Addl. CIT, Meerut v. M/s. Radhey Lal Ved Prakash, Meerut

ITA 176/DEL/2012 | 2006-2007
Pronouncement Date: 30-03-2012 | Result: Dismissed

Appeal Details

RSA Number 17620114 RSA 2012
Assessee PAN OFSEC2928O
Bench Delhi
Appeal Number ITA 176/DEL/2012
Duration Of Justice 2 month(s) 17 day(s)
Appellant Addl. CIT, Meerut
Respondent M/s. Radhey Lal Ved Prakash, Meerut
Appeal Type Income Tax Appeal
Pronouncement Date 30-03-2012
Appeal Filed By Department
Order Result Dismissed
Bench Allotted F
Tribunal Order Date 30-03-2012
Date Of Final Hearing 14-03-2012
Next Hearing Date 14-03-2012
Assessment Year 2006-2007
Appeal Filed On 12-01-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F NEW DELHI) BEFORE SHRI RAJPALYADAV JUDICIAL MEMBER AND SHRI T.S. KAPOOR ACCOUNTANT MEMBER I.T.A. NO.176/DEL/2012 ASSESSMENT YEAR : 2006-07 ADDL. CIT M/S RADHEY LAL VED PRAKASH AAYKAR BHAWAN ALANKAR JEWELLERS RANGE-2 MEERUT. V. VALLY BAZAR MEERUT. (APPELLANT) (RESPONDENT) PAN NO. AACFR-8599-R APPELLANT BY : SMT. RENUKA JAIN GUPTA SR. DR. RESPONDENT BY : SHRI M.P. RASTOGI ADVOCATE. ORDER PER TS KAPOOR AM: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORD ER OF LD CIT(A) MEERUT DATED 31.10.2011 FOR ASSESSMENT YEAR 200 6-07. THE GROUNDS OF APPEAL ARE AS UNDER:- I. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) WAS JUSTIFIED IN L AW IN HOLDING THAT SEC 269T OF THE I.T. ACT 1961 WAS NOT A PPLICABLE ON ACCEPTANCE OF LOANS AS THE SAME IS COVERED U/S 269SS O F THE L.T. ACT 1961 IGNORING THE FACT THAT DURING PENALTY PROC EEDINGS DEFAULT OF ASSESSEE WAS ALWAYS QUOTED IN RESPECT OF ACCEPT ANCE OF LOAN AND ASSESSEE ITSELF REPLIED ACCORDINGLY. THUS MI SQUOTING ITA NO176/DEL/2012 2 OF SECTION WAS VERY MUCH WITHIN THE PURVIEW & SCOPE OF SEC 2928 OF IT ACT 1961 AS PER WHICH THE PROCEEDINGS WER E PURPORTEDLY INITIATED & DISPOSED OFF U/S 271 D OF THE L.T. ACT 1961 INSTEAD OF 271 E FOR THE VIOLATION OF SEC 269SS OF T HE ACT. THE PENALTY ORDER WAS THEREFORE FULLY VALID. 2. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD COMMISSIONER OF INCOME TAX (APPEALS) WAS JUSTIFIED IN FA CTS IN CIRCUMSTANCES OF THE CASE BY DELETING THE PENALTY OF RS.30 14 000/- IN SPITE OF THE FACT THAT THE FIRM HA S ACCEPTED THE AMOUNT OF RS.30 14 000/FROM ITS PARTNERS IN CONTRAVE NTION OF SECTION 269SS OF THE L.T. ACT 1961 WHERE ACCEPTANCE OF LOANS IS PROHIBITED THROUGH ANY MODE WHICH IS OTHERWISE THAN CROSSED BANK CHEQUES/DDS. 3. WHETHER LD. CIT (APPEALS) WAS JUSTIFIED IN ACCEPTIN G THE PLEADINGS OF THE ASSESSEE FIRM FOR TREATING IT AS THE SAME ENTITY ALONG WITH ITS PARTNERS FOR REPAYMENT OF LOAN WHICH I S NOT ACCEPTABLE BECAUSE AS PER IT ACT 1961 PARTNERS OF ANY FIRM ARE DIFFERENT ENTITY. 4. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) WAS JUSTIFIED IN FA CTS IN ACCEPTING THE PLEA OF THE ASSESSEE THAT DEPOSIT IN CAPI TAL ACCOUNTS OF PARTNERS IS NOT A VIOLATION OF SEC.269SS O F THE 1.T. ACT 1961 WHEREAS PENALTY WAS LEVIED FOR ACCEPTING TH E LOAN WHICH WAS UNDOUBTEDLY THE VIOLATION OF SEC 269SS OF THE L.T. ACT 1961. ITA NO176/DEL/2012 3 5. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE ORDE R OF THE COMMISSIONER OF INCOME - TAX (APPEALS) MAY BE SET ASIDE AND THAT OF THE A.O. RESTORED. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS A PART NERSHIP FIRM WHICH HAD FILED RETURN OF INCOME FOR THE ASSESSMENT YEA R 2006-07 ON 23.6.2006. THE ASSESSMENT WAS DONE U/S 143(3) AT THE SAME AMOUNT OF INCOME RETURNED. HOWEVER ON AN ANALYSIS OF RECOR D ASSESSING OFFICER NOTED THAT THERE WERE CERTAIN REPAYMENTS OF LOANS IN VIOLATION TO SECTION 269T AND THERE PENALTY U/S 271E DESERVE TO BE INITIATED. ACCORDINGLY HE ISSUED A NOTICE U/S 271E OF THE ACT O N 20.8.2010 AND AFTER FURTHER NOTICES COMPLETED PROCEEDINGS U/S 271E. THE LD COUNSEL OF THE ASSESSEE SUBMITTED THAT THE PROVISION OF SECTION 26 9T OF THE ACT DOES NOT APPLY TO THE PARTNERS CAPITAL ACCOUNTS I.E. F OR THE DEPOSIT MADE BY THE PARTNERS TO THEIR CAPITAL ACCOUNTS AS WELL AS TO THE WITHDRAWALS MADE BY THE PARTNERS FROM THEIR CAPITAL ACCOUNTS. HOWEVER THE ASSESSING OFFICER DID NOT ACCEPT THE CONTE NTION OF THE ASSESSEE AND IMPOSED PENALTY OF `.30 14 000/- U/S 271E F OR VIOLATION OF SECTION 269T OF THE ACT FOR REPAYMENT OF DEPOSIT. 3. AGGRIEVED BY THIS THE ASSESSEE FILED APPEAL BEFORE T HE LD CIT(A) AND REITERATE ITS CONTENTION THAT WITHDRAWALS AND DEP OSITS IN THE PARTNERS CAPITAL ACCOUNT DO NOT AMOUNT TO REPAYMENT OF LOAN. THE LD COUNSEL FOR THE ASSESSEE ALSO QUOTED THE JUDGMENT OF HON' BLE SUPREME COURT IN THE CASE OF R.M. CHIMBARAM PILLAI REPORTED IN (1977) 106 ITR 292 (SC) IN WHICH IT IS HELD THAT A FIRM IS NOT A LE GAL PERSON EVEN THOUGH IT HAS GOT SOME ATTRIBUTES OF PERSONALITY. IN I NCOME TAX LAW A FIRM IS A UNIT OF ASSESSMENT BY SPECIAL PROVISIONS BUT IT IS NOT A FULL PERSON. THE HON'BLE SUPREME COURT THEREFORE RELYIN G ON THE COMMENTARY OF LINDLEY ON PARTNERSHIP HELD THAT THE F IRM HAS NO LEGAL ITA NO176/DEL/2012 4 RECOGNITION. THE LAW IGNORING THE FIRM LOOKS TO THE PARTNER COMPOSING IT. A PARTNER MAY BE A DEBTOR OR CREDITOR OF HIS CO- PARTNERS BUT HE CANNOT BE DEBTOR OR CREDITOR OF THE FIRM OF WHICH H E IS HIMSELF A MEMBER. THEREFORE THE CREDIT OF THE AMOUNT MADE BY THE FIRM