Penalty linked to annulled assessment should be reconsidered with fresh assessment after denial of fair opportunity.

Where an assessment is set aside and remanded because the dealer was denied a reasonable opportunity to produce books of account, a penalty based on the same default in filing returns and depositing tax should not normally be sustained independently. The penalty issue, including quantum, must be reconsidered along with the fresh assessment because it is linked to the same factual basis that led to annulment of the assessment. The proper course is to remit both assessment and penalty for fresh determination in accordance with law.

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Issues: Whether the penalty imposed for late filing of returns could be sustained when the assessment was set aside and the matter remanded for fresh assessment.

Analysis: The assessment orders had been passed ex parte, and the appellate authority accepted that the dealer had not been given a reasonable opportunity to produce the books of account. On that basis, the assessment was set aside and the matter remanded. Since the explanation accepted for disturbing the assessment also bore upon the delay in filing returns and depositing tax, the penalty order could not be kept alive independently of the assessment. The question of penalty, including its quantum, was therefore one that ought to be reconsidered by the assessing authority when fresh assessment proceedings were taken up.

Conclusion: The penalty was rightly set aside along with the assessment, and the issue of penalty was remitted for reconsideration afresh.

Final Conclusion: The appeals succeeded, and the matter was sent back for fresh determination of assessment and penalty in accordance with law.

Ratio Decidendi: Where the assessment is annulled and remanded because of denial of proper opportunity, a penalty founded on the same default should ordinarily be reconsidered together with the fresh assessment rather than sustained independently.

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