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5. The Assessing Officer found use of the money received by the assessee through sale of crops of his farmers constituents to be in the nature of deposits and invoked the provisions of Section 269SS as applicable to the amount received by a person as deposit from the depositors and the amount utilised by the farmers as withdrawal from the deposits by way of repayment inviting operation of Section 269T. Finding that such transactions of deposit and repayment were not through the bank, penalty proceedings under Sections 271D and 271E respectively concerning the deemed deposits and deemed repayment of loan were initiated during the assessment proceedings for the three assessment years stated hereinabove and as a result of initiating penalty proceedings under Sections 271D and 271E the Assessing Officer imposed penalties in each case.

6. The Commissioner of Income-tax (Appeals) cancelled the penalties holding the instance to be known as "balancing of accounts". Such transactions neither fall in the category of deposits under Section 269SS and repayment under Section 269T nor the penalty was otherwise justified because the Commissioner of Income-tax (Appeals) also found that the assessee has shown reasonable cause for non-adherence to the requirement of dealing through banks as per Sections 269SS and 269T. However, the Commissioner of Income-tax (Appeals) held some instances to be of cash credits as per annexure A totalling to Rs. 1,89,000. Transactions pertaining to three persons, namely, Shri Prem Prakash, Shri Gangaram and Shri Shivraj were held to be in the nature of deposit and violative of Section 269SS and in turn the repayment and withdrawals to be in violation to Section 269T and sustained penalty in respect thereof.

         1996   1996   2000   2000      2000       2000      2000
         P2PB   P3PB

1994-95  12-9-  12-9-  21-1-  21-1-     31-3-     30-9-     29-3-
         1996   1996   2000   2000      2000      1996      2000
         P3PB   P4PB

1995-96  20-12- 20-12- 21-1-  21-1-     31-3-     30-6-     28-3-
         1996   1996   2000   2000      2000      1997      2000
         P1P3   P4PB    P2     P4
 

11. Apart from finding the penalty orders barred by time under Section 275(1)(c), on the merits of the case, the Tribunal found the credits in the assessment year 1993-94 to be genuine as has been contended by the authorised representative of the assessees. Besides the returns of the assessment years 1993-94 and 1994-95 were filed much earlier to the date of search, based on books of account which were complete and closed and considering the Central Board of Direct Taxes circular which explained that where a kachha arhatiya sells goods belonging to agriculturists, the sale proceeds thereof which remain with him cannot be regarded as deposit made by the agriculturist with the kachha arhatiya. Further, where the kacha arhatiya remits only a part of the sale proceeds to the agriculturist, the unremitted part of the sale proceeds would also not assume the character of a deposit. Therefore, the repayment of such sale proceeds does not fall within the purview of Section 269T of the Act, it came to the conclusion that to the facts of the present case, the circular of the Board aptly applies. Therefore, the money received by the assessee as kachcha arhatiya as sale proceeds of the agricultural produce received from his constituents and retained by him cannot be considered deposits. Consequently its remittance in part or full to the constituents or its utilisation by such constituents also does not fall within the purview of repayment of such deposits within the meaning of Section 269T. Coupled with this finding of fact about all transactions to be genuine and bona fide, looking to the practice prevailing and requirements of the farmers, the Tribunal was also of the opinion that the assessee had reasonable and sufficient cause for not complying with Sections 269SS and 269T even if the same were to be considered as deposit and repayment of deposits. About the additions sustained by the Commissioner of Income-tax (Appeals) in respect of alleged cash credit, the Tribunal found such transaction to be not outside the purview of the transactions carried out by the assessee as kachcha adhatiya. Hence, the penalty sustained by the Commissioner of Income-tax (Appeals) was also set aside.

39. Thus, both on the ground that the transaction in question retention of sale price by the kachha adhatiya did not amount to deposit and its utilisation and dealing with it at the instance of farmer constituents did not amount to repayment of loan or deposits within the meaning of Section 269SS or Section 269T and on the ground that limitation under Section 275(1)(c) applies to such proceedings we hold in favour of the respondents.

40. Accordingly, these appeals fail and are hereby dismissed. No order as to costs.