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TMI Blog2021 (12) TMI 1174X X X X Extracts X X X X X X X X Extracts X X X X ..... gh journal entries and had repaid loans to various sister concerns through journal entries as according to ld. DCIT, the same were in violation of provisions of Section 269SS and 269T - proof of reasonable cause in Section 273B for non-imposition of penalty under section 271E - HELD THAT:- Journal entries which had been passed by the assessee company in its books for mutual extinguishment of liabilities between various entities and assignment of debts / receivables from one entity to another entity would not be hit by the provisions of Section 269SS and 269T of the Act as there is sufficient reasonable cause for the same within the meaning of section 273B of the Act. We find that the ledger accounts produced by the assessee before the ld. AO in the quantum assessment proceedings and before the ld. Addl. CIT during the penalty proceedings had not raised any doubt in respect of genuineness of the transactions and the transactions being entered into in the normal course of business of the assessee. Hence, it could be safely concluded that those entries were passed out of business exigencies with bonafide belief that they are not in contravention of provisions of Section 269SS and 269T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7141/Mum/2016) Shri Mahavir Singh, Vice President And Shri M.Balaganesh, Accountant Member For the Revenue : Shri Prakash Chhotaray For the Assessee : Shri Anuj Kisnadwala ORDER PER BENCH: ITA No.3143/Mum/2017 & 3144/Mum2017 (A.Y.2012-13) These appeals in ITA Nos.3143/Mum/2017 & 3144/Mum/2017 for A.Y.2012-13 arise out of the order by the ld. Commissioner of Income Tax (Appeals)-49, Mumbai in appeal No.CIT(A)-49/IT-199 & 198/2015-16 dated 08/02/2017 (ld. CIT(A) in short) in the matter of imposition of penalty u/s.271D & 271E of the Income Tax Act, 1961 (hereinafter referred to as Act). ITA No.3147/Mum/2017 & 3148/Mum/2017 (A.Y.2007-08) These appeals in ITA Nos.3147/Mum/2017 & 3148/Mum/2017 for A.Y.2007-08 arise out of the order by the ld. Commissioner of Income Tax (Appeals)-49, Mumbai in appeal No.CIT(A)-49/IT-191, 192 & 267, 266/2015-16 dated 16/02/2017 (ld. CIT(A) in short) in the matter of imposition of penalty u/s.271D & 271E of the Income Tax Act, 1961 (hereinafter referred to as Act. ITA No.7134/Mum/2016 & 7135/Mum/2016 (A.Y.2008-09) These appeals in ITA Nos.7134/Mum/2016 & 7135/Mum/2016 for A.Y.2008-09 arise out of the order by the ld. Commissioner of Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arise out of the order by the ld. Commissioner of Income Tax (Appeals)-48, Mumbai in appeal No. CIT(A)-48/IT-353 & 352/Addl.CIT, C.R-06/2014-15 dated 08/09/2016 (ld. CIT(A) in short) in the matter of imposition of penalty u/s.271D & 271E of the Income Tax Act, 1961 (hereinafter referred to as Act). ITA No.7138/Mum/2016 & 7139/Mum/2016 (Assessment Year : 2010-11) These appeals in ITA Nos.7138/Mum/2016 to 7139/Mum/2016 for A.Yrs. 2010-11 respectively arise out of the order by the ld. Commissioner of Income Tax (Appeals)-48, Mumbai in appeal No.CIT(A)-48/IT-366 & 367/Addl.CIT, C.R-06/2014-15 dated 14/09/2016 (ld. CIT(A) in short) in the matter of imposition of penalty u/s.271D & 271E of the Income Tax Act, 1961 (hereinafter referred to as Act). CO No.7/Mum/2019 & 8/Mum/2019 (Arising out of ITA No.7138/Mum/2016 & 7139/Mum/2016) (Assessment Year : 2010-11) These Cross Objections Nos.7/Mum/2019 & 8/Mum/2019 arising out of ITA Nos.7138/Mum/2016 & 7139/Mum/2016 for A.Yrs. 2010-11 arise out of the order by the ld. Commissioner of Income Tax (Appeals)-48, Mumbai in appeal No. CIT(A)-48/IT-366 & 367/Addl.CIT, C.R-06/2014-15 dated 14/09/2016 (ld. CIT(A) in short) in the matter of impositio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ording to ld. DCIT, the same were in violation of provisions of Section 269SS and 269T of the Act. The total of acceptance of loan entries / deposits otherwise than by way of account payee cheque / account payee draft and transacted through journal entries are as under:- Sl. No. Name of the sister concerns Credits (Rs.) 1 Lodha Developers Ltd., 17,69,41,354 2 Siddhnath Residential Paradise Pvt. Ltd., 5,13,58,339 Total 22,82,99,693 3.1. Similarly, the details of transactions which are repayment of loans / deposits to various sister concerns otherwise than by way of account payee cheque / account payee draft and transacted through journal entries are as under:- Sl. No. Name of the sister concerns Debits (Rs.) 1 Lodha Developers Ltd., 4,06,24,252 2 Siddhnath Residential Paradise Pvt. Ltd., 18,92,42,868 Total 22,98,67,120 3.2. Accordingly, a show-cause notice issued to the assessee by the ld. AO on 03/07/2015 in which assessee company was asked to explain as to why the penalty u/s.271D and 271E of the Act should not be levied in respect of the aforesaid figures. The assessee filed a reply on 13/07/2015 by stating that the journal entries pointed ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Section 269SS and Section 269T of the Act and proceeded to levy penalty u/s.271D and 271E of the Act respectively. 3.3. The assessee pleaded before the ld. CIT(A) that during the course of original scrutiny assessment proceedings, the entire transactions with the group entities were subject matter of verification by the ld. AO and no infirmity was found thereon, either on its business purposes or on its genuineness. All those transactions were accepted in toto by the ld. AO in the original quantum scrutiny assessment proceedings and no additions were made thereon. The assessee pointed out that the journal entries were passed in the normal course of its business for mutual extinguishment of liabilities. The assessee drew the attention of the ld. CIT(A) on the CBDT Circular No.387 dated 06/07/1984 more particularly to para 32.1 and 32.2 thereon, wherein the purpose behind introduction of Section 269SS and 269T were explained by the CBDT. It was specifically pleaded that absolutely no false explanation has been given by the assessee in respect of the journal entries and there are no false entries in the books of accounts of the assessee. There is absolutely no flow of unaccounted