Partner’s Cash Withdrawal Against Credit Balance Is Not a Loan: ITAT Deletes ₹15 Lakh 271D Penalty

Inder Lal Ramrakhyani Vs ITO (ITAT Raipur)

The Income Tax Appellate Tribunal, RaiPartner’s Cash Withdrawal Against Credit Balance Is Not a Loan: ITAT Deletes ₹15 Lakh Penalty pur Bench, deleted a ₹15 lakh penalty under section 271D, holding that cash withdrawn by a partner against his existing credit balance in a partnership firm did not constitute acceptance of a loan under section 269SS. The Tribunal found that the assessee had a credit balance of ₹61,71,991.71 in the firm’s books and withdrew ₹15 lakh against those funds. The Department had incorrectly characterised the withdrawals as unsecured loans without properly appreciating the ledger account on which the proceedings themselves were based. Background of the Case The assessee, Inder Lal Ramrakhyani, challenged the CIT(A)/NFAC’s order dated 20 July 2026, confirming a penalty imposed for alleged violation of section 269SS during assessment year 2014-15. He was a partner in Balaji Construction, Dhamtari, and also in Shakti Construction.

The Department treated cash received from Balaji Construction as acceptance of unsecured loans exceeding the prescribed threshold. On that basis, it invoked section 271D and imposed a penalty equal to the aggregate cash receipts of ₹15 lakh. The disputed amounts comprised ₹5 lakh on 1 June 2013, ₹5 lakh on 20 September 2013, ₹2 lakh on 12 February 2014, and ₹3 lakh on 2 March 2014. The assessee maintained that these were withdrawals of his own funds from the partnership firm. Assessee Relies on Credit Balance Before the Tribunal, the assessee’s representative produced the ledger account in the books of Balaji Construction. He pointed out that the account reflected a credit balance of ₹61,71,991.71, substantially exceeding the cash withdrawals under dispute. Accordingly, the amounts represented withdrawal against the assessee’s capital or existing funds, rather than fresh borrowing.

The representative argued that section 269SS could not apply where no loan transaction existed. He also submitted an alternative legal argument concerning transactions between partners and their partnership firms, relying on the Delhi High Court’s decision in CIT v. Muthoot Financiers [2015] 371 ITR 408. Revenue’s Contention The Departmental Representative relied on the penalty order and argued that the assessee had accepted that the amounts were loans. The penalty order described the cash receipts from Balaji Construction as unsecured loans and treated them as a contravention of section 269SS. The assessee’s representative disputed that reading. He stressed that the Department had initiated action on the strength of the very ledger account demonstrating the availability of the assessee’s own credit balance. Tribunal Examines the Ledger Judicial Member Partha Sarathi Chaudhury examined the ledger and the findings recorded in the penalty order.

The Tribunal found that the assessee had sufficient funds standing to his credit and had withdrawn ₹15 lakh from that balance on different dates. It specifically observed that the assessee had not stated before the Department that he received a loan from Balaji Construction. The Tribunal therefore rejected the inference that the cash receipts necessarily represented borrowing. The character of the entries had to be determined from the underlying account, rather than from the description adopted in the penalty order. The available record established a withdrawal of existing funds. Reliance on Muthoot Financiers The Tribunal also considered the Delhi High Court’s decision in Muthoot Financiers, which discussed the relationship between partners and a partnership firm in the context of sections 269SS and 271D. The cited judgment examined authorities holding that transactions between a partner and the firm, in the circumstances considered, did not partake of the character of loans or deposits attracting those provisions. It also discussed the relevance of genuine transactions, bona fide belief and reasonable cause under section 273B.

Applying that reasoning, the Tribunal observed that the present assessee stood on a stronger factual footing: he had withdrawn his own money, rather than accepted a loan. Failure to Appreciate the Relevant Evidence The Tribunal found that the CIT(A) had confirmed the penalty by relying on the inference in the penalty order that the assessee had accepted a loan. However, the appellate authority had not rationally considered the ledger account showing the existing credit balance. Once that account was examined, the basis for treating the withdrawals as loans did not survive. The Tribunal held that there was no loan transaction, and section 269SS was therefore not attracted on the facts. It also relied on the rationale of the Delhi High Court decision as supporting relief.

