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2012 (12) TMI 123 - AT - Income TaxPenalty u/s 271D of Income-tax Act deposit or loan - adjustments through book entries - alleged that loan is not taken/accepted by the assessee through account payee cheques or account payee bank draft in violation of the provisions of section 269SS of Income-tax Act - Held that - Assessee executed a development agreement with M/s Duce for development of a residential township - In terms of the agreement M/s Duce agreed to provide finance for purchase of land by the assessee company - M/S Duce made payments to vendors(land owners) on behalf of the assessee by account payee cheques towards purchase of land - penalty could not be levied in bonafide transactions - when by making the book entries the assessee has made the adjustment bona fide without having the knowledge that such book entries may render the assessee liable to penalty under section 271D of the Act on account of violation of the provisions of section 269SS of the Act - Bona fide belief coupled with the genuineness of the transactions will constitute reasonable cause for not invoking the provisions of section 271D of the Act In favor of assessee
Issues Involved:
1. Deletion of penalty levied under Section 271D of the Income-tax Act for violation of Section 269SS. 2. Applicability of the decision in the case of Noida Toll Bridge Company Ltd. 3. Consideration of any fresh grounds of appeal. Issue-wise Detailed Analysis: 1. Deletion of Penalty under Section 271D for Violation of Section 269SS: The Revenue appealed against the deletion of a penalty amounting to Rs. 14,32,57,724/- levied under Section 271D for the assessee accepting loans otherwise than by account payee cheques or drafts, violating Section 269SS. The Assessing Officer (AO) had identified that the assessee received unsecured loans from M/s Duce Properties and Services Pvt. Ltd. (now M/s Jindal Reality Pvt. Ltd.) through transactions not conforming to Section 269SS. The Addl. CIT imposed the penalty, rejecting the assessee's defense that the payments were made directly to landowners by M/s Duce via account payee cheques due to the assessee not having a bank account. 2. Applicability of the Decision in Noida Toll Bridge Company Ltd.: The CIT(A) cancelled the penalty, citing the case of CIT v. Noida Toll Bridge Co. Ltd. (2003) 262 ITR 260, where no cash loan was involved, and transactions were through journal entries. The CIT(A) noted that the assessee and M/s Duce were associate companies, and the transactions were genuine and bona fide, made under a joint development agreement. The payments were made directly to farmers by account payee cheques, and the transactions were recorded as unsecured loans in the books. 3. Consideration of Fresh Grounds of Appeal: The Revenue's appeal included a general ground to add, delete, or amend any grounds of appeal. However, no additional grounds were raised during the proceedings. Judgment Analysis: The Tribunal upheld the CIT(A)'s decision to cancel the penalty. It emphasized that the assessee did not have a bank account at the time of the transactions, and no payments were made in cash. The Tribunal reiterated that Section 269SS requires loans or deposits to be accepted through account payee cheques or drafts to prevent tax evasion through unaccounted cash. However, in this case, the transactions were through book adjustments, not involving any transfer of money, thus not violating Section 269SS. The Tribunal noted that the legislative intent behind Section 269SS was to curb tax evasion through cash transactions, which was not applicable here as the transactions were genuine, bona fide, and involved no cash. The Tribunal referenced several precedents, including: - CIT v. Noida Toll Bridge Co. Ltd., where similar circumstances led to the deletion of penalty as no cash loan was involved. - CIT v. Bhagwati Prasad Bajoria (HUF), where immediate need of money justified transactions not intended to evade tax. - Various ITAT decisions where journal entries for loans or deposits did not attract Section 269SS penalties. The Tribunal also cited the Supreme Court's interpretation in Asst. Director of Inspection (Investigation) v. Kum. A.B. Shanthi, emphasizing that genuine and bona fide transactions could exempt the assessee from penalties under Section 271D. Conclusion: The Tribunal dismissed the Revenue's appeal, affirming that the assessee's transactions did not violate Section 269SS, and the penalty under Section 271D was not justified. The appeal was dismissed in its entirety.
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