TMI Blog2014 (2) TMI 1173X X X X Extracts X X X X X X X X Extracts X X X X ..... k 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. - ITA NO. 4961/Mum/2011 - - - Dated:- 3-2-2014 - SHRI N.K. SAINI AND SHRI SANJAY GARG, JJ. For the Appellant : Shri Ravi Prakash For the Respondent : Shri Firoz Andhyarujina ORDER N. K. Saini (Accountant Member)- This is an appeal by the Department against the order dated February 28, 2011, of the Commissioner of Income-tax (Appeals)-II, Thane. The only grievance of the Department relates to deletion of penalty of ₹ 33,26,960 levied by the Assessing Officer under section 271E of the Income-tax Act, 1961 (hereinafter referred to as the Act ). 2. The facts of the case in brief are that the Assessing Officer during the course of assessment proceedings noticed that the assessee had repaid the loans in cash as under : Name of the party Date of loan repaid Mode of payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cable to the transaction of the assessee with these partnership-firms. Therefore, the learned Assessing Officer has allowed the cash transaction in the capital account with the above referred partnership- firm. 4. The Assessing Officer did not accept the explanation of the assessee by observing that the 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. He also observed that the assessee had not put forward the existence of any compelling circumstances for the transactions in cash. Therefore, the provisions of section 269 were clearly applicable in this case and the claim of the assessee that transaction with his firm was in the nature of withdrawal and deposit of capital cannot be accepted. Accordingly, the Assessing Officer levied penalty of ₹ 33,26,960 under section 271E of the Income-tax Act. Being aggrieved the assessee carried the matter to the learned Commissioner of Income-tax (Appeals) and the submissions made before him as incorporated in paragrap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the intention of the parties and surrounding circumstances. 4.6. The appellant further contended that partners and firm are not independent of each other and the firm is not juristic person these transactions cannot be considered as inter-person but were only for the purpose of carrying on the partner's own business. The partnership-firm under the Indian Partnership Act, 1932, is not a distinct legal entity apart from the partners constituting it. In law, the firm as such has no separate rights of its own in the partnership assets but it is the partners, who own it jointly. The profits of the firm are the profits earned by all the partners in carrying on the business payment by partner to a firm or repayment of capital amount by a firm to partner, temporary advances and withdrawals from joint account do not result in loan/ deposits and are, therefore outside the purview of the afore said provisions The aforesaid penalties are neither automatic nor mandatory, but are directory in nature, i.e., the said penalties would not be leviable if there exists reasonable cause for the default in view of the provisions of section 273B. In view of the above, the payments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness purpose by the partner to the firm, in no way, can be termed as giving loan by the partner to the firm or vice versa. Therefore, the penalty under section 271E was not leviable. Reliance was placed on the following cases : 1. Addl. CIT v. D. Sudhakar [2009] 19 DTR (AT) 276 (Bang). 2. Omec Engineers v. CIT [2007] 294 ITR 599 (Jharkhand). 3. CIT v. Bombay Conductors and Electricals Ltd. [2008] 301 ITR 328 (Guj). 4. CIT v. Lokhpat Film Exchange (Cinema) [2008] 304 ITR 172 (Raj). 5. CIT v. Maheshwari Nirman Udyog [2008] 302 ITR 201 (Raj). 6. CIT v. Raj Kumar Sharma [2007] 294 ITR 131 (Raj). 7. Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26 (SC). Aggrieved by the decision of the Commissioner of Income-tax (Appeals), the Revenue is in appeal before the Tribunal. 6. The learned Departmental representative strongly supported the order of the Assessing Officer and reiterated the observations made in the penalty order. In his rival submissions learned counsel for the assessee reiterated the submissions made before the lower authorities. 7. We have considered the submissions of both parties and have carefully gone through the material placed on re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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