m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id not even challenge this decision on merits and only contested the limitation aspect before the Hon'ble Delhi High Court and the Hon'ble Delhi High Court upheld the Tribunal decision vide its order in ITA N.751/D/2014. The department further carried this matter by way of Special Leave Petition (SLP) before the Hon'ble Supreme Court. The Hon'ble Supreme Court held that while rejecting the SLP that "since on merit, it has been found that there is no penalty, this SLP is dismissed, however, leaving the question of law on limitation open." 3.4. The assessee without prejudice to the aforesaid arguments also submitted that at the time of passing of journal entries, the assessee company was of bonafide belief that creation or assignment of debt or squaring off of receivables / payables among the group entities / affiliate companies do not violate the provisions of Section 269SS and 269T of the Act. The assessee also placed reliance on the decision of the Hon'ble Delhi High Court in the case of CIT vs. Noida Toll Bridge Co. Ltd., reported in 139 Taxman 115 which was not even challenged by the department before the Hon'ble Supreme Court. Hence, the assessee‟ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s argued that there is absolutely no such conclusion in the judgement of the Hon'ble Bombay High Court. It was also argued that the ld. Addl. CIT had also tried to circumvent the examination of the aforesaid points by making the observation regarding the disclosure made by the assessee group before the Hon'ble Income Tax Settlement Commission. The assessee submitted that the order of Hon'ble Income Tax Settlement Commission u/s.245D(4) of the Act was passed on 28/11/2014 whereas the penalty order was passed on 28/09/2015 and no investigation pursuant to the order of the Hon'ble Settlement Commission was pending on 28/09/2015. It was pointed that the ld. Addl. CIT had not spelt out the nature of investigation sought to be carried out as per the directions of the Hon'ble Income Tax Settlement Commission and had merely made a vague statement. It was also pointed out that the ld. Addl. CIT while concluding had only stated that "it cannot be ruled out" to justify the levy of penalty. In this regard, the assessee submitted that no stringent penalties should be levied merely on the theory of probability. 3.7. The assessee also pointed out that it had bonafide belief t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n one of the seven categories cited below. For the sake of convenience, the details of 7 categories are mentioned as under:- i. Alternate mode of raising funds ii. Assignment of receivables iii. Squaring up transactions iv. Operational efficiencies / MIS purpose v. Consolidation of family member debts vi. Correction of errors; and vii. Loans taken in cash 3.9. Therefore, it was pleaded that the assessee‟s case is clearly covered by reasonable cause within the meaning of Section 273B of the Act and hence, there cannot be any levy of penalty u/s.271D and 271E of the Act. 3.10. The ld. CIT(A) went through the journal entries passed by the assessee and found that those journal entries were passed in the normal course of business of the assessee and in a bonafide manner by giving a categorical finding that all the transactions passed thereon are genuine and there was absolutely no malafide intention to evade payment of taxes there on. The ld. CIT(A) by giving a detailed observation in this regard and by placing reliance on various decisions, deleted the levy of penalty. Aggrieved the Revenue is in appeal before us. 4. The ld. Special Counsel for the Revenue filed de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 269SS and 269T of the Act. He quoted from the judgment to highlight that the section does not make any distinction between bona fide and non- bona fide transactions. He also relied on the judgment of the Hon'ble ITAT "F" Bench, Mumbai in the case of V.N. Parekh Securities v. ACIT, Central Circle 40, ITA Nos.6082 & 6083/ Mumbai dated 16.08.2013 where it has been held that there can be no deletion of penalty if simply there is a receipt of loan or repayment of loan through journal entries. Each and every case is required to be considered as to whether there was some reasonable cause in accepting such loans or repaying loans through journal entries. * The ld. Addl. CIT held that there was no reasonable cause for the default. He distinguished the facts of the case in the case of CIT v. Triumph International Finance (India) Limited (supra) observing that in that case the transactions involved the same party and the Hon'ble High Court observed that it would have been an empty formality to pay and receive back the same amount by cheque from the same party. Hence, it was held that there was reasonable cause. * On the averment of the assessee that there was no unaccounted flow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taking advantage of its own wrong. So, it is incorrect to say that the genuineness of the transactions is not in doubt, when this aspect has not been examined by the Assessing Officer. As regards application to the Settlement Commission, it is elementary that one can approach the Settlement Commission, only if it makes additional disclosure of income not disclosed before the Assessing Officer to avoid penalty and prosecution. Hence the very fact that the group has approached the Settlement Commission presupposes existence of concealment. The CIT(A) failed to appreciate this basic fact. * What is most important, as has been pointed out above, the auditors have not been able to certify the correctness of the accounts on this issue because the materials were not furnished to them. Because of this observation of the auditors, the accounts are not reliable. * There was some discrepancies in the tax audit report which was tabulated in page 8 of the written submissions of the ld. Special Counsel for the Revenue and accordingly, he pleaded that the entire matter should go back to the file of the ld. AO and assessee may be directed to get the accounts audited and furnished the audit rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s repayable during the impugned assessment year 2003-04. During the relevant previous year the assessee