J.P. Devadhar, J.

1. This appeal was admitted on 13th September 2010 on the following substantial question of law:

“Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that transactions effected through journal entries in the books of the assessee would not amount to repayment of any loan or deposit otherwise than by account payee cheque or account payee bank draft within the meaning of Section 269T to attract levy of penalty under Section 271E of the Income Tax Act, 1961?”

2. The assessment year involved herein is AY 20032004.

3. The respondent – assessee, a Public Limited Company, is a member of the National Stock Exchange and is also a Category I Merchant Banker, registered with the Securities and Exchange Board of India (SEBI). The assessee is engaged in the business of shares, stock broking, investment and trading in shares and securities.

4. In the assessment year in question, the assessee had filed its return of income declaring loss of Rs.17,27,21,815/. The assessment was completed on 5th November 2003 under Section 143(3) of the Income Tax Act, 1961 ('Act' for short) determining loss at Rs.9,84,92,500/.

5. P