Recorded satisfaction is mandatory before penalty for advance tax default; mere show-cause notice is insufficient.

Penalty under section 273(c) could not be sustained because the Income-tax Officer had not recorded satisfaction during the assessment proceedings that the assessee had defaulted under section 212(3-A). The order did not show any contemporaneous satisfaction or direction to issue notice for that default, and the mere issue of a show-cause notice with the demand notice was held insufficient. The statutory condition precedent for initiating penalty proceedings was therefore not met, so the penalty was unjustified.

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Issues: Whether the penalty imposed under section 273(c) of the Income-tax Act could be sustained when the Income-tax Officer had not recorded satisfaction in the assessment order that the assessee had committed the default under section 212(3-A).

Analysis: The assessee had paid only a part of the advance tax required under section 210 and was obliged to revise the estimate under section 212(3-A). The decisive question, however, was whether the statutory precondition for initiating penalty proceedings had been met. The order passed by the Income-tax Officer contained no indication that he was satisfied, during the course of the assessment proceedings, that the assessee had committed the default, and it also did not direct issuance of notice for that default. The mere issue of a show-cause notice along with the demand notice was held insufficient to establish the requisite satisfaction before completion of the assessment.

Conclusion: The condition precedent of the Income-tax Officer's satisfaction was not fulfilled, so the penalty was not justified and the assessee succeeded.

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