transactions was done with a malafide intention of diverting and/or generating Interest income in the hands of the promoter's sister, instead of his own hands, and claiming the same as deductions from profit and consequently reducing the tax liability of the Assesseecompany. Moreover, I also hold that the act of passing of entries in books of account in respect of the loans accepted end/or repaid cannot be said to be a bona fide transaction of the Assessee-company wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le Bombay High Court in the case of Triumph international Finance India Ltd. (supra) has held that loan/deposit paid by way of debiting account through general entries falls under the contravention of provision of section 269T. According to the ld DR, the finding of the Ld. CIT(A) is contrary to the finding of the Hon'ble High Court and therefore same need to be reversed. 10. On the contrary, the Ld. Sr. Counsel, who appeared on behalf of the assessee, submitted that no loan has been repaid and it has been only assigned from one person to another person and therefore it does not meet requirement of section 271E, which prescribe that penalty is leviable when the person repays any loan or deposit otherwise than in manner provided in section 269T of the Act. He submitted that the Ld. CIT(A) emphasized of no loan repaid, thus no penalty under section 271E of the Act attracted. He further submitted that irrespective of the finding of the Hon'ble Bombay High Court in the case of Triumph International Finance India Ltd. (supra) that repayment by way of general entries also falls under the contravention of section 269T, there exist a reasonable cause in not complying the said provision an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted the penalty on the reasoning that repayment or acceptance of the loan by way of general entries are not in contravention of section 269T and 269SS of the Act respectively. We find that Hon'ble Bombay High Court in the case of Triumph International Finance India Private Limited (supra) has held that repayment of loan/deposit through general entries is in contravention of section 269T of the Act. The relevant finding of the Hon'ble High Court is reproduced as under : "17. Section 269T in Chapter XXB of the Act, as introduced originally in the year 1981 provides that none of the entities specified therein (which includes a Company like the assessee) shall repay any deposit made with it otherwise than by an account payee cheque / bank draft drawn in the name of the person who had made the deposit, if the amount of the deposit together with the interest, if any, payable thereon, exceeds the amount specified therein. The obligation to repay the deposit by account payee cheque / bank draft for the entities specified in Section 269T would have to be construed as mandatory in view of the negative language used in the Section. Section 269T provides that none of the entities specified t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... because, the section does not make any distinction between the bonafide and non-bonafide transactions and requires the entities specified therein not to make repayment of any loan / deposit together with the interest, if any otherwise than by an account payee cheque / bank draft if the amount of loan / deposit with interest if any exceeds the limits prescribed therein. Similarly, the argument that only in cases where any loan or deposit is repaid by an outflow of funds, Section 269T provides for repayment by an account payee cheque / draft cannot be accepted because Section 269T neither refers to the repayment of loan / deposit by outflow of funds nor refers any of other permissible modes of repayment of loan / deposit, but merely puts an embargo on repayment of loan / deposit except by the modes specified therein. Therefore, in the present case, where loan / deposit has been repaid by debiting the account through journal entries, it must be held that the assessee has contravened the provisions of Section 269T of the Act." 11.2 Hon'ble High Court in the above case, however finally held that assessee proved the reasonable cause for such failure, and therefore no penalty could be l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions 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 same issue) wherein this Tribunal had given seven instances of journal entries which could be considered as a reasonable cause within the meaning of Section 273B of the Act. The same are as under:- a. Alternate mode of raising funds b. Assignment of receivables c. Squaring up of transactions d. Operational efficiencies/MIS purpose e. Consolidation of family member debts f. Correction of errors g. Loans taken in cash 11.5 But we find that in the instant case, decision of the Hon'ble Bombay High Court has been pronounced on 12/06/2012 whereas general entries have been passed on 31/03/2013 , which are much after the pronouncement of the decision of the Hon'ble Bombay High Court and therefore assessee cannot take said plea in the instant case. 11.6 In the case, we find that assessee is neither before us by way of appeal or cross-objection or even under Rule 27 of the ITAT Rules to support existence of reasonable cause. The Department has challenged the finding of the Ld. CIT(A) wherein it is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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