2018 (2) TMI 603 - HC - Income Tax

Penalty u/s 271D - failure to comply with Section 269SS - reasonable cause u/s 273B for entering into such transactions through journal entries - Tribunal holds that the failure to comply with Section 269SS was on account of reasonable cause on the part of the respondents - Held that - In the present facts, the period during which the journal entries were made by the respondents was in the previous year relevant to the Assessment Year 200910 i.e. Financial Year 200809. At that time, the decisions of the Tribunal in the cases of Triumph International (2012 (6) TMI 358 - BOMBAY HIGH COURT). wherein held that deposits / loans received through journal entries do not fall with the mischief of Section 269SS, were holding the field. Thus, not in breach of Section 269SS of the Act While agreeing with the submission of Mr. Mohanty, learned Counsel for the appellant that the decision of this Court in Triumph International Finance (supra) has only clarified / stated the position as always existing in law, the receiving of deposits / loans through journal entries would certainly be hit by Section 269SS of the Act. - Decided in favour of assessee

Summary

Issues:
Challenge to common order of Income Tax Appellate Tribunal for Assessment Year 2009-10 regarding penalty under Section 271D of the Income Tax Act, 1961.

Analysis:

Question No. (i):
The Tribunal's order challenged the penalty imposed under Section 271D for breach of Section 269SS due to accepting loans via journal entries. The Tribunal held that there was a reasonable cause under Section 273B for non-compliance with Section 269SS. The Tribunal applied the parameters set by the Court in a relevant case to determine reasonable cause. The Revenue contended that the test of reasonable cause was not met due to multiple transactions and inadequate reasons for using journal entries. However, the Tribunal found reasonable cause based on the business nature of the transactions and lack of adverse findings on the entries' genuineness. The Court upheld the Tribunal's decision, emphasizing that the issue of reasonable cause is a question of fact, not law.

Question No. (ii), (iii), and (iv):
Since the Tribunal's decision on Question No. (i) rendered these questions academic, they were not addressed. The Court found that these questions did not raise substantial questions of law in the present context and thus were not entertained.

In conclusion, all appeals challenging the Tribunal's order were dismissed, and no costs were awarded. The Court upheld the Tribunal's decision regarding the penalty under Section 271D, emphasizing the factual nature of determining reasonable cause and the lack of substantial legal questions in the other issues raised.