SHEVAM JUGALKISHOR KOTHARI,AKOLA vs. ITO-WARD 2, AKOLA

ITA 722/NAG/2026Status: DisposedITAT Nagpur16 October 2026AY 2015-163 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the penalty levied under Section 271E of the Income Tax Act, 1961, was not sustainable. The Tribunal found that the assessee was indeed a partner in M/s. Ramchandra Ramgopal Financial Services (RRFS), as evidenced by the partnership deed and the firm's Income Tax Return signed by the assessee. Furthermore, the assessee's ledger account in the books of the partnership firm showed a debit balance and recorded cash transactions, including the Rs. 4,00,000/- repayment, between the assessee and the firm. The Tribunal concluded that the assessee had inadvertently mentioned the partnership firm and the transaction with it in the list of unsecured loans. Since the repayment was made by the assessee to the partnership firm in his capacity as a partner, the provisions of Section 271E of the Act could not be invoked. Consequently, the findings of the CIT(A) were reversed, and the penalty was deleted. The grounds of appeal raised by the assessee were allowed.

What were the facts?

The assessee, Shevam Jugalkishor Kothari, an individual and partner in M/s. Ramchandra Ramgopal Financial Services (RRFS), filed his return of income for Assessment Year 2015-16. His total income was assessed at Rs. 6,52,250/-. During scrutiny, the assessee disclosed a cash repayment of Rs. 4,00,000/- to the partnership firm, RRFS, against an outstanding amount. The Assessing Officer (AO) treated this as a default and levied a penalty under Section 271E of the Income Tax Act, 1961. The Commissioner of Income Tax (Appeals)/NFAC confirmed this penalty. The assessee appealed to the Income Tax Appellate Tribunal (ITAT). The ITAT examined the partnership deed, the firm's ITR signed by the assessee, and the assessee's ledger account in the firm's books, which showed debit balances and cash transactions between the assessee and the firm.

What were the issues?

1. Whether the penalty levied under Section 271E of the Income Tax Act, 1961, is sustainable when the cash repayment of Rs. 4,00,000/- was made by the assessee to the partnership firm in which he is a partner, against his debit balance in the firm's books? Assessee's contentions: The assessee argued that the cash repayment was made in his capacity as a partner to the partnership firm, and therefore, the provisions of Section 271D or 271E, which deal with loans and deposits, are not applicable to such transactions between a firm and its partners. The assessee contended that he inadvertently included this transaction in the list of unsecured loans furnished to the AO. Revenue's contentions: The revenue's position, as reflected in the AO's and CIT(A)'s orders, was that the cash repayment constituted a default under Section 271E, as it was a repayment of an unsecured loan in cash.

Which sections of the Income-tax Act were involved?

Section 271E,Section 250,Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, PUNE SMC BENCH, PUNE

Before: SHRI MANISH BORAD

For Appellant: Shri Rajesh Loya, CA
For Respondent: Shri Shiv Shankar Yadav, Sr.DR
Hearing: 14/10/2026Pronounced: 16/10/2026

This appeal by the assessee is directed against the order of Ld. Commissioner of Income Tax (Appeals)/NFAC, Delhi (for short, “CIT(A)”) dated 18.05.2026 passed u/sec. 250 of the Income Tax Act, 1961 (for short, “Act”) which is arising out of penalty order dated 28.07.2023 passed u/sec. 271E of the Act for the Assessment Year (A.Y.) 2015-16. 2. The only issue for consideration is against the finding of Ld.CIT(A) confirming the penalty levied by the Ld. AO u/sec. 271E of the Act at Rs. 4,00,000/- for the alleged repayment of unsecured loan taken by the assessee from partnership firm M/s. Ramchandra Ramgopal Financial Services (RRFS).

3.

I have heard the rival submissions and perused the material placed before me. I observe that assessee is an

The order continues below.

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