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TMI Blog2021 (5) TMI 341X X X X Extracts X X X X X X X X Extracts X X X X ..... owards advertisement expenses. Hence it could be safely concluded that these entries were passed out of business constraints and exigencies and for administrative convenience with no malafide intent to evade payment of tax. In our considered opinion, this business constraint and exigency and administrative convenience itself constitutes reasonable cause within the meaning of section 273B of the Act . Hence no penalty u/s 271D and 271E of the Act could be invoked for the same. CIT-A had rightly held that no penalty u/s 271D and 271E of the Act could be levied in respect of transactions with BETL With regard to the other remaining entries where transactions have been passed through journal entries, these journal entries passed represent assignment/transfer of assets/debtors and liabilities/creditors having underlying transactions arising out of business expediencies and exigencies. These entries arise in the normal course of day to day business activities. We find that the argument of the ld AR deserves to be accepted on the bare perusal of the figures involved in the said journal entries as no person would either receive or repay loans in such odd amounts. Going by the fre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that (a) Macrotech Constructions Pvt Ltd has been merged with Lodha Hi-Rise Builders Private Limited with effect from appointed date 10.08.2013. The order giving effect to the aforementioned merger was passed on 04.07.2014 by the Hon ble Bombay High Court. (b) Name of the company Lodha Hi-Rise Builders Private Limited has been changed to Bellissimo Hi-Rise Builders Private Limited on 06.01.2016. Copy of certificate of incorporation pursuant to change of name was placed on record. (c ) Subsequently, Bellissimo Hi-Rise Builders Private Limited has been merged with Lodha Developers Private Limited with appointed date of 01.04.2016. (d) Further, company Lodha Developers Private Limited has been converted into Public Limited Company on 14.03.2018 . Copy of certificate of incorporation consequent upon conversion to Public Limited Company was placed on record. (e ) Subsequently, the name of the company Lodha Developers Limited has been changed to Macrotech Developers Limited on 20.05.2019. Copy of certificate of incorporation pursuant to change of name was placed on record. We find that the revenue had also filed revised Form No. 36 before us by duly mentioning the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the levy of penalty was not justified. Aggrieved by the said order, the revenue had filed these appeals before us. 4.1. We find that the ld CITA had explained the journal entries thereby proving the genuineness of the transactions carried out by the assessee. The ld CITA had observed that on 2.5.2012, Shreeniwas Cotton Mills Ltd (SNCML) gave loan by cheque of ₹ 100 crores to Sahajanand High Tech Pvt Ltd (Sahajanand). An amount of ₹ 100 crroes was given by Sahajanand to Lodha Developers Pvt Ltd (LDPL). On the date of receiving this loan, LDPL has to receive an amount exceeding ₹ 100 crores from the assessee, Macrotech Construction Pvt Ltd (MCPL). Instead of receiving the amount from MCPL and give the same to Sahajanand, LDPL settled the account by passing journal entries crediting the account of MCPL and debiting the account of Sahajanand. MCPL on the other hand debited the account of LDPL and credited the account of Sahajanand in its books of account. The amount which was payable to LDPL by the assessee is now payable to Sahajanand. Sahajanand had to pay ₹ 100 crores to SNCML and had to receive ₹ 100 crores from MCPL. Thus instead of receiving ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Amount (Rs) 1 02/05/2012 Shreeniwas Cotton Mills Ltd 99,50,00,000 2 14/05/2012 Sonal Super Services 22,796 3 28/05/2012 Sonal Super Services 3,096 4 28/05/2012 Sonal Super Services 8,298 5 05/07/2012 Sonal Super Services 18,225 6 25/07/2012 Sonal Super Services 22,603 7 02/08/2012 Sonal Super Services 18,036 8 29/08/2012 Sonal Super Services 21,668 9 14/09/2012 Sonal Super Services 1,661 10 30/09/2012 Brand Equity Treaties Ltd 36,14,531 11 30/09/2012 S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otal (C) 1,00,39,63,078 Transactions with Shreeniwas Cotton Mills Ltd Sr No. Date Particulars Amount (Rs.) 1 05/07/2012 Sonal Super Services 3,917 2 02/08/2012 Sonal Super Services 4,135 3 30/09/2012 Brand Equity Treaties Limited 58,93,873 4 31/10/2012 Brand Equity Treaties Limited 45,22,389 Total (D) 1,04,24,314 Grand total (C + D) 1,01,43,87,392 4.3. The ld AR vehemently argued that the assessee had genuine reasons and justification of passing the above journal entries during the normal course of business. He submitted that the journal entries passed on or before 12.6.2012 and journal entries passed after 12.6.