had transferred shares worth ₹ 4,28,99,325/- to Investment Trust of India. Thus, in the assessment year in question, the assessee was liable to repay the loan/ inter-corporate deposit amounting to ₹ 429,04,722/- to the Investment Trust of India and receive ₹ 4,28, 99,325/- from Investment Trust of India towards the sale price of the shares. Both the parties agreed that the amounts payable/receivable be set-off in the respective books of account by making journal entries and pay the balance by account payee cheques. After setting off mutual claims through journal entries, the balance amount of ₹ 5397/- due and payable by the assessee to Investment Trust of India was paid by crossed cheque. (c) The Hon'ble Court observed: -Para 17- ….The obligation to repay the deposit by account payee cheque/bank draft for entities specified in section 269T would have to be construed as mandatory in view of the negative language used in the section. - Para 18-….. Thus with effect from 1st June 2002, it is mandatory under section 269T of the Act for the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Finance (India) Ltd. [2012] 345 ITR 270 (Bom.), the assessee was under the bona fide belief that transactions through journal entries are not hit by the provisions of 269SS and 269T of the Act. This belief was based on some prevailing judicial pronouncements on the issue. The assessee pleaded that this was a reasonable cause for not complying with the provisions of section 269SS and 269T. The assessee relied on the supplementary reasoning given in the judgment of the Hon'ble Bombay High Court in the case of Commissioner of Income-tax(central)-4 v. Ajinath Hi-Tech Builders (P) Ltd., ITXA 171 of 2015 and five other appeals dated 6th February 2018 [2018] 92 taxmann.com 228 (Bom,) * In the judgment of the Hon'ble Bombay High Court in the case of Commissioner of Income-tax, Central-4 v. Ajinath Hi-Tech Builders (P) Ltd.(ITXA 171 of 2015 and five other appeals, dated 6th February 2018, [2018], 92, taxmann.com. 228 (Bom.) (supra), the Hon'ble High Court dismissed the appeals of the Revenue on two counts. On merits, it accepted the finding on the facts given by the Hon'ble ITAT that reasonable cause existed in these cases for the failure by the assessees to comply with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and every argument of the ld. Special Counsel for the Revenue. The gist of various arguments advanced by the ld. AR are as under:- * With regard to loan discrepancies in the tax audit report and the financial statements of the assessee company as pointed out by the ld. Special Counsel for the Revenue, the ld. AR argued that the Tax Auditor has made only general comments in form 3CD and in either way, the ld. AO had taken due cognizance of the same and had accepted all these transactions to have been entered into in normal course of its business and all those transactions are genuine and bonafide. This is evident from the fact that the ld. AO had not resorted to make any addition in respect of these journal entries in the original scrutiny assessment in the quantum proceedings. * With regard to disclosure made by the Lodha group of cases before the Hon'ble Tax Settlement Commission, the same were not made for the transactions already entered into books of accounts. A disclosure of ₹ 200 Crores was made only for undisclosed income of the group which has got absolutely no relevance for the journal entries already recorded in the books of accounts of the assessee company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the transactions which had been passed through only regular banking channels are genuine and bonafide. This argument cannot be accepted at all in as much as bonafide transactions passed through journal entries would also be genuine. He vehemently argued that no entity in this world could survive without passing of journal entries in its books of accounts. * With regard to the observation made by the Special Bench of Mumbai Tribunal in the case of Deepak Sales and Properties Pvt. Ltd., reported in 95 Taxmann.com 166, the ld. AR drew the attention to para 18 of that judgment wherein both the parties in that case had agreed that bonafide nature of transactions alone would not be sufficient to attract the clutches of Section 271D of the Act. Accordingly, he stated that it is more of a concession given by the parties in that case and hence, the same would lose its precedence value. He also drew our attention to para 22 of the said Special Bench decision wherein there was a categorical finding on fact that there was no urgent business necessity for the assessee on both the occasions to accept the loan in cash in that cases and further the assessee had failed to demonstrate that on bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 Lodha Construction Pvt. Ltd 6602/Mum/2016 and 6604/Mum/2016 2011-12 11 Lodha Construction Pvt. Ltd 6603/Mum/2016 2010-11 12 Lodha Facilities Management Ltd 6605/ Mum/ 2016 and 6606/Mum/2016 2011-12 13 Aashtavinayak Real Estate P.Ltd 6612/Mum/2016 2009-10 14 National Standard India Ltd 6607/Mum/2016 and 6609/Mum/2016 2011-12 B Bench 06.06.2018 15 Palava Dwellers Pvt. Ltd. 6422/Mum/2016 2012-13 C Bench 15.06.2018 16 Shantinath Designer Construction Pvt Ltd 599/M/17and 600/M/17 2009-10 J Bench 09.07,2018 17 Shantinath Designer Construction Pvt Ltd 606/M/17and 615/M/17 2008-09 18 Simtools Private Limited 6608/Mum/2016 2011-12 J Bench 09.07.2018 19 Sumangla Developers & Farms Pvt Ltd 438/M/18 2011-12 E Bench 14.06.2019 20 Mahavir Premises Pvt Ltd 125/M/17and 126/M/17 2009-2010 D Bench 23.10.2018 21 Mahavir Premises Pvt Ltd 143/M/17and 144/M/17 2007-2008 22 Roselabs Finance Limited 131/M/17and 132/M/17 2012-2013 D Bench 23.10.2018 23 Naminath Builders & Farms Pvt Ltd 112/M/17and 113/M/17 2008-2009 B Bench 15.10.2018 24 Naminath Builders & Farms Pvt Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... planations have never been found to be either false or not supported by any evidence. The assessee at best can only provide details before the ld.AO. If those details were chosen not to be examined by the ld. AO terming it to be an impossible task, in the language of the ld. Special Counsel for the Revenue, then why should the assessee be invited with penal