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2019 (6) TMI 1435 - AT - Income TaxPenalty u/s 271D and 271E - assessee has accepted loan/deposit from sister concern through journal entries i.e., otherwise then account payee cheque /draft - violation of provisions of section 269SS and/ or 269T - reasonable cause as prescribed 273B - HELD THAT - Considering the decision of Hon ble Jurisdictional High Court in assessee group case in Ajinath Hi Tech Builder Pvt Ltd 2018 (2) TMI 603 - BOMBAY HIGH COURT , Triumph International Finance(I) Ltd 2012 (6) TMI 358 - BOMBAY HIGH COURT and in Assessee s group case in DCIT vs. Aashthavinayak Estate Company Ltd. 2018 (5) TMI 1745 - ITAT MUMBAI that there was reasonable cause for the assessee to receive deposits of loan or repayment of loans through journal entries. Therefore, in our view the assessees case is squarely falls under a reasonable cause within the meaning of section 273B. - Decided in favour of assessee
Issues Involved:
1. Deletion of penalty under section 271D of the Income Tax Act. 2. Deletion of penalty under section 271E of the Income Tax Act. 3. Applicability of section 269SS and 269T regarding transactions through journal entries. 4. Reasonable cause under section 273B for non-compliance with section 269SS and 269T. 5. Precedent and applicability of the decision in the case of Triumph International Finance (I) Ltd. Issue-wise Detailed Analysis: 1. Deletion of Penalty under Section 271D: The Revenue challenged the deletion of penalty under section 271D by the CIT(A). The Assessing Officer (AO) had levied a penalty of ?27,02,533/- under section 271D, asserting that the assessee accepted loans/deposits from sister concerns through journal entries, violating section 269SS. The CIT(A) deleted the penalty, holding that the transactions were genuine, made for business exigencies, and not for tax evasion. The Tribunal upheld the CIT(A)'s decision, noting that the transactions were settled through banking channels and did not involve unaccounted cash. 2. Deletion of Penalty under Section 271E: Similar to the penalty under section 271D, the AO also levied a penalty of ?49,05,000/- under section 271E for repayment of loans/deposits through journal entries, contravening section 269T. The CIT(A) deleted this penalty as well, citing the same reasons of genuineness and business exigency. The Tribunal affirmed the CIT(A)'s decision, emphasizing that the transactions were bona fide and not intended to evade taxes. 3. Applicability of Section 269SS and 269T Regarding Transactions through Journal Entries: The AO argued that the assessee violated sections 269SS and 269T by accepting and repaying loans/deposits through journal entries instead of account payee cheques or drafts. However, the CIT(A) and the Tribunal found that the journal entries were a recognized mode of recording transactions, especially among sister concerns, and did not involve actual cash flow. The Tribunal referenced the decision in Triumph International Finance (I) Ltd., where it was held that journal entries could contravene section 269SS, but penalties could be avoided if there was a reasonable cause. 4. Reasonable Cause under Section 273B for Non-compliance with Section 269SS and 269T: The CIT(A) and the Tribunal concluded that there was a reasonable cause for the assessee's non-compliance with sections 269SS and 269T, falling within the purview of section 273B. The Tribunal noted that the transactions were made for operational efficiency and business exigencies, and there was no intent to evade taxes. The Tribunal also highlighted that prior to the decision in Triumph International Finance (I) Ltd., there were multiple Tribunal decisions holding that journal entries did not fall foul of section 269SS. 5. Precedent and Applicability of the Decision in the Case of Triumph International Finance (I) Ltd.: The Tribunal considered the decision in Triumph International Finance (I) Ltd., which clarified that transactions through journal entries could violate section 269SS. However, the Tribunal noted that this decision was rendered on 12th June 2012, and the assessee's transactions occurred before this date. The Tribunal also referenced the Bombay High Court's decision in CIT vs. Ajinath Hitech Builders Private Ltd., which upheld the Tribunal's view that there was reasonable cause for non-compliance with section 269SS due to the prevailing understanding before the Triumph decision. Conclusion: The Tribunal dismissed the Revenue's appeals for both assessment years 2008-09 and 2009-10, upholding the CIT(A)'s deletion of penalties under sections 271D and 271E. The Tribunal found that the assessee had a reasonable cause for the transactions through journal entries, which were genuine and made for business exigencies, and there was no intent to evade taxes. The Tribunal's decision was consistent with the precedents set by the Bombay High Court and other Tribunal decisions.
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