DCIT CEN CIR 7(3), MUMBAI V. NATIONAL STANDARD INDIA LTD, MUMBAI

ITA 6607/MUM/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6864 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 10-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEV HARIT
• Keywords: Bonafide belief; Period of limitation; Initiation of penalty proceedings; Reasonable cause; Commercial expediency; Time period of passing order
• Section: 273B; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI RAVISH SOOD , JM ITA NO. 6607 / MUM/20 16 & 6609/MUM/2016 ( ASSESSMENT YEAR : 2011 - 12 ) DCIT CC - 7(3) ROOM NO.655 6 TH FLOOR, AAYAKAR BHAVAN M.K. ROAD, MUMBAI 40 0 020 VS. M/S. NATIONAL STANDARD INDIA LTD., 216, SHAH AND NAHAR INDUSTRIAL ROAD OFF. DR.E. MOSES ROAD WORLI, MUMBAI 400 018 PAN/GIR NO. AAACN9808L APPELLANT ) .. RESPONDENT ) REVENUE BY SHRI RAJEEV HARIT ASSESSEE BY SHRI VI JAY MEHTA DATE OF HEARING 09/05 /201 8 DATE OF PRONOUNCEMENT 06 / 06 /201 8 / O R D E R PER R.C.SHARMA (A.M) : THESE ARE THE APPEALS FILED BY REVENUE AGAINST THE ORDER OF CIT(A) - 48, MUMBAI DATED 31/08/2016 FOR A.Y.2011 - 12 I THE MATT ER OF PENALTY IMPOSED U/S.271E AND 271D OF THE IT ACT. 2. RIVAL CONTENTION S HAVE BEEN HEARD AND RECORD PERUSED. THE FACTS OF THE CASE IN BRIEF ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDING S , THE AO NOTICED THAT THE ASSESSEE HAS VIOLATED THE PROVISIO NS OF SECTION 269SS AND 269T OF THE ACT. THEREFORE, AFTER COMPLETING THE ASSESSMENT U/S 143(3) VIDE ORDER DATED 31.03.2013, THE AO MADE A REFERENCE TO THE ITA NO. 6607/MUM/2016 & 6 609/MUM/2016 NATIONAL STANDARD INDIA LTD., 2 ADDL. CIT THROUGH A LETTER DATED 20.06.2013 INTIMATING THAT THE ASSESSEE HAS TAKEN AND REPAID LOAN F ROM THE VARIOUS SISTER CONCERNS THROUGH JOURNAL ENTRY AND HENCE OTHERWISE THAN THROUGH ACCOUNT PAYEE CHEQUE/DRAFT, THEREBY RESULTING INTO VIOLATION OF SECTION 269SS AND 269T OF THE I.T.ACT. THEREAFTER, ADDL.CIT ISSUED A NOTICE TO THE ASSESSEE ON 27.03.201 4 TO SHOW CAUSE AS TO WHY THE PENALTY U/S 271D AND 271E SHOULD NOT BE LEVIED FOR THE VILOATION OF SECTION 269SS AND 269T OF THE ACT. THE ASSESSEE RAISED VARIOUS CONTENTIONS BEFORE THE ADDL. CIT IN SUPPORT OF ITS CLAIM THAT THE PENALTY IS NOT LEVIABLE WHICH INCLUDED UNJUSTIFIED INITIATION OF PENALTY PROCEEDINGS, JOURNAL ENTRIES NOT BEING COVERED BY SECTIONS 269SS/269T, SECTION 269T NOT APPLICABLE TO THE TRANSACTIONS BETWEEN SISTER CONCERNS, NO TAX EVASION ON ACCOUNT OF PASSING OF SUCH JOURNAL ENTRIES, EXISTE NCE OF REASONABLE CAUSE AS PROVIDED U/S 273B OF THE ACT ETC. THE ADDL. CIT REJECTED ALL SUCH CONTENTIONS OF THE ASSESSEE AND HELD THAT THE ASSESSEE COMPANY HAS VIOLATED THE PROVISIONS OF SECTION 269SS AND 269T BY REPAYING LOANS THROUGH JOURNAL ENTRIES AND LEVIED A PENALTY U/S 271D AND 271E VIDE ORDER DATED 10.09.2014. 3. BY THE IMPUGNED ORDER, CIT(A) DELETED THE PENALTY SO IMPOSED U/S.271E AFTER HAVING THE FOLLOWING OBSERVATION: 5.1 I HAVE GIVEN MY CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED THE FACTUAL MATRIX OF THE CASE AS ALSO THE APPLICABLE LEGAL POSITION. 5.2 GROUND 1 - WHETHER THE ORDER LEVYING THE PENALTY U/S 271 E DATED 10.09.2014 IS TIME BARRED IN ACCORDANCE WITH THE PROVISIONS OF SEC 275?: ITA NO. 6607/MUM/2016 & 6 609/MUM/2016 NATIONAL STANDARD INDIA LTD., 3 5.2.1 THE APPELLANT HAS CHALLENGED THE ORDER LEVYING THE PENALTY U/S 271E ON THE GROUND THAT IT HAS BEEN PASSED BEYOND THE TIME LIMIT AS PROVIDED U/S 275(1) OF THE ACT. THE APPELLANT HAS CLAIMED THAT THE PENALTY PROCEEDING U/S 271E HAS BEEN INITIATED BY THE AO WHILE PASSING AN ORDER OF ASSESSMENT U/S 143(3) ON 31.03.2013 AND THEREFORE THE PENALTY ORDER COULD HAVE BEEN PASSED BY 30.09.2013 I.E. BY SIXTH MONTH FROM THE END OF THE MONTH IN WHICH ACTION FOR IMPOSITION OF PENALTY INITIATED. THE APPELLANT SUBMITTED T HAT DATE OF INITIATING 'ACTION FOR IMPOSITION OF PENALTY' SHALL BE THE DATE OF ASSESSMENT ORDER (I.E. 31.03.2013) AND NOT THE DATE ON WHICH SHOW CAUSE NOTICE WAS ISSUED BY THE ADDLL. CIT. 5.2.2 IN SUPPORT OF THE ABOVE CONTENTION, THE APPELLANT HAS RELIED U PON HON'BLE MUMBAI ITAT'S DECISION IN ITS SISTER CONCERN CASE WHEREIN THE ORDER OF PENALTY U/S 271D WAS QUASHED IN ITS FAVOUR. THE RELEVANT CONCLUDING PARAGRAPH OF THE HON'BLE MUMBAI ITAT (ITA 476/MUM/2014 - ORDER DATED 27/06/2014 IS AS FOLLOWS: 22. IN THE INSTANT CASE, IT IS AN UNDISPUTED FACT THAT THE ASSESSING OFFICER DISCUSSED THE DETAILS AS TO THE VIOLATION OF THE PROVISIONS OF SECTION 269SS AND 269T OF THE ACT IN THE ASSESSMENT ORDER. IT ALSO CONTAINS A REFERENCE TO THE REQUIREMENT OF MAKING A REFEREN CE TO THE ADDL. CIT, CH - 6, AND MUMBAI FOR NECESSARY ACTION. PARA 6 OF THE ASSESSMENT ORDER, WHICH IS ALREADY EXTRACTED ABOVE PARAS, BEARS WITNESS TO THE