9911796707
TMI Blog2025 (1) TMI 867X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 (2) TMI 603 - BOMBAY HIGH COURT ] while holding that receipt/deposit/loans received through journal entries is in breach of sec.269SS, however, has upheld the decision of the Tribunal cancelling the penalty levied on account of reasonable cause In the present case there is a reasonable cause on the part of the assessee for such violation. We, therefore, set aside the order of the Ld. CIT(A) and direct the AO to delete the penalty levied u/sec.271E - Decided in favour of assessee. - Shri Rama Kanta Panda, Vice President And Ms. Astha Chandra, Judicial Member For the Assessee : Shri Nikhil Pathak For the Revenue : Shri Arvind Desai, Addl. CIT-DR ORDER PER RAMA KANTA PANDA, V.P. : This appeal filed by the assessee is directed against the order dated 07.05.2024 of the Ld. CIT(A)-National Faceless Appellate Centre [in short NFAC ], relating to assessment year 2016-2017. 2. Although a number of grounds have been raised by the assessee, however, these all relate to the order of the Ld. CIT(A) in confirming the penalty of Rs. 57,27,410/- levied by the Assessing Officer u/sec.271E of the of the Income Tax Act, 1961 (in short the Act ). 3. Facts of the case, in brief, are that the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ebts and as result loss not only to the Assessee but also to the Government is avoided. 5. During relevant year, assessee has incurred transactions which are related to its directors and related party of the company such as payment of income tax, wealth fax, service tax, on behalf payment etc. All the said transactions are through Bank i.e., account payee cheque, NEFT or RTGS which are settled/transferred through Journal Entries. The underlying principle for incurring such transactions is ease of compliance of various laws and not evasion of taxes as said payment of taxes are made to government. 3.3. It was submitted that these are mere journal entries and, therefore, provisions of secs.269SS and 269T are not applicable. However, the JCIT was not satisfied with the arguments advanced by the assessee. Distinguishing the various decisions cited before him and relying on various other decisions, the JCIT levied penalty of Rs. 57,27,410/- u/sec.271E of the Act for violation of provisions of sec.269T of the Act. 4. In appeal, the Ld. CIT(A) upheld the action of the Assessing Officer. While doing so, he held that journal entry is not a mode prescribed in sec.269T of the Act. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , in a way there is no violation of provisions of sec.269T since the security deposits were obtained through banking channels and were only adjusted towards the outstanding dues. 6.2. Referring to various decisions, he submitted that there exists a reasonable cause on the part of the assessee for making payment of tax on behalf of the Directors and related parties which are settled/transferred through banking channel or journal vouchers. Referring to the decision of Hon ble Supreme Court in the case of CIT vs. Adinath Builders (P.) Ltd., [2019] 102 taxmann.com 57 (SC), he submitted that the Hon ble Supreme Court dismissed the SLP filed by the Revenue and upheld the order of the Hon ble High Court who decided the issue in favour of the assessee that although the receipt of cash deposits/loans received through journal entries is in breach of sec.269SS, however, penalty u/sec.271D cannot be levied since there exists a reasonable cause . It has further been held that journal entries constitute a recognised mode of recording of transactions and in absence of any adverse findings by the authorities that these were made with a view to achieve purpose outside normal business operations or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the Assessee that assessee has taken security deposit from these CSAs through account payee/RTGS/ Demand drafts etc., which were subsequently adjusted against the outstandings due from them towards sales. Therefore, strictly speaking there is no violation of provisions of sec.269T of the Act and in case such entries are treated as violation of provisions of sec.269T, then, in view of provisions of section 273B there exists a reasonable cause on the part of the assessee for such adjustments. So is the case with respect to the transactions with related parties. 8.2. We find some force in the above arguments of the Learned Counsel for the Assessee. We find from the submissions made before the Assessing Officer as well as the Ld. CIT(A) that since the dues are to be recovered from the CSAs on account of sales made to them, the assessee has adjusted the amount of recovery against the security deposits obtained from the said parties through journal entries. Although it has been held that receipts/deposits/loans received through journal entries is in breach of sec.269SS, however, the adjustment of such security deposits against outstandings receivable, in our opinion, will constitute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1961(the Act) ? (iii) Whether on the facts and in the circumstance of the case and in law, the Tribunal is justified in holding that the Assessing Officer's decision to refer the matter of penalty u/s. 271D to the Addl. Commissioner of Income Tax constitute action for imposition of penalty and, therefore, period of limitation would be counted with reference to the date of assessment order instead of the date of issue of penalty notice by the Addl. CIT ? (iv) Whether on the facts and in the circumstance of the case and in law, the Tribunal is justified in holding that the journal entries should enjoy equal immunity on par with account payee cheques and bank drafts? 3. Regarding Question No.(i) :- (a) The common impugned order of the Tribunal arises from the orders passed by the Addl. Commissioner of Income Tax imposing penalty upon the respondents under Section 271D of the Act for breach of Section 269SS of 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 269 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easonable cause as required under Section 273B of the Act gives rise to a question of law as it is a legal inference to be drawn from primary facts as held by the Apex Court in Premier Breweries Ltd. v. CIT [2015] 56 taxmann.com 351/230 Taxman 575/372 ITR 180. Thus, it is submitted this question requires admission as it gives rise to a substantial question of law; (d) We find that the impugned order of the Tribunal has on application of the test laid down for establishment of reasonable cause, for breach of Section 269SS of the Act by this Court in Triumph International Finance (supra) found that there is a reasonable cause in the present facts to have made journal entries reflecting deposits. The Tribunal while relying upon the order of this Court in Triumph International Finance (supra) has held that in the present facts, neither the genuineness of receipt of loans/deposits 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In the above context, the Court observed that when the finding is one of fact, the fact that it itself is an inference from other basic facts, will not alter its character as one of fact. Therefore, the issue of there being reasonable cause or not, is a question of fact and unless it is shown to be perverse, we would normally not interfere. (g) In the above circumstances, the view taken by the Tribunal on the facts before it, is a possible view and does not give rise to any substantial question of law. (h) In any event, as rightly pointed out by Mr. Sridharan, learned Senior Counsel for the respondents assesses, the order of this Court in Triumph International Finance (supra) was rendered on 12th June, 2012. This, was in an appeal filed by the Revenue 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 attenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the case. (k) Therefore, the question as posed does not give rise to any substantial question of law. Thus, not entertained. 4. Regarding question nos. (ii), (iii) and (iv) :- (a) In view of our answer to question no.(i), question nos. (ii), (iii) and (iv) in the present facts have been rendered academic. Thus, we are not dealing with them. (b) In the above view, question (ii), (iii) and (iv) do not give rise to any substantial question of law in the present facts. Thus, not entertained. 5. Accordingly, all six appeals are dismissed. No order as to costs. 8.5. We find when the Revenue challenged the above order before the Hon ble Supreme Court, the Hon ble Supreme Court dismissed the SLP filed by the Revenue as reported in [2019] 102 taxmann.com 57 (SC). Since the facts of the instant case are identical to the facts of the case decided by the Hon ble jurisdictional High Court and SLP has been dismissed by the Hon ble Supreme Court, therefore, respectfully following the same, we are of the considered opinion that there is a reasonable cause on the part of the assessee for such violation. We, therefore, set aside the order of the Ld. CIT(A) and direct the Assessing Officer to delet ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
