Eligibility-condition dispute sustained the assessment but invalidated the consequential penalty until compliance was finally decided.

The assessment rejecting tax deferment under the Final Eligibility Certificate was sustained because the authority had not finally concluded the alleged breach of eligibility conditions, although coercive recovery was restrained for a limited period. The consequential penalty under Rule 25(5) was set aside because it depended on the same unresolved compliance issue, and a penalty cannot stand until the competent authority first decides that question after notice and hearing. Liberty was reserved to initiate fresh penalty proceedings after that decision is communicated.

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Issues: (i) Whether the assessment order rejecting the tax deferment benefit under the Final Eligibility Certificate required interference. (ii) Whether the consequential penalty order under Rule 25(5) could stand.

Issue (i): Whether the assessment order rejecting the tax deferment benefit under the Final Eligibility Certificate required interference.

Analysis: The petitioner's entitlement under the Final Eligibility Certificate was only to deferment of tax. The third respondent's counter affidavit showed that the question of violation of the eligibility conditions and the petitioner's representation were under consideration, and the authority had undertaken to take action in accordance with law after following due procedure. In that situation, the assessment order could not be interfered with, though protection against immediate recovery was warranted for a limited period.

Conclusion: The assessment order was sustained, and coercive recovery was restrained for four months.

Issue (ii): Whether the consequential penalty order under Rule 25(5) could stand.

Analysis: The penalty was founded on alleged non-compliance with the conditions of the Final Eligibility Certificate, an issue which was still to be examined by the third respondent after giving notice and hearing. Since the underlying compliance question had not yet been finally determined, the penalty order could not be maintained at that stage.

Conclusion: The penalty order was set aside, with liberty to initiate fresh penalty proceedings after the third respondent passed orders and communicated them.

Final Conclusion: The writ petitions were disposed of by sustaining the assessment, nullifying the penalty, and granting limited protection against recovery pending fresh consideration by the competent authority.

Ratio Decidendi: Where the validity of the underlying eligibility conditions is still under competent authority's consideration, a consequential penalty based on that alleged breach cannot be sustained, though the assessment itself may be left undisturbed.

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