Income Tax Appellate Tribunal - Ahmedabad
Bharatkumar Dayaram Patel, Surat vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD BENCH "A
"A "
BEFORE SHRI BHAVNESH SAINI,
SAINI, JUDICIAL MEMBER AND SHRI
N.S.SAINI,
N.S.SAINI, ACCOUNTANT MEMBER
Date of hearing : 1-10-10 Drafted on:1-10-10
ITA No.2314/AHD/2010
Assessment Year :2005-06
The Income Tax Vs. Shri Bharatkumar Dayaram
Officer, Ward 7(1), Patel, C/o.Akshar Gems,
Aayakar Bhavan, 30/233-3 Diamond Star
Majura Gate, House, Opp. Police Chowki,
Surat. L.H.Road, Surat.
PAN/GIR No. :ACVPP 3515E
(APPELLANT) .. (RESPONDENT)
Appellant by : Shri R. K. Dhanesta, D.R.
Respondent by: None.
ORDER
PER N.S.SAINI , ACCOUNTANT MEMBER :-
1. This is an appeal filed by the -- against the order of the Learned Commissioner of Income Tax (Appeals)-V, Surat, dated 8- 4-2010.
2. The sole ground of appeal of the Revenue reads as under :-
"On the facts and in the circumstances of the case and in law the Learned Commissioner of Income Tax (Appeals) has erred in deleting the penalty of `.16,00,000/- imposed under section 271E of the Income Tax Act for violating the provisions of section 269T, holding that the transactions between the assessee and M/s. Akshar Gems were related to capital account transactions only and not related to loan account transactions as the transaction with the firm and partners did not attract the provisions of section 269SS and 269T,without appreciating the fact that the transactions have been accounted by the assessee as "loans and advances and deposits".
3. The brief facts of the case are that the assessee is against levy of penalty on repayment of capital to M/s Akshar Gems, in which he is a partner for alleged violation of action 269T of the Act.
-2-The assessee had filed return of income showing total income of Rs. 1,75,470/-. The assessment U/s. 143(3) r.w.s. 147 was finalized on 29-12-2008 wherein it was noticed that the assessee had loan account with M/s, Akshar Gems, a firm in which he was a partner and the same was reflected in the balance sheet under the head "Loans & Advance and Deposits", From the details submitted, it was observed that the appellant had made repayment of loan to M/s. Akshar Gems in contravention of the provisions of Section 269T of the Act as under.
Date Amount of repayment Rs,
27-08-2004 6,00,000
21-10-2004 4,00,000
17-12-2004 6,00,000
Total 16,00,000
Accordingly, the AO issued a show cause notice for imposing penalty U/s. 271E of the Act. In response to the same, the assessee had replied that he was a partner in M/s. Akshar Gems and he had not received or repaid any amount from to M/s, Akshar Gems as loans and the transactions were in the nature of capital introduction or withdrawals. He also stated that in the audited balance sheet of M/s. Akshar Gems, the balance of the assessee was shown under the head "Partner's Capital Account". He also explained that because of negative balance of capital in the firm, the assessee had in his personal balance sheet shown the capital balance under the main head of "Current Liabilities" and sub head of "Loans, Advances and Deposits" as per the grouping made as per accounting software and there was no intention on the part of the assessee to treat the said account as Loan which was clear -3- from the fact that the balance was shown under the main head "Current Liabilities" and not under the head "Loans and Advances". In the books of firm as well as the appellant only one account was maintained and no separate accounts like capital account and loan accounts were maintained. He also submitted that he was under a bonafide belief that the transaction with the partnership firm did not attract the provisions of Section 269T. However, the reply of the assessee was not accepted on the ground that his contention was incorrect as he himself had shown the liability under the head "
Loans and Advances" and he had paid the amount in cash even though he was maintaining bank accounts. Accordingly, he imposed a penalty of Rs. 16,00,000/- for contravention of the provisions of Section 269T of the Act.
