ASSTT. CIT CC 7(3), Mumbai V. M/S. MACROTECH DEVELOPERS LTD. (EARLIER KNOWN AS M/S PALAVA DWELLERS P. LTD.), Mumbai

ITA 4052/MUM/2019

• Counselvise Citation: [NaN] 107 COUNSELVISE.COM (IT) 1749 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Appeal Filed On: 06-06-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure; Question of law; Reasonable cause
• Section: 132; 273B; 271D; 271E; 208

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES “A”, MUMBAI BEFORE SHRI ABY T VARKEY, JUDICIAL MEMBER AND SHRI S RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA No. 4052/MUM/2019 Assessment Year: 2015-16 Assistant Commissioner of Income Tax, CC-7(3), Mumbai, Room No. 655, Aaykar Bhavan, M.K. Road, Mumbai - 400020 Vs. M/s Macrotech Developers Ltd., (Earlier known as M/s Palava Dwellers Pvt. Ltd.), 412, Vardhan Chambers, Cawasji Patel Street, Fort, Mumbai - 400001 PAN: AABCL1117D (Appellant) (Respondent) Revenue by : Shri Mehul Jain (DR) Assessee by : Shri Niraj Sheth (AR) Date of Hearing : 21/04/2022 Date of Pronouncement: 03/06/2022 O R D E R PER S. RIFAUR RAHMAN, AM This is an appeal filed by the revenue against the order dated 05.03.2019 of Learned Commissioner of Income Tax (Appeals)-49, Mumbai [hereinafter in short ‘Ld. CIT(A)’] for the assessment year 2015-16. 2. Brief facts of the case are that a search and seizure action u/s 132 of the Act was conducted on Lodha Group on 10.01.2011 and as a result of undisclosed transactions by the group, in one of the allegations against the group is of resorting to round tripping of funds to evade taxes. According to the AO, assessee had violated the provisions of section 269SS of the Income Tax 2 ITA No. 4052/ MUM/2019 Assessment Year: 2015-16 Act, 1961 (in short ‘the Act’) and accordingly, he levied the penaly of Rs. 1,18,00,608/- u/s 271D of the Act. 3. Aggrieved, assessee preferred an appeal before Ld. CIT(A). Before CIT(A) assessee has explained that Jimmy Gandhy and Gopal Meghnani are employees of assessee Company. During the year under consideration the amounts were payable to employees on account of performance, bonus. These employees had booked flats in Projects being developed by sister concerns i.e. Lodha Impression Real Estate Private Limited and Jawala Real Estate Private Limited. Hence, the amount payable to employees had been adjusted against | amount receivable (against flat booked) by sister concern from the employees. Further the transaction of Sunil Chakraborty is a case where the customer had booked a flat in the project being developed by the assessee company, later on the customer cancelled this booking and booked a flat in a project being developed by its sister concern i.e. Lodha Buildcon Private Limited. Hence, the amount received by the customer (repayable on cancellation) in the assessee company was transferred to Lodha Buildcon Pvt Ltd where the customer had booked the flat. With respect to other transactions the assessee explained that there was a debit balance of the vendor in its sister concerns and the amount payable by the assesse company to the same vendors was adjusted against the amount receivables from vendors in its sister concerns. 4. After considering the submissions of the assessee, Ld. CIT(A) allowed the appeal filed by the assessee by relying on the co-ordinate Bench of ITAT decision in assessee’s own case. 5. Aggrieved, revenue is in appeal before us raising following grounds of appeal: “1. Whether on the fact and circumstances of the case and in law, the Ld. CIT(A) is justified deleting the penalty u/s 271D holding that there was reasonable cause u/s 273B for entering into such transaction through journal entries? 3 ITA No. 4052/ MUM/2019 Assessment Year: 2015-16 2. Whether on the fact and circumstances of the case and in law, the Ld. CIT(A) is justified in holding the journal entries should enjoy equal immunity on par with account payee cheques and bank drafts? 3. Whether, on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in giving the benefit of reasonable cause to a series of transactions, without appreciating that such benefit is available as an exception rather than a rule, to unlawfully granting perpetual legitimacy to transactions otherwise held to be illegal.?” 6. At the time of hearing, it is brought to our notice that the issue under consideration is in favour of the assessee. 