Recorded satisfaction for penalty proceedings may be inferred from the order, but the issue was referred to a Full Bench.

For initiation of penalty proceedings under section 271 of the Income-tax Act, recorded satisfaction is a jurisdictional precondition and must ordinarily reflect proper application of mind, but no rigid statutory form is prescribed; the order is to be read as a whole to see whether the requisite satisfaction is otherwise discernible. In view of earlier decisions, the court did not finally determine the point and referred the substantial question of law to a Full Bench for authoritative consideration and final disposal of the matters.

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Issues: Whether, for initiation of penalty proceedings under section 271 of the Income-tax Act, 1961, satisfaction of the officer must be recorded in specific terms or may be inferred from the order; and whether the question should be referred to a Full Bench for authoritative determination.

Analysis: The order notes that the statutory requirement of satisfaction is a jurisdictional precondition for penalty proceedings and that such satisfaction must ordinarily be evidenced by proper application of mind. It also records that the statute does not prescribe any rigid form for recording satisfaction, and that the order must be examined as a whole to see whether the requisite satisfaction is otherwise discernible. Finding that the issue required authoritative consideration in view of earlier decisions, the matter was not finally answered in the order and was referred to a Full Bench.

Outcome: The appeals were referred to a Full Bench for determination of the substantial question of law and for final disposal of the matters.

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