Banking-channel loan receipts and disclosed loss claim defeat penalties under section 271D and section 271(1)(c).

Penalty under section 271D could not be sustained where the impugned loan receipts were shown to have been made through banking channels and placed in an earlier financial year, so no cash transaction in contravention of section 269SS was established. Penalty under section 271(1)(c) was also not justified because the business loss claim was based on disclosed audited accounts and associated business records; mere acceptance of disallowance did not by itself prove furnishing of inaccurate particulars. On those facts, both penalties were deleted and the assessee received full relief.

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Issues: (i) Whether penalty under section 271D of the Income-tax Act, 1961 was sustainable for alleged violation of section 269SS when the impugned loan transactions were stated to have been received through cheque and in a different year. (ii) Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 was sustainable for claiming business loss as an inadmissible expenditure claim.

Issue (i): Whether penalty under section 271D of the Income-tax Act, 1961 was sustainable for alleged violation of section 269SS when the impugned loan transactions were stated to have been received through cheque and in a different year.

Analysis: The record showed that the impugned receipts were through banking channels and the dates established by the assessee placed the transactions in an earlier financial year. On those facts, there was no basis to presume receipt of cash loans in contravention of section 269SS.

Conclusion: The penalty under section 271D was not exigible and was deleted in favour of the assessee.

Issue (ii): Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 was sustainable for claiming business loss as an inadmissible expenditure claim.

Analysis: The audited accounts disclosed income and expenditure items that were connected with the business activity of the company, and the loss claim was founded on those disclosed financial statements. Mere non-contestation of the disallowance did not, by itself, establish furnishing of inaccurate particulars where the claim was made on disclosed facts and was not shown to be false.

Conclusion: The penalty under section 271(1)(c) was not sustainable and was deleted in favour of the assessee.

Final Conclusion: Both penalty additions failed, and the assessee obtained complete relief in both appeals.

Ratio Decidendi: A penalty for violation of section 269SS cannot stand where the transaction is shown to have been effected through banking channels, and penalty for inaccurate particulars does not arise merely because a loss claim based on disclosed audited accounts is ultimately not accepted.

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