IN HIGH COURT OF DELHI AT NEW DELHI Date of Decision: December 12, 2014 ITA 1421/2006 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) present appeal by Revenue under Section 260A of Income Tax Act, 1961 ( Act in short) was admitted for hearing vide order dated 26.11.2007 on following substantial question of law:- Whether in facts and circumstances of case, Income Tax Appellate Tribunal was correct in deleting penalty imposed by Assessing Officer under Section 271D of Income Tax Act, 1961 in respect of journal entries said to have been made by assessee? 2. In present case, penalty order under Section 271D was passed in proceedings relating to assessment year 2001-02. allegation was that respondent assessee had taken unsecured loan of Rs.8,52,71,500/- from M/s Oswal Agro Mills Ltd., New Delhi, otherwise than by account payee cheque or bank draft in violation of Section 269SS of Act. M/s Oswal Agro Mills Ltd. had discharged respondent assessee s liability towards creditors. Thus, no amount was paid to 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 respondent assessee to M/s Oswal Agro Mills Ltd. It appears that said payments were made by M/s Oswal Agro Mills Ltd. to enable respondent assessee acquire shares of group companies and acquisitions were initially shown as investments. assessee had also debited net interest of Rs.21,775/- in Profit and Loss A/c for assessment year 2001-02 as due and payable to M/s Oswal Agro Mills Ltd.. assessment order passed in case of respondent assessee for assessment year 2001-02 is also placed on record. said assessment order shows that total income of assessee was assessed at loss of Rs.37,190/- as against declared loss of Rs.40,590/-. disallowance of Rs.3,400/- was on account of fee paid to Registrar of Companies. Thus bona fides of transactions and book entries were not in debate and were accepted by Revenue. 3. penalty was affirmed in first appeal by Commissioner of Income Tax (Appeals). However, Tribunal has deleted penalty by impugned order dated 28.02.2006 relying upon decision of 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 occasion to deal with question whether Section 269SS is violated if there is book entry through journal and when there is no actual payment in cash, and it has been held that said provision would not be violated. In said decision we had relied upon another decision of 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 present case also there were mere book entries which had resulted in amount becoming due and payable by 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 respondent assessee. M/s Oswal Agro Mills Ltd. had made payments to third party creditors of respondent assessee. In view of said payments to creditors, book entries were made in journal of respondent assessee, acknowledging their liability to pay said amount to M/s Oswal Agro Mills Ltd. 5. In view of aforesaid factual position, question of law mentioned above has to be answered in favour of respondent assessee and against appellant revenue. appeal is disposed of. No costs. SANJIV KHANNA, J. V. KAMESWAR RAO, J. DECEMBER 12, 2014/km Commissioner of Income-tax v. M/s. Sidhartha Securities and Traders Ltd