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TMI Blog2022 (10) TMI 165X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act, there exists reasonable cause within the meaning of section 273B of the Act. The revenue had challenged the aspect of reasonable cause u/s 273B of the Act before us. Eventhough transactions of one party had been settled by the other party by way of assignment of receivables / payables or for any other reason as detailed supra, we find that all the transactions have been ultimately settled for the difference amount by account payee cheques only. It is not the case of the revenue that the balance amounts lying in each account i.e after adjustment of receivables with payables, were settled by one party to the other party otherwise than by account payee cheques or account payee drafts. Hence it could be safely concluded that there is absolutely no violation of provisions of section 269SS and 269T of the Act in any of the aforesaid transactions carried out by the assessee. Accordingly, the grounds raised by the revenue are dismissed. Penalty u/s 271E - assessee company had carried out certain transactions in contravention of provisions of section 269T - CIT-A deleted Penalty levy - HELD THAT:- It is not in dispute that the loan instalment and interest payable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not shown the reasonable cause us. 273B of the Act for entering into such transactions through journal entries? 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) is erred in deleting the penalty without giving a finding on transaction to transaction basis in the given case for existence of reasonable cause u/s. 273B which led to the exigency of contravention of provisions of 269SS as the fact of each transaction need independent verification? . 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in merely relying upon the various case laws without examining the cause behind each instance of default which, therefore, rendered the impugned order perverse, and thereby rendered the applicability of any judicial precedent as otiose? 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) is justified in giving the benefit of reasonable cause to a series of transactions, without appreciating that the such benefit is available as an exception rather than a rule, unlawfully granting perpetual legitimacy to transactions otherwise held to be illegal? 5. We have heard the rival ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... LEDGER OF PALAVA DWELLERS. Sr. No. Date Name of the Party Credits (Rs.) 1 12/01/2015 Shubham Earthmovers Pvt. Ltd., 67,753 TOTAL 67,753 6. The explanation given by the assessee before the ld. AO is as under:- Bennett Coleman Co. Ltd Rs 74,60,086/- Amount Payable to Bennett Coleman Co. Ltd (BCCL) by the assessee company adjusted against the amount receivable on account of flat booking made by the BCCL in the sister concern In the current year the following journal entry was passed by the Assessee Company in the ledger account of LodhaPranik Landmark Developers Put Mad Crita (LPLDPL) (Now known as Lodha Developers Ltd as LodhaPranik Landmark Developers Pvt Ltd merged into Lodha Developers Limited) Bennett Coleman Co. Ltd ..................Dr 74,60,086 To Lodha Developers Pvt Ltd ....Cr 74,60,086 M/s Bennett Coleman Co. Ltd (BCCL), is a vendor through which advertisement are provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ern. In order to avoid the empty formality of making the payment to Lafarge Aggregates Concrete through LDL and also simultaneously receiving the amount in Assessee Company from Lafarge Aggregates Concrete, the Assessee company issued a credit note to Lafarge Aggregates Concrete and passed the journal entry in order to adjust the amount receivable by Lafarge Aggregates Concrete against amount payable by Lafarge Aggregates Concrete to LDL. Accordingly, for squaring up the mutual transactions of payable and receivable, the above journal entry was passed. Copy of The Screenshot of entry as passed in the books of Assessee company are enclosed herein as Annexure-IV. The assessee submits that it has undertaken the above transaction with a view to extinguish the mutual liability of paying/receiving the amounts by the Assessee and its sister concern. In view of the above facts the assessee submits that it's action of extinguishing the mutual liability of paying/receiving through journal entries constitute reasonable cause; within the meaning of section 273B of the Act and hence no penalty u/s 271D of the Act would be exigible thereon. With respect to other transactions, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs Lodha Crown Buildmart Private Limited in SLP No. 44666/2018 dated 3.1.2019 c) CIT vs Lodha Builders Private Limited in SLP No. 42738/2018 dated 21.1.2019 d) CIT vs Lodha Properties Development Private Limited in SLP No. 42791/2018 dated 10.12.2018 e) CIT vs Adinath Builders Private Limited in SLP No. 40471/2018 dated 3.12.2018 7.1. Moreover, the assessee submitted that this Tribunal in Lodha Developers Pvt Ltd have listed seven reasons which can be considered as a reasonable cause . The details of the seven reasons / groups are :- (1) Alternate mode of raising funds (2) Assignment of receivables (3) Squaring of transactions (4) Operational efficiency / MIS purpose (5) Consolidation of family member debts (6) Correction of error (7) Loans taken in cash 7.2. It was submitted that the Tribunal in the case of Lodha Developers Pvt Ltd had held that any journal entry passed in the books of accounts which fall under any of the seven categories will be considered as having been passed for a reasonable cause and the penalty u/s 271D / 271E of the Act are not attracted. 