ABOVE FINDINGS. FURTHER, TO GIVE EFFECT TO HIS FINDINGS IN THE ASSESSMENT ORDER, THE AO WROTE A LETTER TO THE ADDL. CIT ON 11.1.2012, INTIMATING TO HIM ABOUT THE VIOLATION TO THE SAID PROVISIONS OF THE ACT. ON RECEIPT OF THE SAID REFERENCE FROM THE AO, ADDL. CIT ISSUED A SHOW CAUSE NOTICE ON 15.2.2012 CALLING FOR EXPLANATION OF THE ASSESSEE AS TO WHY THE PE NALTY U/S 271D SHOULD NOT BE IMPOSED IN THE CASE OF THE ASSESSEE. EVENTUALLY, ADD/. CIT PASSED A PENALTY ORDER U/S 271D OF THE INCOME TAX ACT ON 28.9.2012. CONSIDERING THE FACT THAT THE ASSESSMENT ORDER IS DATED 5.12.2011 AND AS PER THE PROVISIONS OF CLAUS E TO SECTION 275(1) OF THE ACT, 6 MONTHS FROM THE END OF THE MONTH IN WHICH THE ACTION WAS INITIATED EXPIRES ON 30.6.2012. AFTER CONSIDERING THE EXPLANATION OF LIMITATION U/S 275(2), EXPLANATION 1 READ WITH SECTION 129 OF THE ACT, EXTENDED LIMITATION EXP IRES ON 30.7,2012 AGAINST THE ABOVE DUE DATES, THE PENALTY ORDER PASSED BY THE ADDL. CIT ON 28.9.2012, WHICH IS BARRED BY THE LIMITATION. THUS, THE ORDERS OF THE PENALTY OF THIS KIND HAVE TO BE EXPLAINED CONSIDERING THE PROVISIONS OF CLAUSE (C) OF SECTION 275(1) OF THE ACT FURTHER, IT IS THE SUMMARY OF THE DECISION CITED ABOVE THAT ANY CASE WHERE AO MADE A REFERENCE IN THE ASSESSMENT ORDER, AFTER DISCUSSING THE SAME WITH THE ASSESSEE DURING THE REGULAR ASSESSMENT PROCEEDINGS OR MADE A REFERRAL TO THE ADDL. CIT FOR IMPOSITION OF THE PENALTY. IN OUR OPINION, THESE PRELIMINARY ACTS CONSTITUTE 'ACTION FOR THE IMPOSITION OF PENALTY'. AN ACTION FOR IMPOSITION OF PENALTY IS ALWAYS ANTERIOR IN TIME TO THE 'ACTUAL' IMPOSITION OF PENALTY. IN OUR OPINION, THE AO?S DISC USSION GIVEN IN PARA 6 OF THE ASS ESSMENT ORDER AND A0 S ITA NO. 6607/MUM/2016 & 6 609/MUM/2016 NATIONAL STANDARD INDIA LTD., 4 LETTER DATED 6 TO THE ADDL. CIT CONSTITUTES 'ACTION FOR IMPOSITION OF PENALTY'. THEREFORE, WE ARE OF THE OPINION, THE ASSESSEE SHOULD SUCCEED ON THE LEGAL ISSUE. ACCORDINGLY, GROUND RAISED BY THE ASSE SSEE IS ALLOWED.' 5.2.3 THUS, IT HAS BEEN HELD THAT WHEN THE AO RAISED AN ISSUE IN VIOLATION OF RELEVANT PROVISIONS, DISCUSSES WITH THE ASSESSEE AND MAKES A REFERENCE IN THE ASSESSMENT ORDER ABOUT SUCH VIOLATION, IT CONSTITUTES AN 'ACTION FOR IMPOSITION OF PENALTY' 5.2.4 SUBSEQUENT, TO ABOVE JUDGMENT OF THE MUMBAI, THE HON'BLE KERALA HIGH COURT IN THE CASE OF GRIHALAXMI VISION VS ADDLL. CIT [ITA 83/2014] HAS HELD THAT THE TIME PERIOD OF SECTION 275(1)(C) STARTS FROM THE DAY WHEN THE ADDLL. CIT ISSUES THE NO TICES. IDENTICAL VIEW WAS TAKEN BY THE HON'BLE SPECIAL BENCH CHANDIGARH IN THE CASE OF DEWAN CHAND AMRITLAL VS DCIT [98 ITD 200]. SUBSEQUENT TO ABOVE ORDER OF THE ITAT, THE CBDT HAS ALSO CLARIFIED THE POSITION VIDE CIRCULAR DATED 26.04.2016 BEARING NUMBER 09/DV/2016 WHEREIN THE CBDT HAS STATED THAT THE PERIOD OF LIMITATION U/S 275(1) SHALL START FROM THE DATE WHEN THE JCIT ISSUES THE NOTICE. THEREFORE, FOLLOWING THE RECENT JUDGMENT OF KERALA HIGH COURT READ WITH THE CBDT'S CIRCULAR ON THE IDENTICAL SUBJECT , I AM OF THE CONSIDERED VIEW THA THE LIMITATION PERIOD MENTIONED IN SECTION 275(1)(C) OF THE ACTS STARTS FROM THE PERIOD WHEN JCIT / ADDLL. CIT ISSUED THE NOTICES FOR LEVY PF PENALTY. IN THE PRESENT CASE, THE NOTICE WAS ISSUED BY THE ADDLL. CIT ON 27.03.2 014 AND THE ORDER IS PASSED ON 10.09.2014 I.E. WITHIN SIX MONTHS FROM THE END OF THE MONTH IN WHICH ADDLL. CIT ISSUED THE NOTICE. SINCE, THE ORDER OF PASSED WITHIN THE PERIOD OF SIX MONTHS FROM THE END OF THE MONTH WHEN ADDLL. CIT ISSUED THE NOTICE FOR LEV Y FOR PENALTY U/S 271D OF THE ACT; THEREFORE, THE PENALTY ORDER PASSED BY THE ADDLL. CIT IS WITHIN THE STATUTORY TIME. GROUNDS 1 IS DISMISSED 5.3 GROUND 2 TO 9 - WHETHER THE PENALTY U/S 271E WAS LEVIABLE OR THERE WAS A REASONABLE CAUSE AS PROVIDED U/S 273B ? 5.3.1 THE APPELLANT HAS CHALLENGED THE LEVY OF PENALTY U/S 271E ON MERITS BY TAKING VARIOUS ALTERNATIVE GROUNDS VIDE GROUND NO 2 TO 9. IT HAS BEEN CLAIMED THAT THE APPELLANT HAS TRANSFERRED/ASSIGNED ASSETS AND LIABILITIES AMONG THE SISTER CONCERNS BY WA Y OF PASSING JOURNAL ENTRIES TO TAKE EFFECT OF ACTIONABLE CLAIMS/PAYMENTS/ RECEIVED BY THE SISTER CONCERNS ON BEHALF OF THE APPELLANT COMPANY. THE APPELLANT COMPANY ALSO SUBMITTED THAT JOURNAL ENTRIES WERE ALSO PASSED FOR SQUARING OFF AND CONSOLIDATION OFF RECEIVABLE AND PAYABLE. 5.3.2 THE APPELLANT HAS CHALLENGED THE LEVY OF PENALTY ON VARIOUS GROUNDS THE LIST OF WHICH IS AS FOLLOWS: I. JOURNAL ENTRIES ARE NOT COVERED WITHIN THE AMBIT OF PROVISIONS OF SEC 269T AND HENCE IT CANNOT BE CONSIDERED AS REP AYMENT OF LOANS AS UNDERSTOOD WITHIN THE MEANING OF 269T. ITA NO. 6607/MUM/2016 & 6 609/MUM/2016 NATIONAL STANDARD INDIA LTD., 5 II. THE TRANSACTIONS WERE BONAFIDE AND MADE OUT OF COMMERCIAL EXPEDIENCY. FURTHER, THE APPELLANT WAS UNDER A BONAFIDE BELIEF THAT ASSIGNING OF DEBTS AND LIABILITIES THROUGH JOURNAL ENTRIES DOES N OT AMOUNT TO BREACH OF SECTION 269T. HENCE, THERE WAS A REASONABLE CAUSE AS PROVIDED U/S 273B AND PENALTY IS NOT LEVIABLE. III. THE SOURCE WAS NOT UNACCOUNTED AND NOT LEADING TO ANY TAX EVASION OR AVOIDANCE. 