1980 (6) TMI 29

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..... essment is 1970-71. During the assessment year 1969-70, the firm had comprised of five partners, namely, Kedarnath, Rameshlal, Dineshlal, Maheshlal and Sureshlal. The first four partners made gifts of varying amounts to their respective wives on October 19, 1968, appertaining to the assessment year 1969-70 and the alleged gifts were made by book transfers and the respective capital accounts of the partners were debited and consequent credit entries were found in the names of the ladies. Interest was paid to the ladies on the loans. In the assessment year 1970-71, the firm claimed deduction of interest to the tune of Rs. 39,000 said to have been paid to the ladies on their loans. On August 26, 1970, the firm's assessment for the year under d .....

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..... case the payment of interest has to be allowed. If the payment of interest is made to the partners,it cannot be allowed by virtue of s. 40(b). It is definitely with a view to get over s. 40(b) that the assessee resorted to the scheme, namely, to show the gifts in favour of the wives of the partners. Therefore, there is no doubt, in our minds that the revenue has established the case against the assessee for concealment of income. At any rate, the assessee is clearly liable for furnishing inaccurate particulars of income ......... " Mr. Mohapatra, for the assessee, contends that all primary facts had been placed before the ITO before the original assessment had been completed. The ITO on being satisfied that the gifts were genuine proceede .....

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..... or furnishing of inaccurate particulars. There would be a presumption under the Explanation to s, 271(1) of the Act which is rebuttable and the IAC as also the Tribunal have not looked at the matter from that angle. There is force in the contention of Mr. Mohapatra that the firm as such is incapable of exhibiting any contumacious conduct and contumacy, if any, must be found in the partners constituting it. The Tribunal vacated the imposition of penalty in the hands of the partners. We do not see any justification in the reasonings advanced by the Tribunal to maintain the penalties in the hands of the firm. It is true that the firm is an independent unit of assessment, but contumacy, if any, which would give the foundation for the imposition .....

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