Penalty proceedings require pending proceedings and valid notice; once appeal ends, the authority becomes functus officio.

Penalty under the income-tax penalty provision could be imposed only while proceedings under the Act were still pending before the authority and after service of the required show-cause notice. Once the appeal against the assessment was refused admission and the appellate proceeding had finally ended, the Assistant Commissioner became functus officio and had no jurisdiction to initiate further penalty action. The defect could not be cured by later action of the Commissioner through re-imposition or duplication of the penalty in appellate or reference proceedings, because that would validate an order made without the statutory notice. The penalty proceedings were therefore without jurisdiction and invalid.

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Issues: Whether, after the appeal against an assessment was refused admission and the appellate proceedings had ended, the Assistant Commissioner had jurisdiction to initiate and impose penalty under the penalty provision without a valid notice, and whether such penalty could be validated by later action of the Commissioner.

Analysis: The assessment was made under the summary assessment provision and the Assistant Commissioner, upon holding that the assessment was valid and refusing to admit the appeal, had conclusively determined the appellate proceeding. Once that proceeding ended, he was functus officio for the purpose of taking further action under the penalty provision. Penalty proceedings could be initiated only while proceedings under the Act were pending before the authority, and a notice to show cause was a necessary prerequisite to any valid penalty. The Commissioner could not cure the defect by re-imposing or duplicating the penalty in the appellate or reference proceedings, since that would amount to validating the very order under challenge without the statutory notice.

Conclusion: The penalty proceedings were without jurisdiction and invalid, and the answers to the referred questions were in favour of the assessee.

Ratio Decidendi: Penalty under the income-tax penalty provision can be validly imposed only when the statutory proceedings are still pending before the authority and after service of the required show-cause notice; once the appellate proceeding is finally terminated, the authority becomes functus officio and cannot initiate or validate penalty action thereafter.

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