Reasonable cause defeats cash repayment penalty where a cooperative bank credited member deposits to savings accounts.

Repayment of deposits in cash may attract penalty under section 271E for contravention of section 269T, but section 273B exempts the default where reasonable cause is shown. A cooperative bank had repaid member deposits by crediting the amounts to members' savings accounts and claimed a bona fide belief that the statutory bar did not apply to transactions with its own members. Because the dealings were genuine and supported a plausible view that the repayments fell outside the mischief of section 269T, reasonable cause was established. On that basis, the penalty under section 271E was held unsustainable and cancelled.

---

---

Issues: Whether penalty under section 271E was leviable for repayment of deposits in cash in excess of the prescribed limit in alleged contravention of section 269T, or whether the assessee had shown reasonable cause under section 273B.

Analysis: Section 269T prohibits repayment of loans or deposits otherwise than by account payee cheque or account payee bank draft, but section 273B saves a case where the assessee establishes reasonable cause. The assessee was classified as a cooperative bank under the Maharashtra Cooperative Societies Act, 1960 and had repaid the amounts by crediting them to the members' savings accounts, which furnished a basis for its bona fide belief that the statutory prohibition was inapplicable. The transactions were with its own members and were genuine, giving rise to a possible view that the repayments were outside the mischief of the provision. In these circumstances, the failure to comply with section 269T was supported by reasonable cause.

Conclusion: Penalty under section 271E was not sustainable and had to be cancelled.

---