4. In appeal before the Learned Commissioner of Income Tax(Appeals) the assessee reiterated the same arguments on facts which were put before the Learned Assessing Officer in reply to the show cause notice and in support of the same filed copy of Audited accounts of the firm and a copy of capital account- It was further submitted that there was no question of Section 269T of the Act as the amount paid by the firm to partners and vice versa was the payment to self and did not partake the character of loan or deposit in general law and therefore, the provisions of Sections 269SS and 269T of the Act were not applicable to such facts and therefore, no penalty U/s. 271E could he levied. The assessee relied on the decision of Rajasthan High Court in CIT Vs. Lokhpat Film Exchange (Cinema) [304 ITR 172] and the ITAT Ahmedabad in me case of Shrepak Enterprise Vs. DC1T [64 ITD 300]. The assessee further submitted that the assessee's case is covered by the decision of ITAT Ahmedabad in the case of M/s. Akshar Gems Vs. ACIT [ITA No, 739 & 740 / Ahd / 2009 - A.Y. 2005-06] wherein in the case of the firm M/s, Akshar Gems, where the appellant was partner and to whom the impugned repayment was made, it was held that the transactions made by partners to firm could not be treated as loans or deposits. The assessee argued that when the -4- transactions were held to be of capital account transactions in the case of the recipient firm, the same transaction could not he termed as loan transaction in the hands of the assessee who made payment to the said firm.
5. After considering the submissions of the assessee the Learned Commissioner of Income Tax (Appeals) held as under:-
"I have gone through the penalty order as well as the submission made by the ARs. At the outset, it is worth mentioning that the appellant had made repayment to the firm M/s. Akshar Gems for which the penalty U/s. 271E of the Act was imposed and similar penalty U/s. 271D of the Act was imposed in the case of the said firm where the Hon'ble ITAT Ahmedabad quashed the penalty with the following observation.
" 3. In the light of aforesaid decision of a co-ordinate Bench, we are of the opinion that the payment of the amount made by a partner to a firm or repayment by the firm to a partner is the payment or repayment to self and does not partake the character of loan or deposit in general law. Therefore, the provisions of Section 269SS and 269T are not applicable to the facts of the case and consequently no penalty is imposable under section 271D or 271E of the Act, As contented by the asscssee before the Id. CIT{A), we also feel that the assessee could be under genuine impression that advancing of money or loan by a partner to a firm or repayment by a firm to partner is not a transfer from one person to the another and hence, there is no violation of provisions of section 269SS or 269T of the Act...".
4.1 Therefore, when the transactions are treated as the transactions of capital account and not loan transactions in the hands of the firm M/s. Akshar Gems, then it is obvious that the same transactions in the hands of the appellant could be of capital account transactions only and there is no reason to treat the same as repayment of loans and the decision of the Hon'ble Tribunal is applicable to the appellant also. Even on merits, it is observed that no separate accounts were maintained in respect of capital account and loan account in the books of the firm as well as the appellant. From a copy of capital account in M/s. Akshar Gems, it is observed that there were transactions of movement of capital during the year to and from the firm and also there were transactions of interest on capital/ salary to partner and payment of income tax. Thus, the transaction in the said account also gives a picture of capital account transactions and therefore, the payment made by a partner to a firm or repayment by the firm to a partner cannot take the character of loan or deposit. On perusal of audited balance -5- sheet it was also observed that the debit balance of capital account of the appellant was shown in Schedule "A" being Statement of Partner's Capital Account and the same was reflected accordingly in the balance sheet. Therefore, I am of the view that the transactions between the appellant and M/s. Akshar Gems were related to capital account transactions only and were not related to loan account transactions* "The appellant had in his personal balance sheet separately shown the loan transactions under (he broad head "loans" and thus the intention of the appellant in respect of the transactions with the firm was very clear to consider the same as capital account transactions and he acted under a bonafide belief that the transactions between the firm and partners did not "attract the provisions of Sections 269SS and Section 269T. The Hon'ble Rajasthan High Court in CIT V/s. Lokhpat Film Exchange (Cinema) (Supra) held that the asscssee firm acting under a bonafide belief that the transactions with partners did not attract the provisions of Sections 269SS and 296T and such bonafide belief constituted reasonable cause for deleting the penalty U/s. 271D and Section 271E of the Act, The Hon'ble 1TAT Ahmedabad in Shrepak Enterprise Vs. DCIT (supra) held that the amount paid, by firm to partners and vice versa is payment to self and does not partake the character of loan or deposit in general law and no penalty provisions arc applicable. Il is also observed that the aforesaid decision of co-ordinate bench is followed in case of M/s. Akshar Gems (Supra), in which the appellant is a partner, considering all these parameters, I am of the view that there is no case for violation of the provisions of Section 269T of the Act and therefore, the penalty of Rs 16,00,000/- imposed on the appellant is not justifiable and the same is directed lo be deleted. In the result this ground stands allowed."
