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TMI Blog2018 (6) TMI 1791X X X X Extracts X X X X X X X X Extracts X X X X ..... ay 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, penalties levied by the addl. CIT under section 271D and 271E of the Act has rightly been deleted by CIT(A). Hence, we confirm the order of CIT(A) and this issue of Revenue s appeal is dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... vide Para 4 of the assessment order as under: - "4. By not accepting the loans through account payee cheque or bank draft and also the repayment the same other than through banking mode, the assessee in fact has violated the provision of section 269SS/269T which prohibits such transactions. The proviso to section 269SS exempts certain categories mentioned as (a) to (3) where loan or deposit taken can be accepted other than by account payee cheque or draft but the assessee does not fall under any of the exempt category. Hence, by not accepting the loan/ deposit or the repayment of the same by account payee cheque or bank draft the assessee has violated the provisions of section 269SS / 269T of the IT Act. Therefore, the matter is being referred to addl. Commissioner of Income Tax (Appeals), CIT-7, Mumbai for necessary action regarding initiation of penalty proceedings under section 271D / 271E of the IT Act." 4. The matter was referred to the additional CIT by the AO for levy of penalty under section 271D and 271E of the Act. The additional CIT, Range-7, Mumbai issued show cause notice dated 03-07-2015, requiring the assessee to explain as to why the penalty under section 271D a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the assessee has contravened the provisions of section 269SS of the IT Act. It needs to be stated that the judgment of Delhi High Court did not consider the judgment of the Bombay High Court in Triumph International Finance (India) Ltd. To that extent this judgment of Delhi High Court can be said to be sub silentio. The case of the assessee is squarely covered by the mischief of section 269T and also the assessee cannot claim the benefit of section 273B since the assessee has failed to prove any reasonable cause. The Hon'ble Bombay High Court in the case of Triumph International Finance (India) Ltd. has held as under: "The argument advanced by the counsel for the assessee that the bonafide transaction of repayment of loan / deposit by way of adjustment through book entries carried out in the ordinary course of business would not come within the mischief of Section 269T cannot be accepted, because, the section does not make any distinction between the bonafide and non bonafide transactions and requires the entities specified therein not to make repayment of any loan / deposit together with the interest, if any otherwise than by an account payee cheque/ bank draft if t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... squaring up of transactions, operation efficiency purpose, consolidation of family debts etc. The plea of the assessee for the benefit of reasonable cause cannot be accepted. The spirit of the Bombay High Court judgment is that only such transactions which are in the nature of squaring up with the same party can only claim the benefit of reasonable cause. Needless to add, the onus is on the assessee to prove there was a reasonable cause in respect of each such transaction since section 273B postulates that penalty is not enforceable if assessee proves that there was a postulates that penalty is not enforceable if assessec proves that there was a reasonable cause for the said failure. No such reasonable cause could be found in this case. The assessee has further submitted that there is no unaccounted cash flowing among the group entities. It shall not be out of place to mention here that the assessee group has made a disclosure before the Hon'ble Income Tax Settlement Commission, Murnbai, of undisclosed income arising out of transactions with and by various group entities which are also the subject matter of investigation pursuant to direction of Hon'ble ITSC. Hence it canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vention of above said provision: The Addl.CIT has taken the view that in the case of Triumph International (supra) the transaction was in the nature of squaring up with the same party and accordingly the benefit of reasonable cause would be available if the transactions by way of passing journal entries was with respect to the same party The Addl.CIT has also observed that in view of the disclosure made by the group companies before the Income Tax Settlement Commission. Mumbai following search in the Lodha group of cases on 10 1 2011. it could not be ruled out that the entities through whom such repayment/acceptances are done by way of journal entries are not part of a chain of entities involved in transaction for the purpose of tax evasion) 6.2. The appellant has submitted that the journal entries passed for transactions assigning debts and liabilities among sister concerns and reimbursement of expenses do not constitute acceptance of loan or deposit of money as per provisions of section 269SS of the Act. It has been submitted that the levy of penalty was not justified since the transactions made through journal entries were bonafide and out of commercial expediency and since th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal entries. Accordingly, following the above said decision, it is held that the appellant has undertaken the journal entries, as noted in the penalty order, in contravention of the provision of section 26955 and ground No.2 taken by the appellant in this regard is dismissed." 