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon ble Jurisdictional High Court rendered a decision in the case of Triumph International Finance (India) Limited (2012) [345 ITR 270]wherein it was held that the transactions through journal entries are also hit by the provisions of section 269SS and 269T of the Act. The decision of Hon ble Bombay High Court rendered on 12.6.2012 is the significance of that date. Hence prior to the judgement of the Hon ble Bombay High Court in the case of Triumph International Finance (India) Limited supra, there were series of consistent decisions on sections 269SS 269T of the Act, holding that mere passing of journal entries will not amount to receipts / payments otherwise than by way of account payee cheque or draft and accordingly the same were not in contravention of provisions of sections 269SS and 269T of the Act and consequently no penalty u/s 271D and 271E of the Act could be levied for the same respectively. The reliance placed on these series of consistent decisions on sections 269SS and 269T of the Act constituted reasonable cause and it was argued that no penalty u/s 271D and 271E of the Act could be levied on the assessee for passing journal entries on or before 12.6.2012. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rve that in the assessee's group case in the case of DCIT v. M/s. Lodha construction in ITA.Nos. 110, 111, 139 to 142/Mum/2017 dated 30.07.2018 held as under: 6. We have considered the rival submission of the parties and have gone through the orders of authorities below. The ACIT levied penalty u/s.271D as well as u/s.271E on his observation that the 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. The Assessing Officer further held that the assessee has not made out any reasonable cause as prescribed 273B of the Act. 7. Before ld. CIT(A) the assessee urged that journal entries is not loan or deposit of money neither there is any unaccounted cash flow money of the group entities. The assessee further contented that Section 269SS was introduced by the Finance Act, 1984. The Circular, gave the purpose of introduction of Section 269SS. The broad purpose of insertion of section 269SS was with the view to counter the device, which enables the tax payer to explain away un accounted cash or unaccounted deposits, the new section 269SS deba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. This penalty was imposed inasmuch as during the previous year relevant to the subject assessment year, the respondents had accepted loans / deposits by way of passing journal entries in its books of accounts, in breach of Section 269SS of the Act. In terms Section 269SS of the Act prohibits a person from taking / accepting any loan / deposit or specified sum, otherwise by an account payee cheque or by an account payee bank draft or by use of electronic clearing system of a bank if the amount involved is in excess of ₹ 20,000/-. This imposition of penalty under Section 271D of the Act, was upheld by a common order dated 31st December, 2013 passed by the Commissioner of Income Tax (Appeals). On further appeal, the impugned order dated 27th June, 2014 of the Tribunal, inter alia held that penalty under Section 271D of the Act is not imposable in view of Section 273B of the Act. This for the reason that there was a reasonable cause for the failure to comply with Section 269SS of the Act. (b) On merits of the issue, the parties before us are agreed that the Tribunal was correct in holding that receipt of any advance / loan by way of journal entries is in breach of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rough journal entries carried out in the ordinary course of business has been doubted in the regular assessment proceedings. It held in the present facts the transaction by way of journal entries was undisputedly done to raise funds from sister concerns, to adjust or transfer balances to consolidate debts, to correct clerical errors etc. Further, the Tribunal records that as observed by this Court in Triumph International Finance (supra) that journal entries constituted a recognized modes of recording of transactions and in the absence of any adverse finding by the authorities that the journal entries were made with a view to achieve purposes out side the normal business operations or there was any involvement of money, then, in these facts there was a reasonable cause for not complying with Section 269SS of the Act. (e) Mr. Mohanty's submission that the test laid down in Triumph International Finance (supra) will have no application in the present facts in view of the large number of entries in this case as compared to only one entry in the case before