Cash receipt penalty relief fails where no reasonable cause is shown for bypassing the banking channel.

Section 269SS prohibits acceptance of loans or deposits above the prescribed threshold otherwise than by account payee cheque or bank draft, and penalty under section 271D can be avoided only if section 273B reasonable cause is proved. The assessee's claim that it was a sick industrial unit needing funds was not accepted as sufficient justification for receiving cash. No circumstance beyond the assessee's control was shown to explain non-compliance with the statutory banking channel. The explanation was therefore held inadequate to attract the protection of section 273B, and the penalty under section 271D was confirmed against the assessee.

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Issues: Whether penalty under section 271D of the Income-tax Act, 1961 was leviable for acceptance of cash deposits in violation of section 269SS, and whether the assessee had established reasonable cause under section 273B.

Analysis: Section 269SS prohibits acceptance of loans or deposits of the specified quantum otherwise than by account payee cheque or bank draft. The availability of relief depends on section 273B, under which no penalty is imposable if the assessee proves reasonable cause for the failure. The assessee's plea that it was a sick industrial unit in need of funds was not accepted as sufficient justification for bypassing the banking channel. The record did not show any circumstance beyond the assessee's control preventing compliance with the statutory mode of receipt. The explanation was therefore held insufficient to attract the protection of section 273B.

Conclusion: Penalty under section 271D was rightly confirmed and the claim of reasonable cause failed, thus the issue was decided against the assessee.

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