Recorded satisfaction in assessment proceedings is essential before penalty for section 269SS contravention can be sustained.

Penalty under section 271D for alleged contravention of section 269SS cannot be sustained where no assessment order or other preceding proceedings record the requisite satisfaction about the default. The Tribunal found that the penalty was initiated without any assessment-based foundation showing the alleged cash transaction violation, and followed the coordinate bench view that such recorded satisfaction is necessary before levy. On that basis, the penalty was held unsustainable and deleted in favour of the assessee.

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Issues: Whether penalty under section 271D for alleged contravention of section 269SS could be sustained in the absence of any assessment order or recorded satisfaction preceding the penalty proceedings.

Analysis: The appeal turned on a single legal question: whether initiation and levy of penalty under section 271D required an assessment order or other proceedings from which the default under section 269SS could be discerned. The Tribunal noted that no assessment order existed containing any finding on the alleged default and, therefore, no satisfaction had been recorded before initiation of penalty. Relying on the cited coordinate bench view, it held that such recorded satisfaction and assessment-related foundation were necessary for sustaining penalty proceedings of this nature.

Conclusion: The penalty under section 271D was held to be unsustainable and was deleted, in favour of the assessee.

Ratio Decidendi: Penalty for contravention of section 269SS cannot be sustained unless the Revenue has first recorded the requisite satisfaction in assessment proceedings or in proceedings arising from an assessment order.

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