2020 (1) TMI 1048

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....13. 2. Brief facts are, the assessee is a partnership firm. While completing the assessment under section 143(3) of the Act, the Assessing Officer having noticed that the assessee has accepted cash loan of Rs. 11 lakh from one of its partners, Shri Surendra Parikh, was of the view that the assessee has violated the provisions of section 269SS of the Act. Accordingly, he intimated the prescribed authority for initiation of penalty proceedings under section 271D of the Act. Thus, on the basis of such intimation, proceedings under section 271D of the Act was initiated against the assessee for having accepted cash loan amounting to Rs. 11 lakh in violation of section 269SS of the Act. In response to the show cause notice issued, the assessee....

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....ct. Assessee challenged the imposition of penalty before the first appellate authority without any success. 3. Reiterating the stand taken before the Departmental Authorities the learned Authorised Representative submitted, the assessee had a bona fide belief that provisions of section 269SS of the Act would not be applicable in relation to a transaction between firm and partners. He submitted, even otherwise also, since the assessee had to immediately make payment to a creditor, it had no other option but to avail cash loan from one of the partners. Thus, he submitted, there was a reasonable cause for availing cash loan. Hence, imposition of penalty under section 271D of the Act is not justified. To demonstrate the aforesaid fact, the l....

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....tner does come within the purview of section 269SS of the Act, as they cannot be treated as different entities. Secondly, it is submitted that due to business exigencies arising out of immediate payment to be made to a creditor, the assessee was compelled to avail the cash loan from one of the partners. From the material on record, it appears that availing of cash loan from one of the partners was for making payment to creditors. The ledger account copies of two creditors placed in the paper book support assessee's claim. Further, the judicial precedents cited before us have also laid down the ratio that cash loan received from partner would not attract the provisions of section 269SS and section 271D of the Act since a "Firm" and "Part....