Decision and Conclusion The Tribunal set aside the CIT(A)/NFAC’s order and allowed the assessee’s appeal, deleting the ₹15 lakh penalty. The decisive finding was that the disputed cash receipts represented withdrawal against the partner’s own credit balance, not acceptance of an unsecured loan. The ruling highlights the importance of examining the actual ledger position before invoking cash-loan penalties. Its factual foundation was the demonstrated availability of sufficient funds belonging to the assessee in the firm’s books, against which the withdrawals were made.

The Income Tax Appellate Tribunal, Rai Partner’s Cash Withdrawal Against Credit Balance Is Not a Loan: ITAT Deletes ₹15 Lakh Penalty

Raipur Bench, deleted a ₹15 lakh penalty under section 271D, holding that cash withdrawn by a partner against his existing credit balance in a partnership firm did not constitute acceptance of a loan under section 269SS.

The Tribunal found that the assessee had a credit balance of ₹61,71,991.71 in the firm’s books and withdrew ₹15 lakh against those funds. The Department had incorrectly characterised the withdrawals as unsecured loans without properly appreciating the ledger account on which the proceedings themselves were based.

Background of the Case

The assessee, Inder Lal Ramrakhyani, challenged the CIT(A)/NFAC’s order dated 20 July 2026, confirming a penalty imposed for alleged violation of section 269SS during assessment year 2014-15.

He was a partner in Balaji Construction, Dhamtari, and also in Shakti Construction.

The Department treated cash received from Balaji Construction as acceptance of unsecured loans exceeding the prescribed threshold. On that basis, it invoked section 271D and imposed a penalty equal to the aggregate cash receipts of ₹15 lakh.

The disputed amounts comprised ₹5 lakh on 1 June 2013, ₹5 lakh on 20 September 2013, ₹2 lakh on 12 February 2014, and ₹3 lakh on 2 March 2014.

The assessee maintained that these were withdrawals of his own funds from the partnership firm.

Assessee Relies on Credit Balance

Before the Tribunal, the assessee’s representative produced the ledger account in the books of Balaji Construction.

He pointed out that the account reflected a credit balance of ₹61,71,991.71, substantially exceeding the cash withdrawals under dispute. Accordingly, the amounts represented withdrawal against the assessee’s capital or existing funds, rather than fresh borrowing.

The representative argued that section 269SS could not apply where no loan transaction existed.

He also submitted an alternative legal argument concerning transactions between partners and their partnership firms, relying on the Delhi High Court’s decision in CIT v. Muthoot Financiers [2015] 371 ITR 408.

Revenue’s Contention

The Departmental Representative relied on the penalty order and argued that the assessee had accepted that the amounts were loans.

The penalty order described the cash receipts from Balaji Construction as unsecured loans and treated them as a contravention of section 269SS.

The assessee’s representative disputed that reading. He stressed that the Department had initiated action on the strength of the very ledger account demonstrating the availability of the assessee’s own credit balance.

Tribunal Examines the Ledger

Judicial Member Partha Sarathi Chaudhury examined the ledger and the findings recorded in the penalty order.

The Tribunal found that the assessee had sufficient funds standing to his credit and had withdrawn ₹15 lakh from that balance on different dates.

It specifically observed that the assessee had not stated before the Department that he received a loan from Balaji Construction.

The Tribunal therefore rejected the inference that the cash receipts necessarily represented borrowing. The character of the entries had to be determined from the underlying account, rather than from the description adopted in the penalty order.

The available record established a withdrawal of existing funds.

Reliance on Muthoot Financiers

The Tribunal also considered the Delhi High Court’s decision in Muthoot Financiers, which discussed the relationship between partners and a partnership firm in the context of sections 269SS and 271D.

The cited judgment examined authorities holding that transactions between a partner and the firm, in the circumstances considered, did not partake of the character of loans or deposits attracting those provisions.

It also discussed the relevance of genuine transactions, bona fide belief and reasonable cause under section 273B.

Applying that reasoning, the Tribunal observed that the present assessee stood on a stronger factual footing: he had withdrawn his own money, rather than accepted a loan.

Failure to Appreciate the Relevant Evidence

The Tribunal found that the CIT(A) had confirmed the penalty by relying on the inference in the penalty order that the assessee had accepted a loan.

However, the appellate authority had not rationally considered the ledger account showing the existing credit balance.

