Rule 29 of the ITAT Rules: Entire law on admission of additional evidence explained
(ii) On the issue regarding existence of a PE, a factual finding is required to be recorded on the basis of evidence on record and, if the Tribunal considers that additional evidence is relevant to the fact in issue, which is existence or not of PE, then in order to advance the cause of justice, the additional evidence should be admitted. In order to enable the Tribunal to decide disputes before it in a lawful, fair and judicious manner, it necessarily is required to look into and consider such and other material having a direct nexus and bearing on the subject matter of the appeal. Merely because the Linkedin profiles was available in public domain and was not referred to by the AO the department cannot be prevented from bringing that information on record so as to arrive at the correct factual finding on the issue regarding PE. This cannot be said to be a case of inordinate delay because the AO had drawn an adverse inference on account of non-furnishing of information by assessee and when assessee is trying to take mileage out of its conduct, the department is bringing on record additional evidence in the form of linkedin profile of employees to demonstrate that the conclusion drawn by department was fully justified. All the cases relied upon by the assessee & CIT(DR) are with reference to additional evidence brought before the Tribunal for the first time by assessee. But none of the cases deals with a situation where the assessee withholds some information from the department and then claims that information relevant to the facts in issue should not be admitted. The inordinate delay theory cannot be invoked in a case where cause of justice will be defeated rather than being sub-served;
Though accepting/ repaying loans/ advances via journal entries contravenes s. 269SS & 269T, penalty cannot be levied if the transactions are bona fide & genuine. The time limit for penalty u/s 271D & 271E is governed by s. 275(1)(c) & not 275(1)(a)
(ii) The acceptance and repayment of loans vide journal entries attracts s. 269SS & 269T as held in Triumph International 345 ITR 370 (Bom). However, in that case penalty u/s 271E was deleted on the basis that there was “reasonable cause” u/s 273B as the transactions were bona fide and genuine and did not involve unaccounted money. On facts, there is no finding by the AO that the transactions constitute unaccounted money or that they are not bona fide or not genuine. The assessee’s explanation for the journal entries, viz that they are alternate mode of raising funds, assignment of receivables, squaring up transactions, operational efficiencies/MIS purpose, consolidation of family member debts, correction of errors, etc are commercial in nature and not non-business. Also, what is the point in issuing hundreds of account payee cheques / account payee bank drafts between sister concerns of the group, when transactions can be accounted in books using journal entries, which is also an accepted mode of accounting? Journal entries should enjoy equal immunity on par with account payee cheques or bank drafts provided the transactions are for business purposes and do not involve unaccounted money and are genuine. In fact, such journal entries shall save large number of cheque books for the banks. There is consequently reasonable cause to delete the penalty.
Bar in S. 269SS/ 269T does not apply to loans/ advances accepted/ repaid via journal entries. Limitation period for s. 271D penalty is as per s. 275(1)(c) & not 275(1)(a)
(ii) On merits, no offence u/s 269SS is made out. S. 269SS applies to a transaction where a deposit or a loan is accepted by an assessee, otherwise than by an account payee cheque or an account payee draft. The section is restricted to transactions involving acceptance of money and not intended to affect cases where a debt or a liability arises on account of book entries. The object of the section is to prevent transactions in currency. This is also clearly explicit from clause (iii) of the explanation to s. 269SS which defines loan or deposit to mean “loan or deposit of money”. The liability recorded in the books of accounts by way of journal entries, i.e. crediting the account of a party to whom monies are payable or debiting the account of a party from whom monies are receivable in the books of accounts, is clearly outside the ambit of s. 269SS because passing such entries does not involve acceptance of any loan or deposit of money (Noida Toll Bridge Co Ltd 262 ITR 260 (Del) followed)
S. 47(xiiib)/ 47A(4): Giving of interest-free loans to partners of the LLP does not contravene Proviso (c), though it contravenes Proviso (f), to s. 47(xiiib). Capital gains have to be computed on the book value of assets transferred & not on market value
(i) Proviso (c) to s. 47 (xiiib) bars the shareholders of the company from receiving any consideration or benefit in any form or manner other than by way of a share in the profit and capital contribution in the LLP. This means that both the company and the LLP must exist for the shareholders of the company to receive any consideration. As, in the present case, the company does not exist after conversion, the question of a violation of Proviso (c) to s. 47(xiiib) does not arise;