7.3. It was further submitted by the assessee that the ld. AO had held that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Apex Court in the case of J.B. Boda Co. (P.) Ltd. (supra). In that case, J.B. Boda Co. (P.) Ltd. (supra) carrying on business as reinsurance brokers were during the course of business required to remit the entire reinsurance premium payable to the foreign reinsurers in foreign currency and then receive commission in foreign currency from the said foreign insure Rs. Instead of remitting the entire amount to the foreign reinsurers and then receiving commission from the said foreign insurers, J B Boda Company with the approval of the Reserve Bank of India retained the foreign currency to the extent of the commission and remitted the balance amount to the foreign reinsure Rs. As deduction under Section 80-O of the Act in respect of the amount retained as commission was denied by the income tax authorities as also the High Court, the Company approached the Apex Court and the Apex Court held that to insist on a formal remittance to the foreign reinsurers first and thereafter to receive the commission from the foreign reinsurer would be an empty formality and a meaningless ritual on the facts of that case. Accordingly, the Apex Court held that the Company was entitled to 80-O de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all be imposed if reasonable cause is shown by the concerned person for failure to comply with the provisions of Section 269T of the Act. 22. The argument advanced on behalf of the assessee that if Section 269T is construed literally, it would lead to absurdity cannot be accepted, because, repayment of loan/deposit by account payee cheque/bank draft is the most common mode of repaying the loan/deposit and making such common method as mandatory does not lead to any absurdity. No doubt, that in some cases genuine business constraints may necessitate repayment of loan/deposit by a mode other than the mode prescribed under Section 269T. To cater to the needs of such exigencies, the legislature has enacted Section 273B which provides that no penalty under Section 271E shall be imposed for contravention of Section 269T if reasonable cause for such contravention is shown. 23. The expression 'reasonable cause' used in Section 273B is not defined under the Act. 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 26. The appeal is disposed of in the above terms with no order as to costs. 8.1. We find that the ld. CIT(A) further placed reliance on yet another decision of Hon ble Jurisdictional High Court in the case of CIT vs Ajinath Hi-tech Builders P Ltd reported in 412 ITR 316 (Bom) and few tribunal decisions rendered in the Lodha group of cases as detailed supra. We find that the ld. CIT(A) had categorically stated in para 6.8.6 of his order that the nature of transactions carried out by the assessee through journal entries in the instant case are not in the form of loan or advance which has been received or repaid and that they are acts of assigning of receivables or extinguishment of mutual liability of paying / receiving the amounts by the assessee and its sister concerns and its sister concerns to third parties. We find that this categorical finding of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied us. 271E of the Act since the assessee has not shown the reasonable cause w/s. 273B of the Act for entering into such transactions through journal entries? 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) is erred in deleting the penalty without giving a finding on transaction to transaction basis in the given case for existence of reasonable cause w/s. 273B which led to the exigency of contravention of provisions of 269T as the fact of each transaction need independent verification? 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in merely relying upon the various case laws without examining the cause behind each instance of default which, therefore, rendered the impugned order perverse, and thereby rendered the applicability of any judicial precedent as otiose? 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) is justified in giving the benefit of reasonable cause to a series of transactions, without appreciating that the such benefit is available as an exception rather than a rule, unlawfully granting perpetual legitimacy to transactions otherwise held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 30/06/2014 Lafarge Aggregates' Concrete 2,80,000 9 15/07/2014 Lafarge Aggregates' Concrete 1,74,750 10 11/08/2014 Lafarge Aggregates' Concrete 4,91,101 11 22/08/2014 Lafarge Aggregates Concrete 1,11,150 12 12/01/2015 Manthan Enterprises 18,160 13 13/01/2015 Lafarge Aggregates . Concrete 32,18,588 14 11/02/2015 Madison Communications Pvt. Ltd. 3,71,894 15 20/03/2015 Terraa Propex Pvt. Ltd. 6,89,165 14. The explanation given by the assessee before the ld. AO is as under:- On behalf payments; Some expenses are incurred at group level and later on allocated to various companies including the assessee company. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 269SS/T. d. Amount Payable to Bennett Coleman Co. Ltd. for advertisement services received adjusted against amount receivable for sale of flat: Amount Payable to Bennett Coleman Co. Ltd (BCCL) by the assessee company adjusted against the amount receivable on account of flat booking made by the BCCL in the sister concern: In the current year the following journal entry was passed by the Assessee Company in the ledger account of LodhaPranik Landmark Developers Put Ltd (LPLDPL) (Now known as Lodha Developers Ltd as LodhaPranik Landmark Developers Pvt Ltd merged into Lodha Developers Limited) Bennett Coleman Co. Ltd..................Dr 74,60,086 To Lodha Developers Pvt Ltd............Cr 74,60,086 M/s Bennett Coleman Co. Ltd (BCCL), is a vendor through which advertisement are provided in the newspaper. During the year under consideration invoices were raised on the assessee company in respect of advertisement services provided during the year by BCCL, As per the term of the barter agreement (Copy of Barter agreement is enclosed herein as Annexure-II) entered into between BCCL and LPLDPL, 66.67% of the value of advertisement servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Concrete to LDL. Accordingly, for squaring up the mutual transactions of payable and receivable, the above journal entry was passed. Copy of The Screenshot of entry as passed in the books of Assessee company are enclosed herein as Annexure-IV. The Assessee submits that it has undertaken the above transaction with a view to extinguish the mutual liability of paying/receiving the amounts by the Assessee and its sister concern. In view of the above facts the assessee submits that it's action of extinguishing the mutual liability of paying/receiving through journal entries constitute reasonable cause; should not be considered as violation of provisions of Sec 269SS/269T. e. Madison Communications Pvt Ltd.: Amount receivable by assessee company from Madison Communications Pvt. Ltd. (MCPL), adjusted against amount payable by Lodha Developers Ltd(LDL) (earlier known as Lodha Developers Pvt Ltd) to MCPL: In the current year the following journal entry was passed by the Assessee Company in respect of the above pictorial representation of transaction: Lodha Developers Ltd................Dr Rs. 3,71,894 To Madison Communications Pvt. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee and its sister concern to the said employee. In view of the above facts the Assessee submits that it's action of extinguishing the mutual liability of paying/receiving through journal entries constitute reasonable cause and should not be considered as violation of provisions of Sec 269SS/269T. g. Brokerage payment to TerraaPropex Put. Ltd.: TerraaPropex Put. Ltd. is common broker of Assessee Company and Shreeniwas Cotton Mills Pvt. Ltd. (SNCML), sister concem of Assessee Company. During the year under consideration the Assessee Company had debit balance of TerraaPropex Pvt. Ltd. on account of Excess brokerage paid towards sale of flat. Simultaneously, SNCML a sister concern, had payable to TerraaPropex Put. Ltd. on account of brokerage towards sale of flat. Debit Balance of TerraaPropex Pvt. Ltd. in the books of Assessee Company on account of Excess brokerage paid is adjusted against amount payable by SNCML, a sister concern. In order to avoid the empty formality of making the payment to TerraaPropex Put. Ltd. through SNCML and also simultaneously receiving the amount in Assessee Company from TerraaPropex Pvt. Ltd., the Assessee company passed the journal entry in or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Finvest Ltd (RFL in short). RFL had disbursed the loan directly to Lodha Developers Pvt Ltd (LDPL) at the behest of the assessee. It is not in dispute that LDPL is a flagship company of the assessee. Since the loan amount was directly disbursed to LDPL by RFL, the assessee passed the following journal entry in its books :- Lodha Developers Pvt Ltd A/c Dr Rs 2,88,72,500 To Religare Finvest Ltd A/c Cr Rs 2,88,72,500 16.1. It is not in dispute that the loan instalment and interest payable to RFL were duly serviced by the assessee company i.e Macrotech Developers Ltd (Successor to Shreeniwas Cotton Mills Ltd) against the outstanding loan account. Even the said repayment of loans were made only by account payee cheques. Hence there is no contravention of provisions of section 269T of the Act as alleged by the ld. AO in the instant case. Accordingly, we hold that this case is no different from other cases that are before us in the present list. 17. Both the parties before us agreed that the reasoning given by the ld. AO and the ld. CIT(A) are one and the same in all the appeals. In view of the detailed reasoning given by us in ITA No. 1290/Mum/2022 hereinab ..... 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