Appeal details
Counselvise Citation
[2022] 104 COUNSELVISE.COM (IT) 9713 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
4 month(s) 5 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
28-09-2022
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
E
Assessment Year
2015-2016
Appeal Filed On
23-05-2022
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL, ‘E‘ BENCH MUMBAI BEFORE: SHRI AMIT SHUKLA, JUDICIAL MEMBER & SHRI M.BALAGANESH, ACCOUNTANT MEMBER ITA No.1290/Mum/2022 (Asse ssment Year :2015-16) ITA No.1291/Mum/2022 (Asse ssment Year :2015-16) Deputy Commissioner of Income Tax Room No.655, Aayakar Bhavan M.K.Road, Mumbai- 400 020 Vs. M/s. Macrotech Developers Ltd., (Earlier known as M/s.Lodha Developers Pvt. Ltd.,) 412, 17G, Vardhaman Chamber, Cawasji Patel Street Fort, Mumbai- 400 001 PAN/GIR No.AAACL1490J (Appellant) .. (Respondent) ITA No.1347/Mum/2022 (Asse ssment Year :2014-15) Deputy Commissioner of Income Tax Room No.655, Aayakar Bhavan M.K.Road, Mumbai- 400 020 Vs. M/s. Macrotech Developers Ltd., (successor to as M/s.Shreeniwas Cotton Mills Ltd.,) 412, 17G, Vardhaman Chamber, Cawasji Patel Street Fort, Mumbai- 400 001 PAN/GIR No.AAICS 9416R (Appellant) .. (Respondent) ITA No.1348/Mum/2022 (Asse ssment Year :2016-17) Deputy Commissioner of Income Tax Room No.655, Aayakar Bhavan M.K.Road, Mumbai- 400 020 Vs. M/s. Macrotech Developers Ltd., (Successor to Palava Dwellers Pvt. Ltd.,) 412, 17G, Vardhaman Chamber, Cawasji Patel Street Fort, Mumbai- 400 001 PAN/GIR No.AAACL1490J (Appellant) .. (Respondent) ITA No.1290/Mum/2022 M/s. Macrotech Developers Ltd., 2 Assessee by Shri Niraj Seth Revenue by Shri U.R. Singh Date of Hearing 24/08/2022 Date of Pronouncement 29/09/2022 आदेश / O R D E R PER BENCH: These appeals in ITA Nos.1290/Mum/2022, 1291/Mum/2022, 1347/Mum/2022 & 1348/Mum/2022 for A.Y.2014-15 to 2016-17 respectively arises out of the order by the ld. Commissioner of Income Tax (Appeals)-49, Mumbai in appeal No.CIT(A)-49, Mumbai/10046/2019- 2020, CIT(A)-49, Mumbai/10047/2019-2020, CIT(A)-49, Mumbai/10220/2017-2018 & CIT(A)-49, Mumbai/10043/2019-20 dated 28/01/2022, 20/01/2022 & 18/01/2022 (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). Identical issues are involved in all these appeals and hence they are taken up together and disposed of by this common order for the sake of convenience. 2. At the outset, we find that there is a delay of 51 days in filing of appeal by the revenue. We find that the order of ld. CIT(A) had been passed during Covid pandemic period and hence in view of the relaxation granted by the Hon’ble Supreme Court , the delay is hereby condoned and appeal of the revenue is admitted for adjudication. ITA No.1290/Mum/2022 M/s. Macrotech Developers Ltd., 3 ITA No. 1290/Mum/2022 – Asst Year 2015-16 – Revenue Appeal against cancellation of penalty u/s 271D of the Act by the ld. CIT(A) 3. The only identical issue involved in this appeal is as to whether the ld. CIT(A) was justified in deleting the penalty levied u/s 271D of the Act in the facts and circumstances of the case. 4. The grounds raised by the revenue are as under:- 1. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) is justified in deleting the penalty levied w/s. 271D of the Act since the assessee has 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 submissions and perused the materials available on record. The assessee is engaged in the business of land development and construction of real estate properties, belonging to prominent builders Lodha group. The return of income for the Asst Year 2015-16 was filed by the assessee company on 08.04.2016 electronically declaring total income at Rs 5,08,97,690/- under normal provisions of the ITA No.1290/Mum/2022 M/s. Macrotech Developers Ltd., 4 Act and book profits of Rs 330,91,37,656/- u/s 115JB of the Act. The final assessment was completed u/s 143(3) read with section 144C(13) of the Act on 18.02.2019 determining total income at Rs 401,72,21,219/- under normal provisions of the Act and book profits of Rs 330,97,63,757/- u/s 115JB of the Act after making various disallowances / additions. In the said assessment order, the Assessing Officer observed that the assessee company had carried out certain transactions in contravention of provisions of section 269SS of the Act which would invite the assessee with penalty u/s 271D of the Act. Accordingly, separate penalty proceedings u/s 271D of the