JUDGMENT

Rajendra Babu, J.-The appellants before us received deposits from Amar Singh, Gurdev Singh and Hardev Singh on different dates in the year 1985 and this fact was disclosed in the Income Tax Return filed for the assessment year 1986-87. The Income Tax Department initiated prosecution against the appellants for offences arising from non-compliance with Section 269SS of the Income Tax Act, 1961 (hereinafter referred to as the Act ). Section 269SS of the Act provides that no person shall take or accept from any other person any loan or deposit otherwise than by an account-payee cheque or account-payee bank draft which exceeds Rs.10 thousand (now, 20 thousand). Punishment for non-compliance with provisions of Section 269SS is provided under Section 276DD of the Act. In addition, penalty is leviable under Section 271D of the Act. Section 276DD has been omitted from the Act by the Direct Tax Law (Amendment) Act, 1987 with effect from 1.4.1989. A complaint under Section 276DD of the Act was filed in the court of Chief Judicial Magistrate, Sangrur on 31.3.1989.

2. The appellants sought for quashing of the proceedings for prosecution under Section 276DD of the Act by filing a petit