Recorded satisfaction requirement for cash-transaction penalties: absence of AO satisfaction or receipt by spouse nullifies penalty imposition.

Penalty under the relevant cash-transaction penalty provision cannot be sustained where the factual record shows the receipt arose from property owned and sold by the spouse and the sale proceeds were deposited by her into a joint account, because the assessee did not himself accept the specified sum. Further, imposition of the penalty requires the Assessing Officer to record satisfaction regarding contravention in the assessment order; absence of such recorded satisfaction vitiates subsequent penalty proceedings. Both defects led to quashing of the penalty and allowance of the appeal.

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Issues: (i) Whether penalty under section 271D of the Income-tax Act, 1961 could be sustained against the assessee where sale proceeds of property owned and sold by the spouse were deposited in a joint bank account; (ii) Whether penalty under section 271D of the Income-tax Act, 1961 can be validly imposed when the Assessing Officer has not recorded satisfaction regarding contravention of section 269SS in the assessment order under section 143(3) of the Income-tax Act, 1961.

Issue (i): Whether penalty under section 271D can be imposed on the assessee where the property was owned and sold by the spouse and sale consideration was deposited in a joint account.

Analysis: Evidence in the record establishes that the subject property was owned and sold by the spouse and the sale consideration was deposited by her into the joint bank account. The penalty under section 271D is attracted upon a person who takes or accepts money in contravention of section 269SS; the factual question is whether the assessee himself accepted the specified sum. The material shows the transaction and ownership pertain to the spouse, and the deposit was made by her into the joint account.

Conclusion: In favour of the assessee.

Issue (ii): Whether absence of the Assessing Officer's recorded satisfaction in the assessment order precludes imposition of penalty under section 271D.

Analysis: Sections 271D and 271E are pari materia. Precedent requires that the Assessing Officer record satisfaction during assessment proceedings for initiation of penalty under the relevant provision; where such satisfaction is not recorded in the assessment order that survives, jurisdiction to levy the penalty by the Joint/Additional Commissioner is vitiated. The assessment order under section 143(3) did not record satisfaction regarding contravention of section 269SS; binding authority establishes that absence of recorded satisfaction invalidates subsequent penalty proceedings under the pari materia provision.

Conclusion: In favour of the assessee.

Final Conclusion: The penalty of Rs. 33.34 lakhs imposed under section 271D of the Income-tax Act, 1961 is struck down both because the relevant receipts pertain to the spouse and because the Assessing Officer did not record the requisite satisfaction in the assessment order; the appeal is allowed.

Ratio Decidendi: Recording of the Assessing Officer's satisfaction in the assessment order regarding contravention of section 269SS is a prerequisite for valid imposition of penalty under section 271D, and where the recorded facts show the receipts relate to the spouse rather than the assessee, penalty cannot be sustained against the assessee.

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