this Court. The test of reasonable cause can not, in the present facts be determined on the basis of the number of entrie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... journal entries do not fall with the mischief of Section 269SS of the Act, so as to invite penalty under Section 271D of the Act. This, the Tribunal did by following its earlier orders in the case of V.N. Parekh Ltd. and Ketan Parekh as indicated in the order of this Court in Triumph International Finance (supra). Our attention was also invited to numerous reported decisions of the Tribunal in the cases of Sunflower Builders Vs. Dy.CIT, 1997 (61) ITD (Pune) 227, Asst.CIT Vs. Ruchika Chemicals Investment (P) Ltd. 2004 (88) TTJ (Delhi) 85 and Asst.CIT Vs. Lala Murari Lal Sons, 2004(2) SOT (Luck) 543 wherein it has been held journal entries in the book of accounts indicating deposit / loans will not fall foul of Section 269SS of the Act. Besides, the Delhi High Court in Commissioner of Income Tax Vs. Noida Toll Bridge Co. Ltd. 262 ITR 260 inter alia held that payment of ₹ 4.85 crores made by the assesses by a journal entry in its books of account by crediting the account of ILFS, would not fall foul of Section 269SS of the Act. This particularly in the absence of any payment beingmade in cash. (i) In the present facts, the period during which the journal entries were ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. From the record we found that AO has levied penalty u/s.271D for accepting loan by way of Journal entries. The Assessing Officer had placed reliance on the judgment of the Hon'ble jurisdictional High Court in the case of CIT v. Triumph International Finance (I) Ltd. (345 ITR 270) rendered on 12.06.2012. It is not disputed that in this judgment it was held that there was violation of the provisions of S. 269T of the Act in a case where the loan was repaid by way of a journal entry entailing levy of penalty u/s. 271E of the Act. However, at the same time it was also held that levy of penalty could be avoided on showing reasonable cause. In the premises, levy of penalty u/ss. 271D of the Act is not automatic, but the genuineness or otherwise of the reasons due to which repayment was made by journal entry has to be considered judiciously. 7. In the order reported as Lodha Builders (P) Ltd. v. ACIT [2014] 163 TTJ 778 (Mum), a bunch of appeals belonging to Lodha group (to which the present assessee belongs) involving identical issue, was disposed of by the coordinate Bench in which levy of similar penalties was held to be not sustainable as there was a reasonable cause, copi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision in the case of DCIT v. Mahavir Build Estate Pvt. Ltd., in ITA.No. 1480 1481/Mum/2017 dated 13.03.2019 the Coordinate Bench held as under: - 8. We have heard the authorised representatives for both the parties, perused the orders of the lower authorities and the material available on record. The revenue has sought our indulgence for adjudicating as to whether the CIT(A) is right in law and the facts of the case in vacating the penalty imposed by the Addl. CIT u/ss. 271D and 271E of the I.T Act. As observed by us hereinabove, the CIT(A) had concluded that as the journal entry transactions of the assessee with its sister concerns were for more than the amount of ₹ 20,000/- and the same were not through account payee cheque or bank drafts, therefore, there was a violation of the provisions of Sec. 269SS/269T of the I.T Act. Apart therefrom, the CIT(A) has supported his aforesaid observation by relying on the judgment of Hon ble High Court of Bombay in the case of CIT Vs. Triumph International Finance (I) Ltd. (2012) 345 ITR 270 (Bom) for A.Y 2003- 04 and ITA No. 5745 of 2010, dated 17.08.2012 for A.Y 2000-01, wherein the Hon ble High Court had observed that re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... E for the reason that since the judgment in CIT vs. Triumph International Finance (I) Ltd. (2012) 345 ITR 270 (Bom) was rendered on 12.06.2012, therefore, the assessee could have had a bonafide belief prior to that date that there was no violation of Sec. 269SS of the I.T Act in accepting loan by journal entry. It was observed by the Tribunal in the aforementioned case, as under : 5. We have considered rival contentions and carefully gone through the orders of the authorities below. We have deliberated on the judicial pronouncements referred by lower authorities in their respective orders as well as cited by learned AR and DR during the course of hearing before us in the context of factual matrix of the case. We had also carefully gone through the orders of the Tribunal in the group case of the assessee exactly on the very same issue, which was upheld by the Hon'ble Jurisdictional High Court as stated above. 