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16. So far as validity of the provision containing section 269SS is concerned, same came up for consideration before Hon'ble Supreme Court in the case of Assistant Director of Inspection (Inv) v. Kum. A.B. Shanthi & Ors. (2002) 255 ITR 258 (SC) and Hon'ble Supreme Court while upholding the validity of the provision has held as under :

"Section 269SS of the Income Tax Act, 1961, prescribing the mode of taking or accepting certain loans or deposits, is not discriminatory and it not violative of Art. 14 of the Constitution of India; nor was it enacted by Parliament without legislative competence. It cannot be said that section 269SS deals with a subject outside the scope of the Income Tax Act'or that it relates to a topic not within the competence of Parliament. Nor are the provisions of section 269SS or section 271D or section 276DD unconstitutional on the ground that the provisions are draconian or expropriatory.

"14. The assessee may be exonerated from the rigour of penalty under section 271D of the Act, provided it is established that there existed a reasonable cause for not complying with the prescription of section 269SS of the Act. The mandate given under section 269SS of the Act is clear. Any departure from the said mandate invites penalty as is envisaged under section 271D of the Act. It is clearly laid down in the section that no person shall after 30-6-1984 take or accept from any other person any loan or deposit otherwise than by an account payee cheque or account payee bank draft, if the amount of loan or deposit or the aggregate amount of such loan, or deposit i5 Rs. 20, 000 or more, This panoply of law was brought on the statute to counter the tax evasion. Therefore, it is not sufficient to say that simply the transaction was genuine, so section 269SS of the Act is not applicable. One cannot accept such proposition of law. There is no ambiguity in the language of the provision. As such, there is no need to apply the purposive theory of interpretation. Subject to the existence of mitigating circumstances penalty cannot be deleted. The assessee must prove beyond the shadow of doubt that there existed a reasonable cause for not complying with the conditions contained in section 269SS. Circumstances under which the cash was accepted must be explained. Unfortunately, no cogent material was produced in that direction. The exigency was stated to be the requirement of machine. How urgent that requirement was is not known. The machine was not purchased soon after taking the loan. This indicates that the assessee could have complied with the requirements of section 269SS of the Act, without much difficulty. It is the duty of every citizen to respect law. Majesty of law is to be maintained.

(iii) It is further observed in the proposed order that learned Commissioner (Appeals) was not justified in sustaining the penalty of Rs. 30,000 each for each of the assessment years without recording finding that any of the loans exceeded the limit prescribed under section 269SS of the Income Tax Act. From the statement of the assessee that the loan was taken two or three times in the lifespan, it could not follow that said amount exceeded Rs. 30,000 for penalty of Rs. 30,000 was sustained purely on ad hoc and estimate basis without recording a specific finding about any particular transaction entered into in violation of the provisions of section 269SS, The provisions of sections 271D and 271E are the harshest of all other penalty provisions, as penalty under these sections is leviable not with reference to income or tax payable by the assessee but with reference to loan given or taken despite the fact that assessee's income may not be taxable. It is, therefore, imperative that the revenue authorities must exercise due care and examine the case from various angles before imposing penalty under these sections. Such approach has not been adjudicated in the present cases.

"It is also a factual position that Income Tax Officer and the assessing officer has not produced clinching evidence that the appellant has in fact received loan from Shri Harbans Lal, Prop., M/s. Juneja Traders, Fazilka, to the tune referred in the penalty orders."

28. The above factual finding recorded by the learned Commissioner (Appeals) is fully supported by the material on record. Except for photocopies of alleged statement of loan account of assessee which is contradicted by admission of Shri Harbans Lal and is shown to be incomplete, there is no material to infer that loan/deposit in contravention of the provisions of section 269SS was received by the assessee. In the circumstances of the case, it is not possible to accept that Shri Harbans Lal did not make admissions in his statement attributed to him by the learned Commissioner (Appeals). Above fact was not challenged before me even by the learned Departmental Representative. It is further not clear to me as to how fact of entering Rs. 10,000 when actually Rs. 8,500 were given, a fact admitted by Shri Harbans Lal would be reflected in the copy of account produced by the revenue. I find it difficult to subscribe to the view proposed by the learned JM. It is a settled law that penalty proceedings are quasi-criminal proceedings. The revenue authorities are obliged to record a clear finding based on authentic evidence which would leave no scope for doubt that assessee committed offence and was liable to be visited with penalty. The penalty cannot be imposed on vague and imaginary evidence. No such definite evidence is available in this case to show that the assessee contravened provisions of section 269SS to justify levy of penalty under section 271D of the Income Tax Act. The learned Commissioner (Appeals) on the basis of statement of the assessee assumed that he must have received loan or deposit of Rs. 30,000 and, therefore, imposed penalty of an equal amount. This inference is not supported by any cogent material. The learned Accountant Member has properly analyzed statement of the assessee. There are large number of credit and debit entries in unreliable photocopies of accounts relied upon by the revenue authorities. Entry or entries taken singly or jointly do not establish that assessee received loan/deposit of Rs. 30,000 in contravention of statutory provision. The penalty, as rightly observed by the learned Accountant Member , has been imposed on estimate and guesswork and Rs. 30,000 has been taken in an ad hoc manner. There is no justification to hold that statutory provisions have been violated in terms of section 271D of the Income Tax Act. Legal effect of the order proposed by the learned JM is that relief allowed by the learned Commissioner of Income Tax (Appeals) is withdrawn although no request to do so is made by the revenue. The impugned order has been accepted by them. I also find force in the alternative finding of the learned AM that assessees are petty traders carrying on small business, with income below taxable limit and for purposes of business were taking small loans without any intention to violate any statutory provision. They had no intention to contravene the provisions of section 269SS and, therefore, it would not be a fit case to levy penalty on them.