5.3. 3 THE APPELLANT HAS RELIED ON THE HON'BLE ITATS DECISION IN ITS GROUP COMPANIES CASE NO. 475/M/2014) WHEREIN THE ISSUE BEFORE THE ITAT WAS LEVY OF PENALTY U/S 271D FOR AC CEPTING LOANS THROUGH JOURNAL ENTRIES IN VIOLATION OF THE PROVISION OF SECTION 269SS. THE ITAT - 55 PASSED A CONSOLIDATED ORDER DATED 27 - 06 - 2014 IN THE CASE OF APPELLANT'S SISTER CONCERNS INVOLVING THE IDENTICAL ISSUE. THE ISSUE BEFORE THE ITAT WAS REGARDING ACCEPTANCE OF LOANS IN VIOLATION OF PROVISION OF SECTION 269SS. THE ISSUE BEFORE ME IS REGARDING REPAYMENT OF LOANS IN VIOLA TION OF PROVISIONS OF SECTION 269T. HOWEVER THE RATIO LAID DOWN BY THE HONOURABLE ITAT SHALL SQUARELY APPLY TO THE CASE BEFORE ME BECAUSE BOTH THE PROVISIONS ARE IN PARI MATERIAL / IDENTICAL. THE MODE OTHER THAN ACCOUNT PAYEE CHEQUE OR DRAFT RESULTS INTO V IOLATION OF THE PROVISIONS, BE IT ACCEPTANCE OR REPAYMENT OF LOANS/DEPOSITS. THEREFORE, THE PRINCIPALS ADOPTED BY HONORABLE ITAT TO DECIDE THE ISSUE OF ACCEPTANCE OF LOANS THROUGH JOURNAL ENTRIES SHALL EQUALLY APPLY TO THE REPAYMENT OF LOANS THROUGH JOURNA L ENTRIES. FURTHER, THE FACTS OF LEADING TO THE PENALTY IN GIVEN CASE ARE IDENTICAL I.E JOURNAL ENTRIES HAVE BEEN PASSED IN THE ACCOUNTS OF SISTER CONCERNS TO GIVE EFFECT TO ASSIGNMENT OF DEBTS/CLAIMS/LIABILITIES ETC. THEREFORE, I RELY ON THE DECISION OF T HE HONORABLE MUMBAI ITAT FOR ADJUDICATING THE ISSUE BEFORE ME, THE RELEVANT PORTION OF WHICH IS AS UNDER: '23. NOW, WE SHALL TAKE UP THE APPLICABILITY OF PROVISIONS OF SECTION 273B OF THE ACT QUA THE REASONABLE CAUSE TO BE PROVED BY THE ASSESSEE. THE PROV ISION OF SECTION 2738 OF THE ACT READS AS UNDER: 'SECT/ON 273B. NOTWITHSTANDING ANYTHING CONTAINED IN THE PROVISIONS OF [CLAUSE (B) OF SUB - SECTION (1) OF [SECTION 271, SECTION 271A, [SECTION 271AA], SECTION 271 B, [SECTION 271BA], [SECTION 271BB,] SECTIO N 271C, [SECTION 271CA,] SECTION 271D, SECTION 271E, [SECTION 271F, [SECTION 271 FA,] [SECTION 271FBJ [SECTION 271GJJ [SECTION 271H,] CLAUSE (C) OR CLAUSE (D) OF SUB - SECTION (1) OR SUB - SECTION (2) OF SECTION 272A, SUB - SECTION (1) OF SECTION 272AA] OR [SECT ION 272B OR] [SUB - SECTION (1)[OR SUB - SECTION (1A)] OF SECTION 272BB OR] [SUB - SECTION (1) OF SECTION 272BBB OR] CLAUSE (B) OF SUB - SECTION (1) OR CLAUSE (B) OR CLAUSE (C) OF SUB - SECTION (1)OF SECTION. 273, NO PENALTY SHALL BE IMPOSABLE ON THE PERSON OR THE A SSESSEE, AS THE CASE MAY BE, FOR ANY FAILURE REFERRED TO IN THE SAID PROVISIONS IF HE PROVES THAT THERE WAS REASONABLE CAUSE FOR THE SAID FAILURE.]' ITA NO. 6607/MUM/2016 & 6 609/MUM/2016 NATIONAL STANDARD INDIA LTD., 6 24. BRIEF FACTS OF THE PRESENT CASE ARE THAT THE ASSESSEE BELONGS LODHA GROUP OF CASES AND THERE ARE LARGE NUMBER OF TRANSACTIONS INVOLVING THE RECEIPTS AND PAYMENTS OF LOANS AND ADVANCES AMONG THE SISTER CONCERNS OF THE LODHA GROUP SETTLED BY WAY OF JOURNAL ENTRIES'. DURING THE ASSESSMENT PROCEEDINGS, AO ASKED THE ASSESSEE TO SHOW CAUSE AS TO WHY LOANS WERE A CCEPTED / REPAID OTHER THAN BY THE ACCOUNT PAYEE CHEQUE / DRAFT. IN THIS REGARD, ASSESSEE INFORMED THAT THE SAID LOANS / ADVANCES WERE TRANSACTED WITH THE SISTER CONCERNS ONLY BY WAY OF 'JOURNAL ENTRIES' AND THERE IS NO CASH TRANSACTIONS INVOLVED THE PROVI SIONS OF SECTION 269SS AND 269T HAVE NO APPLICATION TO THE FACTS OF THE CASE. THUS, IT IS THE CASE OF THE ASSESSEE THAT THE SAID TRANSACTIONS WITH THE SISTER CONCERNS ARE FOR COMMERCIAL REASONS AND THEY SHOULD BE KEPT OUTSIDE THE SCOPE OF THE PROVISIONS OF SECTIONS 269SS/269T OF THE ACT. DURING THE PENALTY PROCEEDINGS BEFORE THE ADDL CIT, THERE WAS AN INQUIRY INTO THE REASONS FOR VIOLATION OF THE SAID PROVISIONS OF THE ACT AND THE ASSESSEE EXPLAINED THE SAID REASONS (VIDE PARA 7.5 OF THE PENALTY ORDER) WHIC H ARE ALREADY EXTRACTED ABOVE. THE ADDL. CIT DID NOT CONSIDER THE 'EXPLANATIONS' AS THE 'REASONABLE CAUSES' AND IMPOSED THE PENALTIES IN ALL THE SEVEN CASES UNDER CONSIDERATION. 