proceedings for the very same transactions by presuming that those transactions are not genuine. * The ld. AR argued that bonafide belief while passing the journal entries was always available with the assessee company and the ld. Special Counsel for the Revenue cannot infer that said bonafide belief of the assessee is wrong. For journal entries passed before 12/06/2012, those entries were passed with a bonafide belief that there was no violation in terms of series of Tribunal decisions that were available in favour of the assessee. In respect of journal entries passed after 12/06/2012, those entries were passed by the assessee only if assessee had a reasonable cause and not otherwise. Hence, in any case, the assessee cannot be invited with the levy of penalty u/s.271D and 271E of the Act. * With regard to the yet another cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of the Hon'ble Jurisdictional High Court in the case of CIT vs. Lodha Builders Pvt. Ltd., in Income Tax Appeal No.199 of 2015 dated 06/02/2018 in support of the same proposition. The ld. AR also placed on record the evidences wherein the Special Leave petitions (SLP) filed by the Revenue against the aforesaid orders of the Hon'ble Jurisdictional High Court were dismissed by the Hon'ble Supreme Court vide various orders dated 03/12/2018, 10/12/2018, 03/01/2019, 04/01/2019 and 21/01/2019. The ld. AR argued that not even an attempt has been made by the ld. Special Counsel for the Revenue to point out as to how the aforesaid decisions are not applicable to the facts of the assessee herein. * The ld. AR argued that the explanations for the nature of transactions which were subject matter of journal entries were indeed examined by the ld. CIT(A) also as they were while forming part of the records before the ld. AO in quantum scrutiny assessment proceedings and before the ld. Addl. CIT before the penalty proceedings. The factual finding given by the ld. CIT(A) on those transactions have not been controverted by the ld. Special Counsel for the Revenue. Hence, he arg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adjustment of transactions between the group entities were not disputed by the Revenue in the original quantum proceedings. We find that the ld. Special Counsel for the Revenue argued that transactions through journal entries cannot be held as bonafide and those passed through regular banking channels alone are bonafide. This argument cannot be accepted at all in as much as bonafide transactions passed through journal entries would also be genuine. We cannot remain oblivious of the fact that no entity in this world could survive without passing of journal entries in its books of accounts. Passing of journal entries in the books is one of the recognised modes of recording the accounting entries of the company. We find that the ld CIT(A) had examined the entire details furnished by the assessee company and had concluded that the journal entries had been passed in respect of transactions with group concerns which have been undertaken to assign debt/ receivables, payments on behalf of group concerns for squaring up transactions and for ease in consolidation of accounts and as a result of these entries, the debt / receivables have gone up or down resulting in taking of loan / repayment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of CIT vs Triumph International Finance (I) P Ltd reported in 345 ITR 270 (Bom) wherein in para 24 and 25 it was observed as under:- "24. In the present case, the cause shown by the assessee for repayment of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this tribunal does not have any power of enhancement of income. Hence the objections raised in this regard by the ld. Special Counsel for the Revenue are rejected. 6.3. It is pertinent to note that the assessee had given explanations for the total entries found in the ledger accounts of the two parties i.e Lodha Developers Ltd and Siddhnath Residential Paradise Pvt ltd which contains lot of cheque entries and also minimum journal entries. The explanations offered by the assessee had been duly accepted by the ld. AO (both cheque transactions as well as journal entries) in the original quantum scrutiny assessment proceedings in as much as he had not resorted to make any additions towards unexplained cash credit or unexplained investments etc in the assessment. This itself goes to prove that assessee had indeed furnished the requisite explanations for the entries in the ledger accounts of two parties. We find that the ld. Addl. CIT had chosen not to analyse the explanations given by the assessee on facts with regard to the journal entries. Whereas the entries were duly examined and analysed by the ld CIT(A) in para 7.2. page 15 for section 271D penalty and in para 10 page 20 for sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " In this regard, we find that there was absolutely no error in the orders passed by this tribunal earlier which were heavily relied upon by the ld. AR before us. Moreover, some of these tribunal orders were even upheld by the Hon'ble Jurisdictional High Court and SLP preferred by the revenue before the Hon'ble Apex Court had been dismissed. Hence where is the error to perpetuate ? Hence the argument advanced by the ld. Special Counsel for the Revenue deserves to be dismissed. 6.8. We are also inclined to accept the argument advanced by the ld. AR that in respect of compliance to provisions of Section 269SS and 269T of the Act, considering the intention behind introduction of those provisions as explained in detailed by CBDT Circular No.387 dated 06/07/1984, rational interpretation should be given to those provisions and not literal interpretation. We find that the Hon'ble Supreme Court in the case of CIT vs. Naga Hills Tea Co. Ltd., reported in 89 ITR 236 had observed that "if the interpretation of fiscal enactment is open to doubt, the construction most beneficial to the subject should be adopted". This approach if applied and adopted to the facts of the instant cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the reasonable cause for passing the journal entries. We also find that in none of the case of Lodha group, a single penalty has been sustained itself proves the bonafide of the assessee and