DCIT CEN CIR 7(3), MUMBAI V. JINESHWAR REAL ESTATE & FARMS P.LTD, MUMBAI

ITA 598/MUM/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6727 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 27-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bonafide belief; Reasonable cause
• Section: 273B

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL 'J' BENCH MUMB AI BEFORE SH. RAJENDRA ACCOUNTANT MEMBER AND SH. SHRIPAWAN SINGH, JUDICIAL MEMBER AND ITA NO.598/MUM/2017 (ASSESSMENT YEAR 2012-13) DCIT CC 7 (3), ROOM NO.655,65 TH FLOOR, AAYAKAR BHAWAN, M.K.ROAD, MUMBAI 400020 ----- APPELLANT / REVENUE REPRESENTED BY MISS AARJU GARODIA SR DR VERSUS M/S JINESHWAR REAL ESTATE & FARMS P LTD 216, SHAH AND NAHAR INDUSTRIAL ROAD, OFF. DR. E. MOSES ROAD, WORLI MUMBAI-400020. PAN: AABCJ8083E ----- RES PONDENT / ASSESSEE REPRESENTED BY SHRI VIJAY MEHTA CA (AR) DATE OF HEARIN G : 25.06.2018 D ATE OF PRONOUNCEMENT : 26.06.2018 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER ; 1. THIS APPEAL BY REVENUE UNDER SECTION 253 OF INCOME TAX ACT IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER (APPEALS) - 49, MUMBAI DATED 2 ND NOVEMBER 2016 FOR ASSESSMENT YEAR 2012- 13, WHICH IN TURN ARISES FROM PENALTY LEVIED UNDER SECTION 271D BY THE ADDI TIONAL COMMISSIONER OF INCOME TAX (ACIT) VIDE ITS ORDER DATED 28 SEPTEM BER 2015. THE REVENUE HAS RAISED FOLLOWING GROUND OF APPEAL. (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, LEARNED COMMISSIONER (APPEALS) ERRED IN DELETING PE NALTY OF RS.1099595 /-LEVIED UNDER SECTION 271D OF THE INCO ME TAX ACT 1961 ITA NO. 598 /M/2017 JINESHWAR REAL ESTATE 2 ON THE GROUND THAT GENUINENESS OF THE TRANSACTION MADE THROUGH JOURNAL ENTRIES IS NOT IN DOUBT. (2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE I N LAW, THE LEARNED COMMISSIONER (APPEALS) HAVING HELD THAT ASS ESSEE HAD CONTRAVENED THE PROVISION OF SECTION 269SS OF THE I NCOME TAX ACT 1961, OUGHT TO HAVE UPHELD THE LEVY OF PENALTY UND ER SECTION 271D AS THE ASSESSEE FAILED TO ESTABLISH THE COMPELLING REA SON OR GENUINE BUSINESS CONSTRAINT OR REASONABLE CAUSE FOR HAVING CONNECTION IN RESPECT OF EACH AND EVERY JOURNAL ENTRY WITH ITS GR OUP CONCERN . 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS A PRIV ATE LIMITED COMPANY, ENGAGED IN THE BUSINESS OF DEVELOPMENT AND CONSTRUC TION OF REAL ESTATE, FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2012 -13 ON 30 SEPTEMBER 2012 DECLARING LOSS OF RS. 6428/-. THE ASSESSMENT W AS COMPLETED UNDER SECTION 143 (3) ON 31 MARCH 2015 DETERMINING THE SA ME LOSS AS DECLARED IN THE RETURN OF INCOME. THE ASSESSING OFFICER DURI NG THE ASSESSMENT PROCEEDING NOTED THAT ASSESSEE HAS RECEIVED LOAN FR OM SISTER CONCERN THROUGH JOURNAL ENTRIES. THE ASSESSEE EXPLAINED ITS BUSINESS EXPEDIENCY AS REASONABLE CAUSE FOR PASSING THE JOURNAL ENTRIES AN D ALSO FILED COPY OF LEDGER ACCOUNT OF SISTER CONCERN WITH WHOM THE JOUR NAL ENTRIES WERE MADE. THE CONTENTION OF ASSESSEE WAS NOT ACCEPTED A S REASONABLE ONE BY ASSESSING OFFICER; THEREFORE, THE ASSESSING OFFICER