25. DURING THE FIRST APPELLATE PROCEEDINGS ALSO, ASSESSEE MADE A DETAILED SUB MISSION ON VARIOUS ASPECTS OF THE REASONABLE CAUSES WHICH WERE ALREADY DISCUSSED IN THE PARAS ABOVE. ON PERUSAL OF THE IMPUGNED ORDER, WE FIND THAT CIT (A) RELIED HEAVILY ON THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF TRIUMPH INTERNATIONAL (I) LTD, SUPRA DATED 17.8.2012 FOR THE PROPOSITION THAT THE RECEIVING LOANS AND REPAYMENTS THROUGH 'JOURNAL ENTRIES' CONSTITUTES 'VIOLATION' WITHIN THE MEANING OF PROVISIONS OF SECTION 269SS AND 269T OF THE ACT. THE CONTENTS OF PARA 9 OF THE SAID JUDGMENT ARE RELEVANT HERE WHICH READ AS UNDER: '9. THE QUESTION AS TO WHETHER LOANS / DEPOSITS CAN BE REPAID BY DEBITING THE ACCOUNTS THROUGH JOURNAL ENTRIES HAS BEEN CONSIDERED BY THIS COURT IN THE ASSESSEES OWN CASE IN INCOME TAX APPEAL NO. 5746 OF 2010 DECIDE D ON 12 TH JUNE, 2012. APPLYING THE RATIO LAID DOWN THEREIN WE HOLD THAT RECEIVING LOANS / DEPOSITS THROUGH JOURNAL ENTRIES WOULD BE IN VIOLATION OF SECTION 269SS OF THE ACT. HOWEVER, AS RIGHTLY CONTENDED BY MR. PARDIWALA, ID SENIOR ADVOCATE APPEARING ON BE HALF OF THE ASSESSEE, THE TRANSACTIONS IN QUESTION WERE UNDERTAKEN NOT WITH A VIEW TO RECEIVE LOANS / DEPOSITS IN CONTRAVENTION OF SECTION 269SS BUT WITH A VIEW TO TO EXTIN GUISH 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 ME TRANSACTIONS IN QUESTION WERE NOT REASONABLE OR BONA FIDE 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 CRS.' ITA NO. 6607/MUM/2016 & 6 609/MUM/2016 NATIONAL STANDARD INDIA LTD., 7 26. FROM THE ABOVE, IT IS EVIDENT THAT THE HON'BLE HIGH COURT HAS GRANTED RELIEF TO THE ASSESSEE ON FINDING THAT THERE IS NO MATERIAL TO SUGGEST THAT THE TRANSACTIONS IN QUESTION ARE NOT REASONABLE OR BONA FIDE. OF COURSE, IT IS THE FINDING OF THE HONBLE HIGH COURT THAT THE IMPUGNED JOURNAL ENTRIES IN THAT CASE DO NOT ESCAPE THE RIGORS OF THE PROVISIONS OF SECTION 269SS/269T OF THE ACT. THE CIT (A) DID NOT APPRECIATE THE YEASONS 1 GIVEN BY THE ASSESSEE FOR RECEIVING LOANS AND ADVANCES THROUGH JOURNAL ENTRIES' AS REASONABLE CAUSES'. IT IS THE FINDING OF HONBLE HIGH COURT IN THE CASE OF M/S TRIUMPH INTERNATIONAL LTD SUPRA, THAT 'THE TRANSACTIONS IN QUESTION WERE UNDERTAKEN NOT WITH A VIEW TO RECEIVE LOANS / DEPOSITS IN CONTRAVENTION OF SECTION 269SS BUT WITH 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 QUE STION WERE NOT REASONABLE OR BONA FIDE AND IN VIEW OF SECTION 2736 OF THE ACT, WE SEE NO REASON TO INTERFERE WITH THE ORDER OF THE TRIBUNAL IN DELETING THE PENALTY..' HE IGNORED THE ABOVE FINDING OF THE COURT AND CONFIRMED THE PENALTY LEVIED BY THE ADDL. C IT. AGGRIEVED WITH THE ABOVE DECISION OF THE CIT (A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL WITH THE ARGUMENT THAT THE ASSESSEE'S REASONS CONSTITUTES A REASONABLE CAUSE. 27. DURING THE PROCEEDINGS BEFORE US, LD COUNSEL FOR THE ASSESSEE SUMMARIZED ALL THE TRANSACTIONS INVOLVING ALL THE SISTER CONCERNS AND GROUPED THE VARIOUS TRANSACTIONS ENTERED IN THE BOOKS OF ACCOUNTS BY WAY OF JOURNAL ENTRIES INTO 7 CATEGORIES. THE DETAILS OF THESE SEVEN GROUPS ARE SUBMITTED AS UNDER: 1. ALTERNATE MODE OF RAISIN G FUNDS; 2. ASSIGNMENT OF RECEIVABLES; 3. SQUARING UP TRANSACTIONS ' 4. OPERATIONAL EFFICIENCIES/MIS PURPOSE; 5. CONSOLIDATION OF FAMILY MEMBER DEBTS; 6. CORRECTION OF ERRORS; AND 7. LOANS TAKEN IN CASE 27.1. ALL THE TRANSACTIONS THAT INVOLVED THE IMPUGNED JOURNAL ENTN'ES FALL IN ONE OF THE ABOVE SEVEN REASONS AND THEY ARE ONLY FOR BUSINESS PURPOSES' OF THE ASSESSEES' UNDER CONSIDERATION. 28. FURTHER, THE ASSESSEE ALSO CLASSIFIED THE IMPUGNED TRANSACTIONS AMOUN TIN G THE SAID SEVEN GROUPS AND THE SAID CHART IS INSERTED HERE AS UNDER FOR COMPLETENESS OF THIS ORDER: CLASSIFICATION OF REASONABLE CAUSES THE CHART SHOWING THE DETAILS OF GROUPS OF THE TRANSACTIONS TO WHICH FALLS INTO EACH OF THE GROUP ARE TABULATED AS UNDER ITA NO. 6607/MUM/2016 & 6 609/MUM/2016 NATIONAL STANDARD INDIA LTD., 8 LODHA BUILDERS PRIVATE LIM ITED . ASSESSMENT YEAR2009 - 10 APPEALNO:476/MUM/2014 . PENALTY LEVIED UNDER SECTION 271D OF THE INCOME - TAX ACT. 1961 SI NO. 1, 2, 3, 4, 5, 6 & 7 REFER TO THE CATEGORIES MENTIO NED IN THE PRECEDING TABLE INSERTED IN PAGE 23 OF THE ORDER RELATING TO CLASSIFICATION OF REASONABLE CAUSES? 29. SUBMISSION OF THE ASSESSEE JUSTIFYING THE CLAIM OF IMMUNITY U/S 273B OF THE ACT TO THE IMPUGNED JOURNAL ENTRIES IS AS UNDER: A. 'THE SEVEN CAT EGORIES OF ENTRIES AND A VERY BRIEF EXPLANATION. B. THESE ENTRIES ARE WITH SISTER CONCERNS AND ASSOCIATES. THE VIEW IN THE PENALTY ORDER THAT DURGESHWAH IS AN INDEPENDENT CONCERN IS INCORRECT BECAUSE PENALTY ORDER ITSELF STARTS WITH THE SENTENCE THAT 'ASS ESSEE HAS TAKEN FROM SISTER CONCERNS'. C. IT HAS BEEN PROVED BEFORE THE ADDL. CIT AND CIT (A) THAT THERE IS ABSOLUTELY NO CASH INVOLVED AND THE SOURCE CAN BE TRACED TO A/C PAYEE CHEQUES ONLY. ADDL. CIT HAS FAILED TO REFUTE THIS BUT ONLY IN ORDER TO STRENG THEN HIS CASE ON FLIMSY GROUND HE MAKES A PRESUMPTIVE ASSERTION THAT THESE ENTRIES HAS BEEN PASSED TO CAMOUFLAGE THE SOURCES AND TO EVADE TAX. D. THERE IS NO ATTEMPT EITHER IN ASSESSMENT ORDER OR IN ORDER TO DOUBT THE SOURCE OF THE ENTRIES AND TO TAKE ANY CONSEQUENTIAL ACTION UNDER RELEVANT PROVISIONS OF THE INCOME TAX ACT. SO, APPELLANT'S ON SOURCE OF ENTRIES BEING A/C PAYEE CHEQUE IS CORRECT.' 