Section 271D penalty requires recorded satisfaction of a Section 269SS breach; without it, the penalty lacks jurisdiction.

Penalty under Section 271D of the Income-tax Act could not be sustained because the assessment order did not record the Assessing Officer's clear satisfaction that the assessee had violated Section 269SS by accepting cash loans. The High Court held that such recorded satisfaction, based on the assessment material, is a jurisdictional precondition for initiating penalty proceedings under Section 271D. As no specific finding appeared in the assessment order, the penalty initiation lacked foundation and was without jurisdiction. The penalty order was therefore set aside in favour of the assessee.

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Issues: Whether penalty under Section 271D of the Income-tax Act, 1961 could be sustained when the assessment order did not record a finding or satisfaction that the assessee had violated Section 269SS of the Income-tax Act, 1961.

Analysis: The assessment order and the material relied upon did not contain a specific finding that the assessee had accepted cash loans in violation of Section 269SS. The authority initiating penalty under Section 271D acted on a reference made after assessment, but the jurisdiction to levy such penalty depended on the Assessing Officer first recording satisfaction, based on the assessment material, that the statutory prohibition had been breached. In the absence of such recorded satisfaction, the basis for penalty proceedings was missing.

Conclusion: The penalty under Section 271D could not be sustained and was rightly set aside in favour of the assessee.

Final Conclusion: The writ petition succeeded, and the penalty order was annulled for want of the requisite satisfaction in the assessment proceedings.

Ratio Decidendi: Penalty under Section 271D can be initiated only when the assessment order records a clear satisfaction that the assessee violated Section 269SS; absent such satisfaction, the penalty is without jurisdiction.

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