M/s Super Fab, New Delhi V. ITO, New Delhi

ITA 5107/DEL/2011

• Counselvise Citation: 510720114 RSA 2011
• Duration Of Justice: 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-02-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2007-2008
• Appeal Filed On: 16-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S MOHANTY
• Assessee Lawyers: C L SHARMA
• Keywords: Reasonable cause

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G NEW DELHI) BEFORE SMT DIVA SINGH, JUDICIAL MEMBER AND SHRI K.D. RANJAN, ACCOUNTANT MEMBER I.T.A. NO.5107 /DEL/2011 ASSESSMENT YEAR : 2007-08 M/S SUPER FAB, ITO, 3072, BAHADURGARH ROAD, WARD-39 (2), NEW DELHI. V. NEW DELHI. (APPELLANT) (RESPONDENT) PAN /GIR/NO.AACFS-3306-F APPELLANT BY : SHRI C.L. SHARMA, ADVOCATE. RESPONDENT BY : SMT. S. MOHANTY, SR. DR. ORDER PER K.D. RANJAN, AM: THIS APPEAL BY THE ASSESSEE FOR ASSESSMENT YEAR 200 7-08 ARISES OUT OF ORDER OF LD CIT(A) XVIII, NEW DELHI. THE GROUND O F APPEAL RAISED BY THE ASSESSEE IS AS UNDER:- THE JCIT RANGE -39 HAS ERRED IN FACTS AND LAW IN L EVYING PENALTY OF RS.4,50,000/- U/S 271D OF THE INCOME TAX ACT, 1961 AND THE CIT(A)- XXVIII HAS WRONGLY AND ILLEGALLY CONFIRMED THE LEVY OF SAID PENALTY. ITA NO5107/DEL/11 2 2. THE ONLY ISSUE FOR CONSIDERATION RELATES TO CONF IRMING THE PENALTY OF RS.4,50,000/- U/S 271D OF THE ACT. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM. DURING T HE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER FOUND THAT SHRI JAI NARAIN SAINI THE PARTNER OF THE FIRM HAD CONTRIBUTED RS. 4,50,000/- IN CASH TO HIS CAPITAL ACCOUNT WITH THE ASSESSEE. THE SAID AMOUNT OF RS. 4,50,000/- WAS DEPOSITED IN CASH ON DIFFERENT DATES. THE ASSESSING OFFICER D URING THE COURSE OF ASSESSMENT PROCEEDINGS INITIATED PENALTY PROCEEDING S UNDER SECTION 271D OF THE INCOME TAX ACT, 1961. 3. DURING THE COURSE OF PENALTY PROCEEDINGS, IT WAS SUBMITTED BY THE ASSESSEE THAT THE AMOUNT OF RS.4,50,000/- WAS CAPI TAL CONTRIBUTION AND WAS OUTSIDE THE PURVIEW OF PROVISIONS OF SECTION 269 SS OF THE ACT AS CAPITAL CONTRIBUTION WAS NEITHER LOAN OR DEPOSIT. IT WAS A LSO CONTENDED THAT ASSESSEE WAS UNDER BONA FIDE BELIEF THAT THE PROVISIONS OF S ECTION 269SS OF THE ACT WERE NOT ATTRACTED IN THE CASE OF TRANSACTION BETWE EN THE PARTNERS AND THE FIRM AND THUS THERE WAS REASONABLE CAUSE FOR ACCEPT ING THE MONEY IN CASH. THE ASSESSEE PLACED RELIANCE ON THE DECISION OF THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF CIT V. LOKPAT FILM EXCHANGE (C INEMA) 304 ITR 172. HOWEVER, LD ASSESSING OFFICER RELYING ON THE DECISI ON OF THE HON'BLE SUPREME COURT IN THE CASE OF RAM JANAKI DEVI V. JUG GILAL KAMLAPAT AIR 1971 SC 2551 SUBMITTED THAT A DEPOSIT IS SOMETHING MORE THAN A LOAN OF MONEY AND IT WILL DEPEND ON THE FACTS OF EACH CASE WHETHER THE TRANSACTION WAS CLOTHED WITH THE CHARACTER OF DEPOSIT OF MONEY. HON'BLE SUPREME COURT HAD FURTHER HELD THAT SURROUNDING CIRCUMSTANCES, TH E RELATIONSHIP AND