TO THE PARTNERS ACCOUNT WAS THE PAYMENT ITSELF TO SELF AND DI D NOT PARTAKE THE CHARACTER OF LOAN OR DEPOSIT IN GENERAL LAW. THE REFORE THE PROVISIONS OF SECTION 269SS ARE NOT APPLICABLE TO THE FACTS OF THE INSTANT CASE AND NO PENALTY IS IMPOSABLE U/S 271D. 4. HE FURTHER CONTENDED BEFORE LD CIT(A) THAT PENAL TY U/S 271E IS IMPOSABLE FOR VIOLATION U/S 269T OF THE ACT WHICH IS F OR REPAYMENT OF LOAN AND THE AMOUNT OF PENALTY IS EQUAL TO THE 100% OF THE AMOUNT REPAID. HOWEVER THE LD ASSESSING OFFICER HAD LEVIED T HE PENALTY EQUAL TO THE AGGREGATE AMOUNT OUTSTANDING TO THE CREDIT OF PARTNERS CAPITAL WHICH WAS `.30 14 000/- BELONGING TO THE FOLLOWING P ARTNERS:- SHRI VED PRAKASH `. 18 10 000/- SHRI PEEYUSH PRAKASH `. 6 02 000/- SHRI ALOK PRAKASH. `. 6 02 000/- ----------------------- `. 30 14 000/- ----------------------- 5. HE FURTHER PLEADED THAT PENALTY IF AT ALL IT WA S LEVIABLE THEN THE PENALTY SHOULD HAVE BEEN EQUAL TO THE AMOUNT SO REPA ID WHICH ARE AS UNDER:- SHRI VED PRAKASH `.10 000/- ITA NO176/DEL/2012 5 SHRI PEEYUSH PRAKASH `. 2 000/- SHRI ALOK PRAKASH `. 2 000/- --------------- `.14 000/- -------------- 6. THE LD CIT(A) AFTER HEARING THE SUBMISSION OF THE A R OF THE ASSESSEE DELETED THE PENALTY ON THE BASIS OF FINDINGS THAT THE FIRM HAS NOT REPAID ANY AMOUNT TO THE PERSONS WHO HAVE GIVEN L OAN OR DEPOSIT TO THE FIRM BUT IT IS SIMPLY THE WITHDRAWALS MADE BY T HE PARTNERS OUT OF THEIR CAPITAL ACCOUNTS IN CASH. 7. HE FURTHER COMMENTED THAT SECTION 271E IS VERY CLE AR AND PENALTY IF IMPOSABLE; WILL BE EQUAL TO THE AMOUNT OF LOAN OR DEPOSIT REPAID IN CASH AND NOT EQUAL TO THE AGGREGATE AMOUNT PAYABLE. THE AO HAS IMPOSED PENALTY U/S 271 E EQUAL TO THE AGGREGATE A MOUNT PAYABLE WHICH ACCORDING TO LD CIT(A) IS DEFINITELY WRONG. 8. AGGRIEVED BY THIS ORDER THE REVENUE IS IN PRESENT APPEAL BEFORE THE TRIBUNAL. THE LD DR PLEADED THAT PENALTY WAS IMP OSABLE UNDER SECTION 271D OF THE ACT FOR ACCEPTANCE OF LOANS OR DE POSITS OTHERWISE THAN BY CROSSED CHEQUE OR CROSS DRAFT WHICH IS IN VIOLA TION OF SECTION 269SS OF THE ACT. SHE FURTHER CONTENDED THAT THE ASSE SSING OFFICER HAD BY MISTAKE REFERRED TO PENALTY PROCEEDINGS U/S 271E IN STEAD OF SECTION 271D. SHE TOOK THE SHELTER UNDER THE PROVISIONS OF SEC TION 292B WHICH STATES THAT NO RETURN OF INCOME ASSESSMENT NOTICE SUMM ONS OR OTHER PROCEDURES WILL BE DEEMED TO BE INVALID MERELY BY RE ASON OF ANY MISTAKE DEFECT OR OMISSION IN SUCH RETURN OF INCOME A SSESSMENT NOTICE OR PROCEDURES PROVIDED THEY ARE IN ACCORDANC E WITH THE INTENT PURPOSE OF THE ACT. ITA NO176/DEL/2012 6 9. THE LD AR PLEADED THAT NO CASH DEPOSITS WERE ACCEPT ED AND THERE WERE NO CASH WITHDRAWALS. THE PARTNERS HAD MERE LY TRANSFERRED AN AMOUNT FROM THEIR FIXED CAPITAL ACCOUNTS TO THEI R CURRENT CAPITAL ACCOUNTS BY DEBITING THE PARTNERS CAPITAL ACCOUNT & CREDITING THE CURRENT CAPITAL ACCOUNTS OF RELEVANT PARTNERS ON THE SAME DAY AND WITH THE EQUIVALENT AMOUNT. 