Cash loan penalty under section 271D upheld as co-operative credit society failed to show reasonable cause under section 273B.

Penalty under section 271D for accepting and repaying cash deposits and loans in violation of section 269SS was upheld because a primary agricultural co-operative credit society without an RBI banking licence was not a co-operative bank and did not fall within the exempted categories in the first proviso. The third proviso to section 269SS was treated as confirming Parliament's intention that the provision applies to such societies, subject only to the enhanced threshold. Mere genuineness of the transactions or a claimed bona fide belief, without a factual basis showing why cash was necessary, did not establish reasonable cause under section 273B, so the assessee failed to avoid penalty.

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Issues: Whether penalty under section 271D of the Income-tax Act, 1961 was leviable for acceptance and repayment of cash deposits and loans in violation of section 269SS, and whether the assessee established reasonable cause under section 273B.

Analysis: The assessee was a primary agricultural co-operative credit society without an RBI banking licence and therefore could not be treated as a co-operative bank. It did not fall within the exempted categories under the first proviso to section 269SS. The insertion of the third proviso to section 269SS showed that Parliament intended the provision to apply even to primary agricultural co-operative credit societies, subject only to the enhanced threshold. Mere genuineness of the transactions or a stated bona fide belief, without a factual foundation showing why cash was compelled, did not constitute reasonable cause within section 273B.

Conclusion: Penalty under section 271D was rightly imposed and the assessee failed to establish reasonable cause; the decision was against the assessee.

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