DCIT CEN CIR 7(3), MUMBAI V. AASHTHAVINAYAK ESTATE COMPANY P.LTD, MUMBAI

ITA 602/MUM/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7137 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 27-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M C OMI NINGSHEN
• Keywords: Income from undisclosed sources; Bonafide belief; Reasonable cause; Commercial expediency; Capital expenditure
• Section: 273B; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI SANDEEP GOSAIN , JM ITA NO. 602/ MUM/20 17 ( ASSESSMENT YEAR : 2009 - 10 ) DCIT CENT CIR 7(3) ROOM NO. 655, 6 TH FLOOR, AAYAKAR BHAVAN M.K. ROAD, MUMBAI 400 02 0 VS. M/S. AASTHAVINAYAK ESTATE COMPANY LTD., 216, SHAH AND NAHAR INDUSTRIAL ROAD, DR. E. MOSES ROAD WORLI, MUMBAI 400 018 PAN/GIR NO. AAGCA2863C APPELLANT ) .. RESPONDENT ) REVENUE BY SHRI M.C.OMI NINGSHEN ASSESSEE BY SH RI VIJAY MEHTA DATE OF HEARING 16/04/2018 DATE OF PRONOUNCEMENT 31 / 05 /2018 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) - 49, MUMBAI DATED 25/11/2016 FOR A.Y.2009 - 10 IN THE M ATTER OF PENALTY IMPOSED U/S.271D OF THE IT ACT. 2. GROUNDS TAKEN BY REVENUE READS AS UNDER: - 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CLT(A) ERRED IN DELETING THE PENALTY OF RS.2 ,18,0 0, 66 7/ - LEVIED U/S.271D OF THE INCOME TAX ACT, 1961 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 AND IN LAW, THE LD.CIT(A) HAVING HELD THAT THE ASSESSEE HAD CONTRAVENED THE PROVISION S OF SECTION 269SS OF THE INCOME TAX ACL, 1961, OUGHT TO HAVE UPHELD THE LEVY OF ITA NO. 602/MUM/2017 M/S. AASHTHAVINAYAK ESTATE COMPANY LTD ., 2 PENALTY U/S.27LD AS THE ASSESSEE FAILED TO ESTABLISH THE COMPELLING REASONS OR GENUINE BUSINESS CONSTRAINTS OR REASONABLE CAUSE FOR HAVING TRANSACTIONS IN RESPECT OF EACH AND EVERY JOURNAL ENTRY WITH ITS GROUP CONCERNS. AT THE OUTSET IT WAS SUBMITTED BY AR THAT ISSUE IS COVERED BY THE ORDER OF BOMBAY HIGH COURT IN THE CASE OF GROUP CONCERN. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. THE BRIEF FACTS OF THE CASE A RE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF LAND DEVELOPMENT AND CONSTRUCTION OF REAL ESTATE PROPERTIES. THE ASSESSEE FILED ITS RETURN OF INCOME ON 10.07.2008 DECLARING LOSS AT RS.50,965/ - FOR A.Y. 2008 - 09. THE CASE WAS REO PENED VIDE NOTICE DATED 4.10. 2013 U/S.148. THE ASSESSMENT U/S.143(3) R.W.S. 147 OF THE ACT WAS COMPLETED ON 31 . 3.2015 DETERMINING TOTAL INCOME AT RS.4,68,320/ - . A REFERENCE FOR CONSIDERATION OF PENALTY U/S.271D & 271E OF THE IT. AC T WAS RECEIVED BY THE ADD L. CIT CENTRAL RANGE - 7 FROM THE A.O. (DCIT, CENT. CIR. - 7(3), MUMBAI THROUGH LETTER DATED 25.6.2015 INTIMATING THAT THE ASSESSEE HAS ACCEPTED LOANS/DEPOSITS FROM VARIOUS SISTER CONCERNS THROUGH JOURNAL ENTRIES I.E OTHERWISE THAN ACCOUNT PAYEE CHEQUE/DRAFT, THEREBY STATING THAT THE ASSESSEE HAS VIOLATED THE PROVISIONS OF SECTION 269SS OF THE INCOME TAX ACT . ACCORDINGLY, AO LEVIED