ITO, WD-1(3), BURDWAN, BURDWAN vs. M/S D. K. ENTERPRISE, BURDWAN

We have heard rival submissions and gone through facts and circumstances of the case. We note that Shri Sumanta Roy, Smt. Mita Roy and Shri Ujjal Kanti Konar are partners of the assessee firm which fact was evident from the copy of the partnership deed found in the assessment records. The partnership firm is not a legal entity in general law though it is treated as a taxable entity under the Income Tax Act. A firm is not a separate juristic entity distinct from its partners. The rights and duties of the partners and the meaning of the term ‘firm’ are to be governed by the provisions of the Indian Partnership Act. The payment made by the firm to the partner and vice versa is payment to self and it is not a transaction between two legal persons under the general law as observed by the Coordinate Bench of this Tribunal in ITA No. 1916/Kol/2004. We take note that since the cash transactions were between the partners of the firm the provisions of section 269SS of the Act is not attracted and since it was a bona fide transaction and a reasonable ground existed on which they had not adhered to the requirement of conducting the transaction through banking channel only. In the light of the aforesaid facts and circumstances of the case, relying on the order of the Hon’ble High court of Rajasthan in Lokhpat Film Exchange (cinema) (supra), we uphold the order of the Ld. CIT(A) and dismiss the ground of appeal raised by the revenue.

We have heard rival submissions and gone through facts and circumstances of the case. The plea of the assessee is that the aforesaid amounts were not loan or deposit but was trade advance in cash on various dates from these two persons. According to the assessee the said amounts were in the nature of trade advance and on failure to supply the desired products; the amounts were refunded to each of them by cheque. According to the assessee, the said amounts were in the nature of trade advance and on failure to supply the desired products the amounts were refunded to each of them by cheque. According to assessee, since the assessee has received an advance towards future supply of goods, such advances cannot fall u/s. 269SS of the Act and penalty u/s. 271D of the Act cannot be attracted and for that the assessee relied on the decision of the Hon’ble Allahabad High Court decision in CIT Vs. Kailash Chandra Deepak Kumar (2009) 317 ITR 351 (All). In order to buttress his argument the Ld. AR drew our attention to page no. 23 and 24 of the paper book which are the copy of ledger account of Sri Arup Mondal and copy of the ledger account of Shri S k. Jalal. We note that the transactions reflected in the said ledger account are from October, 2009 to January, 2010 wherein we note that there is no transaction on a day which is above the threshold limit of Rs.20,000/-. The amounts transacted are less than Rs.20,000/- and the pre-condition laid down to attract section 269 SS of the Act is not per se satisfied. Moreover, the Hon’ble Allahabad High Court has held that the provisions of section 269SS of the Act is not applicable for cash advance made between parties for purchase of goods in future. When the assessee’s case is that the cash payments were advance for future supply of goods which the assessee could not fulfill so, he returned the same back to the individuals by cheque cannot attract section 269SS. The Ld. DR could not controvert the aforesaid facts. In such a scenario, we are of the considered opinion that there is no violation of section 269SS of the Act and, therefore, the penalty imposed u/s. 271D of the Act is not sustainable in the eyes of law and, therefore, is directed to be deleted. Assessee’s appeal is allowed.

Now, we are coming to (Revenue’s appeal). Revenue has filed this appeal against the order of Ld. CIT(A) dated 07.04.2014 for AY 2010-11 passed u/s. 271E of the Act.

Brief facts of the case are that the JCIT has imposed penalty for violation of provisions of section 269T of the Act in respect of loans returned back in cash to Shri Sumanta Roy Rs.9,03,000/-, Smt. Mita Roy Rs.8,97,000/- and Shri Ujjal Kanti Konal Rs.8,86,000/-. Since the loans were given back to these persons in cash, the JCIT imposed penalty u/s. 269T of the Act. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A), who was pleased to delete the same by taking note of the fact that the transaction are between partners and the partnership firm. Aggrieved, the revenue is before us.

We have heard rival submissions and gone through facts and circumstances of the case. We have already decided in that the transactions in cash were between partners and the partnership firm and the payments made by the firm to partners and vice versa are payment to self and, therefore, there is no violation of section 269SS of the Act. On the same logic and reasoning giving cash back by firm to partners also will not attract the provisions of section 269T of the Act, therefore, no penalty is imposable u/s. 271E of the Act. The Ld. CIT(A) has relied on the judgments cited, supra by us in the order passed in ITA No. 1346/Kol/2014 which is not repeated again for the sake of brevity and for the same reasoning, we are of the considered opinion that there is no violation of section 269T of the Act and, therefore, the penalty u/s. 271E of the Act was not warranted in this matter and, therefore, the Ld. CIT(A) has rightly deleted the penalty, which we confirm. This appeal of revenue is dismissed.

To sum up, in the result, both the appeals of revenue are dismissed and that of assessee is allowed.