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TMI Blog2014 (2) TMI 1173X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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. X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 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 paragraphs 4.1 to 4.7 read as under : "4.1 The assessee is an individual and partner in two firms namely M/s. ABC Grass Suppliers and M/s. Chetan Grass Trading Co. and is trader/contract supplier In grass/paddy straw business. In this line of trading in grass, payments for purchases of grass, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtners 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 by partner to firm is a payment to self and not the loan or deposit and as such it would not attract penalty under section 271D/271E of the Income-tax Act, 1961. 4.7. In support of the above contentions, the assessee relies on the following judicial pronouncements- 1. Shrepak Enterprises v. Deputy CIT [1998] 60 TTJ (Ahd.) 199 2. CIT v. Maheshwari Nirman Udyog [2008] 302 ITR 201 (Raj) 3. CIT v. Idhayam Publications Ltd. [2006] 285 ITR 221 (Mad) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 record. 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. In our opinion 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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