hence, the reasonable cause. In fact not only, at the Tribunal level, but no penalty has been sustained by the Hon'ble Bombay High Court as well as the Hon'ble Supreme Court by way of dismissal of SLP in the Lodha Group of cases. The liberal interpretation of the provisions of Section 273B is in accordance with the judgement of the Bombay High Court in the case of Triumph International wherein at para 23 of the decision, the High Court observed that "Unlike the expression "sufficient cause‟ used in Section 249(3), 253(5) and 260A(2A) of the Act, the legislature has used the expression "reasonable cause‟ in Section 273B of the Act. A cause which is reasonable may not be a sufficient cause. Thus, the expression "reasonable cause‟ would have wider connotation than the expression "sufficient cause‟. Therefore, the expression "reasonable cause‟ in Section 273B for non-imposition of penalty under section 271E would have to be construed liberally depending upon t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the revenue are dismissed. 7. In the result, both the appeals of the revenue are dismissed. ITA No.3147/Mum/2017 (Revenue Appeal) 8. The issue involved in this appeal is with regard to levy of penalty u/s.271D of the Act. In this case, the ld. Addl. CIT levied penalty u/s.271D of the Act in respect of the following transactions passed through journal entries. Sl. No. Name of the sister concerns Amount (Rs.) 1 Lodha Builders Pvt. Ltd. 43,56,85,744 2 Lodha Developers Pvt. Ltd. 16,54,064 3 Lodha Properties Development Pvt. Ltd. 8,40,30,000 Total 52,13,69,808 8.1. The ld. CIT(A) appreciated the basis of passing journal entries in respect of the aforesaid transactions by observing that out of the total credits of ₹ 43,56,85,744/- in the account of Lodha Builders Pvt. Ltd. (LBPL), the amounts of ₹ 13,314/-, ₹ 8,40,31,680/- and ₹ 16,40,750/- represent assignment of debt, being transfer of credit balance in the account of LDPL in the books of the assessee company to LBPL on 30/09/2006, 30/09/2006 and 31/03/2007 respectively. Further, the amounts of ₹ 71,18,243/-. ₹ 3,00,00,000/- and ₹ 31,28,81,757/- represent on behalf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on (Dombivali) 42,65,800/- 4. Macrotech Construction Pvt. Ltd. 3,00,000/- Total 45,90,030/- 9.1. The ld. CIT(A) appreciated the basis of passing journal entries in respect of the aforesaid transactions by observing that from the details filed, it is observed that the debit amounts in the books of the assessee company, on which penalty has been levied u/s.271E include :- (i) debit entries of various amounts in the account of LCD, made on reversal of the amounts paid as land purchase advance on various dates and on account of assignment of debt, being credit balance in the account of LCD of ₹ 5,65,800/-transferred to LDPL on 31.03.2007, resulting in repayment of the loan. The total of such amounts is ₹ 42,65,800/-. (ii) the debit of ₹ 3,00,000/- in the account of Macrotech Construction Pvt. Ltd. represents transfer of the amount payable to it by the assessee company to LDPL on 31.03.2007 as a result of which the credit balance is reduced to nil. (iii) other small debit amounts are similar transactions in the nature of assignment of debt /on behalf payments etc. 9.2. All other legal arguments advanced by the assessee before the ld. CIT(A); conclusio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sanathnagar Enterprises Ltd., supra. The arguments of the ld. Special Counsel for the Revenue and the arguments of the ld. AR remain the same as was submitted by them in the case of Sanathnagar Enterprises Ltd., supra. Hence, the conclusions drawn by this Tribunal in the case of Sanathnagar Enterprises Ltd., would hold good for this appeal also. Accordingly, the grounds raised by the Revenue are dismissed. ITA No. 7135/Mum/2016 (A.Y.2008-09) Revenue Appeal 11. This appeal is filed by the Revenue challenging the action of the ld. CIT(A) deleting the levy of penalty u/s.271E of the Act. In this case, the ld. Addl. CIT levied penalty u/s.271E of the Act in respect of the following transactions passed through journal entries. SI. No. Name of the sister concerns Debits ( Rs.) 1 Lodha Developers Pvt ltd 9,24, 925/- 2 Lodha Builders Pvt Ltd 71,53,676/- Total 80,78,601/- 11.1. The ld. CIT(A) appreciated the basis of passing journal entries in respect of the aforesaid transactions by observing that from the details filed it is observed that the amount of ₹ 9,24,925/- relates to debits in respect of share of partnership firm, Lodha Construction, Dombivli and the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aken to assign receivables, payment on behalf of group concern for squaring up transactions and for ease in consolidation of accounts, rectification entries etc. As a result of these entries the receivables have gone up or down resulting in taking of loan/ repayment of loan. The assessee company has also paid interest on such loans taken. All other legal arguments advanced by the assessee before the ld. CIT(A); conclusions drawn by the ld. CIT(A) and Addl. CIT remain same with those recorded in Sanathnagar Enterprises Ltd., supra. The arguments of the ld. Special Counsel for the Revenue and the arguments of the ld. AR remain the same as was submitted by them in the case of Sanathnagar Enterprises Ltd., supra. Hence, the conclusions drawn by this Tribunal in the case of Sanathnagar Enterprises Ltd., would hold good for this appeal also. Accordingly, the grounds raised by the Revenue are dismissed. ITA No. 7144/Mum/2016 (A.Y.2007-08) Revenue Appeal 13. This appeal is filed by the Revenue challenging the action of the ld. CIT(A) deleting the levy of penalty u/s.271E of the Act. In this case, the ld. Addl. CIT levied penalty u/s.271E of the Act in respect of the following transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anathnagar Enterprises Ltd., would hold good for this appeal also. Accordingly, the grounds raised by the Revenue are dismissed. ITA No. 7143/Mum/2016 (A.Y.2008-09) Revenue Appeal 15. This appeal is filed by the Revenue challenging the action of the ld. CIT(A) deleting the levy of penalty u/s.271E of the Act. In this case, the ld. Addl. CIT levied penalty u/s.271E of the Act in respect of the following transactions