Act were initiated for the Asst Year 2015-16 on the assessee company by the ld. Addl CIT (ld. AO herein). In response to the penalty show cause notice u/s 271D of the Act, the assessee responded that during the year under consideration, the following transactions were entered by the assessee by passing journal entries:- LEDGER OF LODHA DEVELOPERS PVT. LTD. Sr. No. Date Name of the Party Credits (Rs.) 1 18/08/2014 Bennett, Coleman & Co. Ltd. 74,60,086 2 12/03/2015 Lafarge Aggregates & Concrete 1,32,463 3 31/03/2015 Yash Enterprise 697 TOTAL 75,93,246 LEDGER OF SHREENIWAS COTTON MILLS LTD. Sr. No. Date Name of the Party Credits (Rs.) 1 09/10/2014 Alakh Advertising And Publicity 3,72,545 TOTAL 3,72,545 LEDGER OF PALAVA DWELLERS. Sr. No. Date Name of the Party Credits (Rs.) ITA No.1290/Mum/2022 M/s. Macrotech Developers Ltd., 5 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: Amount payable by Benett Coleman & .Ltd towards purchase of flat from LodhaPranik Landmark Developers Pvt. Ltd., Amount payable by the Assessee Company Towards advertising services received From Bennett Coleman & Co. Ltd., 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 provided in the newspaper. During the year under consideration invoices were raised on the assessee company in respect of Lodha Developers Pvt Ltd (Lodha Pranik Landmark Developers Pvt. Ltd., Assessee Company Bennett Coleman & Co. Ltd., ITA No.1290/Mum/2022 M/s. Macrotech Developers Ltd., 6 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 services in case of each invoice (excluding commission and Service tax) is to be adjusted against the flat booked by BCCL in LPLDPL and the balance amount of the invoice is to be paid. Accordingly the Assessee Co. transferred 66.67% of value of advertisement services to LPLDPL for adjustment against the flat booked in LPLDPL by BCCL and the balance amount was paid through proper banking channels. This adjustment was given effect by way of the above mentioned journal entry. Copy of Entry passed in the books of assessee company is attached as Annexure-III. 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 to the said vendor. 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. Lafarge Aggregates & Concrete – Rs 1,32,463/- Lafarge Aggregates & Concrete is a vendor of the both the Assessee company as well as Lodha Developers Ltd. (LDL). During the year under consideration the Assessee company had booked Income on account of Royalty Income & Electricity charges from Lafarge Aggregates & Concrete towards RMC plant installed at site by Lafarge Aggregates & Concrete. Electricity charges are recovered by Assessee Company from Lafarge Aggregates & Concrete for use of electricity at site and Royalty income is charged on account of sale of concrete by Lafarge Aggregates & Concrete to third party vendor. Simultaneously LDL, a sister concern, had payable to Lafarge Aggregates & Concrete on account of purchase of concrete material. Debit Balance of Lafarge Aggregates & Concrete in the books of assessee company on account of income booked towards recovery of Electricity charges and Royalty Income is adjusted against amount payable by LDL, a sister concern. 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 ITA No.1290/Mum/2022 M/s. Macrotech Developers Ltd., 7 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, the assessee submitted that there was a debit balance in its sister concerns books and the amount payable by the assessee company to such vendors / customers were adjusted against the amount receivables from them in the sister concerns. The assessee submitted that the journal entries were passed to avoid the delay in procedural hassles of preparing cheques and obtaining signatures of the authorized persons. It was further submitted that these journal entries were passed for business exigencies to clear the transactions expeditiously and without any commercial loan. 7. The ld. AO observed that the assessee had failed to demonstrate any reasonable cause except making a general averment that they were undertaken due to business exigency. The aforesaid transactions were held by the ld. AO as attracting the provisions of section 269SS of the Act. The assessee before the ld. CIT(A) had submitted that there is no violation of provisions of section 269SS of the Act and the order of the ld. AO was on the basis of incorrect understanding of facts and legal position. On