Penalty cannot be restored by enhancement after the underlying assessment is set aside and remanded for fresh reassessment.

A penalty levied under section 12(3) could not be revived by enhancement once the assessment on which it rested had been set aside and remanded for fresh disposal. The penalty fell with the original assessment and could not survive independently after that assessment no longer remained in its original form. The proper course was for the assessing authority to consider afresh, in the reassessment proceedings, whether any penalty was leviable. The enhancement petition was therefore not maintainable, and the deletion of penalty was upheld.

---

---

Issues: Whether the penalty levied under section 12(3) could be restored by an enhancement petition when the assessment on which it was based had been set aside and remanded for fresh disposal.

Analysis: The assessment made by the assessing officer was set aside and sent back for re-doing in accordance with law. The penalty had been levied on the basis of that original assessment. Once the assessment itself no longer survived in its original form, the penalty attached to it could not be sustained independently. In such circumstances, the proper course was for the assessing authority, while completing the fresh assessment, to consider afresh whether any penalty was leviable. An enhancement petition to revive the deleted penalty was therefore not maintainable.

Conclusion: The enhancement petition failed and the deletion of penalty was upheld in favour of the assessee.

Final Conclusion: The revision was dismissed because the penalty based on the original assessment could not survive after the assessment had been remanded, though the assessing officer retained power to consider penalty in the reassessment.

Ratio Decidendi: A penalty imposed on an assessment that has been set aside and remanded cannot be independently restored by enhancement, since it falls with the original assessment and may be considered only in the fresh assessment proceedings.

---