REFERRED THE MATTER TO THE ADDITIONAL COMMISSIONER OF INCOME TAX. ON RECEIPT O F REFERENCE THE ACIT ISSUED NOTICE FOR INITIATION OF PENALTY UNDER SECTION 271D. THE ACIT ISSUED SHOW CAUSE NOTICE UNDER SECTION 271D RE AD WITH SECTION 274 ON 3 JULY 2015. THE ASSESSEE FILED ITS DETAILED REP LY ON 13 JULY 2015. THE ACIT AFTER GIVING HEARING TO THE ASSESSEE COMPANY L EVIED PENALTY UNDER ITA NO. 598 /M/2017 JINESHWAR REAL ESTATE 3 SECTION 271D FOR F RS. 1099595/-, VIDE ITS ORDER DA TED 29 SEPTEMBER 2015. ON APPEAL BEFORE LD. COMMISSIONER (APPEALS) T HE PENALTY LEVIED UNDER SECTION 271D WAS DELETED. THEREFORE, AGGRIEVE D BY THE ORDER OF LEARNED COMMISSIONER (APPEALS) THE REVENUE HAS FILE D PRESENT APPEAL BEFORE THIS TRIBUNAL. 3. WE HAVE HEARD THE LEARNED DEPARTMENTAL REPRESENTATI VE (DR) FOR THE REVENUE AND LEARNED AUTHORIZED REPRESENTATIVE ( AR ) OF THE ASSESSEE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AT THE OU TSET OF HEARING THE LEARNED AR OF THE ASSESSEE SUBMITS THAT THE GROUNDS OF APPEAL RAISED BY REVENUE IS COVERED IN FAVOUR OF ASSESSEE BY THE DEC ISION OF HONBLE JURISDICTIONAL HIGH COURT IN ASSESSEES GROUP CASES IN CIT VS AJINATH HITECH BUILDERS PRIVATE LIMITED & OTHERS IN ITAS NO. 171, 172, 202, 2.3, 218 AND 219 OF 2015 DATED 06 TH FEBRUARY 2018 AND FURTHER BY THE DECISION OF CO-ORDINATE BENCH OF TRIBUNAL IN CIT VE RSUS AASTHAVINAYAK ESTATE COMPANY LTD ( ITA NO. 602/M/ 2017 DATED 31 M AY 2018 AND CIT VS NATIONAL STANDARD INDIA LTD ( ITA NO. 6607/M/201 6 AND 6609/M/2016 DATED 6 TH JUNE 2018. THE LEARNED AR OF THE ASSESSEE FURTHER SUBMITS THAT THE JOURNAL ENTRIES WERE MADE PRIOR TO 12 JUNE 2012 AS THE PRESENT APPEAL PERTAINS TO ASSESSMENT YEAR 2 012-13. THEREFORE, THE RATIO OF DECISION IN CIT VS TRUMP INTERNATIONAL (I) LTD DATED 12 JUNE 2012 (345 ITR 270)/ [22 TAXMANN.COM 138(BOM)] IS NO T APPLICABLE. ITA NO. 598 /M/2017 JINESHWAR REAL ESTATE 4 4. ON GOING THROUGH THE VARIOUS DECISION OF TRIBUNAL A ND THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN CASE OF ASSESS EES GROUP CASE IN CIT VS AJINATH HITECH BUILDERS PRIVATE LIMITED (SUPRA) THE LEARNED DR CONCEDED THAT THE GROUND OF APPEAL RAISED BY THE RE VENUE ARE COVERED IN FAVOUR OF ASSESSEE BY VARIOUS DECISION OF TRIBUNAL AS REFEREED BY LD AR FOR THE ASSESSEE. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ACIT L EVIED THE PENALTY UNDER SECTION 271D ON HIS OBSERVATION THAT THE ASSE SSEE ACCEPTED LOAN/ DEPOSITS FROM SISTER CONCERN THROUGH JOURNAL ENTRIE S I.E. OTHERWISE THEN ACCOUNT PAYEE CHEQUE/DRAFT, THEREBY VIOLATED THE PR OVISIONS OF SECTION 269SS. THE ASSESSEE HAS TAKEN JOURNAL ENTRIES OF RS . 10,99,595/-FROM DHARAMNATH BUIDTECH & FARM PVT LTD. THE ASSESSING O FFICER FURTHER HELD THAT THE ASSESSEE HAS NOT MADE OUT ANY CASE OF REAS ONABLE CAUSE UNDER SECTION 273B BY MAKING THE REFERENCE THE DECISION O F HONORABLE BOMBAY HIGH COURT IN TRUMP INTERNATIONAL FINANCE (I) LTD ( SUPRA). 