6. From the record we found that AO has levied penalty u/s.271D and 271E for accepting and repaying loan by way of Journal entries. The Assessing Officer had placed reliance on the judgment of the Hon'ble jurisdictional High Court in the case of CIT v. Triump ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e from the order of the Tribunal dated 29th January, 2008, which had held that deposits/loans received through journal entries do not fall with the mischief of Section 269SS of the Act, so as to invite penalty under Section 271D of the Act. This, the Tribunal did by following its earlier orders in the case of V.N. Parekh Ltd. and Ketan Parekh as indicated in the order of this Court in Triumph International Finance (supra). Our attention was also invited to numerous reported decisions of the Tribunal in the cases of Sunflower Builders Vs. Dy. CIT, 1997 (61) ITD (Pune 227, Asst. CIT Vs. Ruchika Chemicals Investment P) Ltd. 2004 (88) TTJ (Delhi) 85 and Asst CIT Vs. LalaMurari La I Sons, 2004(2) SOT (Luck) 543 wherein it has been held journal entries in the book of accounts indicating deposit/ loans will not fall foul of Section 269SS of the Besides, the Delhi High Court in Commissioner of Income Tax Noida Toll Bridge Co. Ltd. 262 ITR 260 inter alia held that payment of ₹ 4.85 crores made by the assesses by a journal entry in its books of account by crediting the account of lLFS, would not fall foul of Section 269SS of the Act. This particularly in the absence of any payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; (iv) Order of Agra Bench of the Hon'ble Tribunal in ITO v. Amarnath Shivraj (HUF) (1 SOT 346), dated 28.02.2003; (v) Order of Ahmedabad Bench of the Hon'ble Tribunal in ACIT v. Gujarat Ambuja Proteins Ltd. (3 SOT 811), dated 28.10.2003; (vi) Order of Kolkata Bench of the Hon'ble Tribunal in Krishna KR Pathak (HUF) (90 TTJ 940), dated 12.03.2004; (vii) Judgment of Hon'ble Rajasthan High Court in CIT v. Hissaria Bros (291 ITR 244), rendered on 21.07.2006; off Mumbai Bench of Hon'ble Tribunal in Triumph International Finance (I) Ltd. in FTA No. 542/Mum/2007, dated 29.01.2008; ix) Judgment of Hon'ble Gujarat High Court in CIT v. Bombay Conductors Electricals Ltd (301 ITR 328), rendered on 11.02.2008; (x) Order of Ahmedabad Bench of Hon'ble Tribunal in Jitu Builders (P) Ltd. v. Addl. CIT [124 ITD 134 (Ahd) (TM)], dated 16.07.2009; and (xi) Order of Ahmedabad Bench of Hon'ble Tribunal in ACIT v. Western India Ceramics (P.) Ltd (20 taxmann. Com 317), dated 12.10.2010. 10. It was argued by learned DR that the Hon'ble High Court declares the law as it was always and, hence, there was clearly violation of the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all for any interference. 4.9. We find that in the aforesaid order of this tribunal dated 31.1.2020, all the arguments advanced by the ld DR before us had been duly considered. We find that similar decisions were rendered by the Hon ble Jurisdictional High Court in the case of Lodha Properties Development Pvt Ltd and Lodha Crown Buildmart Pvt Ltd. We also find that the revenue had preferred Special Leave Petitions (SLPs) against the order of the Hon ble Bombay High Court in the case of Lodha Properties Development Pvt Ltd in SLP (Civil) No. 42791/2018 dated 10.12.2018 ; CIT vs Lodha Crown Buildmart Pvt Ltd in SLP (Civil) No. 44666/2018 dated 3.1.2019 and CIT vs Lodha Properties Development Pvt Ltd in SLP (Civil) No. 42738/2018 dated 21.1.2019 challenging the deletion of penalties and all these SLPs were dismissed by the Hon ble Supreme Court. 4.10. In view of aforesaid detailed observations and respectfully following the judicial precedents relied upon hereinabove, we hold that there was reasonable cause on the part of the assessee within the meaning of section 273B of the Act to legally believe that loans / deposits repaid through journal entries upto 12.6.2012, would not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed on or before 12.6.2012 in the sum of ₹ 99,60,29,234/-. 4.12. Let us now address the justification for levy of penalty u/s 271D and 271E of the Act in respect of journal entries passed after 12.6.2012. Entries passed after 12.6.2012 Transaction with Brand Equity Treaties Ltd These entries comprise as follows: Penalty u/s 271E Transactions with Lodha Developers Pvt Ltd (LDPL) Sr No. Date Particulars Amount (Rs) 10 30/09/2012 Brand Equity Treaties Limited (BETL) 36,14,531 27 07/03/2013 Brand Equity Treaties Limited 48,77,220 Transactions with Shreeniwas Cotton Mills Ltd (SNCML) Sr No. Date Particulars Amount (Rs.) 3 30/09/2012 Brand Equity Treaties Limited 58,93,873 4 31/10/2012 Brand Equ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purpose for which those journal entries were passed, it could be safely concluded that these entries neither reflect any