Assessment-stage satisfaction is essential for cash-loan penalty proceedings, and later initiation cannot revive an expired limitation period.

Penalty proceedings for alleged contravention of the cash-loan restrictions require the Assessing Officer to record satisfaction during assessment regarding the specific violation. Where satisfaction was recorded only for a different cash-transaction provision and those proceedings were dropped, the Joint Commissioner could not independently initiate penalty proceedings for the alleged loan-related contravention; the penalties were therefore without jurisdiction. The notes further state that limitation ran under the applicable statutory framework from the assessment-stage satisfaction, and later dropping one proceeding and initiating another could not extend or revive that period. The penalties in both connected matters were consequently quashed for lack of jurisdictional satisfaction and limitation.

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Issues: (i) Whether penalty proceedings under Section 271D for alleged violation of Section 269SS could validly be initiated by the Joint Commissioner without satisfaction recorded by the Assessing Officer during the assessment proceedings; (ii) whether the penalty proceedings and consequential penalty order were barred by limitation.

Issue (i): Validity of initiation of penalty proceedings under Section 271D without satisfaction recorded by the Assessing Officer.

Analysis: Recording of satisfaction by the Assessing Officer during the pendency of assessment proceedings is a condition precedent for initiation of penalty proceedings under Section 271D. The assessment order recorded satisfaction only for proceedings under Section 271DA concerning Section 269ST. Those proceedings were subsequently dropped, and the Joint Commissioner independently initiated proceedings under Section 271D concerning Section 269SS. In the absence of satisfaction by the Assessing Officer for the alleged Section 269SS violation, the Joint Commissioner lacked jurisdiction to initiate the penalty proceedings.

Conclusion: The penalty proceedings initiated under Section 271D were without jurisdiction and the penalty was liable to be deleted.

Issue (ii): Whether the penalty proceedings were barred by limitation.

Analysis: The relevant satisfaction was recorded in the assessment order dated 20 January 2023. Applying the limitation framework under Section 275(1)(c) of the Income-tax Act, 1961, as reflected in the applicable CBDT Circular, the limitation period expired on 31 July 2023. The subsequent dropping of proceedings under Section 271DA and fresh initiation under Section 271D could not extend or revive the limitation period.

Conclusion: The penalty proceedings and consequential penalty order were barred by limitation.

Final Conclusion: The statutory penalties imposed on both assessees under Section 271D were quashed on account of absence of jurisdictional satisfaction and limitation, with the same conclusions applying to both connected appeals.

Ratio Decidendi: Penalty under Section 271D cannot be validly imposed unless the Assessing Officer records satisfaction during the assessment proceedings regarding violation of Section 269SS, and proceedings initiated beyond the limitation prescribed under Section 275(1)(c) are unsustainable.

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