PENALTY U/S.271D. BEING NOT SATISFIED BY ASSESSEES REPLY, AO LEVIED PENALTY OF RS.20,187/ - U/S.271D. 4. BY THE IMPUGNED ORDER, CI T(A) DELETED THE SAME AFTER OBSERVING AS UNDER: - 7.0. I HAVE CONSIDERED THE FACTS OF THE CASE, THE STAND TAKEN BY THE ADDL. CIT, CENTRAL RANGE - 7 IN THE PENALTY ORDER, THE GROUNDS OF APPEAL AND THE WRITTEN SUBMISSIONS FILED BY THE APPELLANT DURING THE APPEA L ITA NO. 602/MUM/2017 M/S. AASHTHAVINAYAK ESTATE COMPANY LTD ., 3 PROCEEDINGS. GROUND NO.2 IS GENERAL IN NATURE AND IS LINK ED TO OTHER GROUNDS. 7.1. THE ASSESSMENT IN THIS CASE WAS COMPLETED U/S.143(3)R.W.S.147 OF THE ACT ON 31.3.2015 AT TOTAL INCOME OF RS,4,68,320/ - . IN THE ASSESSMENT ORDER IT WAS OBSERVED BY THE A.O. THAT THE ASSESSEE HAS VIOLATED THE PROVISIONS OF SECTION 269SS/269T BY NOT ACCEPTING/NOT REPAYING THE LOANS THROUGH ACCOUNT PAYEE CHEQUE OR BANK DRAFT AND ACCORDINGLY A REFERENCE WAS MADE TO THE ADDL.CIT., CENTRAL RANGE - 7, MUMBAI. THE ADDL.CIT HAS LEVIED THE PENALTY U/S.271D WITH RESPECT TO THE TOTAL OF CREDIT ENTR IES AMOUNTING TO RS.2,18,05,667/ - , ARISING IN ITS BOOKS BY WAY OF JOURNAL ENTRIES IN THE ACCOUNT OF LODHA DEVELOPERS PVT. LTD., SHRI VARDHVINAYAK BUILDERS PVT LTD, AJITNATH HI TECH BUILDERS PVT L TD, LODHA HI RISE BUILDERS PVT LTD REFLECTED DURING THE FINANCIAL YEAR 2007 - 08 RELEVANT TO A.Y. 2008 - 09. THE ADDL.CIT HAS REFIED ON THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF TRIUMPH INTERNATIONAL FINANCE(L) LTD TO HOLD THAT THE TRANSACTION O F LOAN/DEPOSIT BY WAY OF ADJUSTMENT THROUGH BOOK ENTRIES WILL RESULT IN CONTRAVENTION OF THE PROVISIONS OF SECTION 269SS OF THE ACT. FURTHER, IT WAS FOUND THAT THE APPELLANT COULD NOT PROVE ANY REASONABLE CAUSE FOR CONTRAVENTION OF ABOVE SAID PROVISION, TH E ADDL.CIT HAS TAKEN THE VIEW THAT IN THE CASE OF TRIUMPH INTERNATIONAL (SUPRA) THE TRANSACTION WAS IN THE NATURE OF SQUARING UP WITH THE SAME PARTY AND ACCORDINGLY THE BENEFIT OF REASONABLE CAUSE WOULD BE AVAILABLE, IF THE TRANSACTIONS BY WAY OF PASSING J OURNAL ENTRIES WERE WITH RESPECT TO THE SAME PARTY. THE ADDL.CIT HAS ALSO OBSERVED THAT IN VIEW OF THE DISCLOSURE MADE BY THE GROUP COMPANIES BEFORE THE INCOME TAX SETTLEMENT COMMISSION, MUMBAI, FOLLOWING SEARCH IN THE LODHA GROUP OF CASES ON 10.12011, IT COULD NOT BE RULED OUT THAT THE ENTITIES THROUGH WHOM SUCH REPAYMENT/ACCEPTANCES ARE DONE BY WAY OF JOURNAL ENTRIES ARE NOT PART OF A CHAIN OF ENTITIES INVOLVED IN TRANSACTION FOR THE PURPOSE OF TAX EVASION. 