Dr. Kalpana Sunil Vaid, Ahmedabad V. The Joint Commissioner of Income Tax, Range-1(3), Vadodara

ITA 583/AHD/2022

• Counselvise Citation: [2023] 100 COUNSELVISE.COM (IT) 4602 (ITAT-AHMEDABAD)
• Duration Of Justice: 11 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 10-10-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 27-12-2022
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Reasonable cause
• Section: 273B; 143(3); 271D; 274; 64; 48

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “SMC” BENCH Before: Ms. Suchitra Kamble, Judicial Member Dr. Kalpana Sunil Vaid, 41, Tapovan Society, Nizampura, Vadodara-390002, PAN: AAUPV7449Q (Appellant) Vs Joint Commissioner of Income Tax, Rang-1(3), Vadodara-390007 (Respondent) Assessee by: Ms. Kinjal Shah, A.R. Revenue by: Ms. Saumya Pandey Jain, Sr. D.R. Date of hearing : 11-10-2023 Date of pronouncement : 20-12-2023 आदेश/ORDER This is an appeal filed against the order dated 01-10- 2021 passed by ld. National Faceless Appeal Centre (NFAC), Delhi for assessment year 2015-16. 2. The grounds of appeal are as under:- ITA No. 583/Ahd/2022 Assessment Year 2015-16 I.T.A No. 583/Ahd/2022 A.Y. 2015-16 Page No. Dr. Kalpana Sunil Vaid vs. JCIT 2 “1 The CIT(A) has erred both in Law and in facts of the case in upholding the order of AΟ the applicability that Sec 269SS applies and thereby Penalty of Rs. 8,71,471/ was leviable u/s 271D. 2 (a) On facts and circumstances of the case and as per provisions of Law, your Appellant submits that she has not taken any Loan or Deposit from the Partnership Firm and has withdrawn her own money and therefore Sec. 269SS does not apply. (b) Without prejudice to above, it is submitted that the Firm has no distinct legal entity apart from Partners constituting it The Business carried by the Firm is in the eye of Law the Business carried on by partners collectively as held by various Authorities including Ahmedabad Tribunal as well as Gujarat High Court. 3. In view of above facts and circumstances, your Appellant submits that Penalty of Rs. 8,71,471/- levied u/s. 271D be deleted. It is therefore submitted that relief claimed above be allowed and the order of the Assessing Officer be modified accordingly. Your Appellant reserves right to add, alter, amend to withdraw any or all Grounds of Appeal.” Additional Grounds of Appeal:- “I 1. The CIT(A) has erred both in Law and in fact confirming levy of Penalty of Rs. 8,71,471/- u/s 271D levied by the Assessing Officer vide his order dated 24-4- 2018 in respect of which notice u/s. 274 r.w.s 271D dated 20-11-2017 was issued by Jt. CIT, Range 1(3), Baroda. 2. Your Appellant refers & relies on Sec, 275(1)(c) and submits that the order of Penalty is not within time and therefore it is bad in Law and Void being Time Barred. 3. Your Appellant submits that as per provisions of Law and facts of the case the Penalty of Rs. 8,71,471/- u/s. 271D was not leviable and that CIT(A) ought to have held so and ought to have cancelled or dismissed of Penalty Order. II. 1 Without Prejudice your Appellant submits tat CIT(A) has erred in not disposing of Application u/s.154 dated 7-3-2023 pointing out mistakes apparent on record. 2. It is submitted CIT(A) has not disposed disposing off the Application within time limitation of 6 months as required under sec. 154(8) and therefore the Application pointing out mistake be held as order admitting the mistake and CIT(A) be directed to pass such order as required under Law. It is therefore submitted that relief claimed above be allowed and the order of the CIT(A) be modified accordingly. Your Appellant reserves right to add, alter, amend to withdraw any or all Ground of Appeal.” I.T.A No. 583/Ahd/2022 A.Y. 2015-16 Page No. Dr. Kalpana Sunil Vaid vs. JCIT 3 3. The assessee filed return of income on 31-08-2015 declaring total income at Rs. 35,35,230/-. The assessee is a practicing gynecologist and also partner in the firm M/s. Kalpna Hospital. The assessment u/s. 143(3) of the Act was finalized on 10-11-2017 accepting return. During the course of assessment proceedings, the Assessing Officer observed that the assessee has made excess withdrawal of capital of Rs. 8,71,471/-, thereby leading to debit balance. The withdrawal was intended and made for the purpose of purchase of personal immoveable property. The Assessing Officer referred the matter for levy of penalty u/s. 271D dated 16-11-2017 and accordingly issued notice u/s. 271D in respect of violation of provisions of section 269SS of the Act. The assessee submitted that the reply dated 11-12-2017. The same was taken into account and the Assessing Officer levied penalty of Rs. 8,71,471/- u/s. 271D to the extent of debit balance in the partners capital account. 