6. We have heard the rival submissions and perused the materials available on record. In the instant case the Learned Assessing Officer levied penalty under section 271E for the alleged violation of Section 269T in respect of cash transaction with M/s. Akshar Gems. The penalty levied was deleted by the Learned Commissioner of Income Tax(Appeals). We find that for the same transaction penalty under section 271D was also levied by the Learned Assessing Officer in the case of M/s. Akshar Gems which was deleted by the this tribunal by observing as under:-
" 3. In the light of aforesaid decision of a co-ordinate Bench, we are of the opinion that the payment of the amount made by a partner to a firm or repayment by the firm to a partner is the payment or repayment to self and does not partake the character of loan or deposit in general law. Therefore, the provisions of Section 269SS and 269T are not applicable to the facts of the case -6- and consequently no penalty is imposable under section 271D or 271E of the Act, As contented by the asscssee before the Id. CIT{A), we also feel that the assessee could be under genuine impression that advancing of money or loan by a partner to a firm or repayment by a firm to partner is not a transfer from one person to the another and hence, there is no violation of provisions of section 269SS or 269T of the Act...".
No material was brought before us by the Learned Departmental Representative to show what was the mistake in the order of the Learned Commissioner of Income Tax(Appeals) in deleting the penalty after following the above order of the tribunal. In absence of the same we are in agreement with the order of the Learned Commissioner of Income Tax (Appeals) that following the above order of the Tribunal the penalty under section 271E levied in the hands of the assessee is not sustainable. We accordingly confirm the order of the Learned Commissioner of Income Tax (Appeals) and dismiss the appeal of the revenue.
Order signed, dated and pronounced in the Court on this 7th day of October, 2010.
Sd/- Sd/-
(BHAVNESH SAINI) (N.S. SAINI)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad: On this 7th day of October, 2010
Compiled and compared by: Patki
Copy of the Order forwarded to :
1. The Appellant
2. The Respondent
3. The CIT Concerned
4. The ld. CIT(Appeals)- V, Surat
5. The DR, Ahmedabad Bench
6. The Guard File.
BY ORDER,
(Dy./Asstt.Registrar), ITAT, Ahmedabad
-7-
Date Initials
1. Draft dictated on 04-10-2010 ----------------
2. Draft Placed before authority 04-10-2010 ----------------
3. Draft proposed & placed 05-10-2010 ---------------- JM
Before the Second Member
4. Draft discussed/approved 06-10-2010 ---------------- JM/AM
By Second Member
5. Approved Draft comes to P.S 06-10-2010 ----------------
6. Kept for pronouncement on 07-10-2010 -----------------
7. File sent to the Bench Clerk 07-10-2010 -----------------
8. Date on which file goes to the ---------------- ----------------
9. Date of dispatch of Order ---------------- ----------------