Once that account was examined, the basis for treating the withdrawals as loans did not survive. The Tribunal held that there was no loan transaction, and section 269SS was therefore not attracted on the facts.

It also relied on the rationale of the Delhi High Court decision as supporting relief.

Decision and Conclusion

The Tribunal set aside the CIT(A)/NFAC’s order and allowed the assessee’s appeal, deleting the ₹15 lakh penalty.

The decisive finding was that the disputed cash receipts represented withdrawal against the partner’s own credit balance, not acceptance of an unsecured loan.

The ruling highlights the importance of examining the actual ledger position before invoking cash-loan penalties. Its factual foundation was the demonstrated availability of sufficient funds belonging to the assessee in the firm’s books, against which the withdrawals were made.

List of Cases Discussed / Relied Upon

1. CIT Vs Muthoot Financiers (Delhi High Court), (2015) 371 ITR 408: The principal precedent relied upon by the assessee and applied by the Tribunal. The Delhi High Court held that transactions between a partner and a partnership firm, in the circumstances examined, did not constitute loans or deposits attracting Sections 269SS and 271D. The Tribunal held that withdrawal of an existing capital balance presented an even stronger case for non-applicability.

2. CIT Vs R.M. Chidambaram Pillai (Supreme Court): Discussed in the extracted judgment of Muthoot Financiers concerning the legal character of a partnership firm and the relationship between the firm and its partners. The Supreme Court explained that a firm is not a separate legal person in the ordinary partnership-law sense, notwithstanding its treatment as an assessment unit under income-tax law.

3. CIT Vs Ramniklal Kothari (Supreme Court), (1969) 74 ITR 57: Cited within Muthoot Financiers for the principle that the business and profits of a partnership firm are, in the relevant legal context, attributable to its partners.

4. V. Sivakumar (Madras High Court): Discussed in Muthoot Financiers as a case in which cash transactions between a partner and partnership firms were held not to attract Section 269SS, and the penalty imposed under Section 271D was deleted.

5. Lokhpat Film Exchange (Cinema) (Rajasthan High Court): Cited for the view that transactions between a partnership firm and its partners do not attract Sections 269SS and 269T merely because cash is exchanged between them.

6. CIT Vs A.W. Figgies & Co. (Supreme Court), (1953) 24 ITR 405: Referred to for the distinction between a partnership firm and its partners for assessment purposes, notwithstanding their relationship under general partnership law.

7. Saini Medical Store (Punjab & Haryana High Court): Cited within Muthoot Financiers regarding reasonable cause under Section 273B where genuine transactions involve no tax avoidance or evasion.

8. Sunil Kumar Goel (Punjab & Haryana High Court): Discussed concerning reasonable cause under Section 273B in genuine transactions between related concerns where no tax avoidance was established.

9. Nagpur Golden Transport Co. (Delhi High Court): Distinguished in Muthoot Financiers because that case concerned interest payments between firms having common partners, rather than a cash transaction governed by Section 269SS.

10. K. Kelukutti (Supreme Court): Distinguished in the extracted High Court judgment because it concerned whether two partnership businesses constituted distinct firms for assessment purposes, rather than the application of Section 269SS to partner-firm transactions.

FULL TEXT OF THE ORDER OF ITAT RAIPUR

The present appeal preferred by the assessee emanates from the order of the Ld.CIT(Appeals)/NFAC, Delhi dated 20.07.2026 for the assessment year 2014-15 as per the grounds of appeal on record.

2. In this case, the assessee is aggrieved with the levy of penalty of Rs.15 lakhs by the A.O invoking Section 271D of the Income Tax Act, 1961 (for short ‘the Act’) for alleged violation of Section 269SS of the Act.

3. At the time of hearing, the Ld. Counsel for the assessee submitted that the assessee had credit balance of Rs.61,71,991/- with the partnership firm M/s. Balaji Construction, Dhamtari, C.G. The assessee was a partner in the said firm M/s. Balaji Construction. It was submitted by the Ld. Counsel that the assessee had made cash withdrawal against the capital which the A.O considered as violation of Section 269SS of the Act. In effect, the contention of the Ld. Counsel for the assessee is that it is not a loan transaction of the assessee, rather, it is his own money withdrawal against the capital which has been deposited with that M/s. Balaji Construction. The Ld. Counsel for the assessee has brought to the notice of the Bench at Page 9 of the paper book i.e. ledger account of the assessee in the books of account of partnership firm viz. M/s. Balaji Construction which reads as follows:

3.1. Referring to the aforesaid ledger account, the Ld. Counsel submitted that from the aforesaid, it is evident that there is credit balance of Rs.61,71,991.71 and against this money, the assessee had withdrawn an amount of Rs.15 lakhs on various dates as appearing therein viz. (i) on 01.06.2013 : Rs.5 lakhs; (ii) on 20.09.2013 : Rs.5 lakhs; (iii) on 12.02.2014: 2 lakhs and (iv) on 02.03.2014: Rs.3 lakhs.

