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2014 (2) TMI 1173 - AT - Income TaxPenalty u/s 271E - cash payment of ₹ 33,26,960 to the firms M/s. Chetan Grass Trading Company and M/s. ABC Grass Company were not reflected in the capital account of the assessee and as per the audit report submitted by the assessee cash payments were treated as repayment of loans - CIT(A) deleted penalty levy - Held that:- In the present case, it is an admitted fact that the assessee is a partner in the firms M/s. Chetan Grass Trading Company and M/s. ABC Grass Company from whom he received a sum of ₹ 2,00,000 and ₹ 31,26,960 respectively. These transactions were treated by the Assessing Officer as repayment of loan in cash. Thus there is no independent legal entity of the firm apart from the rights and liability of the partners constituting it and if any amount is given or taken from the firm by the partners that cannot be treated as giving or taking of a loan. In the instant case, the assessee being a partner gave the money to the partnership-firm when it was in need of business exigencies, later on the amount was received it back if the said amount had been routed through the capital account, there could have been no disallowance by the Department because a partner can deposit cash in his capital account and also he has a right to receive it in cash. Therefore, the penalty levied by AO under section 271E was not justified - Decided in favour of assesse.
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