CHARACTER OF THE TRANSACTION AND THE MANNER IN WHIC H THE PARTY TREATED THE ITA NO5107/DEL/11 3 TRANSACTION WOULD THROW LIGHT IN THE TRUE FORM OF T HE TRANSACTION. THE RELIANCE WAS ALSO PLACED ON THE DECISION OF HON'BLE JHARKHAND HIGH COURT IN THE CASE OF BHALOTIA ENGINEERING WORKS (P) LTD. V. CIT 275 ITR 399 (JHAR.) WHERE IN IT HAS BEEN HELD THAT SHARE APPLICATION MO NEY PARTAKES THE CHARACTER OF THE DEPOSIT FOR THE PURPOSE OF COMPANY AND SECTI ON 269SS WOULD BE ATTRACTED. THE ASSESSING OFFICER, THEREFORE, CAME T O THE CONCLUSION THAT THE CAPITAL CONTRIBUTION MADE BY ANY PARTNER HAS TO BE TREATED AS DEPOSIT WITH THE FIRM WHICH IS A SEPARATE ENTITY FROM THE PARTNER AN D IS LIABLE TO REPAY THE ABOVE CAPITAL CONTRIBUTION. FURTHER THE CAPITAL CON TRIBUTIONS OF THE PARTNERS ARE RETURNED TO THEM IN THE SHAPE OF WITHDRAWAL OR IN CASE OF DISSOLUTION OF THE FIRM. HE, THEREFORE, REJECTED THE CONTENTION OF THE ASSESSEE THAT CAPITAL CONTRIBUTION WAS OUTSIDE THE PURVIEW OF PROVISIONS OF SECTION 269SS OF THE ACT. LD ASSESSING OFFICER, THEREFORE, CONCLUDED THA T THE PROVISIONS OF SECTION 269SS WERE VIOLATED. ACCORDINGLY HE IMPOSED PENALTY U/S 271D AMOUNTING TO RS.4,50,000/- BEING EQUAL TO THE AMOUN T OF DEPOSIT ACCEPTED IN CASH. 4. BEFORE THE LD CIT(A), THE ASSESSEE REITERATED TH E SIMILAR ARGUMENTS BY STATING THAT THE CAPITAL CONTRIBUTION WAS NEITHE R LOAN NOR DEPOSIT. THE ASSESSEE PLACED RELIANCE ON THE DECISION OF HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF CIT V. LOKPAT FILM EXCHANGE (CINEMA) (S UPRA). IT WAS ALSO SUBMITTED THAT SHRI JAI NARAIN SAINI WAS ALSO PARTN ER IN ANOTHER FIRM M/S AUTO ELECTRA FROM WHERE THE AMOUNT IN CASH WAS WITH DRAWN AND THE SAME WAS DEPOSITED IN THE CAPITAL ACCOUNT WITH THE ASSES SEE FIRM. LD CIT(A) OBSERVED THAT THERE WAS NO BONA FIDE BELIEF ON THE PART OF THE ASSESSEE THAT DEPOSITING CASH ABOVE THE PRESCRIBED LIMIT WOULD NO T HIT HIM ADVERSELY AS ITA NO5107/DEL/11 4 PER THE PROVISIONS OF SECTION 269SS OF THE ACT. HE THEREFORE, UPHELD THE PENALTY. 5. BEFORE US WHEN ISSUE CAME UP FOR HEARING LD AR O F THE ASSESSEE SUBMITTED THAT THE CONTRIBUTION MADE BY THE PARTNER TO HIS CAPITAL ACCOUNT CANNOT BE TREATED AS LOAN OR DEPOSIT AND THEREFORE THE PROVISIONS OF SECTION 269SS ARE NOT APPLICABLE. ON THE OTHER HAND, LD SR. DR SUPPORTED THE ORDER OF THE LD CIT(A). 6. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. UNDER SECTION 269SS NO PERSON AFTER 30 TH JUNE, 1984 TAKE OR ACCEPT FROM ANY OTHER PERSON ANY LOAN OR DE POSIT OTHERWISE THEN BY AN ACCOUNT PAYEE CHEQUE OR BY ACCOUNT PAYEE DRAFT E XCEEDING RS.20,000/- OR MORE. THE TERM LOAN OR DEPOSIT AS PER EXPLANATIO N (IIII) MEANS THE LOAN OR DEPOSIT OF MONEY IN CASH. UNDER SECTION 271D AN A SSESSEE WHO HAS ACCEPTED LOAN OR DEPOSIT IN CASH CONTRARY TO THE PR OVISIONS OF SECTION269SS, HE SHALL BE LIABLE TO PENALTY EQUAL TO THE AMOUNT OF LOAN OR DEPOSIT SO TAKEN OR ACCEPTED. IN THE CASE OF THE ASSESSEE, THE FIRM