3.2 The Ld. Counsel has also referred to Paras 2 & 6 of the penalty order which reads as follows:

“2. Assessee is a partner of the Firm M/s. Shakti Construction (PAN: ABDFS3741A) and also partner of M/s.Balaji Construction. On perusal of case and documents submitted by the assessee during the assessment proceedings under consideration, it is found by the AO that the assessee has accepted the unsecured loan above 20,000/- through cash from his another partnership firm M/s.Balaji Construction in which he was a partner during FY-2013-14. From the Ledger Account of the assesee in the books of Shri Balaji construction, it is found that the assessee has received cash from M/s.Balaji Construction which is violated the provisions of section 269SS of Income Tax Act, 1961 mentioned as under:

In response to the assessment order of AO (NFAC), The JCIT (NFAC) has initiated the notice u/s.271D r.w.s. 269SS of the Income tax Act, 1961 on 27.03.2022. Further, this case, is transferred to this office for disposal of penalty. Again, another penalty notice, u/s. 271D r.w.s 129 was issued to the assessee on 05.08.2022 fixing the hearing on 18.08.2022 and served upon the assessee through e-mail which is shown in the return [email protected] which was served to the assessee on the same day. The service of notice through electronic mode is valid in terms of the section 282(1)(c ) r.w.r. 127A and also CBDT, New Delhi’s instruction no.07/2017 dated 23.03.2017 Which is never been challenged.

6. In view of the above, the assessee has received loan in cash of Rs.15,00,000/- during the financial year 2013-14 relevant to assessment year 2014-15 and therefore, penalty u/s. 271D for violating the provisions of Section 269SS of the Income Tax Act, is attracted. In view of the above the penalty u/s. 271D of Rs.15,00,000/- is hereby levied in this case.”

4. The Ld. Sr. DR referring to Para 2 of the penalty order u/s. 271D of the Act submitted that the assessee has accepted that it is loan transaction.

5. Per contra, the Ld. Counsel for the assessee submitted that action u/s. 269SS r.w.s. 271D of the Act has been taken against the assessee by the Department on the basis of ledger account of M/s.Balaji Construction wherein itself it is clear that the assessee had sufficient credit balance from which the assessee had withdrawn money and it was not a loan transaction by the assessee.

6. I have heard the submissions of the parties herein and considered the materials available on record. In the penalty order u/s. 271D, I find that the A.O has referred regarding another firm i.e. M/s. Shakti Construction and firstly he notes that as per return of income filed by the assessee, no modification is required, thereafter, he writes that from ledger account of the assessee in the books of Shri Balaji Construction, it is seen that the assessee had received cash of Rs.5 lakhs on 01.06.2013, Rs.5 lakhs on 20.02.2013, Rs.2 lakhs on 12.02.2014 and Rs.3 lakhs on 02.03.2014 which is in violation of Section 269SS of the Act since the assessee had taken loan in cash in contravention to the provisions of Section 269SS, therefore, he is liable to penalty u/s. 271D of the Act.

7. First of all, the assessee had submitted before the Department copy of ledger account which appears in the name of partnership firm viz. M/s. Balaji Construction in which the assessee is a partner and as per the ledger account in the credit side, the assesse had credit balance of Rs.61,71,991.71 and therefrom, the assessee had withdrawn an amount of Rs.15 lakhs on various dates mentioned therein. Nowhere, the assessee had submitted before the Department that loan was received from M/s. Balaji Construction. It is also noted that the A.O on one hand accepts that the return of income does not need any modification, on the other hand, he is alleging that loan has been received by the assessee from M/s. Balaji Construction which is in contravention of Section 269SS of the Act, hence, penalty u/s. 271D of the Act is invoked.

