JUDGMENT
P. Venkatarama Reddi, J.
1. In this application under Section 256(2) of the Income-tax Act, 1961, the assessee seeks reference of the following questions for consideration of this court :
“1. Whether, on the facts and in the circumstances of the case, the Tribunal was not justified in confirming the penalty of Rs. 92,000 under Section 271D of the Income-tax Act ?
2. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the circumstances mentioned by the assessee which necessitated loans being taken in cash did not constitute reasonable cause for not levying penalty under Section 271D of the Act ?
3. Whether, on the facts and in the circumstances of the case, the Tribunal ought to have followed the decision of the Madras High Court in the case of A.B. Shanthi v. Asst Director of Inspection and cancelled the penalty as not valid in law ?
4. Whether, on the facts and in the circumstances of the case, the order of the Tribunal confirming the penalty under Section 271D was perverse ?”.
2. Learned counsel for the petitioner submits that question No. 3 is not appropriate and, therefore, the petitioner is withdrawing the same.
3. The petitioner took a cash loan of Rs. 92,000 during the months of February and March, 1989, in violation of the provisions of Section 269SS of the Income-tax Act. Penalty of an equal amount was levied under Section 271D by the Deputy Commissioner of Income-tax. It is not in dispute that penalty could be levied only if reasonable cause is not established. Against the order of the Deputy Commissioner levying penalty, the petitioner preferred appeal to the Commissioner of Income-tax (Appeals). The gist of the explanation given before the Deputy Commissioner as well as the written submissions given before the appellate authority were set out by the Appellate Commissioner. After adverting to the contentions on both sides and the order of the Deputy Commissioner, the first appellate authority merely observed at the end that “there is conspicuous absence of reasonable cause”. On further appeal to the Tribunal by the assessee, the Tribunal observed that merely because the loan accepted by the assessee was found to be genuine in the course of assessment proceedings it cannot be said that the impugned penalty is unjustified. As far as this observation is concerned, no exception can be taken. The Tribunal then observed that no exceptional circumstances warranting the cash payments, “such as
absence of banking facilities at the place of payment, payments having taken place after the banking hours or on bank holidays, etc.” have been made out by the assessee. That is the only reason assigned by the Tribunal in upholding the levy of penalty. It is also interesting to note that the Tribunal observed that the reasoning given by the Commissioner of Income-tax (Appeals) is sound and valid and it found itself in complete agreement with that reasoning. As already observed, there was no reasoning at all in the Appellate Commissioner’s order except saying that there was conspicuous absence of reasonable cause. Thus, prima facie, we are of the view that there was non-application of mind on the part of the Tribunal. Moreover, no earnest effort has been made to consider and test the explanation of the assessee. A general observation that no exceptional circumstances were made out cannot be a substitute for a specific finding which is expected of the Tribunal, more so in a case dealing with penalty which is often said to be a quasi-criminal proceeding.
4. We, therefore, consider it a fit case to call for reference of questions Nos. 1 and 4. Question No. 2 only being in the nature of narrative need not be referred.
5. The I. T. C. is accordingly allowed. No costs.