without prejudice basis, it was submitted that the assessee had a reasonable cause for assignment of receivables and payables by passing journal entries and hence penalty is not leviable pursuant to the provisions of section 273B of the Act. The assessee explained before the ld. CIT(A) the object behind introduction of provisions of section 269SS of the Act ; meaning of the term ‘loan’ or ‘deposit’ in order to attract the ITA No.1290/Mum/2022 M/s. Macrotech Developers Ltd., 8 provisions of section 269SS of the Act ; on without prejudice basis – there existed a reasonable cause u/s 273B of the Act for passing journal entries; bonafide belief is regarded as reasonable cause . The assessee also placed reliance on 54 tribunal orders passed in the case of group companies of the assessee including the decisions of Hon’ble Jurisdictional High Court in the case of CIT vs Ajinath Hitech Builders Private Ltd and others in ITA 171&172, 202,213, 218, 219/2015 dated 6.2.2018 , CIT vs Lodha Builders Private Limited in ITA No. 199/2015 dated 6.2.2018, wherein Special Leave Petitions (SLPs) filed by the department were dismissed by the Hon’ble Supreme Court. Apart from above, the SLPs of the department were dismissed by the Hon’ble Supreme Court in the following cases:- a) CIT vs Ashtavinayak Real Estate Private Limited in SLP No. 44674/2018 dated 4.1.2019 b) CIT 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 ITA No.1290/Mum/2022 M/s. Macrotech Developers Ltd., 9 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 case of Triumph International included a transaction with only one party and hence , the same would not attract the provisions of section 271D of the Act. In this regard, it was pointed out that the intention of the Hon’ble Jurisdictional High Court in the case of Triumph International was to exclude transactions which are in the nature of squaring up due to business reasons and to avoid administrative compliances. The Hon’ble High Court in its ruling has nowhere mentioned that this principle would apply only in case of transaction with one only. 8. We find that the ld. CIT(A) relied on the judgement of Hon’ble Jurisdictional High Court in the case of CIT vs Triumph International (I) Finance Ltd reported in 345 ITR 270 (Bom) as under:- 19. In the present case, it is not in dispute that the assessee has repaid loan/deposit by debiting the account through journal entries. The question is, whether such repayment of loan/deposit is in contravention of the modes of repayment set out in Section 269T ? 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 the amount of loan/deposit with interest if any exceeds the limits prescribed therein. Similarly, the argument that only in cases where any loan or deposit is repaid by an outflow of funds, Section 269T provides for repayment by an account payee cheque/draft cannot be accepted because Section 269T neither refers to the repayment of loan/deposit by outflow of funds nor refers any of other permissible modes of repayment of loan/deposit, but merely puts an embargo on repayment of loan/deposit except by the modes ITA No.1290/Mum/2022 M/s. Macrotech Developers Ltd., 10 specified therein. Therefore, in the present case, where loan/deposit has been repaid by debiting the account through journal entries, it must be held that the assessee has contravened the provisions of Section 269T of the Act. 20. Strong reliance was placed by the counsel for the assessee on the decision of 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 deduction in respect of the commission retained by the Company. In our opinion, the aforesaid decision of the Apex Court has no relevance to the facts of the present case, because, Section 80-O and Section 269T operate in completely different fields. The object of Section 80- O is to encourage Indian Companies to develop technical knowhow and make it available to foreign companies and foreign enterprises so as to augment the foreign exchange earnings, where as, the object of Section 269T in Chapter XXB of the Act is to counteract evasion of tax. For Section 80-O, receiving income in convertible foreign exchange is the basic requirement, where as, for Section 269T, compliance of the conditions set out therein is the basic requirement. Section 80-O does not prescribe any particular mode for receiving the convertible foreign exchange, where as, Section 269T bars repayment of loan or deposit