2010 (10) TMI 1228 - AT - Income Tax

Summary

Issues involved: Appeal against penalty imposed u/s 271E for violating provisions of section 269T of the Income Tax Act.

Summary:

Issue 1: Violation of Section 269T - Appellant's contention and AO's penalty imposition
The appellant, a partner in a firm, made repayments to the firm, which were reflected as "Loans & Advances" in the balance sheet. The Assessing Officer (AO) imposed a penalty u/s 271E for contravention of section 269T due to these repayments.

Issue 2: Arguments before the Commissioner of Income Tax (Appeals)
The appellant argued that the transactions were related to capital account, not loan account, citing the firm's balance sheet and the absence of separate capital and loan accounts. The appellant relied on legal precedents to support the argument that transactions between partners and the firm did not constitute loans.

Issue 3: Decision of the Commissioner of Income Tax (Appeals)
The Commissioner of Income Tax (Appeals) noted that similar penalty under section 271D imposed on the firm was quashed by ITAT Ahmedabad. The Commissioner held that the transactions were of capital account nature, not loans, based on the firm's balance sheet and the appellant's clear intention regarding the nature of transactions. Citing legal precedents, the penalty of Rs. 16,00,000 imposed on the appellant was deemed unjustifiable and was directed to be deleted.

Issue 4: Tribunal's decision on the penalty imposition
The Tribunal confirmed the Commissioner's decision to delete the penalty under section 271E, as it found no error in the Commissioner's order. The Tribunal agreed that the transactions were of capital account nature, following the precedent set by ITAT Ahmedabad in similar cases.

In conclusion, the penalty imposed under section 271E for violating section 269T was deleted based on the nature of the transactions being deemed as capital account transactions, not loans, as per the firm's balance sheet and legal precedents.