2016 (12) TMI 1875 - AT - Income Tax

Penalty u/s.271E - violation of Section 269T - assessee has repaid a loan in cash - assessee explained that he is a partner in the said firm and it is a payment between partner and his firm and pleaded that Section 269T is not applicable - HELD THAT - As decision in the case of CIT vs Lokhpat Film Exchange (cinema) 2007 (1) TMI 165 - RAJASTHAN HIGH COURT held under the general provision relating to Partnership Act that partnership firm is not a juristic person and for inter relationship different remedies are provided to enforce the rights arising out of their inter se transactions, the issue about separate entities apart, it cannot be doubted that the assessee has acted bona fide and his plea that inter se transactions between the partners and the firm are not governed by the provisions of ss. 269SS. We find that the CIT-A found examined and satisfied that the assesse is a partner in a firm i.e M/s.C.M.Roy Sons and the AO also during the course of assessment proceedings on perusal of the ledger account in respect of advance receipt and payment found that the Assessee credited as advance from customers with an endorsement To advance memo no- to- from customers and also found the entire sale to M/s.C.M.Roy Sons. The assessee takes advances from its customers and makes payment to its firm time to time for meeting the business needs. We hold that the money received or paid in the above circumstances specially between the partners and its firm can be treated in the nature of advance and not loan or deposit as contemplated in sec.269SS of the Act and that the payments between the partnership firm and its partner and vice versa are payment to self. As discussed above the advances received by the assessee were from proper source and there is no doubt the genuineness of the transactions. In such circumstances, the penalty imposed u/s.271E of the Act is not maintainable - we cancel the penalty levied by the A.O. u/sec.271E - Decided against revenue.

Summary

Issues:
- Delay in filing the appeal
- Justification for deleting the penalty imposed by the AO u/s. 271E

Delay in Filing the Appeal:
The appeal by the revenue was filed with a delay of 104 days due to the misplacement of assessment records during housekeeping maintenance. The appellant sought condonation of the delay, which was granted, and the appeal was heard on merits.

Justification for Deleting the Penalty Imposed by the AO u/s. 271E:
The case involved an individual engaged in gold trading who repaid a loan in cash to a firm, initiating penalty proceedings under Section 271E. The assessee argued that the repayment was between partners and the firm, not subject to Section 269T. The AO imposed a penalty based on the admission of cash repayment by the assessee during assessment proceedings.

The CIT-A, relying on legal precedents, held that the firm and partners are not separate entities, canceling the penalty. The revenue contended that the assessee changed his version during penalty proceedings, arguing that there was no material to prove partnership in the firm. However, the tribunal found that the transactions were advances, not loans or deposits, based on the nature of inter-partner transactions and the genuineness of the dealings.

The tribunal referenced previous judgments to support the decision, emphasizing that transactions between partners and the firm can be treated as advances, not loans or deposits under Section 269SS. Ultimately, the penalty imposed under Section 271E was deemed not maintainable, and the appeal of the revenue was dismissed.

In conclusion, the tribunal dismissed the revenue's appeal, upholding the decision to delete the penalty imposed by the AO under Section 271E.