Penalty notice under section 271AAC based on protective assessment order ruled premature and invalid

The Allahabad HC held that penalty notice u/s 271AAC issued based on a protective Assessment Order was premature. The court found that two simultaneous assessment proceedings were initiated against the same transaction, with the petitioner arguing that sections 153A and 153C should apply instead of sections 147 and 148 following search of premises. The HC ruled that no final penalty order should be passed until the pending appeal before CIT is decided, and directed that the petitioner could file a detailed reply to the penalty notice.

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Issues involved:
The judgment involves issues related to income tax assessments, re-assessments, show cause notices, and penalty imposition u/s 271 AAC of the Income Tax Act, 1961.

Main Prayers of the Petitioner:
The petitioner sought writ orders to quash various notices and orders related to income tax assessments for the assessment year 2019-20 passed u/s 148A clause (b) and (d) of the Income Tax Act, 1961. Additionally, the petitioner challenged the assessment proceedings initiated against the same transaction amount and questioned the amount of transaction for the same cause of action.

Facts of the Case:
The petitioner's husband, a retired government employee, invested an amount in Omaxe Infrastructure Scheme through banking channels. Upon his death, the amount was transferred to the petitioner's account and reinvested in Omaxe Avenue Scheme. The Income Tax Department conducted a search in Omaxe Group premises, alleging unaccounted cash transactions of Rs. 4,10,00,000/- involving the petitioner.

Challenges by the Petitioner:
The petitioner challenged the simultaneous re-assessment notices for two different assessment years for the same amount, arguing jurisdictional errors in the notices issued u/s 147 and 148. The petitioner also contested the penalty notice issued under Section 271 AAC without a final or substantive assessment order.

Legal Arguments:
The petitioner relied on precedents to support the contention that protective assessment orders do not warrant penalty imposition until finalization of assessments. The petitioner argued that the notices issued under Section 147 were incorrect, and the penalty notice was premature without a final assessment order.

Court's Decision:
The Court opined that the challenged notices and orders could be addressed in the pending appeal before the Commissioner of Income Tax. The Court referred to a Division Bench judgment to support its conclusion that final penalty orders should not be passed until the appeal is decided. The petitioner was advised to submit a detailed reply to the penalty notice and approach the Assessing Officer accordingly.

Conclusion:
The writ petition was disposed of with the above observations, allowing the petitioner to address the penalty notice after the appeal decision by the Commissioner of Income Tax.

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