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2018 (7) TMI 2242 - AT - Income TaxPenalty u/s. 271D/272E - genuineness of the transaction made through journal entries - assessee failed to establish the compelling reasons or genuine business constraints or reasonable cause for having transactions in respect of each and every journal entry with its group concerns - HELD THAT - As per decision of M/S. NATIONAL STANDARD INDIA LTD. 2018 (7) TMI 1828 - ITAT MUMBAI in which the penalty levied in the similar circumstances have been ordered to be deleted on the basis of decision of the jurisdictional High Court in the case of CIT Vs. Triumph International Finance Ltd. 2012 (6) TMI 358 - BOMBAY HIGH COURT There are number of judgments have also been relied upon by the Ld. Representative of the assessee in which it is specifically held that the journal entry would not fall under the purview of Section 269SS of the ACT. Further it also came into noticed that the case of the assessee pertains to the A.Y. of 2008-09 therefore the ratio of decision in case title as CIT Vs Triumph International (I) Ltd 2012 (6) TMI 358 - BOMBAY HIGH COURT is not applicable. In the said discussion we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage. Accordingly these issues are decided in favour of the assessee against the revenue.
Issues Involved:
1. Deletion of penalty levied under Section 271D of the Income Tax Act, 1961. 2. Deletion of penalty levied under Section 271E of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Deletion of Penalty under Section 271D: The revenue challenged the deletion of the penalty levied under Section 271D of the Income Tax Act, 1961, arguing that the assessee failed to establish compelling reasons or genuine business constraints for having transactions through journal entries with its group concerns. The CIT(A) had deleted the penalty on the grounds that the genuineness of the transactions made through journal entries was not in doubt. The CIT(A) relied on the decision of the Bombay High Court in the case of Triumph International Finance Ltd., which held that transactions through journal entries do not necessarily contravene Section 269SS of the Act if they are genuine and undertaken for operational efficiency or commercial reasons. The CIT(A) found that the transactions in question were for assigning receivables, payment on behalf of group concerns, and ease in consolidation of accounts. The CIT(A) also noted that there was no finding that these transactions were undertaken to evade tax. The Tribunal upheld the CIT(A)'s decision, noting that the case pertained to the assessment year 2008-09, and the ratio of the decision in CIT Vs. Triumph International Finance Ltd. (345 ITR 270) was applicable. The Tribunal concluded that the CIT(A) had decided the matter judiciously and correctly, and thus, the deletion of the penalty under Section 271D was upheld. 2. Deletion of Penalty under Section 271E: The revenue also challenged the deletion of the penalty levied under Section 271E of the Income Tax Act, 1961, for repaying loans to various concerns through journal entries, which was held to be in violation of Section 269T of the Act by the AO. The CIT(A) deleted the penalty, relying on the same reasoning and judicial precedents as in the case of Section 271D. The CIT(A) observed that the transactions were genuine and undertaken for operational efficiency, and there was no finding that they were intended to evade tax. The Tribunal upheld the CIT(A)'s decision, noting that the factual position and legal reasoning were similar to those in the case of Section 271D. The Tribunal referred to the decision of the Bombay High Court in CIT Vs. Triumph International Finance Ltd. and other relevant ITAT decisions, concluding that the levy of penalty under Section 271E was not justified. The Tribunal confirmed the CIT(A)'s findings and dismissed the revenue's appeal. Conclusion: The Tribunal dismissed all the appeals filed by the revenue, upholding the CIT(A)'s deletion of penalties under Sections 271D and 271E of the Income Tax Act, 1961, for the assessment years 2008-09 and 2009-10. The Tribunal found that the CIT(A) had correctly applied the legal principles and judicial precedents, and the transactions in question were genuine and undertaken for commercial reasons without any intent to evade tax.
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