7.2. THE APPELLANT HAS SUBMITTED THAT THE JOURN AL ENTRIES PASSED FOR TRANSACTIONS ASSIGNING DEBTS AND LIABILITIES AMONG SISTER CONCERNS AND REIMBURSEMENT OF EXPENSES DO NOT CONSTITUTE ACCEPTANCE OF LOAN OR DEPOSIT OF MONEY AS PER PROVISIONS OF SECTION 269SS OF THE ACT. IT HAS BEEN SUBMITTED THAT OUT OF THE TOTAL CREDITS, AN AMOUNT OF RS.55,18,391/ - HAS BEEN CREDITED IN THE ACCOUNT OF LODHA HI - RISE BUILDERS PVT. LTD (LHRBPL) ON 31,3.2008 BEING AMOUNT PAYABLE TO AJITNATH HI - TECH BUILDERS PVT LTD TRANSFERRED TO LHRBPL. SIMILARLY, THE ACCOUNT OF LHRBPL HAS BEEN CREDITED BY RS.53,82,6137 - ON 31.3.2008 ON TRANSFER OF AMOUNT PAYABLE TO LODHA BUILDERS PVT LTD TO LHRBPL AND BY RS.37,89,912/ - ON TRANSFER OF AMOUNT PAYABLE TO LDPL TO LHRBPL. THE ACCOUNT OF AJITNATH HI - TECH BUILDERS PVT LTD HAS BEEN CREDITED BY RS.3 0,02,422/ - ON ACCOUNT OF PAYMENT MADE BY IT TO LAND VENDOR ON BEHALF OF THE APPELLANT COMPANY. IT IS ALSO SUBMITTED THAT THE ACCOUNT OF AJITNATH HI - TECH BUILDERS PVT LTD HAS BEEN CREDITED BY RS.5000/ - IN CASH ON 26.3.2008. THESE TRANSACTIONS HAVE BEEN CATEG ORISED AS TRANSFER OF INTER - COMPANY BALANCE, ASSIGNMENT OF DEBT AND ON BEHALF PAYMENT ETC. PENALTY HAS BEEN LEVIED U/S.271 D WITH RESPECT TO THE ABOVE SAID ITA NO. 602/MUM/2017 M/S. AASHTHAVINAYAK ESTATE COMPANY LTD ., 4 AMOUNTS. OTHER CREDIT ENTRIES ARE STATED TO BE VARIOUS SMALL AMOUNTS OF SIMILAR NATURE, ON ACCOUNT P AYMENT ETC. IT HAS BEEN SUBMITTED THAT THE LEVY OF PENALTY WAS NOT JUSTIFIED SINCE THE TRANSACTIONS MADE THROUGH JOURNAL ENTRIES WERE BONAFIDE AND OUT OF COMMERCIAL EXPEDIENCY AND SINCE THERE EXISTED REASONABLE CAUSE U/S.273BOF THE ACT . 7.2.1. FROM THE AC COUNT OF SHRI VARDHVINAYAK BUILDERS PVT LTD, IN THE BOOKS OF THE APPELLANT COMPANY IT IS NOTED THAT THERE IS A DEBIT BALANCE OF RS.9,29,030/ - ON 23.7.2007 ON ACCOUNT OF VARIOUS TRANSACTIONS BY WAY OF CHEQUE. THERE IS A PROVISION OF INTEREST OF RS.79,067/ - ON 31.3.2008 AND THE ENTIRE DEBIT BALANCE OF RS.10,08,097/ - HAS BEEN TRANSFERRED TO LODHA H - RISE BUILDERS PVT LTD ON 31,3.2008. THE A.O. HAS CONSIDERED THE CREDIT TOTAL AND DEBIT TOTAL OF RS.31,08,097/ - IN THE ACCOUNT OF SHRI VARDHVINAYAK BUILDERS PVT LTD T OWARDS LEVY OF PENALTY U/S.271D/271E. THIS IS NOT CORRECT SINCE THE ENTIRE DEBIT AMOUNT IS BY WAY OF CHEQUE AND PROVISION OF INTEREST OF RS.79,067/ - WOULD NOT ATTRACT LEVY OF PENALTY. SIMILARLY, THE CREDIT AMOUNTS ARE BY WAY OF CHEQUE AND ASSIGNMENT OF REC EIVABLE/DEBIT BALANCE FROM SHRI VARDHVINAYAK BUILDERS PVT LTD TO LHRBPL, WHICH DOES NOT RESULT IN A LOAN IN THE ACCOUNT OF THE FORMER, WOULD NOT ATTRACT LEVY OF PENALTY U/S 271 D/ 271E . 7.3. FROM THE DETAILS FURNISHED AND SUBMISSIONS MADE IT IS NOTED THAT THE PENALTY HAS BEEN LEVIED WITH RESPECT TO JOURNAL ENTRIES WITH, GROUP CONCERN, WHICH HAVE BEEN UNDERTAKEN TO ASSIGN RECEIVABLES, PAYMENT ON BEHALF OF GROUP CONCERN FOR SQUARING UP TRANSACTIONS AND FOR EASE IN CONSOLIDATION OF ACCOUNTS, RECTIFICATION ENT RIES ETC EXCEPT FOR CASH ENTRY OF RS.5000/ - ON 26.3.2008 IN THE ACCOUNT OF SHRI AJITNATH HI - TECH BUILDERS PVT LTD. AS A RESULT OF THIS CASH ENTRY THE CREDIT BALANCE HAS INCREASED FROM RS.42,83,2397 - TO RS.42,88,239/ - . NO EXPLANATION FOR TAKING THIS CASH LO AN OF RS.5000/ - IN CONTRAVENTION OF SECTION 269SS HAS BEEN FURNISHED. AS A RESULT OF