The main legal point established in the judgment is the requirement of reasonable cause for accepting deposits in cash, and the penalty for contravention of loan or deposit provisions under the Income Tax Act.

D. Murugesan, J.

All these appeals are admitted on the following substantial questions of law:

"i) Whether the Tribunal is correct in confirming the order imposing penalty under Section 271D o the Act on the facts and in the circumstances of the case?

ii) Whether the Tribunal is correct in concluding that there was reasonable cause for accepting deposits in cash exceeding Rs.20,000/-with reference to the provisions of Section 273B of the Act?

iii) Whether the Tribunal is correct in not considering the scope and the purpose of the provisions of Section 271D of the Act, especially with reference to Sections 269SS and 273B of the Act? And

iv) Whether the Tribunal is correct in rejecting the ground relating to the violation of the principles of natural justice on the facts and in the circumstances of the case?"

2. For the disposal of the appeals, the facts relating to Tax Case (Appeal) No.552 of 2007 is referred.

3. The appellant-firm is one of the firms floated by one Mathivathanan and his wife Smt. Annakalanjiyam from the year 1994 onwards. They and certain other relatives and friends are partners in all the firms. The firm had accepted deposits from the public for the purpose of business in real estate and property development carried on by related concerns viz., Kasi Housing and Development, Kasi Builders and Mr. Mathivathanan. The total deposits accepted by the firm from 1995-96 to 1997-98, amounted to 6.54 crores. Pursuant to the returns filed, the assessment order under Section 143 (3) r/w Sections 158BC of the Income Tax Act (hereinafter referred to as the Act),for the block period was passed on 29th December, 1998. It was noticed that there was a contravention of the provisions of Section 269T of the Act by the firm in accepting the deposits from the public and therefore, penalty proceedings were initiated under Section 271D of the Act.

4. Before the Assessment Officer, the appellant firms had conducted

1) The acceptance and payments of few deposits in cash above Rs.20000/- was done purely due to business exigencies.

2) The acceptance of few deposits in cash was due to ignorance of law and the partners were not aware of the implications of Sec.269SS of the I.T. Act.

3) The deposits were accepted from people of various walks of life and some of them even do not have a bank account. Of DD/Cheque was insisted upon, then they would have chosen would choose to approach some other finance company.

4) The customers come after the close of banking hours.

5) The entire deposits were received form outside source and no deposits were made by the partners.

6) The quantum of non-compliance is not very substantial comparing with the total deposits accepted.

7) The acceptance of deposits is for business purpose of the group concerns, which require heavy cash for paying advances/consideration for land purchases.

8) The deposits have been treated as genuine in the assessment. This is argued that as provisions of Sec. 269SS were brought into the statute only to curb the creation of bogus credits and , penalty may not be levied."

5. All the contentions of the appellant/assessee were negatived by the Assessing Officer and ultimately penalty was levied under Section 271D of the Act on the deposit taken in cash during different assessment years, namely, Rs.1,30,000/-for the assessment year 1996-97 and Rs.1,70,000/- for the assessment year 1997-98.

6. Similar contentions were raised in respect of other Tax Case (Appeals) and all the contentions were rejected and similar orders levying penalty was issued by the Assessing Officer and hence, we did not elaborate for the purpose of individual cases.

7. The order of the Assessing Officer was questioned before the Commissioner of Income Tax (Appeals) VI, Chennai on the same grounds raised before the Assessing Officer. By Order dated 04.09.2000, the Commissioner of Income Tax Appeals, while allowing the appeal, held that the penalty under Section 271D was not leviable after coming to