AO’s failure to Record Reasons for Subjective Satisfaction u/s 271 E: Madras HC sets aside Penalty Order

The Madras High Court set aside a penalty order under Section 271-E of the Income Tax Act due to the Assessing Officer’s failure to properly record reasons for subjective satisfaction. Section 271-E penalizes assessees for the repayment of loans or deposits in cash exceeding the permissible limit. However, the court held that such penalties could not be imposed unless the reasons for the satisfaction are clearly documented. This judgment underscores the procedural safeguards that protect taxpayers from arbitrary penalties and highlights the importance of due process in tax assessments.