Moly Jagatha Vs National Faceless Assessment Centre Income Tax Department (Kerala High Court)
Summary: The Kerala High Court considered a writ petition filed by Moly Jagatha challenging penalty and recovery proceedings founded on an earlier assessment order. The petitioner was an assessee under the Income Tax Act and challenged penalty show-cause notices, including proceedings under section 271AAC(1) and section 270A, as well as recovery proceedings based on the original assessment order. The original assessment order, Ext.P1, had been dated 12.02.2025. According to the petitioner, that assessment order had subsequently been set aside by the appellate authority through Ext.P2 dated 19.05.2026, with a direction to the assessment authority to conduct the assessment afresh. Pursuant to that direction, Ext.P3 communication dated 05.06.2026 had been issued and fresh assessment proceedings were pending.
The petitioner contended that notwithstanding the setting aside of Ext.P1, the authorities proceeded to issue the penalty notices and recovery notice on the basis of that assessment order. The Court heard both the petitioner’s counsel and the standing counsel for the respondents. It found that Ext.P2 clearly indicated that Ext.P1 had been set aside with a direction for fresh assessment. Consequently, Ext.P1 was no longer in existence and no fresh assessment order had yet been passed pursuant to the appellate direction. On that basis, the Court held that proceedings for penalty or recovery could not have been issued based on Ext.P1 and were therefore per se illegal.
The writ petition was accordingly disposed of by quashing Exts.P4, P4(a) and P5. The Court directed the first respondent or any other competent authority to complete the fresh assessment proceedings based on Ext.P3, as directed by Ext.P4, as expeditiously as possible after providing the petitioner an opportunity of hearing.
FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT
This writ petition is submitted by the petitioner, challenging the recovery proceedings initiated against the petitioner. The petitioner is an assessee under the provisions of Income Tax Act and she is aggrieved by the show cause notice issued as part of the penalty proceedings proposed to be initiated as evidenced by Exts.P4 and P4(a), as well as recovery proceedings initiated as per Ext.P5, based on Ext.P1 assessment order.
2. The case of the petitioner is that, Ext.P1 assessment order is no longer in existence, as it was set aside by the appellate authority by Ext.P2 appellate order, directing the assessing authority to carry out fresh assessment. As part of the fresh assessment proceedings, Ext.P3 notice has been issued, and the same is now pending. In the meantime, Exts.P4 and P4(a) penalty notices and Ext.P5 recovery notice, based on the original assessment order have been issued, and this writ petition is filed challenging the same.
3. I have heard the learned counsel for the petitioner and the learned standing counsel for the respondents.
4. Evidently, Ext.P2 would indicate that, Ext.P1 is set aside with a direction to the assessment authority to conduct the assessment proceedings afresh. Thus, as of now, Ext.P1 is not in existence and no assessment order has been passed, based on the direction issued by the appellate authority as per Ext.P2. Therefore, no proceedings for penalty or recovery could have been issued by the authorities concerned, based on Ext.P1 order and thus,those are per se illegal.
In such circumstances, this writ petition is disposed of, quashing Exts.P4, P4(a) and P5, with a direction to the 1st respondent or any other competent authority to complete fresh assessment proceedings based on Ext.P3 as directed by Ext.P4, as expeditiously as possible, after giving the petitioner and opportunity of hearing.
