M.K. CHATURVEDI, VICE PRESIDENT Order This appeal by Revenue is directed against deletion of penalty amounting to Rs. 1,65,85,000 levied under s. 271D of IT Act, 1961 (hereinafter called as Act ) and relates to block period from 1st April, 1988 to 2nd Sept., 1998. 2 . We have heard rival submissions in light of material placed before us and precedents relied upon. assessee is firm comprising of 4 partners. It is engaged in business of real estate. firm is constructing and selling flats at Trichy. Search and seizure operations under s. 132 of Act were conducted in business premises of assessee as well as residential premises of its partners. During course of search certain books of account and diaries were found and seized. In response to notice issued under s. 158BC on 4th Jan., 1999 assessee filed its block return on 15th March, 2000 declaring undisclosed income at Rs. 59,07,160. AO finalized block assessment proceedings on 29th July, 2000 determining total undisclosed income at Rs. 99,58,020 as under : Rs. "Total investments 3,07,29,064 Add : Difference in value of cost of construction 34,44,736 as per Valuation Cell (later rectified as Rs.47,66,000) Interest paid to loan 5,07,888 creditors Bank balance as on 17,832 date of search Cash found at time 2,38,000 42,08,456 of search 3,49,37,520 Less : Admissible loan 1,29,10,000 creditors Advances received from 1,14,00,000 clients Opening capital assessed in individual assessment of Shri D. Virudhachalam is allowed 5,00,000 2,48,06,000 since it is explained 1,01,31,520 Less : Income already 1,73,500 disclosed and assessed Taxable undisclosed 99,58,020 income (Later rectified as Rs. 1,12,27,284)" 3 . Assessee contested before CIT(A) additions towards undisclosed income. CIT(A) allowed relief to extent of Rs. 5,07,888 under s. 36(1)(iii) of Act and another relief to extent of Rs. 10,67,150 towards self- supervision. Against part relief assessee preferred appeal before Tribunal. Tribunal vide its order dt. 28th Feb., 2002 deleted balance addition of Rs. 47,66,000 made towards difference in cost of construction. Ex consequenti, undisclosed income of Rs. 59,07,160 as declared in block return remained assessed income as on date. 4 . For entire block period assessee claimed aggregate loans to extent of Rs. 2,65,85,000 out of which loans to extent of Rs. 36,75,000 were stated to have been paid. AO gave credit to balance claims of loans to extent of Rs. 1,29,10,000 as on date of search. Assessee has claimed in return of income sum of Rs. 1,18,75,607 as outstanding loans as on 31st March, 1998. assessee has not claimed loan taken from 1st April, 1998 to date of search to extent of Rs. 14,45,000 since this period was outside purview of block assessment as submitted by assessee earlier. 5 . Assessee furnished names and addresses of creditors. Out of 70 creditors 61 persons have responded to summons issued under s. 131 of Act and confirmed credits to extent of Rs. 1,09,00,000. Assessment was based on investment as per entries upto date of search. As per diary entries upto date of search, loan creditors were to extent of Rs. 1,29,10,000. 6 . AO had accepted entire claim relating to loan transactions as genuine. He referred matter under s. 271D of Act to Addl. CIT as assessee had accepted loans/deposits in cash exceeding Rs. 20,000 in violation of provisions of s. 269SS of Act. Addl. CIT initiated proceedings under s. 271D by issuing show-cause notice under s. 274 r/w s. 271D on 29th March, 2001 requiring assessee to show cause as to why penalty thereunder should not be levied for defaults committed. 7. In its reply assessee stressed genuineness of loan. Business exigencies were explained for obtaining loan. It was submitted that once genuineness of transaction is not disputed, disallowance is uncalled for. It was further stated that most of persons from whom assessee had borrowed were agriculturists residing in remote villages and many of them were not having any bank account. Besides assessee firm was not professionally managed. Partners were not conversant with intricacies of tax laws and default, if any, was caused due to ignorance of law. It was not intentional. It was not wilful act of assessee firm. Assessee proved bona fide of transaction and genuineness of credits. On these facts non-acceptance of loan by cheque or draft amounts to only technical or venial breach. 8. Based on dictum de minimis non curat lex (the law takes no notice of trivialities), it was submitted that it is only technical or venial mistake. Assessee should therefore be exonerated from rigour of penalty. Adverting our attention to healing aspects of justice, it was prayed that lenient view be taken in matter. Reliance was placed on some precedents. 9. In case of Asstt. Director of Inspection (Inv.) vs. Kum. A.B. Shanthi (2002) 174 CTR (SC) 513 : (2002) 255 ITR 258 (SC), Hon ble Supreme Court has held that "The undue hardship of provisions of s. 271D, which replaced s. 276DD constituting failure to comply with provisions of s. 269SS into offence, is substantially mitigated by inclusion of s. 273B providing that if there was genuine and bona fide transaction and if for any reason taxpayer could not get loan or deposit by account payee cheque or demand draft for some bona fide reasons, authority vested with power to impose penalty has discretionary power not to levy penalty." 1 0 . When s. 271D is r/w s. 273B, which begins with non obstante clause Notwithstanding anything contained in provisions of inter alia s. 271D , it is clear that in spite of provisions of s. 271D, enactment following, namely, no penalty shall be imposable on person or assessee, as case may be, for any failure referred to in said provisions if he proves that there was reasonable cause for said failure , will have its full operation. Under s. 273B judicial discretion is left with assessing authority not to levy penalty under s. 271D if authority is satisfied that there was reasonable cause for not complying with provisions of s. 269SS. 11. Hon ble Supreme Court in case of Hindustan Steel Ltd. vs. State of Orissa (1972) 83 ITR 26 (SC) has held that "Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform statutory obligation is matter of discretion of authority to be exercised judicially and on consideration of all relevant circumstances. Even if penalty is prescribed, authority competent to impose penalty will be justified in refusing to impose penalty when there is technical or venial breach of provisions of Act or where breach flows from bona fide belief that offender is not liable to act in manner prescribed by statute". power to impose penalty has to be exercised judicially with due regard to all facts and circumstances. It cannot be exercised mechanically. 12. It is all very well to paint justice blind, but she does better without bandage round her eyes. She should be blind indeed to favour or prejudice, but clear to see which way lies truth and less dust there is about better. We made attempt to examine truth. We found that undisclosed income as declared in block return remained assessed income. Revenue did not doubt veracity of creditors. AO did accept credits as genuine. Most of creditors were agriculturists, residing in remote villages and many of them were not having any bank account. Assessee firm was not professionally managed. From this it can be concluded that breach flowed from bona fide belief. Ex facie it is venial breach. Cash appears to be accepted because of business exigencies. As such there exists reasonable cause in accepting cash loans from various parties. Assessee may therefore be exonerated from rigour of penalty. We uphold order of CIT(A). 13. In result, appeal of Revenue stands dismissed. *** DEPUTY COMMISSIONER OF INCOME TAX v. VIGNESH FLAT HOUSING PROMOTERS