TMI Blog2023 (12) TMI 405X X X X Extracts X X X X X X X X Extracts X X X X ..... property was being acquired by the firm and loan was sanctioned in the name of the partners only and property was purchased in individual names only - HELD THAT:- As the impugned property has been purchased in joint ownership of 4 persons all of whom happens to be partner in a firm - From the financial statements as placed on record, it emerges that the said property has been introduced by the partners in the firm and the said property is in business use of the firm. The same is also evidenced by the fact that the depreciation has also been allowed to the firm. The firm is repaying the loan installment and for all practical purposes, it is the firm only which is exclusively using the property for its business use. We also find that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aken by the assessee read as under: 1. The order of the learned Commissioner of Income-Tax (Appeals) ['CIT(A)'] is erroneous and bad in law. Invoking of Section 56(2)(vii) of the Income-tax Act, 1961_('the Act') is void-ab-initio 2.The learned CIT(A) failed to appreciate that since Section 56(2)(vii) is an anti-abuse provision, the facts should be analysed having regard to the intention of the section (being prevention of tax avoidance) before concluding about its applicability. Given that the transaction is between the firm (through its partners) and an unrelated third party, there is clearly no intention of tax avoidance. Accordingly, invoking of Section 56(2)(vii) of the Act by the learned CIT(A) is void-ab- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... related third party. Hence, 56(2)(vii) of the Act shall not be applied in the current facts since the Property in substance is purchased by the firm M/s. Chandran Steels. Principle of substance over form to be preferred as per the Act 5. The learned CIT(A) failed to appreciate the legal principle laid by Commissioner of Income-tax Vs Podar Cement's Private Limited (1997] 226 ITR 625 (SC) that anyone in possession of property in his own title exercising such dominion over the property as would enable others being excluded there from and having the right to use and occupy the property and/or to enjoy its usufruct in his own right shall be the owner/acquirer of the Property though a formal deed of title may not have been execu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nalty 7. The learned CIT(A) erred in levying penalty under 271(1)(c) of the Act whereas there is no concealment of income. 8. The learned CIT(A) erred in levying penalty under section 271(1)(c) of the Act whereas there is no furnishing of inaccurate particulars. As is evident, the sole issue that arises for our consideration is addition made by Ld. AO by invoking the provisions of Sec. 56(2)(vii). 2. The Registry has noted a delay of 6 days in ITA No.652/Chny/2022, the condonation of which has been sought by Ld. AR on the strength of condonation petition. Though Ld. Sr. DR opposed the condonation, the bench deems it fit to condone the delay and admit the appeal for adjudication on merits. 3. The Ld. AR advanced arguments s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, the provisions of Sec.56(2)(vii)(b)(ii) would apply and accordingly, the differential amount was to be added as income from other sources to the extent of assessee s share therein i.e., one-fourth. 4.2 The assessee, inter-alia, submitted that as per Section 14 of Indian Partnership Act, any property and rights and interest in property acquired with money belonging to the firm is deemed to be have been acquired by the firm. The entire amount to purchase the property was spent by the firm and the property actually belonged to the firm. Since the firm paid the amount and also repayment of loan obtained to purchase the property was met out of the funds of the firm, the property belonged to the firm only. The firm claimed the depr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all of whom happens to be partner in a firm M/s Chandran Steels. From the financial statements as placed on record, it emerges that the said property has been introduced by the partners in the firm and the said property is in business use of the firm. The same is also evidenced by the fact that the depreciation has also been allowed to the firm. The firm is repaying the loan installment and for all practical purposes, it is the firm only which is exclusively using the property for its business use. We also find that the provisions of Section 14 of Indian Partnership Act provide that unless the contrary intention appears, property and rights and interest in property acquired with money belonging to the firm are deemed to have been acquired ..... X X X X Extracts X X X X X X X X Extracts X X X X
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