by any mode other than the mode stipulated under that Section and for contravention of Section 269T penalty is imposable under Section 271E of the Act. In these circumstances, the decision of the Apex Court rendered in the context of Section 80-O cannot be applied while interpreting the provisions of Section 269T of the Act. 21. It is relevant to note that with a view to mitigate the hardship that may be caused to the genuine business transactions on account of the bar imposed under Section 269T and the penalty imposable under Section 271E, the legislature, by the Taxation Laws (Amendment & Miscellaneous Provisions) Act 1986 has introduced Section 273B with effect from 10th September 1986. Section 273B interalia provides that notwithstanding anything contained in Section 271E, no penalty shall be imposed on the person or the assessee as the case may be for any failure referred to in the said Section, if such person or assessee proves that there was reasonable cause for such failure. Thus, reading Section 269T, 271E and 273B together it becomes clear that : ITA No.1290/Mum/2022 M/s. Macrotech Developers Ltd., 11 (a) Under Section 269T it is mandatory for the persons specified therein to repay loan/deposit only by account payee cheque/draft if the amount of loan/deposit together with interest, if any, exceeds the limits prescribed therein; (b) Non-compliance of the provisions of Section 269T renders the person liable for penalty under Section 271E; and (c) Section 273B provides that no penalty under Section 271E shall 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 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 the facts of each case. 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 be a ground for sustaining penalty imposed under Section 271E of the Act if reasonable cause is shown by the assessee for failing to comply with the provisions of Section 269T. ITA No.1290/Mum/2022 M/s. Macrotech Developers Ltd., 12 It is not in dispute that settling the claims by making journal entries in the respective books is also one of the recognized modes of repaying loan/deposit. Therefore, in the facts of the present case, in our opinion, though the assessee has violated the provisions of Section 269T, the assessee has shown reasonable cause and, therefore, the decision of the Tribunal to delete the penalty imposed under Section 271E of the Act deserves acceptance. (emphasis supplied by us) 25. In the result, we hold that the Tribunal was not justified in holding that repayment of loan/deposit through journal entries did not violate the provisions of Section 269T of the Act. However, in the absence of any finding recorded in the assessment order or in the penalty order to the effect that the repayment of loan/deposit was not a bonafide transaction and was made with a view to evade tax, we hold that the cause shown by the assessee was a reasonable cause and, therefore, in view of Section 273B of the Act, no penalty under Section 271E could be imposed for contravening the provisions of Section 269T of the Act. 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 ld. CIT(A) has not even been contested by the revenue before us as is evident from the grounds reproduced at the beginning of this order. We find that the ld. CIT(A) had given relief to the assessee even on the aspect of reasonable cause by stating that on without prejudice basis, even if the transactions of the assessee fall within the mischief of provisions of section 269SS of the Act, there exists reasonable cause within the meaning of section 273B ITA No.1290/Mum/2022 M/s. Macrotech Developers Ltd., 13 of the Act. The revenue had challenged the aspect of reasonable cause u/s 273B of the Act before us. 9. It is pertinent to note that 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. We find that the issue in dispute is no longer res integra in view of the aforesaid decisions of this tribunal and also the decisions of Hon’ble Jurisdictional High Courts relied upon supra. We find that the ld. CIT(A) had granted relief to the assessee only by following the aforesaid decisions and hence , in our considered opinion, the elaborate order of the ld. CIT(A) does not warrant any interference. Accordingly, the grounds raised by the revenue are dismissed. 