6. BEFORE LD. COMMISSIONER (APPEALS) THE ASSESSEE URGE D THAT THE JOURNAL ENTRIES HAVE BEEN MADE WITH THE GROUP CONCERN UNDER THE BONAFIDE BELIEF THAT SUCH TRANSACTION WOULD NOT BE HIT BY THE PROVI SIONS OF SECTION 269 SS IN VIEW OF THE VARIOUS JUDICIAL DECISION ON THIS IS SUE, INCLUDING THE DECISION OF DELHI HIGH COURT IN CASE OF NOIDA TOLL BRIDGE (262 ITR 260) AND SUCH LOAN BY WAY OF JOURNAL ENTRIES TRANSA CTION WERE UNDERTAKEN ITA NO. 598 /M/2017 JINESHWAR REAL ESTATE 5 FOR VARIOUS COMMERCIAL REASONS LIKE ASSIGNING OR RE CEIVABLE FOR OPERATIONAL EFFICIENCY, PAYMENT ON THE GROUP CONCE RN FOR SQUARING UP CONNECTION, FOR EASE OF CONSOLIDATION OF ACCOUNTS, RECTIFICATION ENTRIES ETC. THE LEARNED COMMISSIONER (APPEALS) AFTER REFERRING THE DECISION OF BOMBAY HIGH COURT IN TRUMP INTERNATIONAL (SUPRA) HE LD THAT REPAYMENT OF LOAN /DEPOSIT BY WAY OF JOURNAL ENTRIES WAS IN C ONTRAVENTION OF PROVISION OF SECTION 269SS HAS BEEN GIVEN AFTER THE CLOSE OF FINANCIAL YEAR 2011-12 RELEVANT TO ASSESSMENT YEAR 2012-13. THE LE ARNED COMMISSIONER (APPEALS) CONCLUDED THAT REASONS DISCLOSED BY ASSES SEE CONSTITUTE REASONABLE CAUSE WITHIN THE MEANING OF SECTION 273B OF THE ACT; PARTICULARLY IN LIGHT OF THE FACT THAT THERE IS NO FINDING THAT SUCH TRANSACTION WAS UNDERTAKEN TO EVADE THE TAX. THE LE ARNED COMMISSIONER (APPEALS) WHILE CONSIDERING THE CONTENTION OF ASSES SEE ALSO OBSERVED THAT THERE IS NO FINDING THAT TRANSACTION BY WAY OF JOUR NAL ENTRIES WERE UNDERTAKEN TO EVADE TAX AND DELETED THE PENALTY. 7. THE CO-ORDINATE BENCH OF TRIBUNAL IN ASSESSEES OWN CASE IN DCIT V. M/S AASHTHAVINAYAK ESTATE COMPANY LTD. (SUPRA) WHIL E FOLLOWING THE SIMILAR GROUND OF APPEAL, THE ASSESSEES GROUP CASE S PASSED THE FOLLOWING ORDER: 5. WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFUL LY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE DELIBERATED ON TH E JUDICIAL PRONOUNCEMENTS REFERRED BY LOWER AUTHORITIES IN THEIR RESPECTIVE O RDERS AS WELL AS CITED BY LEARNED AR AND DR DURING THE COURSE OF HEARING BEFO RE US IN THE CONTEXT OF FACTUAL MATRIX OF THE CASE. WE HAD ALSO CAREFULLY G ONE THROUGH THE ORDERS OF THE ITA NO. 598 /M/2017 JINESHWAR REAL ESTATE 6 TRIBUNAL IN THE GROUP CASES OF THE ASSESSEE WHICH WAS UPHELD BY THE HONBLE JURISDICTIONAL HIGH COURT AS STATED ABOVE. 6. FROM THE RECORD WE FOUND THAT AO HAS LEVIED PENA LTY U/S.271D FOR ACCEPTING LOAN BY WAY OF JOURNAL ENTRIES. THE ASSES SING OFFICER HAD PLACED RELIANCE ON THE JUDGMENT OF THE HON'BLE JURISDICTIO NAL HIGH COURT IN THE CASE OF CIT V. TRIUMPH INTERNATIONAL FINANCE (I) LTD. (345 ITR 270) RENDERED ON 12.06.2012. IT IS NOT DISPUTED THAT IN THIS JUDGMEN T IT WAS HELD THAT THERE WAS VIOLATION OF THE PROVISIONS OF S. 269T OF THE ACT I N A CASE WHERE THE LOAN WAS REPAID BY WAY OF A JOURNAL ENTRY ENTAILING LEVY OF PENALTY U/S. 271E OF THE ACT. HOWEVER, AT THE SAME TIME IT WAS ALSO HELD THAT LEV Y OF PENALTY COULD BE AVOIDED ON SHOWING REASONABLE CAUSE. IN THE PREMISE S, LEVY OF PENALTY U/SS. 271D OF THE ACT IS NOT AUTOMATIC, BUT THE GENUINENE SS OR OTHERWISE OF THE REASONS DUE TO WHICH REPAYMENT WAS MADE BY JOURNAL ENTRY HAS TO BE CONSIDERED JUDICIOUSLY. 