receipt of loan nor repayment of loan. At the cost of repetition, we find that the journal entries are passed towards amount receivable from BETL towards sale of flats which was adjusted against amount payable to LDPL and SNCML on an understanding that both these companies are liable to pay BETL towards advertisement expenses. Hence it could be safely concluded that these entries were passed out of business constraints and exigencies and for administrative convenience with no malafide intent to evade payment of tax. In our considered opinion, this business constraint and exigency and administrative convenience itself constitutes reasonable cause within the meaning of section 273B of the Act . Hence no penalty u/s 271D and 271E of the Act could be invoked for the same. In this regard, we find that the Hon ble Jurisdictional High Court had addressed the similar issue whether the aforesaid behaviour of the assessee would constitute reasonable cause u/s 273B of the Act to escape from the rigours of applicability of provisions of section 269SS and 269T of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n reasonable cause and, therefore, the decision of the Tribunal to delete the penalty imposed under Section 271E of the Act deserves acceptance. 25. In the result, we hold that the Tribunal was not justified in holding that repayment of loan/deposit through journal entries did not violate the provisions of Section 269T of the Act. However, in the absence of any finding recorded in the assessment order or in the penalty order to the effect that the repayment of loan/deposit was not a bonafide transaction and was made with a view to evade tax, we hold that the cause shown by the assessee was a reasonable cause and, therefore, in view of Section 273B of the Act, no penalty under Section 271E could be imposed for contravening the provisions of Section 269T of the Act. 4.15. We also find that the Hon ble Delhi High Court in the case of CIT vs Worldwide Township Projects Ltd reported in 229 Taxman 560 (Del) in the similar set of facts and circumstances had categorically observed as under:- 8. A plain reading of the aforesaid Section indicates that (the import of the above provision is limited) it applies to a transaction where a deposit or a loan is accepted by an assessee, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal entry in the books of account of the assessed by crediting the account of IL FS. Having regard to the aforenoted findings, which are essentially findings of fact, we are in complete agreement with the Tribunal that the provisions of section 269SS were not attracted on the facts of the case. Admittedly, neither the assessee nor IL FS had made any payment in cash. The order of the Tribunal does not give rise to any question of law, much less a substantial question of law. We accordingly decline to entertain the appeal. Dismissed. 9. In our view, the present appeal is bereft of any merit and is, accordingly, dismissed. 4.15.1. We find that though the ultimate finding recorded by the Hon ble Delhi High Court had been subsequently reversed by the decision of Hon ble Jurisdictional High Court in the case of Triumph International supra, still the observations made by the Hon ble Delhi High Court on the genuineness of the transactions in the ordinary course of business and the element of reasonable cause thereon, would still remain applicable and would have more persuasive value. 4.16. In view of our aforesaid observations and respectfully following the afo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tries in the name of Joystar India amounting to ₹ 98,263/- ; Shree Ganesh Enterprise amounting to ₹ 14,675/-(twice) ; Macrotech Construction amounting to ₹ 1,600/- (twice) ; Sonal Super Services amounting to ₹ 3,94,100/- ; RCIL amounting to ₹ 1,852/- ; Super Fabrication amounting to ₹ 13,100/- ; J K Enterprises amounting to ₹ 2,621/- ; Shree Sai Enterprise amounting to ₹ 800/- and UK Enterprises amounting to ₹ 66,912/-, were passed towards assignment of genuine and bonafide receivables / payables arising out of business expediencies and exigencies in the normal course of business. Hence the same would certainly constitute reasonable cause within the meaning of section 273B of the Act and hence no penalty u/s 271D and 271E of the Act could be levied for the aforesaid sums. Reliance in this regard is placed on the decision of Hon ble Jurisdictional High Court in the case of Triumph International reported in 208 Taxman 299 (Bom) supra wherein the relevant operative portion is already reproduced hereinabove. Respectfully following the same, we do not find any infirmity in the order of the ld CITA cancelling the levy of penalt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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