V.K. Sinha, Accountant Member - (1.)THIS is an appeal filed by the assessee against confirmation by the CIT(A) of levy of a penalty of Rs. 2,11,39,972 under Section 271 (1)(c) of the Income-tax Act, 1961, for concealment.
(2.)The assessee is a registered firm carrying on business of 'Indigenous Bankers' since 1960. The business consisted of taking deposits from the public as well as advancing loans to the public. During the accounting year relevant to assessment year 1985-86, the firm had 180 branches spread over the States of Gujarat, Rajasthan, Maharashtra and Madhya Pradesh besides its Head Office at Bombay.
The assessee was following the calendar year as its previous year. Thus, the previous year for assessment year 1985-86 ended on 31st December, 1984. During this calendar year, certain amendments were brought about in the Reserve Bank of India Act, 1934, by introduction of Section 45S therein, with effect from 15th February, 1984. According to this newly introduced section, no firm shall, at any time, have deposits from more than 25 depositors per partner, or, 250 depositors in all, excluding in either case depositors who were relatives of any of the partners. In case the deposits held by the firm were not in accordance with the above, then it was provided that before the expiry of a period of two years from the date of such commencement, the firm would repay such all the deposits as are necessary for bringing the number of depositors within the relative limits specified in that Sub-Section. This amendment was introduced by Section 10 of Banking Laws (Amendment) Act, 1983. The business of the assessee was affected adversely very severely by the new law effective from 15th February, 1984.

(3.)THE assessee filed return of income on 30th October, 1985 declaring a total loss of Rs. 6,80,84,980. Subsequently, a revised return was filed on 22nd February, 1988 declaring a loss of Rs. 6,84,70,200. THE Assessing Officer passed an assessment order on 20th February, 1989 computing the total income on a positive figure of Rs. 14,32,05,200. Penalty proceedings were also initiated under Section 271(1)(c) of the Act.