30. IT IS THE SUBMISSION OF THE ASSESSES THAT THE HONBLE HIGH COURT HAS LAID DOWN THE BROAD , - PRINCIPLES F OR DETERMINING THE SEASONABLE CAUSE WITHIN THE MEANING OF SECTION 273B OF THE ACT. JUDGMENT IN THE CASE OF TRIUMPH INTERNATIONAL (I) LTD DATED 12.6.2012 (THIS JUDGMENT IS .DIFFERENT FROM THAT OF JUDGMENT OF TRIUMPH INTERNATIONAL (I) LTD DATED 17.8.2012) A ND IT EXPLAINS ' - GUIDELINES FOR THE EXPRESSION 'REASONABLE CAUSE'. 31. THE CONTENTS OF PARAS 23 AND 24 OF THE SAID OF JUDGMENT OF THE HONBLE HIGH COURT IN THE CASE OF TRIUMPH INTERNATIONAL (I) LTD, DATED 12.6.2012 REPORTED IN 345 ITR 370 (BOM) ARE RELEV ANT AND THE SAME READS AS UNDER: - '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 ITA NO. 6607/MUM/2016 & 6 609/MUM/2016 NATIONAL STANDARD INDIA LTD., 9 USED THE EXPR ESSION '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 V EXPRESSION 'SUFFICIENT CAUSE'. THEREFORE, THE EXPRESSION 'REASO NABLE 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 BEE N 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 L OAN 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 REPRESENTE D 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 ASSESSES FOR FAILING TO COMPLY WITH THE PROVISIONS OF SECTION 2697. 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 ASSESSES HAS VIOLATED THE PROVISIONS OF SECTION 269T, THE ASSESSES HAS SHOWN REASONABLE CAUSE AND, THEREFORE, THE DECISION OF THE TRIBUNAL TO DELETE THE PENALTY IMPOSED U NDER SECTION 271E OF THE ACT DESERVES ACCEPTANCE. '32. FROM THE ABOVE EXTRACTS FROM THE JUDGMENT OF JURISDICTIONAL HIGH COURT, IT IS CLEAR THAT THE JOURNAL ENTRIES ARE HIT BY THE RELEVANT PROVISIONS OF SECTION 269SS OF THE ACT. HOWEVER, IT IS THE FINDING O F THE HONBLE HIGH COURT THAT COMPLETING THE 'EMPTY FORMALITIES' OF PAYMENTS AND REPAYMENTS BY ISSUING/RECEIVING CHEQUE TO SWAP/SQUIRE UP THE TRANSACTIONS, IS NOT THE INTENTION OF THE PROVISIONS OF SECTION 269SS OF THE ACT, WHEN THE TRANSACTIONS ARE OTHERW ISE BONAFIDE OR GENUINE. SUCH REASONS OF THE ASSESSEE CONSTITUTE .SEASONABLE CAUSE WITHIN THE MEANING OF SECTION 273B OF THE ACT. IN THE LIGHT OF THE ABOVE RATIO OF JUDGMENT, WE ANALYSE THE FACTS OF THE PRESENT CASE HERE AS UNDER. 33. WE FIND THAT THERE I S NO FINDING OF AO IN THE ORDER OF THE AO DURING THE ASSESSMENT PROCEEDINGS THAT THE IMPUGNED TRANSACTIONS CONSTITUTES UNACCOUNTED MONEY AND ARE NOT BONA FIDE OR NOT ITA NO. 6607/MUM/2016 & 6 609/MUM/2016 NATIONAL STANDARD INDIA LTD., 10 GENUINE. AS SUCH, THERE IS NO INFORMATION OR MATERIAL BEFORE THE AO TO SUGGEST OR DEMONSTR ATE THE SAME. IN THE LANGUAGE OF THE HONBLE HIGH COURT, ,,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 DOU BTED IN THE REGULAR ASSESSMENT. ADMITTEDLY, THE TRANSACTIONS BY WAY OF JOURNAL ENTRIES ARE AIMED AT THE EXTINGUISHMENT OF THE MUTUAL LIABILITIES BETWEEN THE ASSESSEES AND THE SISTER CONCERNS OF THE GROUP AND SUCH REASONS CONSTITUTE A REASONABLE CAUSE. 34 . IN THE PRESENT CASE, THE CAUSES SHOWN BY THE ASSESSEE FOR RECEIVING OR REPAYMENT OF THE LOAN/DEPOSIT OTHERWISE THAN BY ACCOUNT - PAYEE CHEQUE/BANK DRAFT, WAS ON ACCOUNT OF THE FOLLOWING, NAMELY: ALTERNATE MODE OF RAISING FUNDS; ASSIGNMENT OF RECEIVABLES; S QUARING UP TRANSACTIONS; OPERATIONAL EFFICIENCIES/MIS PURPOSE; CONSOLIDATION OF FAMILY MEMBER DEBTS; CORRECTION OF ERRORS; AND LOANS TAKEN IN CASE. IN OUR OPINION, ALL THESE REASONS ARE, PRIMA FACIE, COMMERCIAL IN NATURE AND THEY CANNOT BE DESCRIBED AS NON - BUSINESS BY ANY MEANS. FURTHER, WE ASKED OURSELVES AS TO WHY SHOULD THE ASSESSEE UNDER CONSIDERATION TAKE UP ISSUING NUMBER OF ACCOUNT PAYEE CHEQUES/BANK DRAFTS WHICH CAN BE ACCOUNTED BY THE JOURNAL ENTRIES. THIS BEING THE SPIRIT OF HON'BLE HIGH COURT OF BOMBAY, WE ADOPT THE SAME TO THE PRESENT ISSUE. AS SUCH, IS BINDING ON US. WHAT IS THE POINT IN ISSUING HUND REDS OF ACCOUNT PAYEE CHEQUES. AC COUNT PAYEE BANK DRAFTS BETWEEN THE SISTER CONCERNS OF THE GROUP, WHEN TRANSACTIONS CAN BE ACCOUNTED IN BOOKS USING JOURNAL ENTRIES, WHICH IS ALSO AN ACCEPTED MODE OF ACCOUNTING? IN OUR OPINION, ON THE FACTUAL MATRIX OF THESE CASES UNDER CONSIDERATION, JOURNAL ENTRIES SHOULD ENJOY EQUAL IMMUNITY ON PAR WITH ACCOUNT PAYEE CHEQUES OR BANK DRAFTS. OF COURSE, THE ABOVE CON CLUSIONS APPLY SO LONG AS THE TRANSACTIONS ARE FOR BUSINESS PURPOSES AND DO NOT INVOLVE UNACCOUNTED MONEY AND THEY ARE GENUINE. IN FACT, SUCH JOURNAL ENTRIES SHALL SAVE LARGE NUMBER OF CHEQUE BOOKS FOR THE BANKS. 