Delhi High Court
The Commissioner Of Income Tax vs M/S Sidhartha Securities And ... on 12 December, 2014
$~R-183
*IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of Decision: December 12, 2014
+ ITA 1421/2006
THE COMMISSIONER OF INCOME TAX
..... Appellant
Through Mr.Akash Vajpai, Advocate for
Mr.Kamal Sawhney, Senior
Standing Counsel
versus
M/S SIDHARTHA SECURITIES AND TRADERS LTD.
..... Respondent
Through Mr.Prakash Kumar, Advocate
CORAM:
HON'BLE MR. JUSTICE SANJIV KHANNA
HON'BLE MR. JUSTICE V. KAMESWAR RAO
SANJIV KHANNA, J (ORAL)
The present appeal by the Revenue under Section 260A of the
Income Tax Act, 1961 ('Act' in short) was admitted for hearing vide
order dated 26.11.2007 on the following substantial question of law:-
"Whether in the facts and circumstances of the case, the
Income Tax Appellate Tribunal was correct in deleting the
penalty imposed by the Assessing Officer under Section
271D of the Income Tax Act, 1961 in respect of journal
entries said to have been made by the assessee?"
2. In the present case, penalty order under Section 271D was
passed in proceedings relating to assessment year 2001-02. The
allegation was that the respondent assessee had taken unsecured loan
of Rs.8,52,71,500/- from M/s Oswal Agro Mills Ltd., New Delhi,
otherwise than by an account payee cheque or bank draft in violation
of Section 269SS of the Act. M/s Oswal Agro Mills Ltd. had
discharged the respondent assessee's liability towards creditors. Thus,
no amount was paid to the respondent assessee and no cash payments
were made. Book entries were made to acknowledge and accept that
amount of Rs.8,52,71,500/- was payable by the respondent assessee to
M/s Oswal Agro Mills Ltd. It appears that the said payments were
made by M/s Oswal Agro Mills Ltd. to enable the respondent assessee
acquire shares of group companies and acquisitions were initially
shown as investments. The assessee had also debited net interest of
Rs.21,775/- in the Profit and Loss A/c for the assessment year 2001-02
as due and payable to M/s Oswal Agro Mills Ltd.. The assessment
order passed in the case of respondent assessee for the assessment year
2001-02 is also placed on record. The said assessment order shows that
the total income of the assessee was assessed at loss of Rs.37,190/- as
against declared loss of Rs.40,590/-. The disallowance of Rs.3,400/-
was on account of fee paid to the Registrar of Companies. Thus bona
fides of the transactions and book entries were not in debate and were
accepted by the Revenue.
3. The penalty was affirmed in the first appeal by the
Commissioner of Income Tax (Appeals). However, the Tribunal has
deleted the penalty by the impugned order dated 28.02.2006 relying
upon decision of the Delhi High Court in Commissioner of Income
Tax vs. Noida Toll Bridge Co. Ltd. [2003] 262 ITR 260 (Delhi).
4. Recently on 20.11.2014 in ITA No.33/2002 titled Commissioner
of Income Tax vs. M/s Ruchika Commercials and Investment Pvt.
Ltd., we had the occasion to deal with the question whether Section
269SS is violated if there is a book entry through journal and when
there is no actual payment in cash, and it has been held that the said
provision would not be violated. In the said decision we had relied
upon another decision of the Delhi High Court in Commissioner of
Income Tax vs. Worldwide Townships Project Ltd. [2014] 367 UTR
433 (Delhi). It has been held that mere book entries would not result in
violation of Section 269SS and accordingly penalty under Section
271D cannot be sustained. In the present case also there were mere
book entries which had resulted in an amount becoming due and
payable by the respondent assessee to M/s Oswal Agro Mills ltd. M/s
Oswal Agro Mills Ltd. had not given any loan or deposit in cash or by
way of money to the respondent assessee. M/s Oswal Agro Mills Ltd.
had made payments to third party creditors of the respondent assessee.
In view of the said payments to the creditors, book entries were made
in the journal of the respondent assessee, acknowledging their liability
to pay the said amount to M/s Oswal Agro Mills Ltd.
5. In view of the aforesaid factual position, the question of law
mentioned above has to be answered in favour of the respondent
assessee and against the appellant revenue.
The appeal is disposed of. No costs.
SANJIV KHANNA, J.
V. KAMESWAR RAO, J.
DECEMBER 12, 2014/km
