2010 (12) TMI 865 - AT - Income Tax

Penalty u/s 271D - assessee had received an amount of loan of Rs.26,16,588/- from M/s. Nakshatra Software Pvt. Ltd. and a loan of Rs.9,99,97,540/- from M/s. Panther Ind. Product Ltd., otherwise than by Account Payee Cheque or Draft in violation of Section 269SS - CIT(A) himself has followed the Coordinate Bench decision in assessee s own case for A.Y. 1999-2000, the extract of which was mentioned in his order - There are number of orders on this issue as submitted by the learned counsel for the assessee and in all the cases it is felt that provisions of section 269SS/271D are not warranted when the amounts are received by way of journal entries in the books of account - Decided in favour of the assessee

Summary

Issues:
Levy of penalty under section 271D for receiving loans in violation of Section 269SS through journal entries.

Analysis:
The appeal dealt with the issue of the Revenue contesting the levy of penalty under section 271D for the receipt of loans in contravention of Section 269SS through journal entries. The Additional Commissioner had imposed a penalty of Rs.10,26,14,128 on the assessee for receiving loans without account payee cheques or drafts. The assessee argued that the transactions were made through journal entries and did not violate Section 269SS. The CIT(A) considered the assessee's submissions and previous ITAT decisions, ultimately deleting the penalty.

The CIT(A) reviewed the facts of the transactions involving Nakshatra Software Pvt. Ltd. and Panther Industrial Products Ltd., emphasizing that the transactions were through bank entries and not in contravention of Section 269SS. The CIT(A) referred to previous ITAT orders in the assessee's cases for A.Y. 1999-2000 and A.Y. 2003-04, where penalties under section 271D were deleted for transactions through journal entries. The CIT(A) upheld the deletion of penalty based on these precedents and legal principles.

The Revenue argued that the issue was pending before the Hon'ble Bombay High Court and claimed that the transactions fell under the provisions of section 269SS, justifying the penalty under section 271D. However, the ITAT upheld the CIT(A)'s decision, citing consistent rulings that no penalty should be levied for transactions conducted through journal entries. The ITAT also referenced the judgment of the Hon'ble Delhi High Court in the case of Noida Toll Bridge Co. Ltd. to support their decision.

In conclusion, the ITAT dismissed the Revenue's appeal, affirming the CIT(A)'s order to delete the penalty under section 271D. The decision was based on the consistent application of legal principles and precedents establishing that penalties should not be imposed for transactions conducted through journal entries, in line with previous ITAT decisions and the judgment of the Hon'ble Delhi High Court in a related case.