2025 (10) TMI 765 - AT - Income Tax

Penalty under s.271(1)(b) invalid when earlier satisfaction was set aside and assessment reopened under ss.250/147/144

ITAT DELHI - AT allowed the taxpayer's appeal, holding penalty proceedings under s.271(1)(b) invalid where the earlier assessment/order recording ... Penalty proceedings u/s 271(1)(b) - non-compliance of the statutory notices - HELD THAT:- In the instant case, the assessment order passed u/s 147/144 was ex-party wherein the AO has recorded his satisfaction for initiation of penalty proceedings u/s 271(1)(b) of the Act has been set aside by Ld. CIT(A) for fresh adjudication in terms of the order passed u/s 250 of the Act. AO has given effect to such order u/s 250/147 r.w.s 144 of the Act and start proceedings for fresh assessment through ITBA, therefore, there remain no order under which satisfaction for initiation of penalty proceedings u/s 271(1)(b) was recorded. Appeal of assessee allowed. Assessment for AY 2015-16 was originally completed by an ex parte order dated 21.03.2023 passed u/s 147/144 r.w.s.144B, and penalty proceedings u/s 271(1)(b) were initiated for non-compliance with notices u/s 142(1) dated 17.01.2023 and 01.02.2023, resulting in a penalty of Rs.20,000/-. The LD. CIT(A) set aside the assessment by order dated 26.03.2025 directing fresh adjudication. The AO gave effect to that direction on 14.05.2025 by passing an order u/s 250/147 r.w.s.144 and commencing fresh assessment proceedings through ITBA. Since the underlying assessment order pursuant to which satisfaction for initiation of penalty proceedings was recorded no longer subsists, the Tribunal held there remains 'no order under which satisfaction for initiation of penalty proceedings u/s 271(1)(b) was recorded' and directed the AO to 'delete the penalty levied of Rs.20,000/- u/s 271(1)(b) of the Act.' All grounds of appeal were allowed.