8. Further it is noted that it is found by the A.O in the penalty order u/s. 271D of the Act that the assessee being partner of both firm viz. M/s. Shakti Construction and M/s. Balaji Construction, had during assessment proceedings accepted unsecured loan from M/s.Balaji Construction in violation to Section 269SS of the Act and had given to the other firm M/s. Shakti Construction as contribution for introducing capital.

9. The Ld. Counsel submitted that Section 269SS of the Act does not apply for the reasons viz. (i) the assessee has withdrawn his own money since the assessee had enough credit balance and there is no loan transaction at all; (ii) so far as partner and partnership firm is concerned, Section 269SS of the Act does not apply since for applying Section 269SS a/w. Section 271D of the Act, there must be two persons and since for certain transactions, for example, loan transactions as per Section 269SS of the Act applicability, partnership firm is not having any legal existence as per various case laws. In support of his aforesaid contention, the Ld. Counsel relied on the decision of the Hon’ble High Court of Delhi in the case of CIT Vs. Muthoot Financiers (2015) 371 ITR 408 (Del.). The relevant observations of the Hon’ble High Court reads as follows:

“9. Having heard the learned counsel for the parties, we are of the view that the answer to the issue which arises for our consideration has its contours in realm of the Partnership Law as well as the Act. In fact, the status of partners qua the firm has been summed up by the Supreme Court in the case of R.M. Chidambaram Pillai (supra), wherein the interplay between provisions of the two enactments was examined. The Supreme Court was of the view that a firm is not a legal person even though it has some attributes of the personality. According to the Court, partnership is a certain relation between persons, the product of agreement to share the profits of a business. ‘Firm’ is a collective noun, a compendious expression to designate an entity, not a person. In Income Tax Law, a firm is a unit of assessment by special provisions but is not a full person; which leads to the next step that since a contract of employment requires two distinct persons viz. the employer and the employee, there cannot be a contract of service, in strict law, between a firm and one of its partners. So that any agreement for remuneration of a partner for taking part in the conduct of the business must be regarded as portion of the profits being made over as a reward for the human capital brought in. The Supreme Court, further relying upon its own judgment reported as CIT v. Ramniklal Kothari [1969] 74 ITR 57 wherein it had concluded that business of the firm was a business of the partner and the profits of the firm, were the profits of the partners and the expenditure incurred by partners in earning such shares was admissible for deduction in arriving at the total income under Section 10(1) of the Act. The Supreme Court quoted from the commentary of well-known author namely A.C. Sampath Iyengar, 6th Edn. 1973-pp. 1063-1064 (Vol. II), gave the following summary as under:

“Any interest, salary, bonus, commission or remuneration paid by a firm to any of its partners cannot be deducted by the firm as an expenditure in its profit-computation. The reason is this: The partners in a firm are ultimately entitled to the entire profits of the firm, according to their shares in the business. Therefore, the entirety of such profits should be brought to charge and no portion be exempted by giving’ the same away to a partner as his salary, bonus, commission, remuneration or interest. A partner is bound to find the necessary finances for the partnership and hence any interest on capital supplied by the partner is not deductible. A partner’s rendering services to the firm stands on the same footing as his providing capital; only instead of in money, in kind. Further, no remuneration is permissible to a partner for his rendering services to the firm, since the carrying on of the business of the partnership is a’ primary duty which, all the partners, or some of the partners acting for all, are required to do by the law relating to partnership.

The matter may be looked at another way too. In law, a partner cannot be employed by his firm, for a man cannot be his own employer. A contract can only be bilateral and the same person cannot be a party on both sides, particularly in a contract of personal employment. A supposition that a partner is employed by the firm would involve that the employee must be looked upon as occupying the position of one of his own employers, which is legally impossible. Consequently, when an arrangement is made by which a partner works and receives sums as wages for services rendered, the agreement should in truth be regarded as a mode of adjusting the amount that must be taken to have been contributed to the partnership’s assets by a partner who has made what is really a contribution in kind, instead of contribution in money. Hence, all the aforesaid payments are non-deductible.”

