C.I.T PATIALA vs. M/S RAJENDRA TRADING CO. LDH.

ITR/15/1993HC Punjab & HaryanaPHHC01021903199319 October 2006Author: MR. JUSTICE RAJESH BINDAL,MR. JUSTICE K.S. GAREWAL3 pages
AI SummaryAllowed

What did the High Court hold?

The High Court held that the Tribunal was right in law in deleting the penalty levied under Section 271D. The reasoning was based on the observation that the deposit was made by the karta of an HUF, who was also a partner in the assessee-firm. The CIT(A) had reasoned that a partner is not 'any other person' to the firm, thus Section 269SS was not violated. The Tribunal further supported its decision by noting that the provisions of Section 269SS and Section 271D were introduced only from assessment year 1989-90, and the genuineness of the transaction was not disputed, suggesting the assessee's bonafides could not be doubted. The ratio decidendi is that a transaction between a firm and its partner, even if involving cash deposits in contravention of the literal wording of Section 269SS, may not attract penalty under Section 271D if the partner is not considered 'any other person' and the transaction is genuine, especially considering the recent introduction of the penal provisions. The question was answered against the Revenue and in favour of the assessee.

What were the facts?

The Revenue, Commissioner of Income-tax, Patiala, has referred a question of law to the High Court of Punjab and Haryana concerning an Income-Tax Appellate Tribunal (Tribunal) order for the assessment year 1989-90. The assessee, M/s Rajendera Trading Co., a registered firm, accepted loans/deposits of Rs. 60,000 in cash from M/s Kulwant Rai & Sons, whose karta, Madan Lal, is a partner in the assessee-firm. The Assessing Officer imposed a penalty of Rs. 60,000 under Section 271D of the Income-tax Act, 1961, for alleged contravention of Section 269SS. The Commissioner of Income-tax (Appeals) deleted the penalty, a view affirmed by the Tribunal.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law and on facts in deleting the penalty of Rs. 60,000 levied under Section 271D, after having upheld the view that the loan/deposits taken/accepted by the assessee were in contravention of the provisions of Section 269SS? Assessee's Contention: The assessee argued that Section 269SS was not violated because the deposit was received from a partner of the firm. The CIT(A) observed that the deposit was made by the karta of an HUF, who is a partner in the firm. Therefore, the deposit was received from a partner, who is not considered 'any other person' in relation to the firm. The Tribunal also noted that Section 269SS and Section 271D were introduced from assessment year 1989-90, and the genuineness of the transaction was not in dispute, implying bonafides. Revenue's Contention: The Revenue's stance is implied by their reference of the question to the High Court, challenging the Tribunal's deletion of the penalty. The Assessing Officer had initially levied the penalty for contravention of Section 269SS.

Which sections of the Income-tax Act were involved?

Section 256(1),Section 269SS,Section 271D

AI-generated summary — verify with the full judgment below

I.T.R.No.15 of 1993 [1] IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH I.T.R.No. 15 of 1993 Date of decision: 19.10.2006 The Commissioner of Income-tax, Patiala ..Applicant through

Mr.S.K.Garg Narwana, Advocate v. M/s Rajendera Trading Co., Ludhiana ..Respondent through Mr. Vishal Gupta, Advocate CORAM: Hon'ble Mr.Justice K.S.Garewal Hon'ble Mr.Justice Rajesh Bindal

1.

Whether Reporters of local papers may be allowed to see the judgment ?

2.

To be referred to the Reporters or not ?

3.

Whether the judgment should be reported in the Digest? Rajesh Bindal, J. At the instance of the Revenue, the Income-Tax Appellate Tribunal, Chandigarh Bench (for short, `the Tribunal') has referred, under Section 256(1) of the Income-tax Act, 1961 (for short, `the Act'), the following question of law for opinion of this Court, arising out of ITA No. 807/Chandi/91, for the assessment year 1989-90: “Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law and on facts in deleting the penalty of Rs. 60,000/- levied u/s 271D, after having upheld the view that the loan/deposits tak

The order continues below.

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