HAS CREDITED PARTNERS CAPITAL ACCOUNT ON DIFFERENT DATES AMOUNTING TO RS. 4,50,000/- IN CASH. THE SAID AMOUNT WAS WITHDRAWN FROM M/S AUTO ELECTRA IN WHICH SHRI JAI NARAIN SAINI IS ALSO A PARTNER. THERE IS NO DISPUTE ABOUT THESE FACTS. IN THE CASE OF THE ASSESSEE, THE AMOUNT HAS NOT BEEN OBTAINED BY THE FIRM EITHER AS LOAN OR DEPOSIT BUT HAS BEEN CREDITED IN THE CAPITAL ACCOUN T OF THE PARTNER TO BE UTILIZED. THE AMOUNT SO CREDITED CANNOT BE TREATED AS LOAN OR DEPOSIT. THE AMOUNT MAY BEAR INTEREST AS LONG AS IT IS LYING IN THE CAPITAL ACCOUNT IF TERMS OF THE PARTNERSHIP SO REQUIRED. NO DOUBT, THE PART NERS OF THE FIRM ARE ITA NO5107/DEL/11 5 SEPARATE ENTITY FOR THE PURPOSE OF TAXATION. HOWEVE R, UNDER THE GENERAL LAW, THE FIRM AND PARTNERS ARE ONE AND THE SAME. HON'BL E RAJASTHAN HIGH COURT IN THE CASE OF LOKPAT FILM EXCHANGE (CINEMA) (SUPR A) RELYING ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CI T V. R.M. CHIDAMRAM PILLAI 106 ITR 272 HAS HELD THAT THE FIRM AND PARTN ERS CANNOT BE CONSIDERED TO BE SEPARATE ENTITY. IT WAS ALSO OBSERVED THAT TH E ASSESSEE HAD ACTED ON BONA FIDE BELIEF THAT TRANSACTIONS BETWEEN THE PART NERS AND THE FIRM WERE NOT GOVERNED BY THE PROVISIONS OF SECTION269SS OF THE A CT AND THERE WAS NO LEGAL REQUIREMENT ACCORDING TO WHICH THEY HAD TO AD HERE TO THE REQUIREMENT OF CONDUCTING TRANSACTION THROUGH BANK ONLY. IN VI EW OF THESE FACTS, THE HON'BLE RAJASTHAN HIGH COURT DELETED THE PENALTY IM POSED U/S 271D OF THE ACT. IN THE CASE OF LOKPAT FILM EXCHANGE (CINEMA) (SUPRA), THE PARTNERS OF THE FIRM MADE DEPOSITS WITH THE ASSESSEE FIRM. EVEN THEN THE HONBLE COURT ALLOWED THE RELIEF TO THE ASSESSEE. 7. THERE IS A DISTINCTION BETWEEN A LOAN AND A DEPO SIT. IN THE CASE OF LOAN, IT IS THE DUTY OF THE DEBTOR TO SEEK THE CREDITOR A ND REPAY THE MONEY TO HIM OR REPAY THE MONEY ACCORDING TO THE AGREEMENT. IN THE CASE OF DEPOSIT, IT IS GENERALLY THE DUTY OF THE DEPOSITOR TO GO TO THE BA NKER OR THE PERSON WITH WHOM THE MONEY HAS BEEN DEPOSITED, AS THE CASE MAY BE, AND MAKE A DEMAND FOR THE REPAYMENT OF THE SAME. HOWEVER, IN THE CASE BEFORE US, THERE IS NO DEPOSIT OR LOAN GIVEN TO THE FIRM BY TH E PARTNER. THE AMOUNT HAS BEEN CREDITED TO HIS CAPITAL ACCOUNT. THE AMOUNT LY ING IN THE CAPITAL ACCOUNT OF THE PARTNER IS TO BE GOVERNED WITH THE TERMS PAR TNERSHIP DEED. THEREFORE, THE CREDIT IN THE CAPITAL ACCOUNT OF THE PARTNER CA NNOT BE TREATED AS LOAN OR DEPOSIT. ACCORDINGLY, IN OUR CONSIDERED OPINION, NO PENALTY U/S 271D IS ITA NO5107/DEL/11 6 IMPOSABLE. WE, THEREFORE, SET ASIDE THE ORDER OF L D CIT(A) AND DIRECT THE ASSESSING OFFICER TO CANCEL THE PENALTY. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 9. ORDER PRONOUNCED IN THE OPEN COURT ON THE 29TH D AY OF FEBRUARY,2012. SD/- SD/- (DIVA SINGH) (K.D. RANJ AN) JUDICIAL MEMBER ACCOUNTANT MEMBER DT. 29.2.2012. 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. BY ORDER (ITAT, NEW DELHI). ITA NO5107/DEL/11 7