35. FURTHER, THERE IS NO DISPUTE THAT THE IMPUGNED JOURNAL ENTRIES IN THE RESPECTIVE BOOKS WERE DONE WITH THE VIEW TO RAISE FUNDS FROM THE SISTER CONCERNS, TO ASSIGN THE RECEIVABLE AMONG THE SISTER CONCERNS, TO ADJUST OR TRANSFER THE BALANCES, TO CONSOLIDATE THE DEBTS, TO CORRECT THE CLERICAL ERR ORS ETC. IN THE LANGUAGE OF THE HON'BLE HIGH COURT, THE SAID 'JOURNAL ENTRIES' CONSTITUTES ONE OF THE RECOGNIZED MODES OF RECORDING THE LOAN/DEPOSIT. THE COMMERCIAL NATURE AND OCCURRENCE OF THESE TRANSACTIONS BY WAY OF JOURNAL ENTRIES IS IN THE NORMAL COUR SE OF BUSINESS OPERATION OF THE GROUP CONCERNS. IN THIS REGARD, THERE IS NO ADVERSE FINDING BY THE AO IN THE REGULAR ASSESSMENT. AO HAS NOT MADE OUT IN THE ASSESSMENT THAT ANY OF THE IMPUGNED TRANSACTIONS IS AIMED AT NON COMMERCIAL REASONS AND OUTSIDE THE NORMAL BUSINESS OPERATIONS. AS SUCH, THE PROVISIONS OF SECTION 269SS AND 269T OF THE ITA NO. 6607/MUM/2016 & 6 609/MUM/2016 NATIONAL STANDARD INDIA LTD., 11 ACT SHALL NOT BE ATTRACTED WHERE THERE IS NO INVOLVEMENT OF THE 'MONEY 'AS HELD BY THE HON'BLE HIGH COURT OF DELHI IN THE ABOVE CITED CASES, SUPRA. THEREFORE, IN THE FACTS OF THE PRESENT CASE, IN OUR OPINION, THOUGH THE ASSESSEE HAS VIOLATED THE PROVISIONS OF SECTION 269SS / 269T OF THE ACT IN RESPECT OF JOURNAL ENTRIES, THE ASSESSEE HAS SHOWN REASONABLE CAUSE AND, THEREFORE, THE PENALTY IMPOSED UNDER SECTION 271D/E OF THE ACT ARE NOT SUSTAINABLE. REGARDING AN AMOUNT OF 'MONEY' SAID TO HAVE BEEN PAID IN VIOLATION OF THE SAID PROVISIONS, THE SAME NEEDS TO BE DELETED IN VIEW OF OUR DECISION ON THE LEGAL ISSUE DISCUSSED IN PARA 16 TO 22 OF THE THIS ORDER. ACCORDINGLY, THE GROUN DS RAISED IN THIS REGARD ARE ALLOWED. 5.3.4 RESPECTFULLY, FOLLOWING THE ABOVE DECISION, THE CONTENTION OF THE APPELLANT THAT THE JOURNAL ENTRIES ARE NOT COVERED WITHIN THE PROVISIONS OF SECTION 269T IS REJECTED. HOWEVER, THE TRANSACTIONS COVERED BY THE JO URNAL ENTRIES ARE MADE IN REGULAR COURSE OF BUSINESS WITH THE SISTER CONCERNS BY THE APPELLANT. EVEN IN THE PRESENT CASE, THERE IS NO ADVERSE FINDING OF THE AO EITHER IN THE PENALTY ORDER U/S 271E OF THE ACT OR IN THE REMAND REPORT DATED 09.08.2016 THAT AN Y OF THE IMPUGNED TRANSACTIONS IS AIMED AT NON COMMERCIAL REASONS AND OUTSIDE THE NORMAL BUSINESS OPERATION. THEREFORE, THOUGH THE APPELLANT HAS VIOLATED THE PROVISIONS OF SECTION 269T OF THE ACT IN RESPECT OF JOURNAL ENTRIES, IT HAS SHOWN REASONABLE CAUSE AND THEREFORE THE PENALTY UNDER SECTION 271E IS NOT LEVIABLE. 4. AGAINST THE ABOVE ORDER OF CIT(A), REVENUE IS IN FURTHER APPEAL BEFORE US. 5 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE DE LIBERATED ON THE JUDICIAL PRONOUNCEMENTS REFERRED BY LOWER AUTHORITIES IN THEIR RESPECTIVE 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 CASE OF THE ASSESSEE EXACTLY ON THE VERY SAME ISSUE, WHICH WAS UPHELD BY THE HONBLE JURISDICTIONAL HIGH COURT AS STATED ABOVE. ITA NO. 6607/MUM/2016 & 6 609/MUM/2016 NATIONAL STANDARD INDIA LTD., 12 6 . FROM THE RECORD WE FOUND THAT AO HAS LEVIED PENALTY U/S.271D AND 271E FOR ACCEPTING AND REPAYING LOAN BY WAY OF JOURNAL ENTRIES. THE ASSESSING OFFICER HAD PLACED RELIANCE ON THE JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. TRIUMPH INTERNATIONAL FINANCE (I) LTD. (345 ITR 270) RENDERED ON 12.06.2012. IT IS NOT DIS PUTED 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 HEL D THAT LEVY OF PENALTY COULD BE AVOIDED ON SHOWING REASONABLE CAUSE. IN THE PREMISES, LEVY OF PENALTY U/SS. 271D AND 271E 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 B E 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 GROUP (TO WHICH THE PRESENT ASSESSEE BELONGS) INVOLVING IDENTICAL ISSUE, WAS DISPOSED OF BY THE CO - ORDINA TE 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 RECORD. IN DECIDING THE DISPUTE IN FAVOUR OF THE ASSESSEE, THE HON'BLE TRIBUNAL HAD CONSIDERED AND APPLIED THE R ATIO LAID DOWN BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. TRIUMPH INTERNATIONAL FINANCE (I) LTD. (345 ITR 270). ITA NO. 6607/MUM/2016 & 6 609/MUM/2016 NATIONAL STANDARD INDIA LTD., 13 8 . THE AFORESAID ORDER OF THE HON'BLE TRIBUNAL WAS APPROVED BY THE HONBLE JURISDICTIONS! HIGH COURT IN THEIR JUDGMENT AND O RDER DATED 06.02.2018 IN THE CASE OF CIT V. AJINATH HI - TECH BUILDERS PVT LTD. , COPIES OF WHICH HAVE ALSO BEEN PLACED ON RECORD. IN THIS CASE, 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. TRIUMPH INTERNATIONAL FINANCE (I) LTD. (345 ITR 270) WAS RENDERED ON 12.06.2012, IT WAS HELD, THAT THE ASSESSEE COULD HA VE HAD A BONA FIDE BELIEF PRIOR TO THAT DATE THAT THE R E WAS NO VIOLATION OF S. 269SS OF THE ACT IN ACCEPTING LOAN BY JOURNAL ENTRY. THE RELEVANT OBSERVATIONS OF THE HON'BLE HIGH COURT APPEARING ON PAGES 8 TO 10 OF THE JUDGMENT ARE AS UNDER: '(H) IN ANY EV ENT, AS RIGHTLY POINTED OUT BY MR. SRIDHARAN, LEARNED SENIOR COUNSEL