2018 (6) TMI 1792 - AT - Income Tax

Levy of penalty u/s 271D - assessee failed to establish the compelling reason or genuine business constraint or reasonable cause for having connection in respect of each and every journal entry with its group concern - genuineness of the transaction made through journal entries - HELD THAT - As the co-ordinate bench in assessee s group case in DCIT v. National Standard India Ltd. 2018 (7) TMI 1828 - ITAT MUMBAI while referring the decision of Hon ble jurisdictional High Court in CIT v. Ajitnath Hi-Tech Builders Pvt. Ltd. 2018 (2) TMI 603 - BOMBAY HIGH COURT held that the journal entries passed prior to 12.06.2012 the date on which Bombay High Court in case of CIT v. Trumph International Finance (I) Ltd. was pronounced. Therefore prior to 12.06.2012 it can be safely concluded wherein the assessee under the bonafide belief passed journal entry could not be subject to penalties under section 271D 271E. Considering the decision in case of CIT v Ajitnath Hi-Tech Builders Pvt. Ltd.(supra) and Tribunal s orders in assessee s group case in National Standard India 2018 (7) TMI 1828 - ITAT MUMBAI and M/s Aashthavinayak Estate Company Ltd. 2018 (5) TMI 1745 - ITAT MUMBAI we do not find any reason to interfere with the finding of ld. Commissioner (Appeals). Appeal filed by Revenue is dismissed.

Summary

Issues:
- Appeal against deletion of penalty under section 271D of the Income Tax Act by the Commissioner (Appeals)
- Contravention of section 269SS of the Income Tax Act by the assessee
- Reasonable cause for passing journal entries instead of account payee cheques
- Interpretation of judicial decisions on loan transactions through journal entries
- Application of section 273B regarding reasonable cause for contravention of section 269SS

Analysis:
1. The appeal by the revenue challenged the deletion of a penalty under section 271D of the Income Tax Act by the Commissioner (Appeals). The case involved a Private Limited Company engaged in real estate development that received a loan from a sister concern through journal entries. The assessing officer noted this during assessment and referred the matter to the Additional Commissioner of Income Tax, who levied a penalty. The Commissioner (Appeals) deleted the penalty, leading to the revenue's appeal before the Tribunal.

2. The revenue contended that the assessee contravened section 269SS of the Income Tax Act by accepting loans through journal entries instead of account payee cheques. The assessing officer found no reasonable cause for this action, leading to the penalty under section 271D. However, the Commissioner (Appeals) held that the reasons disclosed by the assessee constituted a reasonable cause under section 273B, especially as there was no evidence of tax evasion.

3. The Tribunal considered various judicial decisions, including those cited by the assessee's authorized representative. The Tribunal noted that the levy of penalty under section 271D is not automatic, and the genuineness of the reasons for repayment through journal entries must be assessed judiciously. The Tribunal also referenced cases involving similar issues within the assessee's group, where penalties were not sustained due to reasonable cause.

4. The Tribunal highlighted that prior to a specific judgment, there was a belief that journal entries for loans did not violate the law. The decision in the case of CIT v. Triumph International Finance (I) Ltd. was crucial in determining the applicability of penalties under sections 271D and 271E. The Tribunal upheld the Commissioner (Appeals)' decision based on the precedents set by the jurisdictional High Court and previous Tribunal rulings in the assessee's group cases.

5. Ultimately, the Tribunal dismissed the revenue's appeal, citing the consistency in decisions across related cases and the application of legal principles regarding loan transactions through journal entries. The Tribunal found no reason to interfere with the Commissioner (Appeals)' decision to delete the penalty imposed under section 271D, based on the interpretation of relevant legal provisions and judicial precedents.

Judgment: The Tribunal dismissed the revenue's appeal, upholding the deletion of the penalty under section 271D by the Commissioner (Appeals) based on the reasonable cause shown by the assessee and the interpretation of legal provisions and judicial decisions on loan transactions through journal entries.