5. Being aggrieved by the penalty order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee. 6. The ld. A.R. submitted synopsis and submissions as follows:- I.T.A No. 583/Ahd/2022 A.Y. 2015-16 Page No. Dr. Kalpana Sunil Vaid vs. JCIT 4 “The Appellant Dr. Kalpana Sunil Vaid a practicing Gynecologist is a partner in the firm in the name of M/s. Kalpana Hospital the other partner being her husband Dr. Sunil Vaid are both Gynecologist and assess to Tax from year to year During the year under Appeal Dr. Kalpana Sunil Vaid had running account with her firm and had withdrawn amounts from time to time with included a withdrawal from her capital the account for payment in cash to following (a) On 21-1-2015 as Stamp Duty on Sale Deed of Rs. 3,57,700/- (b) On 21-1-2015 paid to Taraben Patel the seller of Land Rs.7,32,000/- from time to time. The Assessing Officer considered this withdrawal as a loan/advance by the Partnership Firm to Partner and refers the matter to Joint Commissioner who issued Show Cause Notice u/s 274 r.w.s 271D requiring the Appellant to reply as to why Penalty u/s. 271D should not be levied. The Appellant replied to the Show Cause Notice on 11-12-2017 alongwith which she submitted her copy of Capital Account relevant to Appeal (Paper Book page 32) and also copy of Capital Account for the year 15-16 (Paper Book page 33 to 36). The Jt.CIT not being satisfied levied penalty of Rs.8,71,471 as per his order u/s.271D (Paper Book page 38) The Appellant had purchased Agricultural Land for total cost Rs.76,57,700/- as per Registered Document (pages 48 to 64 of Paper Book) on which Stamp Duty was levied at Rs.3,57,700/- which was paid in cash and a sum of Rs. 7,32,000/- from time to time was paid to the seller Smt. Taraben Patel at her requirement (On Both The Assessing Officer as well as Joint Commissioner considered the payment as liable to Sec. 269SS Penalty of Rs.8,71,471/- was levied u/s 271D of the Act. Without deduction of Basic allowance of Stamp Duty and to seller also on amount paid time to time. Section 269SS deals clearly with loans or deposits, it does not include capital or owner's funds. Capital account in a partnership firm cannot be considered as loans or deposits, it is owners funds accumulated out of profits, remuneration, interest on capital and owner's contribution. The Assessee during the concerned year had I.T.A No. 583/Ahd/2022 A.Y. 2015-16 Page No. Dr. Kalpana Sunil Vaid vs. JCIT 5 withdrawn funds out of the firm which were cash withdrawals. The Assessee's capital balance as at 31.03.2015 was a credit balance amounting to Rs 21.43.731/- (Closing balance). This credit balance is due to Rs 2,18,616/- received as interest on capital, remuneration received Rs. 21,70,691 and profit earned Rs. 8,25,896/- (Entry passed at the end of the year). Moreover, opening credit balance of the Assessee with the firm was Rs. 36,67,821/. The Assessee had enough balance to withdraw money. Although, there is no justification required even if the capital account is a debit balance. As the owners have free liberty to withdraw money from the partnership firm. Section 269SS of the Income Tax Act deals with loans or deposits accepted from third parties. Here, there is no involvement of the third party and thus invoking Section 26988 in present case is void-abintio. It is normal practice in partnership firms that Partners are withdrawing from firm when required and interest on capital account is debited or credited based on the type of balance held in the firm during the year. In addition to capital contribution the capital is created based on the profits generated by the firm and remuneration earned by the partners as per the partnership deed and allowed as expense to the extent allowable under the Income Tax Act. 1961. During the year if there is debit balance of partners because of withdrawals made during the year it shall not be treated as loan to partners. The partners are the owners of the firm and excess withdrawal is not considered to be loan given to the partners. Loan is only when firm provides funds to third party. In case of Assessee there opening and closing balance of capital account is a credit balance. Capital Account of Dr. Kalpana Sunil Vaid with M/s Kalpana Hospital Rs. Opening Balance -01.04.2014-Credit 36,67,828.57 Add: Interest on Capital 2,18,616.00 Profit-Firm 8,25,895.84 Remuneration less withdrawals 19,70,691.00 (21,70,691-2,00,000) I.T.A No. 583/Ahd/2022 A.Y. 2015-16 Page No. Dr. Kalpana Sunil Vaid vs. JCIT 6 Adv. Tax and SA Tax deposited-Firm 4,51,050.00 Total 66,83,031.41 Less: Withdrawals 49,90,350.00 Closingbalance-31.03.2015- Credit 21,43,731.41 The transaction between the firm and the partners cannot be brought within the meaning of section 269SS. Neither the source of money brought by the partners in assessee firm had been doubted by the revenue nor the transaction was bona fide and aimed to avoid any tax liability. Therefore the creditworthiness of the partners and genuineness of the transactions coupled with the relationship between the "two persons" and two different legal interpretations put forward