10. In the result, the appeal of the revenue in ITA No. 1290/Mum/2022 for Asst Year 2015-16 is dismissed. ITA No. 1291/Mum/2022 – Asst Year 2015-16 – Revenue Appeal against cancellation of penalty u/s 271E of the Act by the ld. CIT(A) 11. The only identical issue involved in this appeal is as to whether the ld. CIT(A) was justified in deleting the penalty levied u/s 271E of the Act in the facts and circumstances of the case. ITA No.1290/Mum/2022 M/s. Macrotech Developers Ltd., 14 12. The grounds raised by the revenue are as under:- 1. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) is justified in deleting the penalty levied 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 to be illegal?" 13. We have heard the rival submissions and perused the materials available on record. In the final assessment order framed on 18.2.2019, the Assessing Officer observed that the assessee company had carried out certain transactions in contravention of provisions of section 269T of the Act which would invite the assessee with penalty u/s 271E of the Act. Accordingly, separate penalty proceedings u/s 271E of the Act were initiated for the Asst Year 2015-16 on the assessee company by the ld. Addl CIT (ld. AO herein). In response to the penalty show cause notice u/s 271D of the Act, the assessee responded that during the year under consideration, the following transactions were entered by the assessee by passing journal entries:- ITA No.1290/Mum/2022 M/s. Macrotech Developers Ltd., 15 LEDGER OF LODHA DEVELOPERS PVT LTD Sr. No. Date . Name of the Party Debits (Rs.) 1 13/01/2015 Lafarge Aggregates & Concrete 1,07,700 2 01/03/2015 Deepak Chitnis 51,77,194 3 01/03/2015 Mangesh D Panhalkar 10,17,540 TOTAL 63,02,434 LEDGER OF SHREENJWAS COTTON MILLS LTD. Sr. No. Date Name of the Party Debits (Rs.) 1 14/04/2014 Lafarge Aggregates & Concrete 17,05,855 2 25/05/2014 Valecha Engineering Ltd. 6,63,323 3 26/05/2014 Lafarge Aggregates & Concrete 5,10,180 4 26/05/2014 Lafarge Aggregates & Concrete 2,13,600 5 26/05/2014 Lafarge Aggregates & Concrete 1,76,350 6 02/06/2014 Lafarge Aggregates' & Concrete 5,85,794 7 30/06/2014 Lafarge Aggregates' & Concrete 4,62,212 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 ITA No.1290/Mum/2022 M/s. Macrotech Developers Ltd., 16 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. In the present case before you, the payments made on behalf are explained as follows: a. Transfer of Vendor balances for knocking off: This represents the knocking off of amount payable by the assessee company to vendor and amount receivable from the same vendor in its sisters concerns or vice versa. The assessee submits that there was a debit balance/ credit balance in its sister concerns in respect of certain vendors and the amount payable / receivable by the assessee company to such vendors was adjusted against the amount receivables/payable from such vendors in the books of sister concern. This adjustment was given effect by way of the journal entry. The assessee submits that it has undertaken the transaction with a view to extinguish the mutual liability of paying/receiving the amounts by the assessee and its sister concern. Considering, the nature of transactions not being loan, the journal entry should not be considered as violating the provisions of Section 269SS/T. b. Group Mediclaim Policy: Group Mediclaim policy represents policy taken by Lodha Developers Ltd for all the employees of lodha group. Installment or top up cover premium is paid by Lodha Developers Ltd and subsequently same is allocated to group companies. Since the payment represents on behalf payments incurred and allocated to the group companies, considering the nature of transactions not being loan, the journal entry should not be considered as violating provisions of Section 269SS/T. c. Payment of TDS and service tax: Sometimes the assessee company owing to lack of availability of fund in its bank accounts requests its associate / group companies to pay expenses on its behalf. In the present case before you, the payments made on behalf represents payment of ITA No.1290/Mum/2022 M/s. Macrotech Developers Ltd., 17 TDS and service tax. If the associate companies were to give cheque loans to Assessee Company and then if the assessee company would have to make payment of such expenses, it would involve a time gap of 2 to 3 days and payment of such expenses could be delayed. To avoid this delay and ensure that such payments are paid on time, payment is directly made by associate company on behalf of the assessee