Recorded satisfaction for penalty proceedings is essential; penalty under section 271E fails without a section 269T finding.

Penalty under section 271E could not be sustained where the assessment order did not record the Assessing Officer's satisfaction that repayment of cash attracted section 269T and warranted initiation of penalty proceedings. The record showed initiation of other penalty action, but no recorded satisfaction connecting the alleged default to section 269T or the proposed penalty under section 271E. In the absence of that foundational satisfaction in the assessment proceedings, the penalty proceedings were held to lack a valid basis, and the penalty order and the appellate order upholding it were set aside in favour of the assessee.

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Issues: Whether penalty under section 271E of the Income-tax Act, 1961 was sustainable when the assessment order did not record satisfaction that the case involved violation of section 269T warranting initiation of such penalty proceedings.

Analysis: The assessment order was examined to ascertain whether the Assessing Officer had formed and recorded the requisite satisfaction for initiation of penalty under section 271E. The order disclosed initiation of other penalty proceedings, but it did not record satisfaction that the cash repayment attracted section 269T so as to justify action under section 271E. In the absence of such recorded satisfaction in the assessment proceedings, the foundation for the penalty was held to be lacking.

Conclusion: The penalty under section 271E could not be sustained and the penalty order, as well as the appellate order affirming it, were set aside in favour of the assessee.

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