FOR THE RESPONDENTS ASSESSES, THE ORDER OF THIS COURT IN TRIUMPH INTERNATIONAL FINANCE (SUPRA) WAS RENDERED ON 12TH JUNE, 2012. THIS, WAS IN AN APPEAL FILED BY THE REVENUE FROM THE ORDER OF THE TRIBUNAL DATED 29TH JANUARY, 2008, WHICH HAD HELD THAT DEPOSITS/LOANS RECEIVED THROUGH JOURNAL ENTRIES DO NOT FALL WITH THE MISCHIEF OF SECTION 269SS OF THE ACT, SO AS TO INVITE PENALTY UNDER SECTION 271D OF THE ACT. THIS, THE TRIBUNAL DID BY FOLLOW ING ITS EARLIER ORDERS IN THE CASE OF V.N. PAREKH LTD. AND KETAN PAREKH AS INDICATED IN THE ORDER OF THIS COURT IN TRIUMPH INTERNATIONAL FINANCE (SUPRA). OUR ATTENTION WAS ALSO INVITED TO NUMEROUS REPORTED DECISIONS OF THE TRIBUNAL IN THE CASES OF SUNFLOWE R BUILDERS VS. DY. CIT, 1997 (61) ITD (PUNE 227, ASST. CIT VS. RUCHIKA CHEMICALS & INVESTMENT P) LTD. 2004 (88) TTJ (DELHI) 85 AND ASST CIT VS. LALA MURARI LA I & SONS, 2004(2) SOT (LUCK) 543 WHEREIN IT HAS BEEN HELD JOURNAL ENTRIES IN THE BOOK OF ACCOUNTS INDICATING DEPOSIT/ LOANS WILL NOT FALL FOUL OF SECTION 269SS OF THE BESIDES, THE DELHI HIGH COURT IN COMMISSIONER OF INCOME TAX ITA NO. 6607/MUM/2016 & 6 609/MUM/2016 NATIONAL STANDARD INDIA LTD., 14 NOIDA TOLL BRIDGE CO. LTD. 262 ITR 260 INTER ALIA HELD THAT PAYMENT OF RS.4.85 CRORES MADE BY THE ASSESSES BY A JOURNAL ENTRY IN ITS BOOKS OF ACCOUNT BY CREDITING THE ACCOUNT OF LLFS, WOULD NOT FALL FOUL OF SECTION 269SS OF THE ACT. THIS PARTICULARLY IN THE ABSENCE OF ANY PAYMENT BEING MADE IN CASH. (I) IN THE PRESENT FACTS, THE PERIOD DURING WHICH THE JOURNAL ENTRIES WERE MADE BY THE RESPONDENTS WAS IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2009 - 10 I.E. FINANCIAL YEAR 2008 - 09. AT THAT TIME, THE DECISIONS OF THE TRIBUNAL IN THE CASES OF TRIUMPH INTERNATIONAL (SUPRA) AND DECISION OF V.H. PAREKH (P) LTD.. KETAN V. PAREKH , SUNFLOWER BUILDERS (SUPRA), RUCHIKA CHEMICALS (SUPRA). LA/A MURARI LA/ (SUPRA) AND THE DECISION OF THE DELHI HIGH COURT IN NOIDA TOLL BRIDGE CO. LTD, (SUPRA) WERE HOLDING THE FIELD. THUS, NOT IN BREACH OF SECTION 269SS OF THE ACT IN THE ABOVE VIEW, WHILE AGREEING WITH THE SUBMISSION OF MR. MOHANTY, LEARNED COUNSEL FOR THE APPELLANT THAT THE DECISION OF THIS COURT IN TRIUMPH INTERNATIONAL FINANCE (SUPRA) HAS ONLY CLARIFIED/STATED THE POSITION AS ALWAYS EXISTING IN LAW, THE RECEIVING OF DEPOSITS/ LOANS THRO UGH JOURNAL ENTRIES WOULD CERTAINLY BE HIT BY SECTION 269SS OF THE ACT NEVERTHELESS, PRIOR TO THE DECISION OF THIS COURT IN TRIUMPH INTERNATIONAL FINANCE (SUPRA), THERE WAS REASONABLE CAUSE FOR RESPONDENTS TO RECEIVE DEPOSIT/LOAN THROUGH JOURNAL ENTRIES. T HIS NON - COMPLIANCE WITH SECTION 269SS OF THE ACT WOULD CERTAINLY BE A REASONABLE CAUSE UNDER SECTION 273B OF THE ACT FOR NON - IMPOSITION OF PENALTY UNDER SECTION 271D OF THE ACT' 9 . FROM THE RECORD WE FOUND THAT THE JOURNAL ENTRIES IN THE PRESENT CASE WE RE PASSED IN F.Y. 2010 - 11. THEREFORE, INDISPUTABLY SUCH JOURNAL ENTRIES WERE PASSED PRIOR TO 12.06.2012, THE DATE ON WHICH JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT V. TRIUMPH INTERNATIONAL FINANCE (I) LTD WAS PRONOUNCED. FURTHER MORE, IN ADDITION TO THE ORDERS OF THE HON'BLE TRIBUNAL, REFERRED TO IN THE AFORESAID JUDGMENT, THERE WERE ALSO MANY OTHER ORDERS RENDERED PRIOR TO CIT V. ITA NO. 6607/MUM/2016 & 6 609/MUM/2016 NATIONAL STANDARD INDIA LTD., 15 TRIUMPH INTERNATIONAL FINANCE (I) LTD. [345 ITR 270 (BOM)] HOLDING THAT VIOLATION OF SS. 269SS AND 269T OF THE ACT COULD NOT BE IMPUTED IN ACCEPTING AND REPAYING LOAN BY PASSING A JOURNAL ENTRY. SOME OF THEM ARE: (I) ORDER OF COCHIN BENCH OF THE HON'BLE TRIBUNAL IN MUTHOOT M. GEORGE BANKERS V. ACIT (46 ITD 10), DATED 16.04.1993; (II) ORDER OF AHMEDA BAD BENCH OF THE HON'BLE TRIBUNAL IN BOMBAY CONDUCTORS & ELECTRICALS LTD. V. DCIT (90 TAXMAN 138), DATED 30,11.1995; (III) JUDGMENT OF HON'BLE DELHI HIGH COURT IN CIT V. NOIDA TOLL BRIDGE (262 ITR 260), RENDERED ON 28.01,2003; (IV) ORDER OF AGRA BENCH OF THE HON'BLE TRIBUNAL IN ITO V. AMARNATH SHIVRAJ (HUF) (1 SOT 346), DATED 28.02.2003; (V) ORDER OF AHMEDABAD BENCH OF THE HON'BLE TRIBUNAL IN ACIT V. GUJARAT AMBUJA PROTEINS LTD. (3 SOT 811), DATED 28.10.2003; (VI) ORDER OF KOLKATA BEN CH OF THE HON'BLE TRIBUNAL IN KRISHNA KR PATHAK (HUF) (90 TTJ 940), DATED 12.03.2004; (VII) JUDGMENT OF HON'BLE RAJASTHAN HIGH COURT IN CIT V. HISSARIA BROS (291 ITR 244), RENDERED ON 21.07.2006; OFF MUMBAI BENCH OF HON'BLE TRIBUNAL IN TRIUMPH INTERNATIO NAL FINANCE (I) LTD. IN FTA NO. 542/MUM/2007, DATED 29.01.2008; IX) JUDGMENT OF HON'BLE GUJARAT HIGH COURT IN CIT V. BOMBAY CONDUCTORS & ELECTRICALS LTD (301 ITR 328), RENDERED ON 11.02.2008; (X) ORDER OF AHMEDABAD BENCH OF HON'BLE TRIB UNAL IN JITU BUILDERS (P) LTD. V. ADDL. CIT [124 ITD 134 (AHD) (TM)], DATED 16.07.2009; AND (XI) ORDER OF AHMEDABAD BENCH OF HON'BLE TRIBUNAL IN ACIT V. WESTERN INDIA CERAMICS (P.) LTD (20 TAXMANN. COM 317), DATED 12.10.2010. 