passed through journal entries. SI. No. Name of the sister concerns Amount(Rs.) 1 Lodha Developers Pvt.Ltd 2,43,86,906/- Total 2,43,86,906 15.1. The ld. CIT(A) appreciated the basis of passing journal entries in respect of the aforesaid transactions by observing that from the details filed, it is observed that the amount credited to the account of Lodha Developers Pvt. Ltd. represents assignment of debts on various dates. Further, out of the total debits of Q ₹ 2,43,86,906/-, an amount of ₹ 2,43,56,839/- represents the transfer of balance to Lodha Builders Pvt, Ltd. on 31.03.2008, which is stated to be for consolidation of account at the year end. The balance amount represents various payments on behalf of group concern etc. All other legal ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passing journal entries in respect of the aforesaid transactions by making the same observations as was made in the earlier appeals referred to supra. All other legal arguments advanced by the assessee before the ld. CIT(A); conclusions drawn by the ld. CIT(A) and Addl. CIT remain same with those recorded in Sanathnagar Enterprises Ltd., supra. The arguments of the ld. Special Counsel for the Revenue and the arguments of the ld. AR remain the same as was submitted by them in the case of Sanathnagar Enterprises Ltd., supra. Hence, the conclusions drawn by this Tribunal in the case of Sanathnagar Enterprises Ltd., would hold good for this appeal also. Accordingly, the grounds raised by the Revenue are dismissed. ITA No.7146/Mum/2016 (Revenue Appeal)-A.Y.2010-11 18. The issue involved in this appeal is with regard to levy of penalty u/s.271D of the Act. In this case, the ld. Addl. CIT levied penalty u/s.271D of the Act in respect of the following transactions passed through journal entries. Sl. No. Name of the Sister Concerns Amount (Rs.) 1 Lodha Developers Pvt, Ltd. 139948104 2 Lodha Builders Pvt. Ltd. 35951966 Total 175900070 18.1. The ld. CIT(A) appreciated the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... D 8315053753 3 ARIHANTPRIMISES 1377 4 MACROTECH CONSTRUCTION PVT LTD 490370738 5 DURGESHWARI HI RISE &. FARMS PVT LTD 4432272839 6 LODHA BUILDCON PVT.LTD 169762961 7 LODHA DEVELOPERS LTD 267907388 8 LODHA ESTATE PVT LTD 64244227 9 LODHA LAND DEVELOPERS PVT LTD 82646374 10 LODHA LEADING BUILDERS PVT LTD 8154 11 LOOHA M1LD-A-BUILT PVT LTD 2306 12 LODHA PROFICIENT BUILD PVT. LTD. 9818 13 MAHAVIR PREMISES PVT.LTD. 11313766 14 PADMAVATl BUILDTECH AND FARMS PVT. LTD. 627220 15 SAMBHAVNATH INFRABUILD AND FARMS PVT. LTD. 391395 16 SUVIDHINATH BUILDTECH AND FARMS PVT. LTD. 465 17 VAMADEV1DEVELOPERS AND FARMS PVT. LTD. 5480308 18 VIMALNATH NOVELTY BUILDTECH AND FARMS PVT. LTD. 391139 19 HI-CLASS DEVELOPERS PVT. LTD. 22782 20 SURYAKRIPA FARMS ANDCONSTRUCTION PVT. LTD. 4000000 21 COWTOWN LAND DEVLOPMENT PVT. LTD. 829000 22 MAA PADMAVATI TOWNSHIP PVT. LTD. 4321773052 TOTAL 18203061028 20.1. The ld. CIT(A) appreciated the basis of passing journal entries in respect of the aforesaid transactions by making the same observations as was made in the earlier appeals referred to supra. All other le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R CONST. PVT LTD 271 33 LODHA DEVELOPERS LTD 715480922 34 LOOHA ENERGETIC DEVELOPERS P LTD 79000 35 LODHA ESTATE PVT LTD 53822176 36 LODHA FLATS & HOUSES PVT LTD 140000 37 LODHA FOREMOST CONSTRUCTION P LTD 59000 38 LODHA FOUNDATION DEV. & BUILDERS P LTD 58000 39 LODHA HOUSE DEVELOPERS PVT LTD 60000 40 LODHA IDEAL BUILDERS PVT LTD 59000 41 LODHA INFRABUILD & FARMS PVT LTD 72000 42 LODHA INFRACON PVT LTD 50000 43 LODHA INFRACREATIONS & FARMS P LTD 72000 44 LODHA INFRADEVELOPERS P LTD 60000 45 LODHA INFRAV1SION BUILDTECH P LTD 65000 46 LODHA INTENSITY CONST. PVT LTD 60000 47 LODHA LAND DEVELOPERS PVT LTD 82868466 48 LODHA LUXURY BUILDCON PVT LTD 55000 49 LODHA NOVELTY BUILDTECH & AGRO P LTD 80000 50 LOOHA OBSTINATE EST, DEVELOPERS 61000 SI LODHA ORIGIN REALTORS & ESTATE PVT. LTD. 61000 52 LODHA PASSION BUILDTECH ENGINEERING PVT. LTD. 146000 53 LODHA PREMIUM BUILDERS PVT. LTD. 40000 54 LODHA PROPERTY AND REALTY LTD 41000 55 LODHA QUALITY REALTORS PVT. LTD. 140000 56 LODHA REALTY BUILD AND CONST. PVT. LTD. 47000 57 LODHA RUILING REALTORS PVT. LTD. 8108 58 LOD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2010-11 22. The issue involved in this appeal is with regard to levy of penalty u/s.271D of the Act. In this case, the ld. Addl. CIT levied penalty u/s.271D of the Act in respect of the following transactions passed through journal entries. SI. No. Name of the Sister Concerns Amount (Rs.) 1 Lodha Developers Pvt. Ltd. 3498236 2 Macroteck Constructions Pvt. Ltd. 12668771 3 Susima Buirtech Pvt. Ltd. 115535042 4 Maa Padmavati Township Pvt. Ltd. 112171357 Total 227706399 22.1. The ld. CIT(A) appreciated the basis of passing journal entries in respect of the aforesaid transactions by making the same observations as was made in the earlier appeals referred to supra. All other legal arguments advanced by the assessee before the ld. CIT(A); conclusions drawn by the ld. CIT(A) and Addl. CIT remain same with those recorded in Sanathnagar Enterprises Ltd., supra. The arguments of the ld. Special Counsel for the Revenue and the arguments of the ld. AR remain the same as was submitted by them in the case of Sanathnagar Enterprises Ltd., supra. Hence, the conclusions drawn by this Tribunal in the case of Sanathnagar Enterprises Ltd., would hold good for this appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The arguments of the ld. Special Counsel for the Revenue and the arguments of the ld. AR remain the same as was submitted by them in the case of Sanathnagar Enterprises Ltd., supra. Hence, the conclusions drawn by this Tribunal in the case of Sanathnagar Enterprises Ltd., would hold good for this appeal also. Accordingly, the grounds raised by the Revenue are dismissed. ITA No. 7140/Mum/2016 (A.Y.2010-11) Revenue Appeal 25. This appeal is filed by the Revenue challenging the action of the ld. CIT(A) deleting the levy of penalty u/s.271E of the Act. In this case, the ld. Addl. CIT levied penalty u/s.271E of the Act in respect of the following transactions passed through journal entries. 