7. However, the CIT(A) considered the provisions of section 273B of the Act and held that neither the genuineness of receipts of loans or deposit nor the transactions of repayment of loan by way of adjustment through book entries carried out in the normal course of business has been doubted in the regular assessment and there is a reasonable cause exist in the case of the assessee because in view of the decision of Hon'ble Bombay High Court in the case of CIT Vs Triumph International Finance (I) Ltd (2012) 345 ITR 270 (Bom.), the same was delivered only on 12.06.2012 and on that date Hon'ble Bombay High Court has clarified the position that the receiving of deposits or loans through journal entries would certainly be hit by the provisions of section 269SS and 269T of the Act. According, to CIT(A), prior to the decision of Hon'ble Bombay High Court in the case of Triumph International Finance (I) Ltd (supra) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of section 269T of the Act. (ii) That it would have been an empty formality to repay the loan or deposit amount by account-payee cheque or draft and receive back almost the same amount towards the sale price of the shares. Neither the genuineness of the receipt of loan or deposit nor the transaction of repayment of loan by way of adjustment through book entries carried out in the ordinary course of business had been doubted in the regular assessment There was 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 belonged to the Ketan Parekh group involved in the securities scam could not be a ground for sustaining penalty imposed under section 271E of the Act if reasonable cause was shown by the assessee for failing to comply with the provisions of section 269T. Settling claims by making journal entries in the respective books is also one of the recognized modes of repaying loan or deposit. Therefore, on the facts, in the absence of any finding recorded in the assessment order or in the penalty order to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... similar facts and circumstances, it has been held that the assessee has shown reasonable cause and therefore, the penalty imposed u/s.271D/271E of the Act are not sustainable. 6.5.1. In the penalty order the AddI.CIT has observed that the plea of the assessee for the benefit of reasonable cause cannot be accepted as the spirit of the Bombay High Court judgement (in the case of CIT vs Triumph International Finance(I) Ltd) is only that such transactions which are in the nature of squaring up with the same party can only claim the benefit of reasonable cause. This observation is found to be without merit particularly in light of the decision of High Court of Bombay in the case of CIT vs MIs. Triumph International Finance(l) Ltd ITA No.5745 of 2010 dated 17.8.2012 for the A.Y.2000-01,as noted in para 6.3 above, wherein the appellant company and its sister concern M/s, Triumph Securities Ltd had transactions of sale and purchase with common customers and the credit/debit liabilities were settled through journal entries and it was held 'that the transactions in question were undertaken not with a view to receive loans/deposits in contravention of Section 26955, but in a view to ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect to the levy of penalty u/s.271D as discussed in para 6.1 to 652 above, it is held that although the transactions by way of journal entries are in contravention of provision of section 2691 of the Act, the appellant has shown reasonable cause uls.2738 of the Act and the levy of penalty was not justified. Accordingly, the levy of penalty of ₹16,15,47,23,035/- is hereby cancelled Ground No. 2 is dismissed and Ground No. 3 to 9 are allowed." Aggrieved, now Revenue is in appeal before Tribunal. 9. We have heard this appeal of Revenue and cross objection filed by the assessee. We have heard the rival contentions and gone through the facts and circumstances of the case. Admittedly, the assessee has accepted loan/ deposits from various sisters concerns through journal entries otherwise then account payee cheque or draft in excess of ₹ 20,000/- in violation of the provisions of section 269SS. Such entries are as under: - Sl No. Name of the sister concerns Credits (₹) 1. Lodha HI-Rise Builders Pvt. Ltd. 135,90,17,150 2. Lodha Healthy Construction and Developers Pvt. Ltd 317,79,36,347 3. Lodha Novel Buildfarms Pvt. Ltd 289,64,11,649 4. Lodha Developers P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posits by way of an adjustment through 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal 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 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, penalties levied by the addl. CIT under section 271D and 271E of the Act has rightly been deleted by CIT(A). Hence, we confirm the order of CIT(A) and this issue of Revenue's appeal is dismissed. 13. As regards to the issue of assessee's cross objection on merits also the issue is covered against assessee that the journal entries which are covered by the provisions of section 269SS and 269T of the Act in view of the decision of Hon'ble Bombay High Court in the case of Triumph International Finance (I) Ltd (supra). Respectfully, following ..... X X X X Extracts X X X X X X X X Extracts X X X X
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