Penalty for non-compliance notices fails when the underlying assessment is set aside and no longer survives.

Penalty under the Income-tax Act for non-compliance with statutory notices could not survive once the assessment order that formed the basis of the penalty was set aside for fresh adjudication. The assessment order dated 21.03.2023, in which penalty satisfaction had been recorded, had ceased to exist after the appellate order under section 250 directed a fresh assessment. As the subsequent giving effect order left no subsisting assessment order, the penalty was treated as consequential to a non-existent foundation and was deleted.

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Issues: Whether penalty under section 271(1)(b) of the Income-tax Act, 1961 for non-compliance with statutory notices could survive after the assessment order that formed the basis of the penalty was set aside for fresh adjudication.

Analysis: The assessment order dated 21.03.2023, in which satisfaction for initiation of penalty proceedings had been recorded, was set aside in appeal under section 250 of the Income-tax Act, 1961, and the matter was directed for fresh assessment. The subsequent giving effect to that appellate order left no subsisting assessment order on the basis of which the penalty satisfaction had been recorded. In these circumstances, the penalty was treated as consequential to an order that no longer survived.

Conclusion: The penalty of Rs. 20,000/- under section 271(1)(b) of the Income-tax Act, 1961 was directed to be deleted and the assessee succeeded.

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