Penalty under Section 271D fails where the assessment order records no satisfaction for initiating penalty proceedings.

Penalty under Section 271D could not be sustained because the assessment order accepted the returned income, made no quantum addition, and recorded no satisfaction for initiating penalty proceedings. The Tribunal held that penalty for breach of Section 269SS must have a valid jurisdictional foundation in the assessment order itself; a separate show-cause notice issued later could not cure the absence of such satisfaction. On that basis, the penalty order was set aside and the assessee's appeal succeeded.

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Issues: Whether penalty under Section 271D of the Income-tax Act, 1961 could be sustained when the assessment order contained no recorded satisfaction for initiation of penalty proceedings and the returned income was accepted without any quantum addition.

Analysis: The penalty under Section 271D is attracted only when there is contravention of Section 269SS, but the initiation of such penalty proceedings must rest on satisfaction recorded in the assessment order. Where the assessment order accepts the returned income and does not record any satisfaction for penalty initiation, the Assessing Officer cannot later issue a separate show-cause notice and impose penalty independently. The provision operates in the backdrop of the assessment proceedings, and the absence of foundational satisfaction deprives the penalty order of valid jurisdiction. The decision follows the binding principle that, in the absence of recorded satisfaction in the assessment order, penalty proceedings for breach of Section 269SS cannot be validly sustained.

Conclusion: The penalty under Section 271D was not sustainable and the appeal succeeded in favour of the assessee.

Final Conclusion: The assessment having been accepted without any quantum addition and without the requisite satisfaction for penalty initiation, the impugned penalty order was liable to be set aside.

Ratio Decidendi: Penalty under Section 271D of the Income-tax Act, 1961 cannot be validly imposed unless the assessment order records the requisite satisfaction for initiating such proceedings.

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