INDER LAL RAMRAKHYANI, DHAMTARI,DHAMTARI vs. ITO, DHAMTARI, DHAMTARI

ITA 694/RPR/2026Status: DisposedITAT Raipur14 October 2026AY 2014-1514 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the cash withdrawals by the assessee from M/s. Balaji Construction were not in the nature of a loan, but rather a withdrawal of his own money against his credit balance in the firm. The ledger account clearly indicated a substantial credit balance of Rs. 61,71,991.71, from which the assessee withdrew Rs. 15 lakhs. The Tribunal noted that the assessee had never submitted that a loan was received from the firm. Furthermore, the Tribunal relied on the decision of the Hon'ble High Court of Delhi in CIT vs. Muthoot Financiers, which held that loan transactions between a partner and a partnership firm do not attract the rigors of Section 269SS. Even if it were considered a loan, the assessee was in a better position as he was withdrawing his own money, for which Section 269SS is not applicable. The CIT(Appeals)/NFAC's order was set aside, and the penalty was deleted. The ratio decidendi is that withdrawals by a partner from their credit balance in a partnership firm do not constitute a loan transaction attracting Section 269SS, and even if it were a loan, transactions between a partner and a firm are outside the purview of Section 269SS.

What were the facts?

The assessee, Inder Lal Ramrakhyani, is in appeal against the order of the CIT(Appeals)/NFAC, Delhi, dated 20.07.2026, for Assessment Year 2014-15. The appeal challenges a penalty of Rs. 15 lakhs levied by the Assessing Officer (AO) under Section 271D of the Income Tax Act, 1961, for alleged violation of Section 269SS. The AO held that the assessee accepted unsecured loans in cash exceeding Rs. 20,000 from his partnership firm, M/s. Balaji Construction, which was considered a violation. The assessee contended that the cash withdrawals were from his own credit balance in the firm, not a loan, and provided a ledger account showing a credit balance of Rs. 61,71,991.71. The withdrawals totaling Rs. 15 lakhs were made on various dates during FY 2013-14.

What were the issues?

1. Whether the cash withdrawals by the assessee from his partnership firm, M/s. Balaji Construction, against his credit balance constitute a loan transaction attracting the provisions of Section 269SS of the Income Tax Act, 1961, thereby warranting a penalty under Section 271D? (Question of law and fact, turning on Section 269SS and 271D). Assessee's Contention: The assessee argued that the cash withdrawals were not loans but the withdrawal of his own money from his credit balance in the firm. He relied on the ledger account showing a substantial credit balance. Furthermore, he contended that Section 269SS does not apply to transactions between a partner and a partnership firm, citing CIT vs. Muthoot Financiers (2015) 371 ITR 408 (Del.). Revenue's Contention: The revenue, through the Sr. DR, referred to paragraph 2 of the penalty order, suggesting the assessee had accepted it as a loan transaction.

Which sections of the Income-tax Act were involved?

Section 271D,Section 269SS,Section 273B,Section 282(1)(c),Section 127A,Section 40(B),Section 36

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, RAIPUR BENCH “SMC”, RAIPUR

Before: SHRI PARTHA SARATHI CHAUDHURY

For Appellant: Shri R.B Doshi, CA
For Respondent: Shri Piyush Tripathi, Sr. DR
Hearing: 13.10.2026Pronounced: 14.10.2026

PER PARTHA SARATHI CHAUDHURY, JM The present appeal preferred by the assessee emanates from the order of the Ld.CIT(Appeals)/NFAC, Delhi dated 20.07.2026 for the assessment year 2014-15 as per the grounds of appeal on record.

2.

In this case, the assessee is aggrieved with the levy of penalty of Rs.15 lakhs by the A.O invoking Section 271D of the Income Tax Act, 1961 (for short ‘the Act’) for alleged violation of Section 269SS of the Act.

The order continues below.

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