could constitute a reasonable cause under section 273B for not invoking the penalty under section 271D. As mentioned in the Penalty order, that the withdrawals were intended and made for purchase of personal immovable properly, thereby parking the nature of the loan covered under section 269SS of the Act is not a reason of covering section 269SSbecause during the FY 2014-15. Assessee has withdrawn Rs. 51,90,350/- (Rs.49,90,350/- Rs. 2,00,000) from firm and deposited in individual bank account and similarly deposited in the firm through bank (for Firm Advance tax and SA Tax paid) Rs. 4,51,050/- During the concerned year Assessee has purchased / invested in land for Rs. 73.00.000/- by making most of the payments through bank only. The Firm in which assessee is a partner name M/s. Kalpana Hospital is Gynaecology Hospital and excess fund with firm are withdrawn by partners during the year for their own investment or other purposes. Since the firm is not in need of funds therefore partners are withdrawing and interest is calculated according to the running balance held by the partners with the firm. The intention of the direct taxes in considering transaction u/s.269SS have been well explained by Circular of Central Board of Direct Taxes bearing No. 387 dated 6-7-1984 which is very strongly relied.” The ld. A.R. further relied upon the decision of Tribunal in case of Shree Enterprises vs. DCIT (1998) 64 ITD 300 as well I.T.A No. 583/Ahd/2022 A.Y. 2015-16 Page No. Dr. Kalpana Sunil Vaid vs. JCIT 7 as ITO vs. Universal Associates ITA No. 1349/Ahd/2010. Thus, the A.R. submitted that it is a very clear case that section 269SS is not violated and therefore provisions of penalty u/s. 271D are not attracted in levy of penalty of Rs. 8,71,471/-. 7. The ld. D.R. relied upon the assessment order, penalty order and the order of the CIT(A). The ld. D.R. further submitted that the assessee has not challenged the reopening assessment passed u/s. 143(3) of the Income Tax Act, 1961. The ld. D.R. submitted that the circular no. 387 of 06-07-1984 will not be applicable in the present case and therefore the decisions relied upon are also not applicable. 8. Heard both the sides and perused all the relevant materials available on record. The assessee filed this appeal belatedly by 392 days for which the assessee has filed condonation of delay application explaining therein that the assessee did not receive the email of the order and the CIT(A) and was not able to file the appeal within time. The ld. D.R. opposed the condonation of delay, but in the circumstances peculiar in this case it appears that the assessee’s reason for filing delayed appeal is genuine and hence delay is condoned. Further, the assessee has filed additional grounds of appeal along with the original grounds of appeal thereby challenging I.T.A No. 583/Ahd/2022 A.Y. 2015-16 Page No. Dr. Kalpana Sunil Vaid vs. JCIT 8 the levy of penalty and related section 275(1)(c) by the Assessing Officer and stated therein that the order is not within time. From the perusal of records, it appears that the penalty order is passed within the time limit prescribed and the CIT(A) has also disposed as per due process of law, the appeal of the assessee. Thus, additional grounds are dismissed. From the perusal of records, it appears that the original assessment and the observations made therein was never challenged by the assessee before the CIT(A) as well as before the Tribunal or any other forum which is available as per the income tax statute to the assessee. Thus, the assessee at the penalty stage cannot take the plea that section 269SS is not violated. In fact, the assessee has made excess withdrawal capital of Rs. 8,71,471/- thereby leading to debit balance and thus withdrawal was for purchase of personal property. The assessee were paid interest to the forum in the event of occurrence of debit of capital and thus transactional behavior of the assessee with the firm has been given colour of that nature of loan. Thus, the Assessing Officer has rightly observed that the assessee has violated the provisions of 269SS of the Income Tax Act, 1961. The assessee is a gynecologist and also partnership firm with M/s. Kalpana Hospital and has dealt this transaction in personal capacity but has given the colour that the loan has been taken from the partnership firm. Thus, the decision relied upon by the I.T.A No. 583/Ahd/2022 A.Y. 2015-16 Page No. Dr. Kalpana Sunil Vaid vs. JCIT 9 assessee will not be applicable vis-a-vis Circular No. 387 dated 06-07-1984 issued by the CBDT will also not be applicable in the present case. Thus, the appeal of the assessee is dismissed. 9. In the result, the appeal of the assessee is dismissed. Order pronounced in the open court on 20-12-2023 Sd/- (SUCHITRA KAMBLE) JUDICIAL MEMBER Ahmedabad : Dated 20/12/2023 आदेश क त ल प अ े षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपील य अ धकरण, अहमदाबाद