9.1 HE FURTHER PLEADED THAT DEBIT TO PARTNERS FIXED CAPITAL AND CREDIT TO PARTNERS CURRENT CAPITAL CANNOT BE SAID TO BE RE PAYMENT OF LOAN AND THEN ACCEPTANCE OF THE FRESH LOANS. HE ALSO REFERRED T O RELEVANT PAPERS SUPPORTING HIS CONTENTION. 10. WE HAVE HEARD THE PARTIES AND PERUSED THE AVAILAB LE RECORD. FROM THE FACTS OF THE CASE AND RELEVANT MATERIAL PLA CED IN THE FILE IT IS APPARENT THAT THE WITHDRAWALS BY THE PARTNERS OF THE ASSESSEE FIRM WERE FROM 18 TH AUGUST 2005 TO 11 TH SEPTEMBER 2005 VIDE DEBIT TO THE FIXED CAPITAL ACCOUNT OF THE PARTNERS AND CREDIT TO THE CURRENT ACCOUNT OF THE SAME PARTNER AND ON THE SAME DATE. THE RELEVAN T PAPERS SHOWING THE ABOVE WITHDRAWALS AND DEPOSITS BY DEBIT AND SIMULTANEOUS CREDITS ARE PLACED AT PAPER BOOK PAGES 21 TO 26. THE CASE OF THE REVENUE IS THAT SECTION 269SS PROHIBITS ANY PERSON FROM ACCEPTING LOAN OR DEPOSIT OTHERWISE THAN BY ACCOUNT P AYEE CHEQUE OR ACCOUNT PAYEE DRAFT IF THE AGGREGATE AMOUNT OF LOAN OR DEPOSIT ALONG WITH OPENING BALANCE ON THE DATE OF ACCEPTANCE EXCE EDS `.20 000/-. SIMILARLY SECTION 269T PROHIBITS THE REPAYMENT OF LO AN OR DEPOSIT TO ANY PERSON IF THE AGGREGATE AMOUNT OF LOAN OR DEPOSIT HELD BY SUCH PERSON AT THE TIME OF REPAYMENT EXCEEDS `.20 000/-. I N THE PRESENT CASE THE FACT REMAINS THAT DURING THE PERIOD OF TRAN SACTIONS THE PARTNERS REMAINED PARTNERS IN THE FIRM AND THE TRANSFE R FROM FIXED CAPITAL TO CURRENT CAPITAL OF A PARTNER CAN NEVER B E SAID TO BE A ITA NO176/DEL/2012 7 REPAYMENT FROM CAPITAL ACCOUNT AND FRESH DEPOSIT IN C URRENT ACCOUNT. BALANCE IN BOTH ACCOUNTS REPRESENTS PARTNERS MONEY AN D THE ONLY DIFFERENCE BETWEEN THESE TWO ACCOUNTS IS THE NATURE OF CAPITAL I.E. FIXED OR FLOATING BUT THE VERY NATURE OF IT BEING C APITAL REMAINS AS LONG AS HE REMAINS PARTNER IN THE FIRM. IN VIEW OF THE ABO VE DISCUSSIONS WE DO NOT SEE ANY REASON TO INTERFERE IN THE ORDER OF L D CIT(A). 10. IN THE RESULT THE APPEAL FILED BY THE REVENUE I S DISMISSED. 11. ORDER PRONOUNCED IN THE OPEN COURT ON THE 30TH DAY OF MARCH 2012. SD/- SD/- (RAJPAL YADAV) (T.S. KAPOOR ) JUDICIAL MEMBER ACCOUNTANT MEMBER DT. 30.3.2012. HMS COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)- NEW DELHI. 5. THE DR ITAT LOKNAYAK BHAWAN KHAN MARKET NEW DEL HI. TRUE COPY. (ITAT NEW DELHI).