THESE ENTRIES THE RECEIVABLES HAVE GONE UP OR DOWN RESULTING IN TAKING OF LOAN/ REPAYMENT OF LOAN. THE APPELLANT COMPANY HAS ALSO PAID INTEREST ON SUCH LOANS TAKEN. SINCE T HE TRANSACTIONS ARE FOR MORE THAN THE AMOUNT OF RS.20,000/ - AND THE SAME ARE NOT THROUGH ACCOUNT PAYEE CHEQUE OR BANK DRAFT, THERE IS VIOLATION OF THE PROVISIONS OF SECTION 269SS/269T. 7.3.1. IN THIS REGARD RELIANCE IS PLACED ON THE DECISION OF THE JURISD ICTIONAL HIGH COURT IN THE CASE OF CIT VS TRIUMPH INTERNATIONAL FINANCE(L) LTD DATED JUNE 12, 2012 (22 TAXMANN.COM 138 BOM) FOR A.Y, 2003 - 04 AND THE CASE OF CIT VS M/S. TRIUMPH INTERNATIONAL FINANCE(L) LTD ITA NO.5745 OF 2010 DATED 17.8.2012 FOR A.Y.2000 - 0 1. THE DECISION FOR A.Y.2003 - 04 IS WITH RESPECT TO CONTRAVENTION OF PROVISIONS OF SECTION 269T, SINCE THERE WAS A REPAYMENT OF LOAN BY MAKING JOURNAL ENTRIES IN THE BOOKS OF ACCOUNT AND IT WAS HELD BY THE HON'BLE COURT THAT REPAYMENT OF LOAN/DEPOSIT, EXCEP T BY THE MODES SPECIFIED IN SECTION 269T, WOULD AMOUNT TO CONTRAVENTION OF THE SAID ITA NO. 602/MUM/2017 M/S. AASHTHAVINAYAK ESTATE COMPANY LTD ., 5 PROVISION. THE DECISION FOR THE A.Y.2000 - 01 IS WITH RESPECT TO CONTRAVENTION OF PROVISIONS OF SECTION 269SS WHEREIN THE APPELLANT COMPANY AND ITS SISTER CONCERN M/S. TRIUMP H SECURITIES LTD HAD TRANSACTIONS OF SALE AND PURCHASE WITH COMMON CUSTOMERS AND THE CREDIT/DEBIT LIABILITIES WERE SETTLED THROUGH JOURNAL ENTRIES. THE HON'BLE COURT HELD, APPLYING THE RATIO LAID DOWN IN ITA NO.5746 OF 2010 DECIDED ON 12 TH JUNE 2012 (THE D ECISION FOR A.Y.2003 - 04), THAT RECEIVING LOANS/DEPOSITS THROUGH JOURNAL ENTRIES WOULD BE IN VIOLATION OF SECTION 269SS OF THE ACT. 7. 3.2 FURTHER, I FIND THAT THE ISSUE REGARDING LEVY OF PENALTY U/S.271D/271E OF THE IT. ACT IN THE CASE OF VARIOUS OTHER COM PANIES OF LODHA GROUP (LODHA BUILDERS PVT LTD VS ACIT AND FIVE OTHER GROUP CONCERNS) FOR A.Y.2009 - 10 HAS BEEN DECIDED BY THE ITAT '' BENCH, MUMBAI VIDE ORDER DATED 27.6,2014. IN THE SAID ORDER, UNDER SIMILAR FACTS AND CIRCUMSTANCES, THE ITAT IS OF THE OPI NION THAT THE ASSESSEE HAS VIOLATED THE PROVISIONS OF SECTION 269SS/269T OF THE ACT IN RESPECT OF JOURNAL ENTRIES. ACCORDINGLY, FOLLOWING THE ABOVE SAID DECISION, IT IS HELD THAT THE APPELLANT HAS RECEIVED THE LOAN AMOUNT OF RS.186,97,570/ - ( RS.218,05,667 ( - ) RS.31,08,097/ - ) BY WAY OF JOURNAL ENTRIES, AS NOTED IN THE PENALTY ORDER, IN CONTRAVENTION OF THE PROVISION OF SECTION 269SS AND GROUND NO,3 TAKEN BY THE APPELLANT IN THIS REGARD IS DISMISSED. 7 . 