10. The aforesaid conclusion of the Supreme Court was referred to by the Madras High Court in V.Sivakumar’s case (supra), wherein the assessee was a partner in four firms and the proprietor in Reliance Realtors and in the Assessment Year 2005-06, the assessee had taken loan from the four firms which were found to be in cash. The Assessing Officer initiated penalty proceedings under Section 271D of the Act and imposed penalty of Rs. 18 lakhs. The Commissioner of Income Tax (Appeals) dismissed the appeal. On a further appeal before the Tribunal, the Tribunal remitted the matter to the Assessing Officer to give a definite finding whether the transaction was between the firm and partner. The Assessing Officer passed a fresh order that the assessee individual was a partner in four firms from where funds had been advanced to the assessee and imposed a penalty of Rs. 18 lakhs. The Commissioner of Income Tax (Appeals) allowed the appeal holding that the transactions between the partner and the firm do not partake the character of a loan or deposit and therefore, there is no applicability of the provisions of Section 269-SS of the Act. The further appeal preferred by the revenue was dismissed by the Tribunal which resulted in the revenue filing an appeal before the High Court. The High Court dismissed the appeal filed by the revenue, upholding the conclusion of the Tribunal that there is no separate legal entity for the partnership firm and the partner is entitled to use the funds of the firm.

11. We further note that even the Rajasthan High Court in the case of Lokhpat Film Exchange (Cinema),(supra) relying upon the decision of the Supreme Court in R.M. Chidambaram Pillai (supra), dealing with identical facts, wherein, the firm during the relevant Assessment Year, received deposits from its partners. The Assessing Officer, considering it be a intra-party transactions of deposit, otherwise, than by way of a cheque or by bank draft, considered the payment and repayment in violation of Section 269-SS and 269-T of the Act, imposed penalty, for receiving deposits in cash and payment in cash. The Court after consideration, has held that the partnership firm being not a juristic person, the inter-se transaction between the firm and the partners are not governed by the provisions of Section 269-SS and 269-T of the Act.

12. At the same time, we note that the Supreme Court in the case of CIT v. A.W. Figgies & Co. [1953] 24 ITR405 held that the partners of the firm are distinct as a civil entities while the firm as such is a separate and distinct unit for the purpose of assessment.

13. The question raised is whether in a transaction between the firm and the partner the provision of Section269SS would be attracted and if we hold that Section 269SS was attracted and therefore violated, whether the respondent assessee would be entitled to benefit of Section 273B of the Act. The position that emerges is that there are three different High Courts, which have held that Section 269SS would not be violative when money is exchanged inter-se between the partners and partnership firm in spite of the fact that the partnership firm and individual partners are separate assessees. We appreciate and understand that the opposite view is possible. Keeping in view that three different High Courts have taken a consistent view on the facts, which are similar to the facts in the present case, which includes the judgment of the Madras High Court as late as in the year 2013, we respectfully follow the same line of reasoning given by the Madras High Court in the case of V.Sivakumar (supra).

14. Having said that, it is clear that any interest, salary, bonus, commission or remuneration paid by a firm to any of its partners should be regarded as a mode of adjusting the amount that must have been taken to have been contributed to the partnership assets by a partner, who can really contribute in kind as well as in money. Applying this principle, we are of the view that the transaction effected in these cases cannot partake the colour of loan or deposit and as such, Section 269-SS nor Section 271-D of the Act would come into play.

15. We further find, it is an undisputed fact that the money was brought by the partners of the assessee-firms. The source of money has also not been doubted by the appellant revenue. The transaction was bona fide and not aimed to avoid any tax liability. 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 in a given case for not invoking Section 271-D and 271-E of the Act. Section 273B of the Act would come to the aid and help of the respondent-assessee. In this regard, we refer to the judgment of the Punjab and Haryana High Court in the case of Saini Medical Store (supra), as under:

“6.1 As pointed out earlier, there is no doubt about the genuineness of the transactions which have been fully accepted in the assessment made for the year under consideration. Even if, there is any ignorance, which resulted in the infraction of law, the default is technical or venial which did not prejudice the interests of the Revenue as no tax avoidance or tax evasion was involved. To my mind, bona fide belief coupled with the genuineness of the transactions would constitute reasonable cause under Section 273Bfor not invoking the provisions of Section 271E of the Act, The impugned order of penalty is cancelled.”

13. The findings of the Commissioner of Income Tax (Appeals) have been confirmed in appeal by theTribunal.

14. Therefore, the findings recorded by the Commissioner of Income Tax (Appeals) and the Tribunal that the assessee had shown reasonable cause for the failure to comply with the provisions of Section 269T of the Act is a finding of fact based on appreciation of material on record. It does not give rise to any question of law much less substantial question of law.”