7. On the other hand, Ld. DR also clearly agreed with the above facts on record however, he relied on the orders passed by the AO. 8. Considered the rival submissions and perused the material placed on record. We observed that in the preceding assessment year i.e. assessment year 2014-15, co-ordinate Bench has considered the issue and decided the issue in favour of the assessee, for the sake of brevity, we reproduce the same herein under: “3.5. We find the entire gamut of the case had been dealt in detail by the ld. CIT(A) in his order which have already been narrated hereinabove. The same are not reiterated herein for the sake of brevity as they remain undisputed. We find from the aforesaid factual narration and the basis of passing journal entries by the assessee in its books that these entries are merely passed for squaring up of transactions or adjustment of entries. This categorical finding given by the ld. CIT(A) in his order has not been controverted by the Revenue before us. Yet another categorical finding recorded by the ld. CIT(A) which remain uncontroverted by the Revenue before us is that these transactions were not made by the assessee with 4 ITA No. 4052/ MUM/2019 Assessment Year: 2015-16 a malafide intent to evade tax and that there is no evidence brought on record to even remotely suggest that the assessee company by passing the aforesaid journal entries had sought to introduce its unaccounted income into the system. We find that these are genuine transactions carried out in the normal course of the business of the assessee. Hence, if the aforesaid transactions are looked into from the perspective of the object and intention behind introduction of provisions of section 269SS and 269T of the Act , then the provisions of section 269SS and 269T of the Act cannot be made applicable to the facts of the instant case. Moreover, from the detailed explanation of the aforesaid transactions together with the purpose for which those journal entries were passed, it could be safely concluded that these entries neither reflect any receipt of loan nor repayment of loan. 3.6. We find from pages 5-7 of the impugned penalty order u/s.271D of the Act that assessee has given complete explanation of the transactions before the ld. Addl. CIT by way of detailed explanation together with the purpose of passing a journal entry including relevant journal entry passed in the books of accounts of the assessee company. The same are not reiterated for the sake of brevity herein as they are already forming part of the records. Hence it could be safely concluded that these entries were passed out of business constraints and exigencies and for administrative convenience with no malafide intent to evade payment of tax. In our considered opinion, this business constraint and exigency and administrative convenience itself constitutes reasonable cause within the meaning of section 273B of the Act . Hence no penalty u/s 271D and 271E of the Act could be invoked for the same. In this regard, we find that the Hon‟ble Jurisdictional High Court had addressed the similar issue whether the aforesaid behaviour of the assessee would constitute reasonable cause u/s 273B of the Act to escape from the rigors of applicability of provisions of section 269SS and 269T of the Act in the case of CIT vs Triumph International Finance (I) Ltd reported in 208 Taxman 299 (Bom). The relevant operative portion of the said decision is reproduced hereunder:- “23. The expression 'reasonable cause' used in Section 273B is not defined under the Act. Unlike the expression 'sufficient cause' used in 5 ITA No. 4052/ MUM/2019 Assessment Year: 2015-16 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. 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. 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 6 ITA No. 4052/ MUM/2019 Assessment Year: 2015-16 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. 