4. GROUND NO.4 TO 9 ARE AGAINST THE FINDING OF THE ADD! .CIT THAT PENALTY WAS LEVIABLE U/S.271D OF THE ACT SINCE NO REASONABLE CAUSE COULD BE FOUND IN THIS CASE. IN THIS REGARD IT IS OBSERVED THAT THE WORDS 'REASONABLE CAUSE' HAVE NOT BEEN DEFINED UNDER THE I.T. ACT, THOUGH, IT HAS BEEN INTERPRETED BY VARIOUS C OURTS. THE HON'BLE DELHI HIGH COURT HAS ENUNCIATED THE MEANING OF THE TERM 'REASONABLE CAUSE' IN THE CASE OF AZADI BACHAO ANDOLAN VS. UNION OF INDIA 252 ITR 471 TO BE A CAUSE WHICH PREVENTS A MAN OF AVERAGE INTELLIGENCE AND ORDINARY PRUDENCE, ACTING UNDER NORMAL CIRCUMSTANCES, WITHOUT NEGLIGENCE OR INACTION OR WANT OF BONAFIDES. IN WOODWARD GOVERNORS INDIA (P) LTD. VS. CIT 118 TAXMAN 433 (DELHI), THE HON'BLE DELHI HIGH COURT CONSIDERED THE MEANING OF REASONABLE CAUSE AND HELD : 'REASONA BLE CAUSE AS APPLIED TO HUMAN ACTION IS THAT WHICH WOULD CONSTRAIN A PERSON OF AVERAGE INTELLIGENCE AND ORDINARY PRUDENCE. IT CAN BE DESCRIBED AS A PROBABLE CAUSE. IT MEANS AN HONEST BELIEF FOUNDED UPON REASONABLE GROUNDS, OF THE EXISTENCE OF A STATE OF CI RCUMSTANCES, WHICH, ASSUMING THEM TO BE TRUE, WOULD REASONABLY LEAD ANY ORDINARY PRUDENT AND CAUTIOUS MAN, PLACED IN THE POSITION OF THE PERSON CONCERNED, TO COME TO THE CONCLUSION THAT THE SAME WAS THE RIGHT THING TO DO.' IN THE CASE OF CIT VS, TRIUMPH I NTERNATIONAL FINANCE (I.) LTD. (SUPRA), THE HON'BLE BOMBAY HIGH COURT HAS HELD : ITA NO. 602/MUM/2017 M/S. AASHTHAVINAYAK ESTATE COMPANY LTD ., 6 (I) THAT THE TRIBUNAL WAS NOT JUSTIFIED IN HOLDING THAT REPAYMENT OF LOAN OR DEPOSIT THROUGH JOURNAL ENTRIES DID NOT VIOLATE THE PROVISIONS OF SECTION 269T OF THE ACT. (II) T HAT IT WOULD HAVE BEEN AN EMPTY FORMALITY TO REPAY THE LOAN OR DEPOSIT AMOUNT BY ACCOUNT - PAYEE CHEQUE OR DRAFT AND RECEIVE BACK ALMOST THE SAME AMOUNT TOWARDS THE SALE PRICE OF THE SHARES. NEITHER THE GENUINENESS OF THE RECEIPT OF LOAN OR DEPOSIT NOR THE T RANSACTION OF REPAYMENT OF LOAN BY WAY OF ADJUSTMENT THROUGH BOOK ENTRIES CARRIED OUT IN THE ORDINARY COURSE OF BUSINESS HAD BEEN DOUBTED IN THE REGULAR ASSESSMENT. THERE WAS NOTHING ON RECORD TO SUGGEST THAT THE AMOUNTS ADVANCED BY INVESTMENT TRUST OF IND IA TO THE ASSESSEE REPRESENTED THE UNACCOUNTED MONEY OF THE INVESTMENT TRUST OF INDIA OR THE ASSESSEE. THE FACT THAT THE ASSESSEE - COMPANY BELONGED TO THE KETAN PAREKH GROUP INVOLVED IN THE SECURITIES SCAM COULD NOT BE A GROUND FOR SUSTAINING PENALTY IMPOSE D UNDER SECTION 271E OF THE ACT IF REASONABLE CAUSE WAS SHOWN BY THE ASSESSEE FOR FAILING TO COMPLY WITH THE PROVISIONS OF SECTION 2697. SETTLING CLAIMS BY MAKING JOURNAL ENTRIES IN THE RESPECTIVE BOOKS IS ALSO ONE OF THE RECOGNIZED MODES OF REPAYING LOAN OR DEPOSIT. THEREFORE, ON THE FACTS, IN THE ABSENCE OF ANY FINDING RECORDED IN THE ASSESSMENT ORDER OR IN THE PENALTY ORDER TO THE EFFECT THAT THE REPAYMENT OF LOAN OR DEPOSIT WAS NOT A BONAFIDE TRANSACTION AND WAS MADE WITH A VIEW TO EVADE TAX, THE CAUSE SHOWN BY THE ASSESSEE WAS A REASONABLE CAUSE AND 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. 