2020 (4) TMI 811 - AT - Income Tax

Penalty u/s 271D - receipt of deposit of loan or repayment of the same otherwise than banking channel - genuineness of the transaction made through journal entries is in doubt - reasonable cause under section 273B - CIT-A deleted the addition - HELD THAT - As decided in M/S BRIGHTGOLD CONSTRUCTION PVT. LTD. 2019 (7) TMI 1609 - ITAT MUMBAI where loan / deposit has been repaid by day to day accounts of the parties through journal entries, it must be held that the assessee has committed default for the contravention of provisions of section 269SS or 269T as the case may be. But the Hon ble Bombay High Court in Lodha developers Pvt. Ltd 2018 (2) TMI 603 - BOMBAY HIGH COURT and Triumph International Finance (I) Ltd 2012 (6) TMI 358 - BOMBAY HIGH COURT has clarified the position with effect from 12.06.2012 date when the judgement was pronounced and prior the date of decision of Hon ble Bombay High Court in the case of Triumph International Finance (I) Ltd (supra) there was a reasonable cause for the assessee to receive deposit of loan or repayment of the same through journal entries. Accordingly, the assessee s case is squarely falls under a reasonable cause under section 273B of the Act and therefore, in our view, penalty levied by the addl. CIT under section 271D of the Act has rightly been deleted - Decided in favour of assessee.

Summary

Issues Involved:
1. Deletion of penalty levied under Section 271D of the Income Tax Act, 1961.
2. Contravention of provisions of Section 269SS of the Income Tax Act, 1961.
3. Establishment of compelling reasons or genuine business constraints for transactions through journal entries.

Detailed Analysis:

Issue 1: Deletion of Penalty Levied under Section 271D of the Income Tax Act, 1961
The primary issue in this appeal was whether the Commissioner of Income Tax (Appeals) [CIT(A)] erred in deleting the penalty of ?47,67,09,864 levied under Section 271D of the Income Tax Act, 1961. The penalty was initially imposed on the grounds that the assessee had accepted loans or deposits through journal entries exceeding ?20,000, which is in violation of Section 269SS of the Act.

The CIT(A) deleted the penalty on the basis that the genuineness of the transactions made through journal entries was not in doubt. The Tribunal noted that the CIT(A) had passed a combined order for the assessee and another group company, Brightgold Construction Pvt. Ltd., and that the Tribunal had previously affirmed the CIT(A)'s order in the case of Brightgold Construction Pvt. Ltd. The Tribunal also considered various decisions from other cases within the same group, where similar penalties were deleted, and the decisions were upheld by higher courts, including the jurisdictional High Court and the Supreme Court.

Issue 2: Contravention of Provisions of Section 269SS of the Income Tax Act, 1961
The second issue was whether the CIT(A) should have upheld the penalty under Section 271D since the assessee had contravened the provisions of Section 269SS by accepting loans or deposits through journal entries. The Tribunal observed that the CIT(A) had considered the provisions of Section 273B, which provides for reasonable cause for non-compliance with Section 269SS. The CIT(A) found that the transactions were genuine and carried out in the normal course of business, and that there was a reasonable cause for the contravention, especially given that the legal position was clarified only after the decision of the Bombay High Court in the case of CIT vs. Triumph International Finance (India) Ltd. on 12.06.2012.

Issue 3: Establishment of Compelling Reasons or Genuine Business Constraints for Transactions through Journal Entries
The Tribunal also considered whether the assessee had established compelling reasons or genuine business constraints for conducting transactions through journal entries. The Tribunal noted that the CIT(A) had accepted the assessee's explanation that the transactions were carried out to raise funds, adjust balances, and correct clerical errors, among other reasons. The Tribunal agreed with the CIT(A) that these constituted reasonable causes under Section 273B of the Act, particularly since the legal position regarding journal entries was not clear before the Bombay High Court's decision in 2012.

Conclusion
The Tribunal dismissed the revenue's appeal, affirming the CIT(A)'s decision to delete the penalty levied under Section 271D. The Tribunal found that the transactions were genuine, carried out in the normal course of business, and that there was a reasonable cause for the contravention of Section 269SS. The Tribunal's decision was consistent with previous rulings in similar cases within the same group, and the legal position clarified by higher courts.