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TMI Blog2017 (8) TMI 447X X X X Extracts X X X X X X X X Extracts X X X X ..... olation of Section 269SS of the Act. These loans are genuine transaction which were accepted by way of cheques by its sister concern. The assessee claims that it was under the bonafide belief that, acceptance of loans or deposit by book adjustment would not attract the provision of Sections 269SS of the Act. There is a reasonable cause, for failure to comply with the provision of Section 269SS of the Act, therefore penalty cannot be levied u/s. 271D of the Act. - Decided in favor of assessee. - ITA no.6930/Mum./2016 - - - Dated:- 14-6-2017 - SHRI D.T GARASIA, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER For The Assessee : Shri. Harish P. Shah For The Revenue : Ms. Pooja Swaroop ORDER PER: MANJUNATHA G. This appeal filed by the assessee is directed against order of the CIT(A)-42, Mumbai dated 19.08.2016 and it pertains to the assessment year 2012-13. 2. The brief facts of the case are that the assessee is a firm engaged in the business of manufacture of printed polythene bags, filed its return of income for assessment year 2012-13 on 14.09.2012 declaring total income of ₹ 1,38,060/-. The assessment was completed u/s. 143(3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S, which attracts penalty u/s. 271D of the Act. The A.O further observed that though Section 273B excludes certain failures referred to in the provision of Section 271D, to get immunity from penalty, the onus is on the assessee to prove that there was a reasonable cause for the said failure. The assessee, neither before the A.O nor during penalty proceedings failed to prove reasons for not accepting the loans by way of modes referred to in Section 269SS of the Act. Therefore, opined that the assessee has violated the provision of Section 269SS, which attracts penalty u/s. 271D of the Act. Accordingly, levied penalty of ₹ 21,51,464/-, equal to the amount of loan/deposit taken/accepted. 6. Aggrieved by the penalty order, the assessee preferred an appeal before the CIT(A). Before the CIT(A), the assessee reiterated the submissions made before the A.O. The assessee further submitted that there is no violation of provisions of Section 269SS of the Act, as it has accepted loans by way of book adjustment by passing necessary journal entries in the books of accounts for the existing loans appeared in the books of accounts of its sister concerns. The reasons for transferring existi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s accepted loans under bonafide belief that these transactions are not hit by the provisions of Section 269SS and also fact that there is reasonable cause for not accepting the loans by way of cheques or bank drafts and therefore, the AO was completely erred in levying penalty, brushing aside explanation filed by the assessee. In support of his arguments, relied upon the following judgments. i) ITO vs. Ramalingeswara Commercial Complex and ANR. (2016) 47 CCH 0052 Vishakhapatnam Tribunal ii) ACIT vs. Lala Murari Lal and Sons (2004) 2 SIT 543 (Luck) iii) CIT vs. Natvarlal Purshottamdas Parekh (203 ITR 5) iv) CIT vs. Noida Toll Bridge Co. Limited (2562 ITR 260) v) Bombay Conductors Electricals Limited vs. OCIT 56 TT J(Ahd) 580 vi) CIT vs. Govind Kumar 119 Taxman 110 (Raj) vii) Sunflower Builders (P) Ltd. vs. OCIT 61 ITO 227 (Pune) viii) ITO vs. Arnar Nath Shivraj (HUF);1 SOT 346 (Agra) ix) ACIT vs. Gujarat Ambuja Proteins Ltd. 3 SOT 811 (Ahd.) 9. On the other hand, the Ld. DR strongly supported order of the CIT(A). The D.R further submitted that the provisions of section 271D would apply, if assessee accepts loans or deposits in contravention of the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has accepted loans in excess of specified limits, otherwise then by way of account payee cheque or account payee bank draft. Therefore, we are of the considered view that the assessee has accepted loans in contravention of the provision of Section 269SS of the Act. 12. Having said, let us examine whether any reasonable cause for not accepting loans by way of account payee cheque or demand draft. The assessee claims that it has accepted loans by book adjustment by passing journal entries in the books of accounts for transfer of existing loans appeared in the books of accounts of its sister concerns. The assessee further claims that these loans were accepted by its sister concern, through proper banking channel. It was further contended that it has transferred existing loans of its sister concerns, because its bankers were insisting for bringing in more capital contribution in the form of own capital or loans and advances from partners or their friends and relative for the purpose extending credit facilities. The assessee claims that these loans are genuine transaction which were accepted by way of cheques by its sister concern. The assessee further claims that it was un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as provided u/s. 273B and hence, penalty cannot be levied u/s. 271D of the Act, for contravention of provision of Section 269SS of the Act. 14. Coming to the case laws relied upon by the assessee, as well as the CIT(A). The assessee has relied upon the decision of Hon ble High Court of Bombay, in the case of CIT vs Triumph International Finance(India) Ltd. (2012) 245 ITR 270. The Ld. CIT(A) also relied upon the decision of Hon ble Bombay High Court, in the case mentioned above to confirm the penalty levied by the A.O. We have gone through the case law relied upon by both the parties. On perusal of the decision of Hon ble High Court, we find that their lordships in the first phase, held that taking of loans/ repaying loans through journal entries is a violation of the provision of section 269SS of the Act. However, in the second phase, the Hon ble Court observed that in the absence of any finding in the assessment order or in the penalty order to the effect that the repayment of loan or deposit was not a bonafide transaction and was made with a view to evade tax, the cause shown by the assessee was a reasonable cause and in view of Section 273B of the Act, no penalty u/s. 271E co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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