Penalty demand quashed where the dispute turned on whether a valid appeal against assessment had already been filed.

The penalty order and consequential notice of demand were quashed because the assessee asserted that a valid appeal against the assessment order had already been filed, and the Court accepted that the limited controversy turned on verification of that fact. The Assessing Officer was permitted to call for the relevant details and ascertain whether a valid appeal existed before proceeding further. The initiation of proceedings under Section 274 read with Section 271AAB of the Income-tax Act, 1961 was left undisturbed, and the matter was to proceed in accordance with law after verification.

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Issues: Whether the penalty order and consequential notice of demand could be sustained when the assessee asserted that a valid appeal had already been filed against the assessment order.

Analysis: The assessee contended that an appeal had been filed, that a common acknowledgement had been generated for the appeals relating to two assessment years, and that the penalty order was passed on the assumption that no valid appeal existed. The Court noted that the limited controversy could be resolved by verification of whether a valid appeal had in fact been filed, and that the Assessing Officer could call for the necessary details for that purpose.

Conclusion: The penalty order and consequential notice of demand were quashed, while the initiation of proceedings under Section 274 read with Section 271AAB of the Income-tax Act, 1961 was left undisturbed and the Assessing Officer was permitted to ascertain whether a valid appeal had been filed and proceed in accordance with law.

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