Recorded satisfaction in assessment order is essential to sustain penalty under section 271D; penalty deleted.

Penalty under section 271D could not be sustained because the assessment order under section 143(3) contained no recorded satisfaction for initiation of penalty proceedings. The assessment was completed by accepting the returned income, with no addition made, and the absence of such satisfaction in the assessment order meant the statutory precondition for penalty was not met. The penalty was therefore directed to be deleted, and the assessee succeeded with the penalty order annulled.

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Issues: Whether penalty under section 271D of the Income-tax Act, 1961 could be sustained when the assessment order under section 143(3) of the Income-tax Act, 1961 contained no recorded satisfaction for initiation of penalty proceedings.

Analysis: The assessment was completed accepting the returned income and no addition was made. The assessment order did not record any satisfaction for initiating penalty proceedings under section 271D of the Income-tax Act, 1961. In the absence of such recorded satisfaction in the assessment order, the precondition for sustaining the penalty was not met.

Conclusion: The penalty under section 271D of the Income-tax Act, 1961 could not be sustained and was directed to be deleted in favour of the assessee.

Final Conclusion: The assessee succeeded in the appeal and the penalty order stood annulled.

Ratio Decidendi: Where the assessment order does not record satisfaction for initiation of penalty proceedings, the penalty cannot be sustained merely on the basis of the subsequent penalty order.

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