Raju Chandrasekar Vs ITO (ITAT Chennai)
Penalty Cannot Survive When Reassessment Is Quashed: ITAT Chennai Deletes Section 271(1)(c) Penalty for AY 2015-16
The Chennai Bench of the ITAT allowed the assessee’s appeal for AY 2015-16 and set aside the penalty imposed under section 271(1)(c), holding that the penalty had no legs to stand once the quantum reassessment itself was quashed.
The Tribunal noted that the reassessment for the relevant year had already been set aside by the ITAT in the assessee’s quantum appeal, on the ground that the notice under section 148 was issued by the Jurisdictional Assessing Officer (JAO) instead of the Faceless Assessing Officer (FAO), in violation of the post-29.03.2022 faceless reassessment scheme, following the jurisdictional Madras High Court ruling in TVS Credit Services Ltd. Since the very foundation of the reassessment was held to be invalid, the consequential penalty levied under section 271(1)(c) automatically collapsed.
The ITAT reiterated the settled principle that penalty proceedings are dependent on the existence of a valid quantum assessment. Where the assessment is annulled or set aside on jurisdictional grounds, the penalty order arising therefrom cannot survive. However, the Tribunal clarified that since liberty had been reserved in the quantum order to the Revenue to seek revival of the reassessment in the event of a favourable Supreme Court decision, the penalty proceedings could also be revived if and when the quantum assessment itself is lawfully restored.
With these observations, the ITAT deleted the penalty for the present and allowed the assessee’s appeal.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
