Reassessment on a wrong factual premise failed, and the dependent penalty could not survive after the quantum order was quashed.

Reassessment based on a recorded belief that no return had been filed was invalid where the record showed an e-filed return under a different PAN; the reopening failed for want of proper verification and non-application of mind, so the reassessment was quashed in favour of the assessee. Penalty under section 271(1)(c) could not survive once the quantum assessment forming its sole foundation was set aside; the penalty was therefore deleted. The additions and related penalty liability were removed in full.

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Issues: (i) Whether the reassessment was valid when the recorded reasons proceeded on the basis that no return had been filed, although the return had in fact been filed under a different PAN; (ii) Whether the penalty under section 271(1)(c) could survive after the quantum assessment was quashed.

Issue (i): Whether the reassessment was valid when the recorded reasons proceeded on the basis that no return had been filed, although the return had in fact been filed under a different PAN.

Analysis: The reassessment was founded on the premise that the assessee had not filed any return for the relevant assessment year. The record showed that a return had in fact been filed through e-filing, though under a different PAN. Since the basic assumption recorded for reopening was factually incorrect, the jurisdiction to reopen was exercised without proper verification of the existing record. The reopening therefore suffered from non-application of mind and could not be sustained.

Conclusion: The reassessment was invalid and was rightly quashed, in favour of the assessee.

Issue (ii): Whether the penalty under section 271(1)(c) could survive after the quantum assessment was quashed.

Analysis: The penalty proceedings were wholly dependent on the quantum assessment. Once the assessment order forming the foundation of the penalty was held to be illegal and was deleted, the basis for the penalty no longer survived. In such circumstances, the penalty could not be independently sustained.

Conclusion: The penalty was not sustainable and was deleted, in favour of the assessee.

Final Conclusion: Both the reassessment and the consequential penalty were set aside, with the additions and penalty liability removed in full.

Ratio Decidendi: Reassessment initiated on a demonstrably incorrect foundational fact lacks valid jurisdiction, and any penalty wholly dependent on such reassessment cannot survive once the quantum order is quashed.

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