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7. Similarly, the AO also observed that at the time of assessment proceedings for asst. yr. 1996-97, it was noted that the assessee has returned back the deposits to the extent of Rs. 55,26,734 in violation of the provisions of Section 269T of the Act. Relying on the reasons while imposing penalty under Section 271D, the AO imposed the penalty of Rs. 55,26,734 for asst. yr. 1996-97 under Section 271E of the Act.

8. On appeal, the CIT(A) observed that the entire penalty imposed by the AO does not relate to the repayment of deposits during the asst. yr. 1996-97. He held that the penalty under Section 271E could be imposed on the amount of repayment of deposits made by the assessee in violation of the provisions of Section 269T in the previous year relevant to the asst. yr. 1996-97. He, therefore, asked for a remand report from the AO and after considering such remand report, the CIT(A) restricted the penalty under Section 271E of the Act for asst. yr. 1996-97 to Rs. 11,12,936. The Revenue accepted the findings of the CIT(A). Consequently, the AO issued show-cause notice to the assessee for different assessment years on the basis of observations made by him while imposing the penalty under Section 271D. The AO accordingly imposed the following penalties under Section 271E of the Act :

20. Learned counsel further stated that the penalties under Sections 271D and 271E were not mandatory. Section 273B provides that no penalty under these sections shall be imposable for any violation referred to in the said provisions if the assessee proves that there was a reasonable cause for the said violation. The learned counsel stated that the accounts of the assessee were audited. The auditors in their reports had mentioned about the cash payments for the purposes of Section 40A(3) of the Act. But they did not point out any violation of Section 269SS or 269T. It was claimed that when the auditors who are the experts and professional in the field were not aware about the (sic-violation) of the provisions of Section 269SS/269T of the Act. The assessee was under a bona fide belief that there was no violation of any provisions of law. It was stated that the assessee a layman cannot know every provision of law. The assessee is supposed to know the business only. There was no requirement of law that the every person knows the law. The reliance was placed on the decision of Hon'ble Supreme Court in the case of Moti Lal Padampat Sugar Mills Co. Ltd. v. State of UP (1979) 118 ITR 326 (SC). He further argued that the assessment orders under Section 143(3) were passed by two different AOs. None of them could catch this point when they issued notices for initiating penalties under Section 271(1)(c) of the Act. It was argued that if two AOs who were senior officers of the IT Department could not know the provisions as to whether there was any violation of the provisions of Section 269SS/269T of the Act and assessee who was a layman in the field could not be supposed to know the law. Learned counsel further stated that even assuming that both the AOs were aware of the violation of the provisions of Section 269SS/269T of the Act, it will be presumed that they were satisfied that no penalties under the above sections were imposable as there was reasonable cause for such violation. Learned counsel also relied on the decision in Kumari A.B. Shanti v. Asstt. Director of Inspection (1992) 197 ITR 330 (Mad) to the effect that the provisions of Section 269SS were declared as ultra vires though subsequently the same was overruled. It was also stated that the offence committed by the assessee was venial in nature and no penalties were imposable. The reliance was placed on the decision of Hon'ble Supreme Court in the case of Hindustan Steel Ltd. v. State of Orissa (1972) 83 ITR 26 (SC). The learned counsel further referred to various cases on the interpretation of the statute. The learned counsel, therefore, argued that the penalties under Section 271D/271E for different years sustained by the CIT(A) were not justified and deserved to be cancelled.

(ii) 6 months from the end of the month in which action for imposition of penalty is initiated whichever is later.

53. We have to, therefore, decide as to when the penalty proceedings were initiated. It is admitted position that during the course of assessment proceedings, for asst. yr. 1996-97, the AO noted that the assessee has accepted/repaid loans/deposits in violation of the provisions of Sections 269SS and 269T during the period 1st April, 1997 to 31st March, 1998. The aggregate of loans/deposits accepted during these periods in violation of the provisions of Section 269SS came to Rs. 1.83 cores. The repayment of deposits in violation of the provisions of Section 269T during these periods amounted to Rs. 57,68,570. The AO, therefore, issued a show-cause notice dt. 14th Dec., 1998, asking the assessee as to why the penalties under Sections 271D and 271E may not be imposed for such violation. The show-cause notice was returnable on 22nd Dec., 1998. Thus, it could be safely said that the penalty proceedings under Section 271D/271E were initiated on 14th Dec., 1998, in respect of even those deposits which fell in different assessment years before us. Though subsequently, the AO has issued fresh notices initiating the penalty proceedings under Section 271D/271E on 1st Nov., 1999, but subsequent show-cause notice cannot change the date of initiation of penalty proceedings. We are not going into the issue as to whether penalties under Section 271D/271E were relatable to a particular assessment year or not but once the Revenue has accepted the stand that the penalties under the above sections were relatable to the amount of loans/deposits accepted repaid in a particular assessment year, we are not making any comments on it. Needless to say that even in respect of those amounts which have been considered by the AO/CIT(A) for imposition of penalties under Section 271D/271E in different assessment years, show-cause notice was first issued on 14th Dec., 1998. Thus, there cannot be any dispute that the penalty proceedings in respect of entire amount accepted/repaid in contravention of the provisions of Section 269SS/269T relatable to all the assessment years were initiated on 14th Dec., 1998. As per Section 275(1)(c), the penalties in respect of the entire amount could be imposed by 31st March, 1999, i.e., end of the financial year in which the penalty proceedings were initiated or by 30th June, 1999, i.e., 6 months from the end of the months in which penalty proceedings were initiated. As the later period expired on 30th June, 1999, the penalty could have been imposed by 30th June, 1999 only.

55. Thus, the penalties imposed in those cases which were imposed in Dec., 1999, we have no hesitation in holding that the penalties imposed by the AO and sustained by the CIT(A) were beyond the limitation period.

56. We have also examined the claim of the assessee regarding reasonable cause for failure to adhere to the provisions of Sections 269SS and 269T. As mentioned earlier, the penalties were not mandatory. Section 273B provides that notwithstanding anything contained, inter alia, in the provisions of Sections 271D and 271E, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provision if he proves that there was reasonable cause for the said failure. We find that the accounts of the assessee are audited. The copy of the auditor's report is also on record. Nowhere the auditor pointed out any violation of the provisions of Section 269SS/269T of the Act. Once the professionals who are expert in the field of taxation were not aware of the violation of Section 269SS/269T, the layman who carries on the business was not supposed to know the complications of the law. Similarly, the assessments for different years were completed by two different officers who were senior officers of the IT Department, They passed the orders under Section 143(3) for some years and on the basis of certain additions even initiated penalty proceedings under Section 271(1)(c). Even these officers did not comment about any violation of the provisions of Section 269SS/269T of the Act. Then it will be too much to expect from an assessee that he knows the provisions of Section 269SS/269T of the Act.