Penalty under Wealth-tax law cannot survive where the underlying assessment is invalid and may be challenged in penalty proceedings.

Penalty under the Wealth-tax Act depends on a valid underlying assessment, and a challenge to the assessment's validity may be raised in penalty proceedings. The Tribunal noted that the assessment order was bound by the jurisdictional High Court's view and found no basis to ignore that authority. On that footing, the appellate cancellation of penalty was treated as justified because the assessment itself had been held invalid for failure to compute the tax payable in the body of the assessment order. The penalty was therefore considered unsustainable.

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Issues: Whether penalty under Section 18(1)(a) of the Wealth-tax Act could survive when the underlying assessment was held invalid for failure to compute the tax payable in the body of the assessment order, and whether the validity of the assessment could be questioned in penalty proceedings.

Analysis: The appellate authority had cancelled the penalty on the footing that the assessment itself was invalid. The Tribunal held that the assessment order was governed by the binding view of the jurisdictional High Court and that there was no basis to disregard that decision. It further held that a plea going to the validity of the assessment can be raised in penalty proceedings, because a valid assessment is the foundation for levy of penalty.

Conclusion: The penalty was not sustainable, and the cancellation of penalty was upheld.

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