company and journal entry is passed by the assessee company for giving effect to this transaction. Considering, the nature of transactions not being loan, the journal entry should not be considered as violating provisions of 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: Amount payable by Benett Coleman & .Ltd Towards purchase of flat from LodhaPranik Landmark Developers Pvt. Ltd., Amount payable by the Assessee Company Towards advertising services received From Bennett Coleman & Co. Ltd., 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 Assessee Company Bennett Coleman & Co. Ltd., Lodha Developers Pvt Ltd (Lodha Pranik Landmark Developers Pvt. Ltd., ITA No.1290/Mum/2022 M/s. Macrotech Developers Ltd., 18 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 services in case of each invoice (excluding commission and Service tax) is to be adjusted against the flat booked by BCCL in LPLDPL and the balance amount of the invoice is to be paid. Accordingly the Assessee Co. transferred 66.67% of value of advertisement services to LPLDPL for adjustment against the flat booked in LPLDPL by BCCL and the balance amount was paid through proper banking channels. This adjustment was given effect by way of the above mentioned journal entry. Copy of Entry passed in the books of Assessee Company is attached as Annexure-III. 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 to the said vendor. 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; hence, penalty levied u/s 271E should be deleted. d. Lafarge Aggregates & Concrete: Lafarge Aggregates & Concrete is a vendor of the both the Assessee company as well as Lodha Developers Ltd. (LDL). During the year under consideration the Assessee company had booked Income on account of Royalty Income & Electricity charges from Lafarge Aggregates & Concrete towards RMC plant installed at site by Lafarge Aggregates & Concrete. Electricity charges are recovered by Assesse Company from Lafarge Aggregates & Concrete for use of electricity at site and Royalty income is charged on account of sale of concrete by Lafarge Aggregates & Concrete to third party vendor. Simultaneously LDL, a sister concern, had payable to Lafarge Aggregates & Concrete on account of purchase of concrete material. Debit Balance of Lafarge Aggregates & Concrete in the books of assessee company on account of income booked towards recovery of Electricity charges and Royalty Income is adjusted against amount payable by LDL, a sister concern. 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 ITA No.1290/Mum/2022 M/s. Macrotech Developers Ltd., 19 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; 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: Amount payable by Lodha Developers Ltd., to Madison Communications Pvt. Ltd., towards advertising services Debit Balance of Madison Communications Pvt. Ltd., in the books of Assessee Company On account of advance payment made to Madison Communications Pvt. Ltd., by the Assessee Company towards advertising services Assessee Company Madison Communications Pvt. Ltd., Lodha Developers Pvt Ltd ITA No.1290/Mum/2022 M/s. Macrotech Developers Ltd., 20 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. Rs. 3,71,894 M/s Madison Communication Pvt. Ltd. (MCPL), is an agent through which advertisements are placed with different vendors namely Bennett Coleman Co. Ltd. etc. During the year under consideration certain amount was payable by LDL on account of advertising services received by LDL from MCPL. Correspondingly, assessee co. also had certain amount receivable from MCPL towards advance payment for services receivable. The said payable by LDL was adjusted against credit note issued by the Assessee Company. This adjustment was given effect by way of the above mentioned journal entry. (Copy of The Screenshot of entry passed in the books of Assessee Company are enclosed herein as Annexure-V) 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 to the said vendor. 