Reasonable cause under penalty provisions saved cash deposit transactions between members and avoided penalty exposure.

Sections 269SS and 269T restrict cash acceptance and repayment of loans or deposits, while sections 271D and 271E prescribe penalties for breach; section 273B protects an assessee where reasonable cause is shown. The transactions here were between the assessee and its members in the course of regular banking activity, were recorded in the books, and were treated as genuine by the Revenue. On that basis, the assessee's bona fide belief that the provisions did not apply was accepted, and the penalty provisions were held not invocable, with the penalties deleted.

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Issues: Whether penalties under section 271D and section 271E were leviable for cash acceptance and repayment of deposits in excess of the statutory limit, and whether the assessee had shown reasonable cause under section 273B.

Analysis: The statutory scheme of sections 269SS and 269T prohibits acceptance and repayment of loans or deposits otherwise than by prescribed banking modes, and sections 271D and 271E provide for penalty for breach. However, section 273B saves the assessee from penalty where reasonable cause is proved. The transactions in question were between the assessee and its members in the course of its regular banking activity, were recorded in the books, and were treated as genuine by the Revenue. The assessee's conduct was found to be under a bona fide belief that the provisions were not attracted to its case, having regard to the nature of its activities and the mutual character of the dealings.

Conclusion: The penalty provisions were held not to be invocable on the facts, and the penalties under section 271D and section 271E were deleted.

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