By the Court.—Heard learned counsel for the appellant and Sri Gaurav Mahajan, learned counsel for the respondents.

2. This appeal has been filed by the assessee against the order of the Income Tax Appellate Tribunal, Delhi Bench ‘H’ dated 4.8.2006 passed in ITA No. 131 and 133 (Del)/2005 for the assessment year 1999-2000, on the following question of law :

“(a) Whether in view of the division bench judgment of the Hon’ble Rajasthan High Court in the case of C.I.T. v. M/s. Ajanta Dyeing and Printing Mills (supra), the Tribunal was legally justified in disallowing the adjustment of Rs. 40,000/- in the amount of penalty imposed.”

3. Briefly, it is undisputed fact that the appellant had taken cash loan for its business purpose on five different dates being 2.5.1998, 28.5.1998, 2.6.1998, 7.11.1998 and 30.1.1999 for Rs. 50,000/-, Rs. 1,00,000/-, Rs. 70,000/-, Rs. 50,000/- and Rs. 2,00,000/- respectively. All the loans having been taken in cash, the Assessing Officer invoking the provision of Section 271-D read with Section 269 SS of the Income Tax Act (hereinafter referred to as the Act) and imposed 100% penalty on the assessee for having taken those cash loans, in excess of statutory limit of Rs. 20,000/-.

4. Upon appeal, Commissioner of Income Tax partly allowed the assessee’s appeal. In the first place he found that the cash loan taken by the assessee on 2.5.1998, 7.11.1998 and 30.1.1999 for Rs. 50,000/-, Rs. 50,000/- and Rs. 2,00,000/- each had been taken on Saturday and Sunday when either the banking hours were short or bank was closed. On that reasoning, the Commissioner of Income Tax Appeals accepted the explanation of the assessee that the cash loans of Rs. 3,00,000/- had been taken due to exceptional circumstances being lack of banking facility. Accordingly, he deleted the penalty to that extent.

5. However, in respect of two other cash loans being for Rs. 1,00,000/- and Rs. 70,000/- that were transacted on week days, the CIT appeals restricted the penalty to Rs. 80,000/- and Rs. 50,000/- respectively apparently on the reasoning that the penalty could be imposed only in respect of cash loans taken in excess of Rs. 20,000/-.

6. Against the order of CIT (Appeals), the revenue as also the assessee filed individual appeals before the Tribunal. The Tribunal has affirmed the order of CIT (Appeals) in so far the said appeal authority deleted the penalty of Rs. 3,00,000/- against cash loans taken by the assessee on Saturday and Sunday. However, the departmental appeal restricting the penalty to Rs. 80,000/- and Rs. 50,000/- for the other two loans has been allowed and those penalties have been restored.

7. Learned counsel for the assessee submitted that in view of the statutory limit of Rs. 20,000/-, penalty could have been imposed only in respect of cash loans taken by the assessee in excess of that amount.

8. Learned counsel for the respondent, on the other hand submits that the language of Section 269 SS read with Section 271-D of the Act is mandatory and the penalty is automatic for violation of this provisions. In this regard, the provision of Section 269 SS read with Section 271-D are quoted below :

“269SS. Mode of taking or accepting certain loans, deposits and specified sum.

No person shall take or accept from any other person (herein referred to as the depositor), any loan or deposit or any specified sum, otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account, if,-

(a) the amount of such loan or deposit or specified sum or the aggregate amount of such loan, deposit and specified sum; or

(b) on the date of taking or accepting such loan or deposit or specified sum, any loan or deposit or specified sum taken or accepted earlier by such person from the depositor is remaining unpaid (whether repayment has fallen due or not), the amount or the aggregate amount remaining unpaid; or

(c) the amount or the aggregate amount referred to in clause (a) to