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2018 (8) TMI 122 - AT - Income TaxPenalty u/s 271D or 271E - assessee has accepted loan/deposit from sister concern through journal entries i.e., otherwise then account payee cheque /draft thereby violated provisions of section 269SS and/ or 269T - AO held that the assessee has not made out any 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 assessee case is squarely falls under a reasonable cause within the meaning of section 273B.
Issues Involved:
1. Deletion of penalty under sections 271D and 271E of the Income Tax Act. 2. Violation of provisions under sections 269SS and 269T by accepting loans/deposits through journal entries. 3. Determination of reasonable cause under section 273B for not complying with sections 269SS and 269T. Detailed Analysis: Issue 1: Deletion of Penalty under Sections 271D and 271E The Revenue challenged the deletion of penalties under sections 271D and 271E by the CIT(A). The penalties were levied for accepting loans/deposits through journal entries, which the Assessing Officer (AO) held as a contravention of sections 269SS and 269T. The CIT(A) deleted the penalties, holding that the transactions were genuine, and there was no finding that they were made to evade tax. The CIT(A) also noted that the transactions occurred before the decision of the Hon'ble Bombay High Court in Trump International Finance (I) Ltd., which constitutes a reasonable cause under section 273B. Issue 2: Violation of Sections 269SS and 269T The AO levied penalties under sections 271D and 271E, asserting that the assessee accepted loans/deposits from sister concerns through journal entries, which violated sections 269SS and 269T. The AO argued that the transactions were not made through account payee cheques/drafts, thus violating the provisions. The assessee contended that the journal entries were made for business exigencies, operational efficiency, and to avoid delays and procedural hassles, and that no cash transactions were involved. Issue 3: Determination of Reasonable Cause under Section 273B The CIT(A) and the Tribunal examined whether there was a reasonable cause for the assessee's actions, as required under section 273B. The Tribunal referred to the Hon'ble Bombay High Court's decision in CIT vs. Ajinath Hitech Builders Private and Others, which held that journal entries made for genuine business purposes and without any adverse findings do not attract penalties under sections 271D and 271E. The Tribunal also noted that the transactions occurred before the decision in Trump International Finance (I) Ltd., and thus, the assessee had a reasonable cause for their actions. Tribunal's Decision: The Tribunal upheld the CIT(A)'s decision to delete the penalties, agreeing that the assessee had a reasonable cause under section 273B. The Tribunal noted that the transactions were genuine, made for business exigencies, and there was no intention to evade tax. The Tribunal also referred to previous decisions, including those of the Hon'ble Bombay High Court, which supported the assessee's case. Conclusion: The Tribunal dismissed the Revenue's appeals, affirming that the penalties under sections 271D and 271E were not applicable due to the reasonable cause established by the assessee. The Tribunal's decision emphasized the importance of genuine business transactions and the absence of any tax evasion motive in determining the applicability of penalties under the Income Tax Act.
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