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2018 (7) TMI 1828 - AT - Income TaxPenalty imposed u/s.271E and 271D - taking and repayment of loan from the various sister concerns through Journal Entry - Held that - As decided in case of Ajinath Hi-Tech Builders Pvt. Ltd. 2018 (2) TMI 603 - BOMBAY HIGH COURT the assessee could not be visited with penalty in respect of the period prior to 12.06.2012, the day on which the decision in CIT v. Triumph International Finance (I) Ltd. (2012 (6) TMI 358 - BOMBAY HIGH COURT) was pronounced. In light of this, it can safely be concluded that the assessee being under a bona fide belief, could not be visited with penalties u/ss. 271D and 271E of the Act. In any case, in light of this binding decision, there is no requirement to establish reasonable cause in respect of each and every entry as canvassed by the Id. DR. The reasonable cause in respect of all the entries is the bona fide belief of the assessee that there was no violation of any provision of the Act. In view of the above, we observe that the case of the assessee is squarely covered by the exception carved out in the judgment of the Hon ble Bombay High Court in CIT v. Triumph International Finance (I) Ltd.(2012 (6) TMI 358 - BOMBAY HIGH COURT). Accordingly, both the penalties were not exigible in the present case as the assessee was under a bona fide belief and there was no contravention as per the law prevailing as on the date of passing the journal entries. The orders of the CIT (A), therefore, do not call for any interference. - decided in favour of assessee
Issues Involved:
1. Whether the order levying the penalty u/s 271E dated 10.09.2014 is time-barred in accordance with the provisions of sec 275. 2. Whether the penalty u/s 271E was leviable or there was a reasonable cause as provided u/s 273B. Issue-wise Detailed Analysis: 1. Time-barred Penalty Order: The appellant argued that the penalty order u/s 271E was time-barred as per sec 275(1)(c) of the Act. The appellant claimed that the penalty proceedings were initiated by the AO on 31.03.2013, thus the penalty order should have been passed by 30.09.2013. The appellant relied on a prior ITAT decision which quashed a similar penalty order for being time-barred. However, the CIT(A) referred to the Kerala High Court's decision in Grihalaxmi Vision vs Addl. CIT and the CBDT circular dated 26.04.2016, which clarified that the limitation period starts from the date when the JCIT/Addl. CIT issues the notice. Since the notice was issued on 27.03.2014 and the order was passed on 10.09.2014, it was within the six-month limitation period. Thus, the ground was dismissed. 2. Levy of Penalty and Reasonable Cause: The appellant challenged the levy of penalty on several grounds, including that journal entries are not covered by Sec 269T, the transactions were bona fide and commercially expedient, and there was no tax evasion. The appellant relied on a prior ITAT decision in a sister concern's case where penalties for accepting loans through journal entries were quashed. The CIT(A) noted that the transactions were made in the regular course of business with sister concerns and there was no adverse finding that they were non-commercial or outside normal business operations. The CIT(A) concluded that though there was a technical violation of Sec 269T, the appellant had shown reasonable cause under Sec 273B, and thus, the penalty was not leviable. Tribunal's Observations: The Tribunal considered the rival contentions and reviewed the orders of the authorities below. It noted that the AO had levied penalties for accepting and repaying loans via journal entries, relying on the Bombay High Court's decision in Triumph International Finance (I) Ltd. However, the Tribunal observed that the levy of penalty is not automatic and must consider the genuineness of the reasons for repayment through journal entries. The Tribunal referred to its prior order in Lodha Builders (P) Ltd. v. ACIT, which was upheld by the Bombay High Court, where penalties for similar transactions were held to be unsustainable due to reasonable cause. The Tribunal also noted that prior to the decision in Triumph International Finance (I) Ltd., there were several rulings holding that journal entries did not violate Sec 269SS and 269T, thus the appellant could have had a bona fide belief that there was no violation. The Tribunal concluded that the appellant's journal entries were passed before the Triumph International Finance decision and were based on a bona fide belief. Therefore, penalties u/s 271D and 271E were not exigible. The Tribunal dismissed the revenue's appeals and upheld the CIT(A)'s order. Conclusion: The Tribunal dismissed the revenue's appeals, affirming that the penalties u/s 271D and 271E were not leviable due to the appellant's bona fide belief and reasonable cause. The order pronounced on 06/06/2018.
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