Penalty proceedings linked to revised assessment remain valid despite not starting in original assessment proceedings.

Penalty proceedings under section 273(b) were treated as valid where they were initiated in connection with revision of the assessment under section 155(1), because such proceedings were regarded as connected with the regular assessment for purposes of section 2(40). The fact that initiation did not occur during the original assessment proceedings did not, by itself, invalidate the penalty action. On that basis, the Tribunal was held not justified in treating the levy of penalty as bad in law, and the referred question was answered against the assessee.

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Issues: Whether penalty proceedings under section 273(b) of the Income-tax Act, 1961 could be treated as invalid merely because they were initiated while revising the assessment under section 155(1) and not during the original regular assessment proceedings.

Analysis: The reference was decided by following the earlier binding view that proceedings for penalty, when initiated in connection with revision of the assessment, still fall within proceedings connected with the regular assessment for the purposes of section 2(40). The absence of initiation during the original assessment did not by itself render the penalty proceedings unlawful.

Conclusion: The Tribunal was not justified in holding the levy of penalty under section 273(b) to be bad in law. The answer to the referred question was in the negative and against the assessee.

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