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2. During the year, the assessee company has received share application money of Rs.7 lacs in cash from 26 persons. The Assessing Officer initiated the penalty proceedings u/s 271D. The penalty was levied u/s 271D of the Income-tax Act, 1961. The assessee filed the appeal. The CIT (A) has deleted the penalty by holding as under :-

"3.1 I have carefully considered the submission made on behalf of the appellant, findings of the Assessing Officer and the facts on record. I have also perused the case laws relied upon by the appellant. Admittedly, the assessee received an amount of Rs.7,00,000/- in cash on account of share application money in violation of the provisions of section 269SS of the Act. Therefore, the penal provisions of section 271D get triggered.

3.2 Section 269SS was inserted by the Finance Act, 1984, with effect from 1.4.1984, which lays down the mode of taking and accepting certain loans and deposits. From a bare reading of the aforesaid provision, it is manifestly clear that after the insertion of the aforesaid section, no person should take or accept from any other person any loan or deposits otherwise than by an account payee cheque or account payee bank draft if the amount is Rs.20,000 or more. Section 271D provides that if a person takes or accepts any loan or deposit in contravention of the provisions of section 269SS, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit so taken or accepted. However, there is one exception to the above provisions under section 273 of the Act and no penalty shall be imposable on the person or assessee, as the case may be, for any failure referred to in the said provisions, if he proves that there was reasonable cause for the said failure. The words 'reasonable cause' have not been defined under the Act but they could receive the same interpretation which is given to the expression 'sufficient cause'. Therefore, in the context of the penalty provisions, the words 'reasonable cause' would mean a cause which is beyond the· control of the assessee. 'Reasonable cause' obviously means a cause which prevents a reasonable man of ordinary prudence acting under normal circumstances, without negligence or inaction or want of bonafides. Before imposition of penalty under section 271D , the Assessing Officer must be satisfied, not arbitrarily but judiciously, that the assessee has without reasonable cause failed to comply with the provisions.

3.4 Therefore, considering the entire gamut of facts and circumstances of the case, I am of the considered view that the appellant had a reasonable cause for its failure to accept the impugned amounts in a manner other than those prescribed under section 269SS of the Act thereby rendering it outside the purview of the penal provisions of section 271D. Therefore~ it is held that A.O. was not justified in imposing penalty u/s 271D amounting to Rs.7,00,000/-. Accordingly, the same is cancelled.

4. After considering pleadings of both side, we hold that the issue is covered in favour of the assessee by the decision of Hon'ble jurisdictional High Court wherein the question involved was answered by the Hon'ble High Court as under :

"2.1 Whether learned ITAT/CIT (A) erred in deleting the penalty of Rs.18,00,000/- imposed by the Assessing Officer under section 271D of the Income Tax Act, 1961?
2.2 Whether ITAT was correct in law in holding that the share application money received in cash is not violation of section 269S attracting penalty under section 271D of the Income Tax Act, 1961?