25.1. The ld. CIT(A) appreciated the basis of passing journal entries in respect of the aforesaid transactions by making the same observations as was made in the earlier appeals referred to supra. All other legal arguments advanced by the assessee before the ld. CIT(A); conclusions drawn by the ld. CIT(A) and Addl. CIT remain same with those recorded in Sanathnagar Enterprises Ltd., supra. The arguments of the ld. Special Counsel for the Revenue and the arguments of the ld. AR remain the same as w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 I T Act. Therefore regarding initiation of penalty proceedings u/s 271D/271E of the I T Act, the matter is being referred to Addl. CIT, CR-6, Mumbai for necessary action." 27.1. The Addl. CIT noted that a reference for consideration of levy of penalty under section 271E of the Act was received from the AO through letter dated 26.06.2013 intimating that the assessee has repaid loans to various sister concerns through journal entry other than account payee cheques or draft and therefore has violated the provisions of section 269T of the Act. The Addl. CIT CR-6, Mumbai issued notice vide dated 27.03.2014, in which an explanation was called for as to why penalty under section 271E of the Act should not be imposed for violation of the provisions of section 269T of the Act. The Addl. CIT finally levied the penalty under section 271E of the Act vide order dated 10.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n clause (c), no order imposing penalty shall be passed (i) After the expiry of financial year in which action for imposition of penalty is initiated or (ii) six months from the end of the month in which action for imposition of penalty is initiated, whichever period expires later. According to Ld. Counsel, the action for imposition for penalty has been initiated on 21.03.2013 and accordingly the first time barring is 31.03.2013 and the second time barring is 30.09.2013. He submitted that as the second period i.e. 30.09.2013 expires later, the maximum period for passing penalty order cannot be extended beyond 30.09.2013. Ld. Counsel stated that the subject of initiating of penalty proceedings begins with the first observation made by the AO in the assessment order and he referred to para 8b as reproduced above. The AO after considering the submissions of the assessee formed an opinion in the matter against the assessee made a reference to the Addl. CIT who is the authority empowered to impose the penalty under the Act. According to assessee‟s counsel, the date of initiation of "Action for imposition of penalty" shall be the date of assessment order i.e. 21.03.2013 and accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of DCIT vs. Lodha Builders Pvt. Ltd. ITA No.6614/M/2016 for A.Y. 2007-08 & ors. vide order dated 31.01.2020 has considered this issue and relied on another Co-ordinate Bench decision in ITA No.475 to 481/M/2014 order dated 27.06.2014 held that the penalties levied under section 271D & 271E of the Act are barred by limitation as the reference made by the AO to the Addl. CIT for initiation of penalty proceedings in the assessment order constitutes action for imposition of penalty as contemplated in the provisions of section 275(1)(c) of the Act. The relevant findings and observations of the Bench reads as under: "18. We have heard the rival submissions, perused the orders of the authorities below and case laws relied on. We observed that the tribunal in assessee's own case and group cases after considering various decisions on the issue held that the discussion by the Assessing Officer in the Assessment Order and making referral to the Addl. CIT for imposition of penalty constitutes initiation for "action for imposition of the penalty" and that is the date which should be reckoned for the purpose of limitation as specified in clause(c) of section 275(1) of the Act. While holding s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operative from 01.04.1989, the provision of divided cases for the purpose of prescribing limitation for completing penalty proceedings into three categories: (i) Category I covers cases where the assessment to which the proceedings for imposition of penalty relate is the subject - matter of an appeal to the Dy. CIT(A) or the CIT(A) under section 246 or with effect from 1 - 6 - 2000, section 246A or an appeal to the Tribunal under section 253; (ii) Category II covers cases where the relevant assessment is the subject matter of revision under section 263; and (iii) Category III covers all other cases not falling within category I and category II which is governed by clause (c). By dividing into three categories the period of limitation for cases falling under category (i), i.e., clause (1)(a) is the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed or six months from the end of the month in which the order of the Dy. CIT(A) or the CIT(A) or, as the case may be, the Tribunal is received by the Chief CIT or CIT, whichever period expires later. 22. The period of limitation for the cases fallin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y be. The penalty proceedings could also be initiated during the appellate proceedings arising out of the relevant assessment proceedings. It is only where the assessment proceedings are independent and not directly linked to the assessment proceedings that the result of such proceedings in the course of which the penalty proceedings were initiated does not affect the levy of penalty. On such penalty proceedings, independent of the assessment proceedings, clause (c) has been made applicable. In this category, the period of limitation for completing the penalty proceedings is linked with the initiation of the penalty proceedings itself. In such cases, the penalty proceedings can be initiated independent of any proceedings but obviously, the penalty proceedings can be initiated only when the default is brought to the notice of the concerned authority which may be during the course of any proceedings and, therefore, for this type of cases where the penalty proceedings have been initiated in connection with the defaults for which no statutory mandate is there about any particular proceedings during the course of which only such penalty proceedings can be initiated, a different period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken by the ITAT, Rajkot Bench (Third Member) in the case of ACIT vs. Dipak Kantilal Takvani [2013] 39 taxmann.com 53 (Rajkot - Trib.) (TM) and the penalty orders u/s 271D and 271E of the Act, being unconnected to the income of the assessee, are to be considered as per the provisions of clause (c) of section 275(1) of the Act. The said Rajkot Bench of ITAT has followed the judgment of the Rajasthan High Court in the case of Jitendra Singh Rathore (supra). In this case, the Hon'ble High Court also observed that the first show cause notice for levy of penalty was issued by the AO though the authority obtained to initiate penalty proceedings has also subsequently issued a show cause notice as well. Hon'ble High Court held that the penalty proceedings were initiated by issue of first notice from the AO and not from the date of issue of notice by the JCIT and thus, the penalty order passed after expiry of 6 months from the end of the month in which the action for imposition of penalty initiated was barred by limitation. The said decision of the ITAT in the case of Dewan Chand Amit Lal (supra) deferred at the relevant point of time that the order of the Tribunal in the case of Hissaria ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch entries does not involve acceptance of any loan or deposit of money. In the present case, admittedly no money was transacted other than through banking channels M/s. PACL India Ltd made certain payments through banking channels to land owners. This payment made on behalf of the assessee was recorded by the assessee in its books by crediting the account of M/s. PACL India Ltd. In view of this admitted position, no infringement of section 269SS of the Act is made out. This court, in the case of Noida Toll Bridge Co. Ltd (supra), considered a similar case where a company had paid money to the Government of Delhi for acquisition of a land on behalf of the assessee therein. The Assesing officer levied a penalty under section 271D of the Act for alleged violation of the provision s of section 269SS of the Act since the books of the assessee reflected the liability on account of the lands acquired on its behalf. On appeal, the CIT (A) affirmed the penalty. The order of the CIT was successfully impugned by the assesee before the IT AT. On appeal, this Court held as under: "While holding that the provisions of section 269SS of the Act were not attracted, the Tribunal has noticed that ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact that the Assessing Officer discussed the details as to the violation of the provisions of section 269SS and 269T of the Act in the assessment order. It also contains a reference to the requirement of making a reference to the Addl. CIT, CR-6, Mumbai for necessary action. Para 6 of the assessment order, which is already extracted above paras, bears witness to the above findings. Further, to give effect to his findings in the assessment order, the AO wrote a letter to the Addl. CIT on 11.1.2012, intimating to him about the violation to the said provisions of the Act. On receipt of the said reference from the AO, Addl. CIT issued a show cause notice on 15.2.2012 calling for explanation of the assessee as to why the penalty u/s 271D should not be imposed in the case of the assessee. Eventually, Addl. CIT passed a penalty order u/s 271D of the Income Tax Act on 28.9.2012. Considering the fact that the assessment order is dated 5.12.2011 and as per the provisions of clause © to section 275(1) of the Act, 6 months from the end of the month in which the action was initiated expires on 30.6.2012. After considering the explanation of limitation u/s 275(2), Explanation 1 read with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dentical as the Assessing Officer in the course of the assessment proceedings made reference in the Assessment Order to the loans accepted and repaid other than by way of Account Payee Cheque/Drafts. We also observed that the assessee was asked to explain why the loans were accepted other than by Account Payee Cheque and in response to the query raised by the Assessing Officer in the course of assessment assessee submitted its reply. The Assessing Officer records a finding that the contentions of the assessee are not accepted as it is not falling under any exemption categories where loan/deposit can be accepted other than by Account Payee Cheque/draft. Therefore, the Assessing Officer concluded that the assessee by not accepting the loan/deposit by Account Payee Cheque or bank drafts violated the provisions of section 269SS/269T of the Act and accordingly reference for initiation of penalty proceedings u/s. 271D/271E of the Act was made to Addl. CIT, Circle-6, Mumbai in the Assessment Order. After completion of assessments, the Assessing Officer by letters dated 11.12.2012 and 26.06.2013 made a reference to the Addl. CIT for initiation of penalty proceedings. Therefore, the facts o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when during some proceedings such default is noticed, though the final fact finding in this proceeding may not have any bearing on the issues relating to establishing default, e.g., penalty for not deducting tax at source while making payment to employees, or contractor, or for that matter not making payment through cheque or demand draft where it is so required to be made. Either of the contingencies does not affect the computation of taxable income and levy of correct tax on chargeable income; if clause (a) was to be invoked, no necessity of clause (c) would arise. 28. Thus, both on the ground that the transaction in question of retention of sale price by the Kachcha Arhatiya did not amount to deposit and its utilisation and dealing with it at the instance of farmer constituents did not amount to repayment of loan or deposits within the meaning of section 269SS or section 269T, and on the ground that limitation under section 275(1)(c) applies to such proceedings, we hold in favour of the respondent." Subsequently, this decision of Hon'ble Rajasthan High Court was affirmed by Hon'ble Supreme Court in Civil Appeal No.5254 of 2008 (2016) 386 ITR 719 (SC) wherein it is he ..... X X X X Extracts X X X X X X X X Extracts X X X X
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