7. IN THE ORDER REPORTED AS LODHA BUILDERS (P) LTD. V. ACIT [2014] 163 TTJ 778 (MUM), A BUNCH OF APPEALS BELONGING TO LODHA GR OUP (TO WHICH THE PRESENT ASSESSEE BELONGS) INVOLVING IDENTICAL ISSUE, WAS DI SPOSED OF BY THE CO-ORDINATE BENCH IN WHICH LEVY OF SIMILAR PENALTIES WAS HELD T O BE NOT SUSTAINABLE AS THERE WAS A REASONABLE CAUSE, COPIES OF WHICH HAVE BEEN P LACED ON RECORD. IN DECIDING THE DISPUTE IN FAVOUR OF THE ASSESSEE, THE HON'BLE TRIBUNAL HAD CONSIDERED AND APPLIED THE RATIO LAID DOWN BY THE H ON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. TRIUMPH INTERNATIONAL F INANCE (I) LTD. (345 ITR 270). 8. THE AFORESAID ORDER OF THE HON'BLE TRIBUNAL WAS APPROVED BY THE HONBLE JURISDICTIONS! HIGH COURT IN THEIR JUDGMENT AND ORD ER DATED 06.02.2018 IN THE CASE OF CIT V. AJINATH HI-TECH BUILDERS PVT LTD. AN D OTHERS, COPIES OF WHICH HAVE ALSO BEEN PLACED ON RECORD. IN THIS CASE, IT W AS ALSO HELD THAT PRIOR TO THE JUDGMENT IN CIT V. TRIUMPH INTERNATIONAL FINANCE (I ) LTD. (345 ITR 270), THERE WERE SERIES OF ORDERS ON THIS POINT HOLDING THAT JO URNAL ENTRY WOULD NOT FALL FOUL OF S. 269SS OF THE ACT. SINCE THE JUDGMENT IN CIT V . TRIUMPH INTERNATIONAL FINANCE (I) LTD. (345 ITR 270) WAS RENDERED ON 12.0 6.2012, IT WAS HELD, THAT THE ASSESSEE COULD HAVE HAD A BONAFIDE BELIEF PRIOR TO THAT DATE THAT THERE WAS NO VIOLATION OF S. 269SS OF THE ACT IN ACCEPTING LO AN BY JOURNAL ENTRY. 9. WHILE DECIDING THE ISSUE, THE CIT(A) HAS ALSO FO LLOWED THE DECISION OF JURISDICTIONAL HIGH COURT IN CASE OF GROUP CONCERN OF THE CASE. THE FACTS AND CIRCUMSTANCES DURING THE YEAR UNDER CONSIDERATION A RE SAME, ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FO R DELETING THE PENALTY IMPOSED U/S.271D BY RELYING ON THE DECISION OF JURI SDICTIONAL HIGH COURT IN GROUP CASE OF THE ASSESSEE. 8. FURTHER, THE CO-ORDINATE BENCH IN ASSESSEES GROUP CASE IN DCIT V. NATIONAL STANDARD INDIA LTD. (SUPRA) WHILE REFERRIN G THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN CIT V. AJITNAT H HI-TECH BUILDERS ITA NO. 598 /M/2017 JINESHWAR REAL ESTATE 7 PVT. LTD. (SUPRA) HELD THAT THE JOURNAL ENTRIES PAS SED PRIOR TO 12.06.2012, THE DATE ON WHICH BOMBAY HIGH COURT IN CASE OF CIT V. TRUMPH INTERNATIONAL FINANCE (I) LTD. WAS PRONOUNCED. THER EFORE, PRIOR TO 12.06.2012 IT CAN BE SAFELY CONCLUDED, WHEREIN THE ASSESSEE UNDER THE BONAFIDE BELIEF, PASSED JOURNAL ENTRY, COULD NOT BE SUBJECT TO PENALTIES UNDER SECTION 271D & 271E. 9. CONSIDERING THE DECISION OF HONBLE BOMBAY HIGH COU RT IN CASE OF CIT V AJITNATH HI-TECH BUILDERS PVT. LTD.(SUPRA) AND TRIB UNALS ORDERS IN ASSESSEES GROUP CASE IN NATIONAL STANDARD INDIA AN D M/S AASHTHAVINAYAK ESTATE COMPANY LTD. (SUPRA), WE DO NOT FIND ANY REA SON TO INTERFERE WITH THE FINDING OF LD. COMMISSIONER (APPEALS). 10. IN THE RESULT, APPEAL FILED BY REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 26 TH DAY OF JUNE, 2018. SD/- SD/- (RAJENDRA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 26/06/2018 S.K.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (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/