The Income Tax Appellate Tribunal (ITAT), Mumbai Bench held that accepting loans through journal entries with reasonable cause will not attract penalty u/s 271D of the Income Tax Act,1961.
The assessee,M/s. Macrotech Developers Ltd engaged in the business of development and construction of Real Estate Properties filed its return of income declaring a total income of Rs.4,950/- under the normal provisions of the Act and book profit of Rs.11,31,373/- u/s 115JB of the Act.
The AO noted that the assessee had accepted/repaid loans from various sister concerns through journal entries other than by the account payee cheque/draft. The assessee filed detailed submissions stating that the journal entries have been passed due to business exigency to settle the business transaction amongst group companies.
The Additional CIT did not accept the contention of the assessee and levied penalties u/s 271D and 271E of the Act.The assessee contended that the penalty was not leviable as there was the reasonable cause as per section 273B of the Act.
It was evident that the action of the assessee accepting/repaying the loan/deposits through journal entries to its sister concerns other than through account payee cheque/draft is in violation of Section 269SS/269T of the Act and the penalty u/s 271D/271E of the Act attracted. The assessee stated that there was “reasonable cause” for passing the journal entries and as per Section 273B of the Act,a penalty need notbe imposed.
Shri Aby T Varkey, JM and Shri Gagan Goyal, AM viewed that there was reasonable cause for assessee netting off/assigning off the debt against liabilities through journal entries u/s 269SS/269T of the Act and held that “thought the appellant has violated the provisions of section 269SS of the Act in respect of journal entries, it has shown reasonable cause and therefore, the penalty under section 271D is not leviable.”
Shri Vijay Mehta appeared for the assessee and Shri Chhotarary (Special Counsel) appeared for the revenue.
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