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; hence, penalty levied u/s 271E should be deleted. f. Flat sale transactions with employee: During the year under consideration the amounts were payable to Deepak Chitnis and Mangesh D Panhalkar on account of vest benefits/performance bonus by sister concern Lodha Developers Ltd. These employees had booked flats in Projects being developed by sister concem M/s Bellissimo Developers Thane Pvt. Ltd. Hence, the amount payable to employees on account of vested benefits had been adjusted against amount receivable by sister concern on account of flat sale to the employees. Copy of flat purchase agreement between Deepak Chitnis and Mangesh D Panhalkar with Bellissimo Developers Thane Pvt. Ltd. is enclosed herein as Annexure-VI. This adjustment was given effect by way of the below mentioned entries. Copy of entries passed in the books are attached as Annexure-VII L Lodha Developers Ltd Dr. 51,77,194 To Deepak Chitnis Cr 51,77,194 ITA No.1290/Mum/2022 M/s. Macrotech Developers Ltd., 21 ii. Lodha Developers Ltd Dr. 10,17,540 To Mangesh D Panhalkar Cr 10,17,540 The pictorial representation of transaction is as follows: Amount payable by Deepak Chitnis and Mangesh D Panhalkar towards purchase of flat from Bellissimo Developers Thane Pvt. Ltd., Amount payable by LDL to Deepak Chitnis and Mangesh D Panhalkar in respect of vested benefits 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 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 Lodha Developers Ltd., 1. Deepak Chitnis 2. Mangesh D Panhalkar Assessee Company ITA No.1290/Mum/2022 M/s. Macrotech Developers Ltd., 22 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 order to adjust the amount receivable from TerraaPropex Pvt. Ltd. against amount payable to TerraaPropex Pvt. Ltd. by SNCML 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-VIII 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 within the meaning of section 273B of the Act and hence no penalty u/s 271E of the Act would be exigible thereon. With respect to other transactions, the assessee submitted that there was a credit balance in its sister concerns books and the amounts receivable by the assessee company from such vendors / customers were adjusted against the amounts payable to them in the sister concerns. The assessee submitted that the journal entries were passed to avoid the delay in procedural hassles of preparing cheques and obtaining signatures of the authorized persons. It was further submitted that these journal entries were passed for business exigencies to clear the transactions expeditiously and without any commercial loan. 15. We find that the ld. AO had levied penalty for the very same reasons as detailed hereinabove with regard to penalty proceedings u/s 271D of the Act considered supra. Similarly the ld. CIT(A) also had cancelled the levy of penalty u/s 271E of the Act in the same fashion for the same reasoning that had been given by him for section 271D proceedings. ITA No.1290/Mum/2022 M/s. Macrotech Developers Ltd., 23 16. Infact for the appeal of the revenue in ITA No. 1347/Mum/2022, the ld. DR vehemently submitted that in this case, it is a clear case of repayment of loan to Religare Finvest Ltd amounting to Rs 2,88,72,500/- which has been made by way of journal entries by the assessee company thereby violating provisions of section 269T of the Act. In this regard, we find that during the year under consideration, the assessee company i.e Macrotech Developers Ltd (Successor to Shreeniwas Cotton Mills Ltd) had taken loan from Religare 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 ITA No.1290/Mum/2022 M/s. Macrotech Developers Ltd., 24 hereinabove, we hold that there is absolutely no case made out by the revenue for justifying the levy of penalty u/s 271D and 271E of the Act for the years under consideration and for various assesses before us. 18. TO SUM-UP A.Y. Name of the Assessee ITA No. Appeal By Result 2015-16 M/s. Macrotech Developers Ltd., (earlier known as M/s. Lodha Developers Pvt. Ltd.,) 1290/Mum/2022 Revenue Dismissed 2015-16 M/s. Macrotech Developers Ltd., (Successor to M/s. Lodha Developers Pvt. Ltd.,) 1291/Mum/2022 Revenue Dismissed 2014-15 M/s. Macrotech Developers Ltd., (Successor to Shreeniwas Cotton Mills Ltd., 1347/Mum/2022 Revenue Dismissed 2016-17 Macrotech Developers Ltd., (Successor to Palava Dwellers Pvt. Ltd.,) 1348/Mum/2022 Revenue Dismissed Order pronounced on 29/09/2022 by way of proper mentioning in the notice board. Sd/- (AMIT SHUKLA) Sd/- (M.BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated 29/09/2022 KARUNA, sr.ps ITA No.1290/Mum/2022 M/s. Macrotech Developers Ltd., 25 Copy of the Order forwarded to : BY ORDER, (Sr. Private Secretary / Asstt. Registrar) ITAT, Mumbai 1. The Appellant 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy//