3.7. We also find that the Hon‟ble Delhi High Court in the case of CIT vs Worldwide Township Projects Ltd reported in 229 Taxman 560 (Del) in the similar set of facts and circumstances had categorically observed as under:- 8. A plain reading of the aforesaid Section indicates that (the import of the above provision is limited) it applies to a transaction where a deposit or a loan is accepted by an assessee, otherwise than by an account payee cheque or an account payee draft. The ambit of the Section is clearly restricted to transaction involving acceptance of money and not intended to affect cases where a debt or a liability arises on account of book entries. The object of the Section is to prevent transactions in currency. This is also clearly explicit from clause (iii) of the explanation to Section 269SS of the Act which defines loan or deposit to mean "loan or deposit of money". The liability recorded in the books of accounts by way of journal entries, i.e. crediting the account of a party to whom monies are payable or debiting the account of a party from whom monies are receivable in the books of accounts, is clearly outside the ambit of the provision of Section 269SS of the Act, because passing such 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 Assessing Officer levied a penalty under Section 271D of the Act for alleged violation of the provisions of Section 269SS of the Act since the books of the assessee reflected 7 ITA No. 4052/ MUM/2019 Assessment Year: 2015-16 the liability on account of the lands acquired on its behalf. On appeal, the CIT (Appeals) affirmed the penalty. The order of the CIT was successfully impugned by the assessee before the ITAT. 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: (i) in the instant case, the transaction was by an account payee cheque, (ii) no payment on account was made in cash either by the assessed or on its behalf, (iii) no loan was accepted by the assessee in cash, and (iv) the payment of Rs. 4.85 crores made by the assessee through IL & FS, which holds more than 30 per cent. of the paid-up capital of the assessee, by journal entry in the books of account of the assessed by crediting the account of IL & FS. Having regard to the aforenoted findings, which are essentially findings of fact, we are in complete agreement with the Tribunal that the provisions of section 269SS were not attracted on the facts of the case. Admittedly, neither the assessee nor IL & FS had made any payment in cash. The order of the Tribunal does not give rise to any question of law, much less a substantial question of law. We accordingly decline to entertain the appeal. Dismissed." 9. In our view, the present appeal is bereft of any merit and is, accordingly, dismissed. 3.8. We find that though the ultimate finding recorded by the Hon‟ble Delhi High Court had been subsequently reversed by the decision of Hon‟ble Jurisdictional High Court in the case of Triumph International supra, still the observations made by the Hon‟ble Delhi High Court on the genuineness of the transactions in the ordinary course of business and the element of „reasonable cause‟ thereon, would still remain applicable and would have more persuasive value. 3.9. In view of our aforesaid observations and respectfully following the aforesaid judicial precedents relied upon hereinabove, we hold that the ld. CIT(A) had rightly held that no penalty u/s.271D of the Act could be 8 ITA No. 4052/ MUM/2019 Assessment Year: 2015-16 levied in respect of transactions with Jawala Real Estate Pvt. Ltd., Shreeniwas Cotton Mills Limited & Lodha Developers Private Limited totaling to Rs.66,01,707/- in the facts and circumstances of the instant case. Accordingly, the grounds raised by the Revenue are dismissed”. 9. Respectfully following the above decision, we are inclined to dismiss the grounds raised by the revenue. 10. In the result, appeal filed by the revenue is dismissed. Order pronounced in the open court on 03.06.2022. Sd/- Sd/- (ABY T VARKEY) JUDICIAL MEMBER (S. RIFAUR RAHMAN) ACCOUNTANT MEMBER (M. BALAGANESH) ACCOUNTANT MEMBER (SAKTIJIT DEY) JUDICIAL MEMBER (M. BALAGANESH) ACCOUNTANT MEMBER (SAKTIJIT DEY) JUDICIAL MEMBER म ुंबई Mumbai; दिन ुंक Dated: 03.06.2022 Alindra, PS आदेश प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपील र्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आय क्त(अपील) / The CIT(A)- 4. आयकर आय क्त / CIT 5. दिभ गीय प्रदिदनदि, आयकर अपीलीय अदिकरण, म ुंबई / DR, ITAT, Mumbai 6. ग र्ड फ ईल / Guard file. सत्य दपि प्रदि //True Copy// आदेशानुसार/ BY ORDER, उि/सहायक िंजीकार (Dy./Asstt. Registrar) आयकर अिीिीय अतिकरण, म ुंबई / ITAT, Mumbai