10. IT WAS ARGUED BY LEARNED D R THAT THE HON'BLE HIGH COURT DECLARES THE LAW AS IT WAS ALWAYS AND, HENCE, THERE WAS CLEARLY VIOLATION OF THE PROVISIONS OF THE ACT. HE FURTHER ARGUED THAT THE ASSESSEE HAS NOT EXPLAINED REASONABLE CAUSE IN RESPECT OF EACH AND EVERY ENTRY AND, HENCE, TH E PENALTIES WERE CORRECTLY LEVIED. ITA NO. 6607/MUM/2016 & 6 609/MUM/2016 NATIONAL STANDARD INDIA LTD., 16 11. AS REGARDS THE FIRST ARGUMENT OF THE L D. DR, WE OBSERVE THAT THE ID ENTICAL ARGUMENT WAS RAISED BEFORE THE HON'BLE HIGH COURT IN THE CASE OF AJINATH HI - TECH BUILDERS PVT. LTD. (AND OTHER GROUP COMPANIES OF THE ASSESSE E) (SUPRA). HOWEVER, FINDING NO MERIT IN THE PLEA CANVASSED, IT WAS REJECTED AS PER OBSERVATIONS IN SUB - PARA (I) OF PARA 3 ON PAGE NO. 10 OF THEIR JUDGMENT WHICH READ AS UNDER: (I) ........................,....._ IN THE ABOVE VIEW, WHILE AGREEING WITH THE SUBMISSION OF MR. MOHANTY. LEARNED COUNSEL FOR THE APPELLANT THAT THE DECISION OF THIS COURT IN TRIUMPH INTERNATIONAL FINANCE (SUPRA) HAS ONLY CLARIFIED/ STATED THE POSITION AS ALWAYS EXISTING IN LAW, THE RECEIVING OF DEPOSITS/LOANS THROUGH JOURNAL EN TRIES WOULD CERTAINLY BE HIT BY SECTION 269SS OF THE ACT NEVERTHELESS, PRIOR TO THE DECISION OF THIS COURT IN TRIUMPH INTERNATIONAL FINANCE (SUPRA), THERE WAS REASONABLE CAUSE FOR RESPONDENTS TO RECEIVE DEPOSIT/LOAN THROUGH JOURNAL ENTRIES. ' (EMPHASIS SUP PLIED). 11 . SO FAR AS THE SECOND ARGUMENT OF THE ID. DR IS CONCERNED, WE OBSERVE THAT AS PER THE ABOVE DECISION OF THE HON'BLE HIGH COURT, THE ASSESSEE COULD NOT BE VISITED WITH PENALTY IN RESPECT OF THE PERIOD PRIOR TO 12.06.2012, THE DAY ON WHICH THE DECISION IN CIT V. TRIUMPH INTERNATIONAL FINANCE (I) LTD. WAS PRONOUNCED. IN LIGHT OF THIS, IT CAN SAFELY BE CONCLUDED THAT THE ASSESSEE BEING UNDER A BONA FIDE BELIEF, COULD NOT BE VISITED WITH PENALTIES U/SS. 271D AND 271E OF THE ACT. IN ANY CASE, I N LIGHT OF THIS BINDING DECISION, THERE IS NO REQUIREMENT TO ESTABLISH REASONABLE CAUSE IN RESPECT OF EACH AND EVERY ENTRY AS CANVASSED BY THE ID. DR. THE REASONABLE CAUSE IN RESPECT OF ALL THE ENTRIES IS THE BONA FIDE BELIEF OF THE ASSESSEE THAT THERE WAS NO VIOLATION OF ANY PROVISION OF THE ACT. ITA NO. 6607/MUM/2016 & 6 609/MUM/2016 NATIONAL STANDARD INDIA LTD., 17 1 3 . IN VIEW OF THE ABOVE, WE OBSERVE THAT THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE EXCEPTION CARVED OUT IN THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN CIT V. TRIUMPH INTERNATIONAL FINANCE (I) LTD. [345 ITR 270 (BOM)]. ACCORDINGLY, BOTH THE PENALTIES WERE NOT EXIGIBLE IN THE PRESENT CASE AS THE ASSESSEE WAS UNDER A BONA FIDE BELIEF AND THERE WAS NO CONTRAVENTION AS PER THE LAW PREVAILING AS ON THE DATE OF PASSING THE JOURNAL ENTRIES. THE ORDERS OF T HE CIT (A), THEREFORE, DO NOT CALL FOR ANY INTERFERENCE. 1 4 DURING THE COURSE OF HEARING, LEARNED AR SUBMITTED THAT A GROUND REGARDING LIMITATION ASPECT OF THE PENALTY ORDER UNDER RULE 27 OF THE INCOME - TAX (APPELLATE TRIBUNAL) RULES, 1963. IT WAS SUBMITTED THAT THE ISSUE REGARDING LIMITATION PERIOD WAS RAISED FIRST BEFORE THE ADDL. CIT, AND THEREAFTER BEFORE THE CIT (A); AND BOTH THE AUTHORITIES HAVE DISCUSSED THIS PLEA BUT REJECTED THE CLAIM OF THE ASSESSEE. IN LIGHT OF THE ABOVE FACT, ALTHOUGH THE ASSESSE E HAD NOT FILED ANY APPEAL OR CROSS OBJECTION, IT IS ENTITLED TO RAISE THE SAID ISSUE BEFORE THE HON'BLE TRIBUNAL. IN SUPPORT OF THIS PLEA, ATTENTION OF BENCH WAS INVITED TO RULE 27 OF THE IT(AT) RULES WHICH READS AS UNDER: 'THE RESPONDENT, THOUGH HE MAY NOT HAVE APPEALED, MAY SUPPORT THE ORDER APPEALED AGAINST ON ANY OF THE GROUNDS DECIDED AGAINST HIM. ' ITA NO. 6607/MUM/2016 & 6 609/MUM/2016 NATIONAL STANDARD INDIA LTD., 18 1 5 . HENCE, RELIANCE WAS PLACED ON THE JUDGMENT OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF PR. CIT V. SUN PHARMACEUTICALS INDUSTRIES LT D., (2017) 86 TAXMANN.COM 148) AND ALSO ON THE JUDGMENT OF THE HON'BLE KERALA HIGH COURT IN THE CASE OF CIT V. COMMONWEALTH TRUST (INDIA) LTD. (221ITR 474) . 1 6 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. SINCE, WE HAVE ALREADY DECIDED THE ISSUE ON MERIT BY FOLLOWING THE ORDER OF THE JURISDICTIONAL HIGH COURT IN THE GROUP CASES OF THE ASSESSEE, WE DO NOT CONSIDER T HE PLEA TAKEN BY THE ASSESSEE UNDER RULE 27 OF THE ITAT RULES. 17 . IN THE RESULT, APPEALS FILED BY THE REVENU E ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 06 / 06 /201 8 SD/ - ( RAVISH SOOD) SD/ - (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 06 / 0 6 /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//