16. Even, in the case of Sunil Kumar Goel (supra), it was observed:—

“The Income Tax Appellate Tribunal was right in recording its conclusion that a “reasonable cause” had been shown by the respondent-assessee. The Income Tax Appellate Tribunal relied on the fact that the respondent-assessee had produced his cash books, depicting loans taken by him unilaterally before the Revenue. Another fact taken into consideration was that no prejudice was caused to the Revenue in the instant action of the respondent-assessee inasmuch as the respondent-assessee did not attempt by the impugned act to avoid any tax liability. Furthermore, there is no dispute about the fact that the instant cash transactions of the respondent-assessee were with the sister concern and that these transactions were between the family and due to business exigency. A family transaction, between two independent assessees, based on an act of casualness, specially in a case where the disclosure thereof is contained in the compilation of accounts and which has no tax effect, in our view establishes “reasonable cause” under Section 273B of the Act. Since the respondent-assessee had satisfactorily established “reasonable cause” under Section 273B of the Act he must be deemed to have established sufficient cause for not invoking the penal provisions (sections 271D and 271E of the Act) against him”.

17. Insofar as the judgments relied by the learned counsel for the appellant-revenue, are concerned, we first refer to the judgment in the decision of this Court in Nagpur Golden Transport Co. (supra). At the outset, we note that the said case was not with regard to the violation of Section 269-SS or the penalty imposed under Section 271-D of the Act. Even on facts, it is seen that assessee firm in that case namely Nagpur Golden Transport Company has paid interest to the firm Laxmi Chand Jiwan Dass. The controversy arose because the partner in the firm Laxmi Chand Jiwan Dass was the same as in the assessee firm i.e. Nagpur Golden Transport Company. The Income Tax Officer formed the opinion that the payment of interest by one firm to the other was the payment to the partners of the firm inasmuch as the partners in the two firms were common, attracting the applicability of Section 40(B) which has an overriding effect on the provisions of Section 36 of the Act. It was in the aforesaid context, this Court had held that under the scheme of the Act, the firm and its partners are treated as separate legal entity so far as the provisions of tax laws are concerned, more so, by framing an order of the assessment, the firm and its partners are treated as two separate legal entitles. The said judgment is therefore, not applicable to the facts here. Similarly, the judgment relied by Mr. Rohit Madan in K.Kelukutti (supra). The question in that case was whether partners constituting a partnership firm carrying on one business constitute thereafter another partnership firm carrying on a separate and distinct business, are two distinct partnership firms, in whose hand, the turnover of the two businesses falls to be respectively assessed or is there in law only a single partnership firm liable to assessment on the turnover of both businesses. Suffice to state, the question which fell for consideration of the Supreme Court being not identical to the one which falls for our consideration in these appeals, we do not think, the same would be of any help to Mr. Rohit Madan.

18. In view of the submissions made, we are of the view that the present appeals filed by the revenue are devoid of any merit. We answer the substantial question of law against the revenue and in favour of therespondent-assessees.

19. The appeals are accordingly dismissed. No costs.”

10. That as per the decision of the Hon’ble High Court (supra) even loan transactions taking place between a partner and partnership firm cannot bring in the rigors of Section 269SS r.w.s. 271D of the Act. In the present case before me the assessee is in a better footing since here assessee has withdrawn his own money and for withdrawal of own money Section 269SS does not apply.

11. The Ld. CIT(Appeals)/NFAC had confirmed the addition only on the basis of the inferences made at Para 2 of the penalty order that the assessee had accepted the said loan but had failed to consider rationally the relevant documents on record especially the ledger account of assessee submitted in the books of account of M/s. Balaji Construction. As I have already examined earlier in the foregoing paras that facts emanating from this document i.e. ledger account clearly shows that the assessee has withdrawn money and he had sufficient credit balance to withdraw such money. Therefore, firstly, there is no loan transaction and even following the rationale of the Hon’ble High Court of Delhi (supra), Section 269SS of the Act is not attracted.

12. In view thereof, I set aside the order of the Ld. CIT(Appeals)/NFAC and allow the appeal of the assessee.

13. In the result, appeal of the assessee is allowed.

Order pronounced in open court on 14th day of October, 2026.