7.5. IN THE APPELLANT'S CASE THE GENUINENESS OF THE TRANSA CTION MADE THROUGH JOURNAL ENTRIES IS NOT IN DOUBT AND IT HAS NOT BEEN SHOWN EITHER IN THE ASSESSMENT PROCEEDINGS OR IN THE PENALTY PROCEEDINGS THAT UNACCOUNTED INCOME OF THE LENDER OR THE BORROWER WAS INVOLVED. FROM THE ASSESSMENT ORDER PASSED U/S.143(3} DATED 31.3.2015, IT IS NOTED THAT THE TOTAL INCOME HAS BEEN ASSESSED AFTER MAKING THE FOLLOWING ADDITIONS : I) LAND & BROKERAGE INCOME - RS.5,00,000/ - (II) CAPITAL EXPENDITURE - RS.19.284/ - AND PENALTY PROCEEDINGS U/S.271(1)(C) HAVE BEEN INITIATED . THIS ADDITIONAL INCOME REPRESENTS THE ADDITIONAL INCOME DISCLOSED BEFORE THE SETTLEMENT COMMISSION, WHICH WAS NOT ALLOWED TO BE PROCEEDED WITH VIDE ORDER U/S.245D(1) DATED 12.2.2013. HOWEVER, THERE IS NO FINDING THAT THE TRANSACTIONS BY WAY OF JOURNAL EN TRIES WERE NOT BONAFIDE OR HAD BEEN UNDERTAKEN TO EVADE TAX. 7.5.1. FURTHER, THE APPELLANT HAS SUBMITTED THAT THERE WAS REASONABLE CAUSE FOR THE ABOVE SAID CONTRAVENTION OF SECTION 269SS SINCE (I) THE JOURNAL ENTRIES HAVE BEEN MADE WITH THE GROUP CONCERNS UNDER THE BONAFIDE BELIEF THAT SUCH TRANSACTIONS WOULD NOT BE HIT BY THE PROVISIONS OF SECTION 269SS IN VIEW OF VARIOUS JUDICIAL DECISIONS ON THIS ISSUE, INCLUDING - THE DECISION OF HIGH COURT OF DELHI IN THE CASE OF NOIDA TOLL BRIDGE 262 ITR 260 AND (II) S UCH LOANS BY WAY OF JOURNAL ENTRY TRANSACTIONS WERE UNDERTAKEN FOR VARIOUS COMMERCIAL REASONS LIKE ASSIGNING OF RECEIVABLES FOR OPERATIONAL EFFICIENCY, PAYMENT ON BEHALF OF GROUP CONCERN FOR SQUARING UP TRANSACTIONS, FOR EASE IN CONSOLIDATION OF ACCOUNTS, RECTIFICATION ENTRIES ETC. IN THIS REGARD I FIND THAT THE DECISION DATED JUNE 12, 2012, OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. TRIUMPH INTERNATIONAL FINANCE(L) LTD (SUPRA), HOLDING THAT REPAYMENT OF LOAN/DEPOSIT BY WAY OF JOURNAL ENTRIES W AS IN CONTRAVENTION OF PROVISION OF SECTION 269T HAS BEEN GIVEN AFTER THE CLOSE OF THE FINANCIAL YEAR 2011 - 12 RELEVANT TO A.Y.2012 - 13. !N MY CONSIDERED OPINION ITA NO. 602/MUM/2017 M/S. AASHTHAVINAYAK ESTATE COMPANY LTD ., 7 THE ABOVE SAID REASONS DO 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 TRANSACTIONS WERE UNDERTAKEN TO EVADE TAX. RELIANCE IS PLACED ON THE DECISION OF THE ITAT DATED 27.6.2014 IN THE CASE OF LODHA BUILDERS PVT LTD VS ACIT ITA NO.476/M/2014 AND ITA NO.4 81/M/2014 A.Y.2009 - 1Q AND FIVE OTHER GROUP CASES, WHEREIN UNDER SIMILAR FACTS AND CIRCUMSTANCES, IT HAS BEEN HELD THAT THE ASSESSEE HAS SHOWN REASONABLE CAUSE AND THEREFORE, THE PENALTY IMPOSED U/S.271D/271E OF THE ACT ARE NOT SUSTAINABLE. HOWEVER, THERE I S A CONTRAVENTION OF SECTION 269SS IN RESPECT OF THE CASH LOAN OF RS.5000/ - TAKEN ON 26.3.2008 FROM AJITNATH HI - TECH BUILDERS PVT LTD WHEN THE CREDIT BALANCE WAS RS42,88,239/ - I.E. MORE THAN RS.20,000/ - . THEREFORE, LEVY OF PENALTY U/S.271D IN RESPECT OF RS .5000/ - IS FOUND TO BE JUSTIFIED. 