Inordinate delay in assessment can invalidate the assessment and also extinguish consequential penalty.

An assessment order passed nearly 18 years after the return was filed was held to be vitiated by inordinate delay, since the delay was not satisfactorily explained on the record. On that basis, the assessment for the relevant assessment year could not be sustained and was annulled. Once the assessment failed, the consequential penalty imposed on the assessee also could not survive and was quashed. The result was in favour of the assessee and against the Revenue.

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Issues: Whether the assessment for the assessment year 1978-79 was liable to be annulled on the ground of inordinate delay in passing the assessment order, and whether the consequential penalty could survive.

Analysis: The return had been filed for the assessment year 1978-79, but the assessment order was passed only on 5 July 1996, resulting in a delay of about 18 years. The Court held that such a prolonged delay was inordinate and not satisfactorily explained on the record. On that basis, the assessment could not be sustained. Once the assessment was annulled, the penalty imposed on the assessee also could not survive.

Conclusion: The assessment was annulled on the ground of inordinate delay, and the penalty was quashed. The answer was in favour of the assessee and against the Revenue.

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