M.Y.EQBAL, J. - (1.) IN the instant case, the Tribunal referred the following question of law under Section 256(1) of the Income -tax Act, 1961 for opinion by this Court: Whether in the facts and circumstances of the case, there was reasonable cause for the assessee to receive the loans and deposits in cash and not by the account payee cheque or account payee bank draft as required u/s 269SS and, as such the penalty levied u/s 271D for receiving the loans and deposits in cash, was proper and justified?
(2.) THE facts of the case lie in a narrow compass: The assessee is a firm carrying on contract business. The assessee received Rs. 20000/ - or more in cash from 11 persons in between 14.2.1993 and 10.11.199b amounting to Rs. 5 lacs. The return filed by the assessee was, however, accepted under Section 143(3) of the Income -tax Act. After the assessment was made, a penalty proceeding under Section 271D of the said Act was initiated by the Assessing Authority for receiving and accepting those deposits in violation of provisions under Section 269SS of the Act. In compliance to the notice issued by the Assessing Authority., the assessee submitted his explanation stating, inter alia, that the assessee firm was in urgent need of money for payment to the labourers and sufficient cash was not available, therefore, he received deposits from different persons in cash. The assessee further stated that his return was finally accepted under Section 143(3) of the Act and no loss of revenue was found. The assessee further stated that he has not acted deliberately in defiance of law. The Deputy Commissioner of Income -tax, Ranchi finally passed the order in the penalty proceeding imposing penalty of Rs. 7 lacs which is equal to the deposits accepted by the assessee. The authority took the view that the provision under Section 269SS is a rule of procedure to avoid evasion of tax and to safeguard interest of Revenue and admittedly the assessee has violated the provisions under Section 269SS which made him liable for penalty under Section 271D. Aggrieved by the said order, the assessee preferred appeal before the Commissioner of Income -tax (Appeals), Ranchi. The appellate authority held that the provisions under. Section 271D is not attracted unless the appellant proves that there was a reasonable cause for failure of compliance as contemplated under Section 273B of the Act. The appellate authority, therefore, affirmed the order of penalty. The assessee then preferred Second Appeal before the Income - tax Appellate Tribunal. The Tribunal held that there was no reasonable cause for taking the deposits in cash in violation of provisions under Section 269SS. The Tribunal disapproved the assessees claim that it had taken loans in cash because cash was not available in order to make cash payment to the labourers, petty contractors, etc. On an application filed by the assessee, the Tribunal formulated the question of law quoted herein above and referred the same to this Court for opinion.
(3.) MR . D.V. Pathy, learned Counsel appearing for the assessee firstly drew our attention to the provisions of the Act and submitted that the purpose and objection of Section 269SS is only to prevent the laundering of black money. In the instant case, there is a concurrent finding that the transaction was genuine and therefore, the return filed by the assessee was accepted after the scrutiny under Section 143(3) of the Act. Learned Counsel further submitted that in absence of any finding by any of the authority that the transaction was mala fide and with the sole objection to disclose the concealed or undisclosed money, no penalty can be imposed. Learned Counsel relied upon the case of Kerala State Industrial Development Corporation Ltd. v. Commissioner of Income -tax , Hindustan Steel Ltd. v. State of Orissa .;