Penalty proceedings stayed during pendency of assessment appeal, with earlier Division Bench reasoning applied to the same controversy.

Penalty proceedings initiated on the basis of an assessment order should be kept in abeyance while the appeal against that assessment remains pending. Applying an earlier Division Bench ruling on identical facts, the HC held that continuing penalty action before disposal of the assessment appeal was not appropriate and applied the same directions mutatis mutandis. The result was that the penalty proceedings were stayed until the appellate authority decided the assessment appeal, relieving the petitioner from parallel penalty action during the pendency of the appeal.

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Issues: Whether penalty proceedings initiated pursuant to the assessment order should remain in abeyance until disposal of the appeal against the assessment order.

Analysis: The assessment order was under challenge in appeal. The Court found that, following the earlier Division Bench decision in an identical controversy, penalty proceedings should not continue while the appeal against the assessment order remained pending. The directions issued in the earlier case were applied to the present matter mutatis mutandis.

Conclusion: The penalty proceedings were directed to be kept in abeyance until the appellate authority decides the assessment appeal, in favour of the petitioner.

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