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TMI Blog2015 (5) TMI 470X X X X Extracts X X X X X X X X Extracts X X X X ..... ACIT [2014 (8) TMI 872 - ITAT MUMBAI], we hold that in the case in hand, the explanation put forth by the assessee-company, falls within the scope of phrase "reasonable cause" as provided under Section 273B of the Income Tax Act, 1961. So, in view of our observations made above, the penalty imposed upon the assessee by the AO and further confirmed by the CIT(A) is hereby ordered to be deleted. - Decided in favour of assessee. - ITA Nos.7197 & 7198/M/2014 - - - Dated:- 15-4-2015 - Shri R.C. Sharma Shri Sanjay Garg JJ. For the Appellant : Shri A.V. Sonde, A.R. For the Respondent : Shri Neil Philip, D.R. ORDER Per Sanjay Garg, Judicial Member : The above titled two appeals preferred by the assessee relevant to the same assessment year i.e. A.Y. 2010-11 have arisen from two separate orders of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] both dated 16.10.2014 in relation to penalty levied under section 271D and 271E of the Income Tax Act (hereinafter referred to as the Act). 2. For the sake of convenience, we take up the facts from ITA No.7197/M/2014 agitating the confirmation of penalty levied under section 271D of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mistake which was also submitted to the AO. The relevant evidences including copy of ledger account of Mr. R.R. Chaturvedi in the books of the assessee company were also submitted. It was also submitted that with respect to the amount of ₹ 1,48,25,034/- paid for motor vehicle, only ₹ 5,24,482/- was paid by Mr. R.R. Chaturvedi and balance amount of ₹ 1,43,00,552/- was paid by the assessee company from its own account by way of account payee cheque. It was further submitted that out of the total loan accepted of ₹ 15,23,37,169/- from Mr. R.R. Chaturvedi, only ₹ 3,20,000/- was received by cash which was received for payment of stamp duty. In relation to the purchase of land in Kalapur which is a remote area and lacks banking facilities, the transaction was made in cash due to the compelling circumstances. The Ld. CIT(A), however, did not accept the contention of the assessee. He, relying upon the decision of the Hon ble Bombay High Court in the case of M/s. Triumph International Finance (I) Ltd. ITA No.5746/M/2010 decided on 12.06.2012, held that the repayment of loan by any other mode except by way of account payee cheque/draft attracts the penalty un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nk draft drawn in the name of the person who had made the deposit if, the amount of deposit together with interest is ₹ 20,000 or more. Section 271E deals with penalties imposable for failure to comply with the provisions of Section 269T. Section 273B of the Act provides that no penalty is imposable for any failure referred to in the said provisions, if the assessee proves that there was reasonable cause for the said failure. Therefore, a combined reading of the provisions of sections 271E and 273B of the Act makes it clear that if the assessee shows reasonable cause for the failure to comply with any provision referred to therein, the penalty for its violation shall not be imposable on the assessee. 6.1 We further find that the decision of the Tribunal in the case of Lodha Builders Pvt. Ltd. vs. ACIT ITA No.476/M/2014 and others decided on 27.06.2014 is squrely applicable to the case of the assessee as the issue before the tribunal was relating to the transfer of amount by way of general entries. The Tribunal in the said case has made the following observations: 29. Submission of the assessee justifying the claim of immunity u/s 273B of the Act to the impugned journ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the loan/deposit otherwise than by account-payee cheque/bank draft was on account of the fact that the assessee was liable to receive amount towards the sale price of the shares sold by the assessee to the person from whom loan/deposit was received by the assessee. It would have been an empty formality to repay the loan/deposit amount by account-payee cheque/draft and receive back almost the same amount towards the sale price of the shares. Neither the genuineness of the receipt of loan/deposit nor the transaction of repayment of loan by way of adjustment through book entries carried out in the ordinary course of business has been doubted in the regular assessment. There is nothing on record to suggest that the amounts advanced by Investment Trust of India to the assessee represented the unaccounted money of the Investment Trust of India or the assessee. The fact that the assessee company belongs to the Ketan Parekh Group which is involved in the securities scam cannot be a ground for sustaining penalty imposed under Section 271E of the Act if reasonable cause is shown by the assessee for failing to comply with the provisions of Section 269T. It is not in dispute that settling the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be described as non-business by any means. Further, we asked ourselves as to why should the assessee under consideration take up issuing number of account payee cheques / bank drafts which can be accounted by the journal entries. This being the spirit of Hon‟ble High Court of Bombay, we adopt the same to the present issue. As such, the same is binding on us. What is the point in issuing hundreds of account payee cheques / account payee bank drafts between the sister concerns of the group, when transactions can be accounted in books using journal entries, which is also an accepted mode of accounting? In our opinion, on the factual matrix of these cases under consideration, journal entries should enjoy equal immunity on par with account payee cheques or bank drafts. Of course, the above conclusion apply so long as the transactions are for business purposes and do not involve unaccounted money and they are genuine. In fact, such journal entries shall save large number of cheque books for the banks. 35. Further, There is no dispute that the impugned journal entries in the respective books were done with the view to raise funds from the sister concerns, to assign the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finding of the Tribunal given in almost similar circumstances, we hold that in the case in hand, the explanation put forth by the assessee-company, falls within the scope of phrase reasonable cause as provided under Section 273B of the Income Tax Act, 1961. So, in view of our observations made above, the penalty imposed upon the assessee by the AO and further confirmed by the CIT(A) is hereby ordered to be deleted. Appeal No.7198/M/2012 8. In this case, the penalty has been levied by the AO on account of repayment of loan other than by way of account payee cheque or draft which was in violation of provisions of section 269T of the Act. The assessee has given similar explanation for repayment of the amount through journal entries. The relevant part of the submissions of the assessee made before the lower authorities is reproduced as under: During the assessment proceedings as well as penalty proceedings, the appellant had given details of all the transactions appellant company had with Mr. R.R. Chaturvedi and Mrs. Veena Chaturvedi. The details of the same are as under: Mr. R.R. Chaturvedi S. No. Particulars Amount (Rs.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tements of the appellant company Mr. P. R. Chaturvedi and all the parties to whom appellant had advanced money for purchase of property and the same was receivable which was ultimately transferred to Mr. R. R. Chatuivedi through journal entries (The ledger of Mr. R. R Chaturvedi is enclosed as Annexure 4 of the paper book). It was also submitted that all the entries routed through journal entries were originally advanced by the appellant company by account payee cheque and no cash was involved in it. This was verified by AC as well as Addl. CIT and same forms part of assessment/ penalty records. In the Tax audit report, the auditor had erroneously mentioned entire amount of Ps. 2,76,22,050/- as repaid otherwise than by account payee cheque. On realizing the mistake, auditor had given certificate dated 16. 10.2010 rectifying the mistake. During the penalty proceedings, the same was submitted to the Additional CIT vide letter dated 20.05.2013. (The certificate is enclosed as Annexure 2 and the submission dated 20.05.2013 is enclosed as annexure 15 of the paper Book). In short, out of the total loan repaid of ₹ 2,05,87,050/- to Mr. R. R. Chaturvedi only ₹ 3,20,000/- w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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