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The ITAT held that where a partnership firm repays loans to its partners by journal entries/book entries, such transactions are not covered u/ss 269SS/269T of the Act, as a partnership firm is not distinct from its partners under general laws. The repayment by journal entry falls outside the ambit of section 269T, and such transactions are entitled to immunity u/s 273B, which stipulates that penalty u/s 271E is not imposable if there was reasonable cause for failure to accept/repay loans/deposits in prescribed modes. The journal entries were made in bona fide belief based on judicial precedents, without any finding of tax evasion intent. Consequently, the assessee's appeal was allowed.
The ITAT held that where a partnership firm repays loans to its partners by journal entries/book entries, such transactions are not covered u/ss 269SS/269T of the Act, as a partnership firm is not distinct from its partners under general laws. The repayment by journal entry falls outside the ambit of section 269T, and such transactions are entitled to immunity u/s 273B, which stipulates that penalty u/s 271E is not imposable if there was reasonable cause for failure to accept/repay loans/deposits in prescribed modes. The journal entries were made in bona fide belief based on judicial precedents, without any finding of tax evasion intent. Consequently, the assessee's appeal was allowed.
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