7.5.2. IN THE PENALTY ORDER THE ADDL.CIT HAS OBSERVED THAT THE PLEA OF THE ASSESSEE FOR THE BENEFIT OF REASONABLE CAUSE CANNOT BE ACCEPTED AS THE SPIRIT OF THE BOMBAY HIGH COURT JUDGEMENT ( IN THE CASE OF CIT VS TRIUMPH I NTERNATIONAL FINANCE(L) LTD) IS ONLY THAT SUCH TRANSACTIONS WHICH ARE IN THE NATURE OF SQUARING UP WITH THE SAME PARTY CAN ONLY CLAIM THE BENEFIT OF REASONABLE CAUSE. THIS OBSERVATION IS FOUND TO BE WITHOUT MERIT PARTICULARLY IN LIGHT OF THE DECISION OF HI GH COURT OF BOMBAY IN THE CASE OF CIT VS M/S. TRIUMPH INTERNATIONAL FINANCE(L) LTD ITA NO.5745 OF 2010 DATED 17.8.2012 FOR THE A.Y.2000 - 01,AS NOTED IN PARA 6.3 ABOVE, WHEREIN THE APPELLANT COMPANY AND ITS SISTER CONCERN M/S. TRIUMPH SECURITIES LTD HAD TRAN SACTIONS OF SALE AND PURCHASE WITH COMMON CUSTOMERS AND THE CREDIT/DEBIT LIABILITIES WERE SETTLED THROUGH JOURNAL ENTRIES AND IT WAS HELD 'THAT THE TRANSACTIONS IN QUESTION WERE UNDERTAKEN NOT WITH A VIEW TO RECEIVE LOANS/DEPOSITS IN CONTRAVENTION OF SECTI ON 269SS, BUT IN A VIEW TO EXTINGUISH THE MUTUAL LIABILITY OF PAYING/RECEIVING THE AMOUNTS BY THE ASSESSEE AND ITS SISTER CONCERN TO THE CUSTOMERS, IN THE ABSENCE OF ANY MATERIAL ON RECORD TO SUGGEST THAT THE TRANSACTIONS IN QUESTION WERE NOT REASONABLE OR BONAFIDE AND IN VIEW OF SECTION 273B OF THE ACT, WE SEE NO REASON TO INTERFERE WITH THE ORDER OF THE TRIBUNAL IN DELETING THE PENALTY OF RS.22.99 CRORES. 7.5.3. IT HAS ALSO BEEN OBSERVED BY THE ADDL.CIT THAT IT SHALL NOT BE OUT OF PLACE TO MENTION THAT T HE ASSESSEE GROUP HAS MADE A DISCLOSURE BEFORE THE HON'BIE INCOME TAX SETTLEMENT COMMISSION, MUMBAI, OF UNDISCLOSED INCOME ARISING OUT OF TRANSACTIONS WITH AND BY VARIOUS GROUP ENTITIES WHICH ARE ALSO THE SUBJECT MATTER OF INVESTIGATION PURSUANT TO THE DIR ECTION OF HON'BLE ITSC. HENCE IT CANNOT BE RULED OUT THAT THE ENTITIES THROUGH WHOM SUCH REPAYMENT/ACCEPTANCES ARE DONE ARE NOT PART OF A CHAIN OF ENTITIES INVOLVED IN TRANSACTION FOR THE PURPOSE OF TAX EVASION - IN THIS REGARD THE APPELLANT HAS SUBMITTED T HAT NO INVESTIGATION PURSUANT TO THE ORDER OF THE SETTLEMENT COMMISSION WAS PENDING ON 28.9.2015 I.E THE DATE OF LEVY OF PENALTY SINCE THE ORDER OF THE SETTLEMENT COMMISSION U/S.245D(4) WAS PASSED ON 28.11.2014. THUS, THE ABOVE SAID OBSERVATION IS FOUND TO BE BASED ON PRESUMPTIONS AND DO NOT JUSTIFY THE LEVY OF PENALTY U/S.271D OF THE ACT, EXCEPT FOR THE AMOUNT OF RS.5000/ - AS NOTED ABOVE. ITA NO. 602/MUM/2017 M/S. AASHTHAVINAYAK ESTATE COMPANY LTD ., 8 8.0. IN VIEW OF ABOVE DISCUSSION, THE LEVY OF PENALTY OF RS.5000/ - U/S,271D IS UPHELD. FURTHER, THE LEVY OF PENALTY U/ S.271D OF THE BALANCE AMOUNT OF RS.2,18,00,667/ - IS FOUND TO BE NOT JUSTIFIED AND THE SAME IS HEREBY CANCELLED. GROUND NO.4 TO 9 TAKEN BY THE APPELLANT ARE PARTLY ALLOWED. 9.0. IN GROUND NO.10 IT HAS BEEN CONTENDED THAT THE ADDL.CIT ERRED IN NOT FOLLOWING THE DECISION OF THE ITAT, MUMBAI IN ITA NO.475 TO 481 OF 2014 IN RESPECT OF IDENTICAL PENAL TI ES LEVIED IN ASSESSEE'S OWN AND ASSOCIATE COMPANY CASES. IN VIEW OF THE FINDINGS GIVEN IN PARA 7.3.2. AND 7.5.1. ABOVE, WHEREIN THE ABOVE SAID DECISION OF THE ITA T, MUMBAI HAS BEEN FOLLOWED, THIS GROUND IS ALLOWED. 5. WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE DELIBERATED ON THE JUDICIAL PRONOUNCEMENTS REFERRED BY LOWER AUTHORITIES IN THEIR RESPECT IVE ORDERS AS WELL AS CITED BY LEARNED AR AND DR DURING THE COURSE OF HEARING BEFORE US IN THE CONTEXT OF FACTUAL MATRIX OF THE CASE. WE HAD ALSO CAREFULLY GONE THROUGH THE ORDERS OF THE 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 PENALTY U/S.271D FOR ACCEPTING LOAN BY WAY OF JOURNAL ENTRIES. THE ASSESSING OFFICER HAD PLACED RELIANCE ON THE JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH CO URT 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 JUDGMENT IT WAS HELD THAT THERE WAS VIOLATION OF THE PROVISIONS OF S. 269T OF THE ACT IN 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 ITA NO. 602/MUM/2017 M/S. AASHTHAVINAYAK ESTATE COMPANY LTD ., 9 THAT LEVY OF PENALTY COULD BE AVOIDED ON SHOWING REASONABLE CAUSE. IN THE PREMISES, LEVY OF PENALTY U/SS. 271D OF THE ACT IS NOT AUTOMATIC , BUT THE GENUINENESS 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 LODH A GROUP (TO WHICH THE PRESENT ASSESSEE BELONGS) INVOLVING IDENTICAL ISSUE, WAS DISPOSED OF BY THE CO - ORDINATE BENCH IN WHICH LEVY OF SIMILAR PENALTIES WAS HELD TO BE NOT SUSTAINABLE AS THERE WAS A REASONABLE CAUSE, COPIES OF WHICH HAVE BEEN PLACED ON RECOR D. IN DECIDING THE DISPUTE IN FAVOUR OF THE ASSESSEE, THE HON'BLE TRIBUNAL HAD CONSIDERED AND APPLIED THE RATIO LAID DOWN BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. TRIUMPH INTERNATIONAL FINANCE (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 ORDER DATED 06.02.2018 IN THE CASE OF CIT V. AJINATH HI - TECH BUILDERS PVT LTD. AND OTHERS, COPIES OF WHICH HAVE ALSO BEEN PLACED ON RECORD. IN THIS CA SE, IT WAS 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 JOURNAL ENTRY WOULD NOT FALL FOUL OF S. 269SS OF THE ACT. SINCE THE JUDGMENT IN CIT V. TR IUMPH INTERNATIONAL FINANCE (I) LTD. (345 ITR 270) WAS RENDERED ON 12.06.2012, IT WAS HELD, THAT THE ASSESSEE COULD ITA NO. 602/MUM/2017 M/S. AASHTHAVINAYAK ESTATE COMPANY LTD ., 10 HAVE HAD A BONAFIDE BELIEF PRIOR TO THAT DATE THAT THE R E WAS NO VIOLATION OF S. 269SS OF THE ACT IN ACCEPTING LOAN BY JOURNAL ENTRY. 9. WHIL E DECIDING THE ISSUE, THE CIT(A) HAS ALSO FOLLOWED THE DECISION OF JURISDICTIONAL HIGH COURT IN CASE OF GROUP CONCERN OF THE CASE. THE FACTS AND CIRCUMSTANCES DURING THE YEAR UNDER CONSIDERATION ARE SAME, ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE OR DER OF CIT(A) FOR DELETING THE PENALTY IMPOSED U/S.271D BY RELYING ON THE DECISION OF JURISDICTIONAL HIGH COURT IN GROUP CASE OF THE ASSESSEE. 10. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 31 / 05 /201 8 SD/ - ( SANDEEP GOSAIN ) SD/ - (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 31 / 05 /201 8 KARUNA SR. 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//