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2022 (10) TMI 165 - AT - Income TaxPenalty u/s 271D - contravention of provisions of 269SS - Scope of 'reasonable cause' used in Section 273B - CIT-A deleted Penalty levy - HELD THAT - We find that the CIT(A) had categorically stated in para 6.8.6 of his order that the nature of transactions carried out by the assessee through journal entries in the instant case are not in the form of loan or advance which has been received or repaid and that they are acts of assigning of receivables or extinguishment of mutual liability of paying / receiving the amounts by the assessee and its sister concerns and its sister concerns to third parties. We find that this categorical finding of the ld. CIT(A) has not even been contested by the revenue before us as is evident from the grounds reproduced at the beginning of this order. CIT(A) had given relief to the assessee even on the aspect of reasonable cause by stating that on without prejudice basis, even if the transactions of the assessee fall within the mischief of provisions of section 269SS of the Act, there exists reasonable cause within the meaning of section 273B of the Act. The revenue had challenged the aspect of reasonable cause u/s 273B of the Act before us. Eventhough transactions of one party had been settled by the other party by way of assignment of receivables / payables or for any other reason as detailed supra, we find that all the transactions have been ultimately settled for the difference amount by account payee cheques only. It is not the case of the revenue that the balance amounts lying in each account i.e after adjustment of receivables with payables, were settled by one party to the other party otherwise than by account payee cheques or account payee drafts. Hence it could be safely concluded that there is absolutely no violation of provisions of section 269SS and 269T of the Act in any of the aforesaid transactions carried out by the assessee. Accordingly, the grounds raised by the revenue are dismissed. Penalty u/s 271E - assessee company had carried out certain transactions in contravention of provisions of section 269T - CIT-A deleted Penalty levy - HELD THAT - It is not in dispute that the loan instalment and interest payable to RFL were duly serviced by the assessee company i.e Macrotech Developers Ltd (Successor to Shreeniwas Cotton Mills Ltd) against the outstanding loan account. Even the said repayment of loans were made only by account payee cheques. Hence there is no contravention of provisions of section 269T of the Act as alleged by the ld. AO in the instant case. Accordingly, we hold that this case is no different from other cases that are before us in the present list. Assessee appeal allowed.
Issues Involved:
1. Justification for deleting the penalty levied under Section 271D of the Income Tax Act. 2. Justification for deleting the penalty levied under Section 271E of the Income Tax Act. Issue-wise Detailed Analysis: 1. Justification for Deleting the Penalty Levied under Section 271D of the Income Tax Act: The primary issue in this appeal was whether the Commissioner of Income Tax (Appeals) [CIT(A)] was justified in deleting the penalty levied under Section 271D of the Income Tax Act, 1961. The grounds raised by the Revenue included the lack of reasonable cause for entering into transactions through journal entries and the failure to examine each transaction independently. The assessee, engaged in land development and construction, filed its return for the Assessment Year (AY) 2015-16, declaring a total income of Rs 5,08,97,690 under normal provisions and book profits of Rs 330,91,37,656 under Section 115JB. The Assessing Officer (AO) observed that certain transactions violated Section 269SS, resulting in penalty proceedings under Section 271D. The assessee argued that the transactions were journal entries to extinguish mutual liabilities and constituted a reasonable cause under Section 273B. The CIT(A) relied on the jurisdictional High Court's judgment in CIT vs Triumph International (I) Finance Ltd, which held that journal entries for settling claims were a recognized mode of repaying loans/deposits and constituted a reasonable cause. The CIT(A) also referenced other tribunal decisions and found that the transactions were not loans or advances but assignments of receivables or extinguishments of mutual liabilities. The CIT(A) concluded that even if the transactions fell under Section 269SS, there existed a reasonable cause under Section 273B. The Tribunal found that the CIT(A)'s order did not warrant interference, as the transactions were ultimately settled by account payee cheques, and there was no violation of Sections 269SS and 269T. The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision. 2. Justification for Deleting the Penalty Levied under Section 271E of the Income Tax Act: The second issue was whether the CIT(A) was justified in deleting the penalty levied under Section 271E of the Income Tax Act. The grounds raised by the Revenue were similar to those in the first issue, focusing on the lack of reasonable cause for entering into transactions through journal entries. The AO observed that certain transactions violated Section 269T, leading to penalty proceedings under Section 271E. The assessee provided explanations for various transactions, such as on behalf payments, transfer of vendor balances, group mediclaim policy, payment of TDS and service tax, adjustments against flat sales, and brokerage payments. The assessee argued that these transactions were not loans but adjustments to extinguish mutual liabilities, constituting a reasonable cause under Section 273B. The CIT(A) canceled the penalty, relying on the same reasoning as in the Section 271D proceedings. The Tribunal found that the transactions were ultimately settled by account payee cheques, and there was no violation of Section 269T. The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision. Summary of Judgments: - ITA No. 1290/Mum/2022 (AY 2015-16): The appeal by the Revenue against the cancellation of penalty under Section 271D was dismissed. - ITA No. 1291/Mum/2022 (AY 2015-16): The appeal by the Revenue against the cancellation of penalty under Section 271E was dismissed. - ITA No. 1347/Mum/2022 (AY 2014-15): The appeal by the Revenue against the cancellation of penalty under Section 271E was dismissed. - ITA No. 1348/Mum/2022 (AY 2016-17): The appeal by the Revenue against the cancellation of penalty under Section 271E was dismissed. Conclusion: The Tribunal upheld the CIT(A)'s decisions to delete the penalties under Sections 271D and 271E for the respective assessment years, finding that the transactions were not loans or advances but adjustments of mutual liabilities, and there existed a reasonable cause under Section 273B. The appeals by the Revenue were dismissed.
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